Sacramento Bee: Columnist Walters on future of cities redevelopment

Dan Walters: Will redevelopment emerge in new form?

By Dan Walters
The Sacramento Bee

Published: Friday, Jul. 8, 2011 - 12:00 am | Page 3A

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Redevelopment, a powerful and controversial tool that has remade – for better or worse – California's urban landscape for the past six decades, will soon die.

Or will it?

Two pieces of last month's state budget package abolish the 400 local redevelopment agencies on Oct. 1, but allow them to remain in business – albeit under much tighter state control – if they agree to give big chunks of their property tax revenues to schools, thereby reducing the state treasury's educational burden.

Overall, state officials hope to gain $1.7 billion from the transfer during the 2011-12 fiscal year and about $400 million each year thereafter, plus inflation.

Gov. Jerry Brown and legislators adopted the historic change after years of Capitol machinations over the agencies' shift from blight eradication and low-income housing into complex subsidies for hotels, retail complexes and auto dealerships. It was one of those rare issues that transcended party lines with Democrats and Republicans lining up on both sides.

The two bills also ended months of efforts by redevelopment agencies to buy their way out of political trouble. And at the last moment, a bid by Assembly Speaker John A. Pérez to exempt Los Angeles' redevelopment agency from the death sentence failed.

So what now?

A court battle over the abolition decree looms, but if it survives, most cities probably will continue redevelopment projects by paying tribute to the state. However, they'd have less money to spend and less flexibility in how they operate.

The changes also are sparking a search by politicians for substitute ways to finance local development projects. One vehicle that looms large, it would appear, is the "infrastructure financing district," which bears an uncanny resemblance to redevelopment, particularly with the changes now being contemplated in the Legislature.

Several legislators who voted to abolish the redevelopment agencies are carrying measures that would expand the scope of IFDs, as they are called, including their ability to retain property taxes from private projects to repay debt that they incur.

San Francisco Assemblyman Tom Ammiano, for instance, wants to give his city broad new powers to use IFDs to develop Treasure Island, the one-time Navy base in San Francisco Bay, and make improvements to the San Francisco waterfront for the upcoming America's Cup yacht race.

Assembly Bill 664, like several others of its ilk, would eliminate the long-standing requirement for voter approval to issue IFD bonds that would be repaid from retained property taxes – taxes that otherwise would go to schools and other local purposes.

"Why should the state general fund subsidize the America's Cup IFD bonds?" an analysis of AB 664 by the Senate Governance and Finance Committee asks.

Why, indeed?