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Inland Cities Paying 'Ransom' To Save Redevelopment

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Rialto, Grand Terrace join statewide move as critics push for RDA reform

By Chris Levister –

Insisting that forking over money to the state outweighs losing the city’s redevelopment agency, the Rialto City Council agreed to pay what it described as a $6 million “ransom” early next year and pay approximately $1.4 million in fiscal year 2013 and every year after.

The Council passed a resolution declaring its intent to participate in the “voluntary” redevelopment program. Members also passed a second required ordinance saying it would comply with the state’s new Redevelopment Agency (RDA) law.

“This action should not be interpreted as caving in,” insisted Robb Steel, the city’s redevelopment director. His Power Point slide presentation called “Ransom Note” highlighted the city’s disappointment and frustration with the new law.

Steel said the bulk of the $6 million payment will come from property-tax proceeds sent to the Rialto RDA for the development of low and moderate income housing projects.

“The city stands to gain, the public stands to gain,” said Councilman Joe Baca, Jr. Councilman Ed Scott defended the city’s RDA practices saying, “We have spent our money wisely.”

State lawmakers created two laws in June that city and redevelopment officials are calling unconstitutional. The first law killed all redevelopment agencies. The second allowed cities to resurrect redevelopment agencies by paying the state some of their local taxes to help balance the budget. The measures are linked to each other, meaning one cannot take effect without the other.

The law requires redevelopment agencies to each pay their share of $1.7 billion if they want to stay in the redevelopment game.

Facing new laws that force them to either pony up an estimated $2.1 billion over the next two years to schools and special districts or be axed, roughly 80% of redevelopment agencies will make every effort to come up with the cash, according to a recent survey by the California Redevelopment Association (CRA).

Rialto joins a growing number of California municipalities including Grand Terrace that are grudgingly opting to pay to keep their RDAs.

Grand Terrace City Council agreed to pay the state more than $2.8 million in fiscal 2011-12 and $670,745 every year afterward. Council members characterized the outlay as “extortion payments” to maintain the city’s RDA.

In Riverside and San Bernardino counties, where the programs are heavily used, 51 redevelopment agencies would pay nearly $360 million. Fontana, Riverside County and Rancho Cucamonga each would pay more than $27 million, according to the California Redevelopment Association.

The League of California Cities and the CRA have filed a lawsuit challenging the new state RDA law.

Meanwhile officials are scrambling to shore up ‘front burner’ projects. Among them is a plan to develop Rialto Municipal Airport into a commercial center, which has been on the live calendar for years, said Steel.

In June Inland mayors and legislative representatives signed a joint letter calling for the repeal of Redevelopment Elimination Bills (AB 1x 26/27), maintaining redevelopment funds, along with state and federal funds, have been instrumental in improving the quality of life of residents in the region by addressing transportation, public infrastructure, economic development, public safety, schools and affordable housing needs.

RDAs have come under fire because other local agencies do not share the incremental tax revenue, which is the amount of taxes generated by development after a redevelopment zone has been established.

Critics like the Institute for Justice - the nation’s leading legal advocate against eminent domain abuse argue California’s Community Redevelopment Law (CRL) designed to rid unsanitary urban slums that posed a genuine threat to the health and safety of the public has been mutilated and turned into a multi-billion dollar profit machine.

The Institute claims eminent domain under the guise of “blighted” is used arbitrarily to take property from small business owners, churches, farmers and the poor and minorities, in order to give it to a more favored private developer.

“California redevelopment agencies stretch the law to declare nearly any area to be “blighted,” said Christina Walsh, the Institute’s director of activism and coalitions. “Indeed, redevelopment often has little to do with true blight.”

State Controller John Chiang's office conducted a month-long review to determine whether redevelopment agencies were paying for low-and moderate-income housing as required by state law; accurately providing allotted payments to school districts; and not overpaying board members and employees or misapplying the "blighted" designation.

His review of 18 redevelopment agencies documented missed payments to school districts, accounting deficiencies, slipshod payroll practices and inappropriate use of affordable housing funds.

“For a government activity which consumes more than $5.5 billion of public resources annually, we should be troubled that there are no objective performance measures demonstrating that taxpayers are receiving optimal return for each invested dollar,” Chiang said.

According to the CRA in the 2006-07 fiscal year, California redevelopment agencies generated $40.79 billion in total economic activity. This includes the direct impact of RDA construction activities, as well as the indirect and induced effects that RDA activities have on affected industry sectors. (about 80 percent of municipalities have an RDA) overseeing around 750 blight zones.

Walsh said the agencies now siphon off most of the property taxes from the hundreds of blight zones across the state.

San Bernardino developer and community outreach consultant, Francis J. Grice whose extensive background in redevelopment dates back to the early 70s welcomed the revamped state law calling locally controlled economic development vital to California's long- term prosperity but in need of retooling. “Like an outdated sofa some of these agencies are due for reupholstering,” she explained.

“The hope is this public review of RDAs will lead to greater accountability and transparency. Those agencies that operate by the rules will survive. Those that don’t will fold.”

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