Neglected Questions at the Bee

Of all the silly things my old employer the Sacramento Bee has written in its campaign to keep the Kings in town, it's hard to find one sillier than describing Sacramento's "struggling downtown" as "the neglected heart of the capital city."

Neglected? Have they put the paper’s news archive down the memory hole?

Just off the top of my head, here are a few projects built using public money, in whole or part, since I moved to town in 1985:

Hyatt Hotel.

Sheraton Hotel.

Citizen Hotel.

Convention Center expansion.

City Hall expansion.

California Environmental Protection Agency.

Downtown library expansion and U.S. Bank Tower.

Esquire Building and IMAX Theater.

Downtown Plaza expansion.

Elks Building renovation.

Dive Bar.

Cosmopolitan entertainment complex.

County jail.

Matsui Federal courthouse.

Numerous housing projects, including the lofts where Gov. Jerry Brown bunks when he’s in town.

The list could go on and on. I haven’t gotten to all the investments made by the state after former Gov. Pete Wilson reversed state policy to encourage new agency buildings to locate downtown, a change that led to construction of the huge East End project, the Justice building, and the Secretary of State/Archives complex. There’s hardly a block downtown that hasn’t been blessed with a subsidy.

Far from neglecting it, Sacramento has been devoting attention and public dollars by the hundreds of millions on downtown for more than a half century. And what result has that devotion yielded? To hear the Bee tell it, a “struggling downtown.”

Anyone with a shred of curiosity or even a little concern for the public interest might be tempted to ask some questions here. If all those public dollars have left downtown still in need of “revitalization,” maybe the city has been doing things wrong. Are there policies that prevent efficient use of the money? Are public dollars being invested in the wrong way. Are they being overwhelmed by policies and trends that push people and private investment to the urban fringe? Are the benefits of downtown public investment going to developers instead of the broader public?

The Bee, it seems, has neglected to ask.

Redevelopment Greed Backfires

The best thing about the California Supreme Court redevelopment decision isn’t that the justices upheld the power of the Legislature to abolish the agencies that suck up and waste billions of tax dollars. No, the best thing was how the court did it: by picking up Proposition 22—the 2010 measure the redevelopment agencies wrote to exempt themselves from California’s budget crisis—and shooting the agencies with their own gun.

For those who haven’t been scoring at home, here’s the two-minute recap of the issue:

• Redevelopment agencies are devices for grabbing property tax dollars that would otherwise go to schools, colleges, and other useful public services. The agencies instead use them to subsidize development that voters would be unlikely to support if they had to pay for the projects with new tax dollars.

• Faced with diminished revenue and the prospect of deep cuts in essential programs, state lawmakers decide schools are a higher priority than downtown hotels, convention centers, and ornamental street lights. They shift the money grabbed by redevelopment agencies back to education.

• Redevelopment agencies fight back by writing and passing Prop 22, which bars the Legislature from taking away from redevelopment agencies the money they are taking away from schools.

• New Gov. Jerry Brown responds by proposing, in his 2011-12 budget, to abolish redevelopment agencies in their current form and reclaim, once and for all, the money for schools. He proposes a constitutional amendment to allow communities to pursue future redevelopment projects, but using their own money.

• Legislature enacts a two-bill compromise. One bill abolishes redevelopment agencies; a second bill hands them a lifeline, rescinding the death sentence of redevelopment agencies that agree to shift their tax booty to schools.

• Redevelopment agencies sue, arguing that Prop 22 prevents the lawmakers from mucking with their money or their fate.

Not so, the Supreme Court has now decided. The Legislature had the constitutional authority to create redevelopment agencies and likewise has the authority to end what it created. Prop 22 did not change that. But what Prop 22 did change, the justices found, was the Legislature’s power to shift redevelopment property tax dollars to higher priority uses. It therefore found that, under Prop 22, the Legislature no longer has the power to offer them a conditional lifeline.

“The irony of these circumstances concerning Proposition 22 should not be ignored — the very measure that was crafted to protect financing for new redevelopment projects has been broadly interpreted in a manner that effectively ends all financing for new redevelopment projects,” Chief Justice Cantil-Sakauye wrote. “This cannot be a necessary result intended by the proponents of Proposition 22 concerning redevelopment.”

Not the intended result, perhaps. But certainly the result they deserved.

Redevelopment: Grabbing other people's money

Two mistakes frequently mar news reports on the fight over Gov. Jerry Brown’s redevelopment proposals.

The first labels Brown’s plan a “state grab” of local redevelopment revenue. It is easy to understand how the media might make this error. “State grab” is how local officials like to spin the fight: They, the virtuous defenders of local government, are the victims, set upon by the big bad state. Many editors and reporters seem inclined to accept the local home-team spin as gospel truth. But in their uncritical acceptance of spin they confuse the public about who are the real grabbers and the grabbed in this fight.

Consider how redevelopment works. A local government, usually a city, designates a portion of its jurisdiction “blighted” and declares it as a redevelopment area. When that designation is made, the amount of property taxes that flow from land and buildings in the area to local governments—city, county, school districts—is capped.

Going forward, for the life of the designation, any increase in property tax collections from that area above the cap is diverted to the redevelopment agency, which uses it to fund infrastructure, subsidies to developers, and its own operations. This is true even if the increases are entirely the result of normal events—inflation, reassessment of properties at change of ownership, or new construction—unrelated to any of the agency’s activities. To put it baldly, the redevelopment agency grabs all the growth, known as the tax increment; the schools and county get nothing.

In practice, things aren’t quite so stark. When redevelopment areas get proposed, other local governments are often able to bargain for a share of the tax increment. And schools get made whole by the state, which backfills their lost revenue to the tune of $1.8 billion a year. But the essentials are clear: Redevelopment agencies are the real grabbers at the expense of other local governments and the state budget.

Brown’s budget seeks to end that grab. He proposes to abolish redevelopment agencies as of July 1, 2011. In the first year, this would make available $1.9 billion of tax increment above redevelopment agencies’ existing obligations for bond payments and pass-through agreements with other local governments, money Brown would use to close the budget gap. After that, all the property tax increment revenues would once again flow to school, city, and county coffers as they did before the redevelopment agency existed. No more grabbing.

The second common mistake is to report that Brown is proposing to end local redevelopment. In fact, Brown simple wants to change how redevelopment is financed. He has asked the Legislature to pass a constitutional amendment to permit local governments to raise taxes and issue bonds for infrastructure and redevelopment with the approval of voters.

This alternative would let cities to do everything they do today with redevelopment: erect parking lots for museums, subsidize mermaid bars, hand out goodies to auto dealers willing to move from the next city over, build sports palaces for millionaire athletes and billionaire sports team owners. The only difference? Instead of financing it by grabbing other people’s money, they would have to do it directly and openly, with public consent.

That’s why Brown’s proposal throws mayors and other city officials into such a tizzy. It’s a small but telling blow against their privileges under California’s dysfunctional Prop 13 operating system.

That system absolves local elected officials of any responsibility for raising the tax dollars they spend and reduces public scrutiny of how they spend it. It lets them buy the goodies their constituents and campaign contributors like—from shiny downtown buildings to bloated police pensions—without having to ask for the money to pay for it. When their irresponsible decisions lead to unbalanced budgets and cuts in day-to-day services, they just point their fingers at the state Capitol for grabbing “their” money. If the latest PPIC poll, in which voters approved of Brown’s redevelopment proposal by more than a five-to-two margin, is any indication, at least one small piece of that system may be tottering.

Boyarsky: “Brown’s right on redevelopment boondoggle”

At LA Observed, veteran Los Angeles journalist Bill Boyarsky cheers the prospect of ending California’s redevelopment agencies: “Close down all the redevelopment agencies. Let redevelopment beneficiaries like billionaire Phillip Anschutz, who owns downtown’s LA Live and Staples Center, finance their own projects. If we end the subsidies, we can put the money to better use—the schools.”