Winding Down of Redevelopment?
Back in July 2011, I offered an overview of Redevelopment Agencies, their functions and their funding through “tax increment.” Redevelopment agencies were created by the State Legislature in the 1950s to address urban blight and evolved into complex entities in an attempt to address State mandated affordable housing.
In order to give the appearance of passing a State Budget for 2011-12, along with other debatable actions, the State Legislature passed AB X1 26 (elimination of Redevelopment Agencies) and AB X1 27 (new governance for cities wishing to continue redevelopment activities) to grab local funds. It is obviously clear that these two pieces of legislation were hastily crafted without much thought other than to grab any funds for passing a budget. After all, the members of the legislature were not going to get paid if they did not pass a timely budget.
These two bills were challenged in the California State Supreme Court where the Court found AB X1 26 to be constitutional and AB X1 27 to be unconstitutional. So, with the Supreme Court upholding AB X1 26, the Legislature enacted its retaliation on the cities for their introducing and movement to get Prop 22 approved by the voters in 2010 (keep local funds at the local level). But the striking down of AB X1 27 stated that there will be no more redevelopment activity. These Supreme Court rulings were the worst possible scenario for municipalities having Redevelopment Agencies.
One purpose of Redevelopment agencies was to provide affordable housing and often, school teachers made use of the affordable housing programs. Without the affordable housing programs, there will be fewer teachers able to afford housing in our expensive housing market and fewer teachers available for our growing student population. Redevelopment agencies were one of the vehicles that promote construction that include jobs during a period when California is still suffering through a recession. Should we conclude that the State Legislature feels that the affordable housing issues have been addressed and continued unemployment has vanished?
AB X1 26 was apparently crafted without much thought other than a means for the State to take funds from the local levels and perpetuate “kick-the-can” down the road budgeting. AB X1 26 is a flawed piece of legislation and the Legislature seems unwilling to do anything about the problems that have already occurred and will continue to do so. Of the many flaws, most are of a procedural nature. But the one that disturbs me most is the outside evaluation and perception of our State’s inability to act as a responsible body.
Many Redevelopment Agencies have issued Bonds for financing some of their projects and the repayment of the debt appears in doubt according to some investor services. Moody’s Investors Service, Standard and Poor’s Rating Services, and Fitch Ratings have all issued their form of “watch negative” on all California tax allocation bonds. These are outside rating services whose intent is to present an objective opinion so they will tend to offer creditable ones.
There are some Redevelopment Agencies that have purchased property subject to federal agency approval before conveyance, while other Agencies will have difficulty with property transfers when there has been a break in the chain of recorded title, forcing title companies to shy away from such transactions.
The State Legislative leaders have been asked to slow the dissolution process down to a manageable pace without much success. We at the local level have been told that because the Governor has stated that he will veto any legislation that impedes the dissolution process, the legislators are reluctant to introduce any legislation that counters the Governor’s wishes. It was my impression that the Legislature was a separate body (Legislative) from the Governor (Executive). If the Legislature feels that legislation should be introduced for the good of the people then it should be done no matter what the Governor thinks or says. The last time I looked, the Legislature does not report to the Governor, it reports to the people or at least it is supposed to.
Redevelopment Agency dissolution will be the subject of many written articles and media attention for some time to come. I, for one, would welcome a State Legislature that represents the people who elected them and not some self-serving or political party interest; but that is probably wishful thinking.
I would appreciate your comments on this and other issues by emailing me at email@example.com or calling 650-573-7359.
February 08, 2012
Winding Down of Redevelopment?