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Battle for Redevelopment Funds Gets Nasty

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Potential losers take off the gloves, critics urge caution

Chris Levister –

From San Bernardino’s New Hope Family Center (formally the Public Enterprise Complex) on Highland Avenue to the T. Hughes Building on Baseline which houses multiple community outreach programs to the destruction of the blighted and crime infested Meridian Apartments, off West Fifth Street, redevelopment monies help cities reinvent themselves.

From the construction of a mega Kohl’s warehousing and distribution center near the San Bernardino Airport, to a state-of-the-art senior housing center under construction on the city’s long suffering Westside, California's redevelopment program has been transforming polluted and blighted areas across the state into thriving destination spots and commercial districts for nearly 60 years.

Members of many local councils who in most cases run the redevelopment agency (RDAs), say they depend on the billions in redevelopment funding for important projects to limit poverty and bring in sales tax revenue.

Cities such as San Bernardino, Fontana, Rialto and Riverside have made liberal use of the redevelopment process to reinvent themselves in ways that have benefited residents and businesses.

So it’s little wonder that Governor Jerry Brown’s proposal to scrap the $5.7 billion annual program has sparked outrage and launched a mad dash to lock up future revenue – in effect laying claim to the money Brown wants.

While most local cities are taking a more reserved approach to the proposed funding grab, San Bernardino like Los Angeles is gearing up to do what some critics say is tantamount to “hiding money”.

“We are extremely concerned about the governor’s proposal,” says San Bernardino Mayor Pro Tem and Sixth Ward Councilman Rikke Van Johnson. Concerned to the extent that the City Council is considering a plan similar to one approved by the Los Angeles redevelopment agency that would attempt an end run around Brown’s proposal.

Friday, Los Angeles redevelopment commissioners voted to hand control of nearly $1 billion, for more than 275 projects, to the city. Days later the L.A. City Council abruptly postponed a vote on the matter. Other cities pushed forward.

“We are studying a plan that would create a contract that calls for passing the property tax money that would normally go to the city’s redevelopment agency to a non-profit agency outside of the City Council’s control,” said Johnson.

A second option says Johnson is to reestablish a Joint Powers Authority (JPA), an entity permitted under the law whereby two or more public authorities (e.g. local governments, or utility or transport districts) can operate collectively. Joint powers authorities are widely used in California (where they are permitted under Section 6500 of the State Government Code).

City officials thought they had put a stop to state raids of RDA agencies with passage of Proposition 22 in November which protected redevelopment funds said Johnson. “No one apparently foresaw that Brown would propose killing them altogether.”

Brown has said existing contracts would be honored under his proposal even if RDAs were disbanded.

“Prop 22 was supposed to protect us, but now the state is making a U-turn,” said Johnson. “It would be prudent for the governor to look at the huge revenue streams from unions, political pacts and other groups that helped him get elected,” said Johnson. “To target funds used to reclaim already struggling cities is grounds for drawing a line in the sand.”

Brown's proposal to abolish redevelopment agencies, to help close the $25.4 billion state budget gap, has caused anxiety in city halls across the state.

The California Redevelopment Association has asked its member cities with redevelopment agencies not to do anything “that would give redevelopment a black eye” as they look for ways to keep funds intact.

SB City Attorney James F. Penman issued a similar warning. “It probably won’t go over well with voters if all of a sudden this city went from $300 million in RDA funds controlled by the mayor and a handful of elected officials to control by a non-profit board. Besides he said there’s no guarantee that the Legislature will go alone with Brown’s proposal.

San Bernardino’s redevelopment agency expects to receive at least $300 million in tax increment revenue, according to interim redevelopment director Emil Marzullo.

Legal experts claim the draconian plans won’t pass legal muster. “They actually think murder is a loophole for larceny,” said Murray Kane, a lawyer who advises several cities that have taken action since Brown’s proposal. “You can’t get away with hiding public funds.”

"I do think it's prudent upon us, as the stewards of these funds, to protect them as best we can," Johnson said. "If redevelopment agencies are abolished, we've done what is prudent for our citizens."

Brown’s proposal would disband 390 independent redevelopment agencies across California that use public money to spur private development, ending a program many cities and counties have relied on to turn around troubled areas since the passage of Proposition13 in 1978 curtailed their ability to raise taxes.

Redevelopment began in 1945 as a postwar blight-removal effort that relied mostly on federal grants.

By the early 1950s, it had morphed into a financing structure that allows redevelopment agencies to borrow against future increases in property tax revenues.

The agencies use most of that money to improve an area and attract private investment. Laws passed in recent decades also require redevelopment projects to include affordable housing. Redevelopment supports more than 300,000 jobs and contributes more than $40 billion each year to the state's economy, according to the California Redevelopment Association. The association and others, including cities, vow to fight Brown's proposal, in court if necessary.

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