Battle Continues Over the Future of Redevelopment Agencies

A special 10-member, two-house committee began its work February 23 reconciling the differences between spending plans crated by the Senate and the Assembly.

They could be done within days.

Not because an estimated $26 billion gap between state spending commitments and revenue isn’t vexing but because there aren’t many large differences between the two budget plans.

A summary of the major issues to be resolved runs only 19 pages.

However, a key difference is the approach taken by each house to Gov. Jerry Brown’s proposal to eliminate the state’s 400-odd redevelopment agencies.

“Redevelopment funds come directly from local property taxes that would otherwise pay for school and core city and county services such as police and fire protection and care for the most vulnerable in our society” Brown said in his State of the State speech.

“I come down on the side of those who believe that core functions of government must be funded first.”

The Senate embraces the Democratic governor’s plan.

Brown would get rid of the agencies, pay off the debt of any existing or approved projects then divvy up the local property tax revenue the agencies now receive between cities, counties and schools.

He eliminates redevelopment agencies, in part, because he must to use the property tax revenue they receive for other purposes.

The League of California Cities and redevelopment agencies bankrolled a $2.5 million campaign last November to pass Proposition 22, which prevents the state from borrowing any of their money to balance its budget.

Brown says his proposal to eliminate the agencies will save the state $1.7 billion, give schools $1 billion more each year starting in the fiscal year beginning July 1, 2012 and another $900 million to cities, counties and special districts.

“The Assembly version includes the general fund savings of the governor’s plan but reflects that the final budget crafted by the conference committee may achieve the savings through reforms in lieu of elimination,” says the 56-page summary of the Assembly’s budget plan.

Why doesn’t the Democratic majority Assembly embrace Brown’s proposal if the Democratic majority Senate does?

A likely reason is that the lower house’s leader, Speaker John Perez, is a Los Angeles Democrat.

Antonio Villaraigosa, the mayor of Los Angeles, has been a vocal opponent of Brown’s plan, calling it a “non-starter,” among other things. Villaraigosa has attempted to encumber $980 million in future property tax revenue by having the city’s redevelopment agency commit to a series of future projects.

San Diego Mayor Jerry Sanders makes Villaraigosa look like a piker.

At a February 22 press conference, Sanders described the Democratic governor’s plan as “desperate” and said if it was approved, Brown’s legacy would be “the governor who crippled the economic progress of California’s cities.”

Sanders then presented a 74-page list of $4 billion worth of redevelopment projects that would be financed through future property tax revenue.

The Voice of San Diego has dubbed the scramble by San Diego, Los Angeles and other cities to encumber funds, “redevelopment Mardi Gras.”

Ten of the state’s largest cities have offered a counter proposal to Brown’s that would save the state $1.7 billion but allow redevelopment agencies to survive.

It’s appears likely voters would need to approve a constitutional amendment that creates an exception to Proposion 22’s blanket prohibition against the state receiving redevelopment agency funds.

As described by the budget conference committee, the guts of the proposal, which appears to still be evolving, is this:

Bonds totaling $1.7 billion would be sold by the state. They would be repaid over 25 years with $200 million annually in redevelopment agency funds.

All current redevelopment agencies, which are set to expire at various dates, would be given 10-year extensions.

School districts oppose the redevelopment agency counter proposal and will fight to see Brown’s plan in the final budget.

The districts note that instead of the additional $1 billion they would receive under the Democratic governor’s plan, the counter proposal gives them $50 million – an $8 increase per pupil versus $170.

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