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EnterpriseZones/RDA Press Clips
Tuesday, February 8, 2011


Enterprise Zones Dealt Untimely Blow By New Study

Defenders of tax-benefit zones in San Bernardino, elsewhere tout program

Enterprise zones get Long Beach defense

Budget cuts jeopardize redevelopment agencies

State Enterprise Zones Provide Little Bang for the Buck

California’s enterprise zones debated

Enterprise zones haven’t created jobs in state, study says,0,5271711.story

Town of Truckee reclaims $2.28 million in redeveloment funds in fear of state raid

City officials to meet on governor’s plan to end redevelopment funds

California budget plan jeopardizes major projects in San Francisco

Calimesa unsure about redevelopment agency


Editorial: Abolish  a  failed tax break, plug a budget hole

Dan Walters: Questions abound on Brown budget plan

City Aggressively Moving Forward with Redevelopment Projects

Can Redevelopment Agencies Be Saved?

Poster Children for Abolishment

Editorial: Tough times call for tough measures toward redevelopment agencies

Opinion: Redevelopment is a key to recovery, not a barrier


Enterprise Zones Dealt Untimely Blow By New Study

Sacramento began Monday its examination of enterprise zones–lower-income areas throughout California in which businesses get tax credits for setting up shop and hiring local workers.

And like a last-second punch before the final bell, another study struck a damning blow to the program— on the day the scorecard went before the judges.

As two state assembly committees heard arguments for and against the zones Monday, a study from the California Budget Project (CBP) was released to the public.

The report, titled “California’s Enterprise Zone Program: No Bang for the Buck,” says that big businesses are the biggest beneficiaries of the tax credits.

The study, which follows a similar one done by Jed Kolko and the Public Policy Institute of California , found the following:
Seven of 10 zone tax break dollars are claimed by corporations with assests of $1 billion or more.
From 1986 to 2008, the cost of zone tax credits and deductions increased from $675,000 to $465.5 million.
The program has failed to focus growth to distressed communities
The program, on average, has no impact on job or business creation.
Similar finds came in Kolko’s report in 2009.

Ever since Gov. Jerry Brown proposed to eliminate the program, designed to encourage economic growth in depressed areas through tax credits, the business world has been at odds with some politicians.

Despite a conflicting study USC professor Charles Swenson helped author along with three other researchers, the statistics are starting to pile up in opposition to the zones.

The newest study’s main revelation that statistical evidence shows money goes to large corporations is counter to what Blake Christian, a Long Beach CPA, told Neon Tommy in a story  last month about conflicting studies muddling the true effectiveness of the zones.

When Christian’s firm  did a study of 350 businesses in Long Beach that had used enterprise zones, he found that 325 of those companies had less than 100 employees, Christian said.

“It’s economic suicide,” he said. “You will send out a chilling message to businesses that are here and send out a very, very bad message to out-of-state and foreign companies that want to move here.”

According to Brown, eliminating enterprise zones would free up $924 million to local governments.

Defenders of tax-benefit zones in San Bernardino, elsewhere tout program

SACRAMENTO – Supporters of tax-benefit zones in San Bernardino and elsewhere came out in force Monday to criticize Gov. Jerry Brown’s plan to dissolve the program.     
California’s 42 enterprise zones have come under Capitol scrutiny in recent years. Proponents say they are a vital tool to create jobs in economically troubled areas. Critics call the zones an increasingly        expensive perk for big business, costing the state more than $500 million.     
Enterprise zones now are in Brown’s crosshairs. His January budget proposal to close a $25.4 billion shortfall through June 2012 counts on ending a $924 million “subsidy” to various hiring, sales and other tax credits for companies doing business in the zones.     
Zone proponents, after a muted response last month, are rallying to save the program. Monday, dozens of city officials, business representatives and others spoke at an Assembly budget hearing. The program’s defenders have hired well-connected capital firms to lead a public-relations push.     
“Not only are we getting jobs from out of state, but we’re getting  significant amount of taxes for the city and the state,” said Colin Strange of the San Bernardino Valley Enterprise Zone, which extends from Bloomington to northern San Bernardino.     
But Lenny Goldberg of the California Tax Reform Association said  companies have earned tax credits after hiring people to six-figure jobs. The program should be shut down and retooled to target benefits at the poor, he said.     
In 2010, 182 businesses in the San Bernardino zone claimed tax credits for 2,276 employees. That was up significantly from 2009, when 99 businesses received credits on 854 employees in 2009.     
Enterprise zone supporters last week released a survey of eight unidentified companies in the San Bernardino zone.     
The report found that the program encouraged the businesses to hire employees who qualified for the tax credits. The companies likely would stay put even if the benefits disappeared, according to the survey.     
The nonpartisan Legislative Analyst’s Office has signed off on the governor’s proposal to eliminate the program.     
Besides enterprise zones, Brown’s budget calls for the phasing out of redevelopment agencies. Redevelopment lets governments divert property-tax money to subsidize anti-blight and economic development projects.
Majority Democrats  seem skeptical of both programs. They could vote to shut down redevelopment themselves.
But ending the tax credits for enterprise zones would qualify as a tax increase, meaning at least some GOP  votes would be required. Republicans lawmakers, who defended the program Monday, have ruled out voting for higher taxes as part of a budget deal.

Enterprise zones get Long Beach defense

A Long Beach city official led the charge Monday in Sacramento against a plan to eliminate state enterprise zones, even as recently released studies gave mixed reviews of the zones’ economic benefits.   

Craig Johnson, manager of Long Beach’s enterprise zone and president of the California Association of Enterprise Zones, was one of dozens of city officials, business owners and concerned citizens to speak either for or against Gov. Jerry Brown’s plan during an Assembly subcommittee meeting. The meeting was purely informational and the subcommittee didn’t make any decisions.   

“Contrary to what you might have heard today … it is a very effective program,” Johnson told the Press-Telegram afterward, adding that in 2010 enterprise zones created 800 jobs in Long Beach. “The idea was to create a program that fostered economic growth. The easier you make it for businesses to operate and do what they do, then they’re going to hire more people.”   

However, Jed Kolko, a research fellow at the Public Policy Institute of California, testified at the meeting that his study found otherwise.   

“Enterprise zones on average do not raise employment,” Kolko said.   

Instead, the zones tend to favor certain areas or certain workers over others in creating jobs, he said.   

Enterprise zones are established in low-to-middle-income areas and provide tax incentives for businesses that hire specific types of workers, such as those with a criminal past and people who are receiving unemployment benefits. About 70 percent of Long Beach is in enterprise zones.   

The Assembly’s budget subcommittee was discussing both the elimination of enterprise zones and another key proposal of the governor’s budget-balancing plan – the elimination of redevelopment agencies. The agencies allow cities to hold onto property tax revenue, instead of giving it to the state, to spur the development of poor and blighted neighborhoods.   

Eliminating the enterprise zones alone is projected to generate $343 million for the state in 2010-11, and $581 million in 2011-12. The new revenue would help cut California’s $28.5 billion budget deficit.   

Yet Johnson questioned whether the state could reap such savings, noting that enterprise zones actually save California money by helping businesses grow and taking felons and the unemployed off the government dole.   

That doubt was raised as well by Charles Swenson, a research fellow at USC whose own study produced far different results than Kolko’s.   

Swenson testified to the subcommittee that unlike Kolko’s study, his looked at enterprise zones throughout the country, and he found that they decreased unemployment by an average of 3.1 percent. In California, that number was 3.4 percent.   

Poverty levels also dropped while income levels rose in enterprise zones, Swenson noted.   

“Enterprise zones work,” Swenson said. “We think it’s going to increase unemployment if they’re eliminated.”   

Meanwhile, adding fuel – and confusion – to the fire, the independent California Budget Project released a study Monday that says enterprise zones are ineffective.   

The study notes that the loss in tax revenue to the state because of the zones has risen from $675,000 in 1986 to $465.5 million in 2008, while benefitting mostly large businesses. Corporations with $1 billion or more in total assets claimed more than 70percent of the enterprise zone tax credits, the study says.   

The governor has set a March deadline to pass the state budget.   

Budget cuts jeopardize redevelopment agencies

Governor Jerry Brown has said balancing our budget is going to be ugly and the first item on the chopping block is state funding to redevelopment agencies.

Every year about $5 billion is allocated to these agencies that could otherwise be used for schools and other state programs.

The redevelopment agency in Bakersfield is responsible for many improvements and projects including the Rabobank Arena, the Mill Creek Project, Fire Station 5 renovations and the beautification of downtown.

“18 years ago the streetscape and investment in the downtown and the Rabobank, basically what you had was probably 60% to 70% vacancy in the buildings, basically you could have shot a canon down Chester Avenue and wouldn’t have hit anything along your way,” said Donna Kunz, Bakersfield Economic Development Director.

Governor Brown’s goal is to free up tax dollars to fund schools and other state programs which have suffered with California budget problems.

“What we found was that looking at enterprise zones and carefully comparing to what happened to jobs in those areas with carefully constructed comparison areas, showed no difference in employment growth, either immediately after a zone is designated or several years after designation,” said Jed Kolko, Public Policy Institute of California.

Speculation of economic growth due to redevelopment are in question, therefore, State Controller John Chiang launched an audit of 18 redevelopment agencies to determine if they really provide economic gains to communities. Here at home, the Economic and Community Development Agency says the proof is in the pudding, especially when looking at our convention center.

“All those ticket-paying folks also pay sales tax on those tickets, buy food. That sales tax returns to the city for police and fire, public works and streets,” said Kunz.

“They’ve run out of other things to do so, basically, they have to confiscate and steal from somebody else to pay our bills, and it’s too bad because there’s been many successful redevelopment projects in Bakersfield,” said Michael Turnipseed, Kern Taxpayers Association.

State Enterprise Zones Provide Little Bang for the Buck

California’s enterprise zones suck hundreds of millions dollars out of the state treasury every year but fail “to create jobs or new businesses – key goals of the program,” according to a new report released today  by the non-profit California Budget Project.

“At a time when we’re raising community college tuition, throwing 250,000 kids off welfare, and dramatically cutting funding for the University of California and California State University” it makes sense to examine the effectiveness of enterprise zones, the budget project’s director Jean Ross said in an interview.

Gov. Jerry Brown has called for the elimination of tax breaks provided through California’s enterprise zone program as he attempts to balance the state’s $25 billion budget deficit.

The state Department of Finance estimates that eliminating the state’s 42 enterprise zones could generate $343 million this year and $581 million next year.

“We need to transform our state, given the ongoing fiscal crisis,” the Finance Department’s H.D. Palmer said.

In an e-mailed statement, Craig Johnson, the president of the California Association of Enterprise Zones, criticized the California Budget Project report and said that the additional revenues predicted by the governor’s finance department could be a mirage. 

Johnson said enterprise zones created or retained more than 118,000 jobs in California in 2010 alone.

“The Governor’s proposal to eliminate enterprise zones is not only legally questionable, but will also increase taxes, put a further burden on the jobs climate and disadvantaged communities who are already struggling during these tough times. While we understand the state is facing a difficult budget year,” Johnson wrote, “the last thing we should be doing is raising taxes, making it more difficult to hire and eliminating one of the few programs that helps people get off government assistance and on to self sustainability.”

Originally designed to spur economic development in blighted areas by providing tax incentives to companies who locate in them, enterprise zones have become ubiquitous throughout California. The  tax credits and benefits are substantial. Firms can earn $37,400 or more in state tax credits for each qualified employee hired, carry forward their operating losses for 15 years for tax purposes, earn sales tax credits on purchases of $20 million per year for qualified machinery and parts, and depreciate their equipment up front to further limit their tax liability.

But the California Budget Project found the zones are not necessarily located in the most blighted areas. For example, 12 percent of the all tax breaks were taken by companies doing business in San Francisco’s enterprise zone – an area that includes, not only the impoverished Bay View, but also the Financial District, Union Square, and Fisherman’s Wharf. 

That means Bloomingdales, Nordstrum, and the Sheraton Palace Hotel are all allowed to take special state tax breaks for hiring workers and paying sales tax.

“State corporate taxes comprise just one or two percent of a business’ costs in California, so there is no California tax break large enough to affect an international decision,” Ross said.

In recent years, some Bay Area companies have received additional tax breaks from enterprise zones and still laid off their workers.

In the Summer of 2009, local officials and the state economic development agency agreed to extend Oakland’s enterprise zone into Berkeley to keep the drug-maker Bayer from shuttering their West Berkeley factory.

California’s enterprise zones debated

SACRAMENTO, CA – Gov. Brown’s proposal to do away with enterprise zones and redevelopment agencies as part of his plan to balance the state budget was heard before two Assembly committees Monday.

The enterprise zone program offers tax credits and other incentives to businesses in 42 zones throughout the state.

Studies show conflicting results for enterprise zones. The non-profit California Budget Project, which advocates for low and middle class families, shows enterprise zones place an increasing strain on the state budget and that large corporations are by far the biggest beneficiaries. However, a USC study showed enterprise zones increase employment by two percent, household income by seven percent and also helped reduce poverty in the targeted zones.

The Public Policy Institute of California found in a 2009 study that funds going to enterprise zones did not improve employment figures.

“What we found,” said the PPIC’s Jed Kolko, “was that looking at enterprise zones and comparing to what happened to jobs in those areas with carefully constructed comparison areas showed no difference in employment growth, either immediately after a zone is designated or several years after designation, compared to those controlled areas. At the same time, the enterprise zone program encompasses a large number of zones in the state that have a lot of diversity, and we found that program effectiveness does seem to vary across zones, some are more effective than others.”

Whether the Legislature supports Brown’s plan, it appears the matter will go to court.

Enterprise zones haven’t created jobs in state, study says,0,5271711.story

California’s enterprise zones, which are designed to stimulate investment in hard-pressed geographic areas by providing tax credits, don’t create jobs, according to an analysis released Monday by the California Budget Project.

“Our review of the most up-to-date data on the Enterprise Zone Program finds its cost has soared, but our communities haven’t seen the jobs and economic growth they were promised,” said Jean Ross, executive director of the California Budget Project.

The analysis shows that the cost of enterprise-zone tax credits grew to $465.5 million in 2008, the latest year for which data are available, from $675,000 in 1986. The average cost per zone increased to $11.1 million in 2008, from $48,000 in 1986.

  In addition, 70% of tax breaks related to enterprise zones are claimed by corporations with assets of $1 billion or more. Many of those corporate tax credits in 2008 were claimed by companies in the San Francisco zone, costing the state $25.5 million.

The report also says enterprise zones don’t necessarily motivate companies to create new jobs. Because the credits are for new hires, not new jobs, companies can continually hire new employees into high-turnover positions and get credits although no new jobs are created.

The data echo a 2009 report by Jed Kolko of the Public Policy Institute of California, which found that enterprise zones have no overall effect on job growth. The nonpartisan Legislative Analyst’s Office has agreed, recommending in 2010 that enterprise zones be eliminated.

The issue is, however, a controversial one. Some business leaders contend that doing away with enterprise zones is unconstitutional. Others cite a 2009 study by USC professors that showed that enterprise zones increase employment by 2% and household income by 7%, reducing poverty.

“The governor’s proposal to eliminate enterprise zones is not only legally questionable, but will also increase taxes, put a further burden on the jobs climate and disadvantage communities who are already struggling during these tough times,” said Craig Johnson , president of the California Assn. of Enterprise Zones. “While we understand the state is facing a tough economic time, the last thing the state should be doing is raising taxes, making it more difficult to hire and eliminating one of the few programs that helps people get off government assistance and on to self-sustainability.”

On Monday, a state Assembly budget committee heard testimony from supporters and detractors of enterprise zones, the geography-based tax incentive program that is on Gov. Jerry Brown ‘s chopping block. Brown says eliminating enterprise zones would make an additional $924 million available to local governments.

Town of Truckee reclaims $2.28 million in redeveloment funds in fear of state raid

TRUCKEE, Calif. — Under a dark forecast from Sacramento that Gov. Jerry Brown’s new budget could drain statewide redevelopment funding, town council has taken a pre-emptive approach by approving an early repayment of a $2.28 million loan.

At last Thursday’s town council meeting, members unanimously approved a request for the full repayment of the loan from the town’s redevelopment agency budget to the town’s general fund, including any outstanding interest incurred from it, made in September 2006.

According to the town, the request was made due to the instability of current legislation in Sacramento to potentially require the seizure of all redevelopment funds from redevelopment agencies across the state.

“Repayment of this loan to the (town’s) General Fund will assure the General Fund that its investment is returned without any ‘taking’ by the state,” town staff said in the request.

Kim Szczurek, Truckee’s administrative services director, said the move provides an additional level of security should redevelopment funding be in trouble.

“If things settle down then we can look at re-lending it back to the projects that we had anticipated it for,” Szczurek said.

According to numbers from February 2010, the town’s RDA held roughly $12.5 million in bond revenue.

Szczurek said the state legislature continues to discuss a potential redevelopment bill, Szczurek said; no concrete details have been solidified despite indications developments would come sometime last week.

City officials to meet on governor’s plan to end redevelopment funds

Representatives from up to 37 cities, including Visalia, will assemble inside the Visalia Rawhide Hall of Fame Club at Recreation Park’s baseball stadium starting at 6 p.m. Thursday to discuss Gov. Jerry Brown’s controversial proposal to eliminate tax-saving redevelopment districts.

The discussion, featuring guest speaker Marshall Linn of the Orange-based Urban Futures Inc., takes the form of a general membership dinner and meeting of the South San Joaquin Valley Division of the League of California Cities.

The public is not invited to what is technically a closed membership session, but league spokeswoman Hilary Baird said a coalition is forming that invites anyone to join the opposition to  Brown’s proposal.

“Redevelopment districts encourage job growth,” Baird said. Terminating existence of the districts is the “worst thing” that can happen in a down economy, Baird said.

Linn agrees.

“It’s ludicrous,” Linn said Monday night of the governor’s plan. “Look at Dinuba, where the proper use of redevelopment districts has been very successful.”

Dinuba, in northwest Tulare County, has become one of the fastest-growing cities in the state, even the nation, as a result of redevelopment districts, which tend to encourage business growth of all kinds, experts say.

Linn said he will propose some guidelines at Thursday’s session for how cities can best stop the elimination of redevelopment districts.

Brown first floated the proposal last month, and it was immediately shot down by a chorus of opposition from California cities.

California budget plan jeopardizes major projects in San Francisco

The City’s Redevelopment Agency has analyzed the potential impact of the governor’s proposal to abolish such agencies, and the results are not pretty.

Elimination of the San Francisco Redevelopment Agency would jeopardize major projects such as the Transbay Transit Center and the transformation of Treasure Island, and it would threaten to cancel construction of tens of thousands of new homes across The City.

Gov. Jerry Brown’s proposal to close redevelopment agencies and redirect their funding to other state and local needs leaves almost all San Francisco’s major development projects at risk, according to an agency report to be reviewed by The City’s Planning Commission on Thursday.

Under the governor’s proposal, the state would confiscate unclaimed redevelopment funds, although some of that money would be redirected back to local governments for core services such as education and fire and police.
“I personally think it is extremely shortsighted,” Planning Commission Vice President Ron Miguel said. “Unless you create a tax base and put people to work, you will not have what you need for the future.”

If the Legislature were to approve Brown’s proposed budget, $1.7 billion of city redevelopment funding would be redirected to offset state Medi-Cal and trial-court deficits and $200 million will go straight back into core programs, a governor’s spokesman said.

Meanwhile, $2.2 billion would be set aside to help complete existing projects, tie up loose ends and cover debt, spokesman H.D. Palmer said.

“We believe that the $2.2 billion is a reasonable estimate,” Palmer said.

But local officials fear there is no guarantee that would cover the agency’s existing financial commitments. That is because Brown’s proposal does not spell out which pre-existing deals would be allowed to keep their funding and which would not.

“I don’t know as of this second what it means for Hunters Point or Treasure Island, where construction has not begun,” said Executive Director Gabriel Metcalf of the local think tank San Francisco Planning and Urban Research Association. “That’s my fear.”

Consequently, the developers of some large projects are rushing to finalize their details to eliminate the risk of funding uncertainty. The developer Lennar Corp. hopes to soon sign an agreement for the massive Treasure Island redevelopment project that would lock in funding before the governor’s proposal could take effect.

“Access to public financing for certain projects is essential to bring private investors to the table, particularly for projects in areas that typically have not attracted much investment,” Kofi Bonner, Lennar’s regional president, wrote in an e-mail.   

Calimesa unsure about redevelopment agency

 CALIMESA – While some cities are quite vocal about keeping their redevelopment agencies, Calimesa remains ambivalent, for now.   

The Calimesa City Council unanimously voted Monday to bring back an item that would say the city is against eliminating redevelopment agencies.   

Under Gov. Jerry Brown’s proposed budget cuts, redevelopment agencies, which are responsible for revitalizing areas of deterioration, may be cut entirely. The possible legislature has already met opposition from other cities, like Rancho Cucamonga and Fontana.   

“I have reservations either way,” said Councilmember Jeff Hewitt, who serves as the council’s redevelopment agency vice-chairman. “(Eliminating redevelopment agencies) would change the way we do things at every level.”   

The councilmembers debated at their meeting about the pros and cons of the redevelopment agency. Councilmember Jim Hyatt said that he knew that many cities had problems with their agencies due to financial abuse.   

“It’s not happening in our city,” Hyatt said.   

Hyatt asked that the council come back to the action item, adding that the League of California Cities “is digging their heels in,” trying to keep redevelopment agencies from being cut.   

“I think it’s premature to act at this time,” Hyatt said, explaining that he would support signing a letter from the council in opposition to the proposed elimination.   

The council was unanimous in its decision to look at the item in more depth at its March 7 meeting, which would allow council and staff time to research the impacts eliminating the city’s redevelopment agency would have.    


Editorial: Abolish  a  failed tax break, plug a budget hole

If there was any doubt before, there is none now: Corporate tax breaks  known as enterprise zones need to be abolished.
An analysis shows these tax breaks  do no favors for most small businesses. Rather, the beneficiaries are corporations that report revenue of $1 billion or more.
The analysis comes from the nonprofit California Budget Project, which delivered its report to an Assembly committee on Monday. The organization is liberal but has analyzed the budget for years. In this instance, the information is based on Franchise Tax Board data.     
 Gov. Jerry Brown,  trying to solve the state’s $25 billion deficit, has called on the Legislature  to take the step of eliminating enterprise zones, which provide $500 million a year in tax breaks and are supposed to stimulate jobs but have fallen short.
The lobby backing the zones is formidable, as was reflected by the intense interest during the overflow Assembly hearing. Certainly, businesses located in these zones benefit from tax breaks they receive. No doubt, many businesses located in these zones have hired workers.
But too few businesses located in the zones actually create jobs because of incentives they receive, according the  Legislative Analyst’s Office   and research from the Public Policy Institute of California.
The California Budget Project, relying on Franchise Tax Board information, found that businesses with revenue of $1 billion or more represent less than one-half of one percent of the corporations in California, but received 70 percent of the enterprise zone tax breaks  in 2008.
Corporations with less than $1 million in assets claimed only 1.6 percent of the credits, making it clear that small businesses are not the main beneficiaries of these tax breaks.
California’s  enterprise zones are spread across the state. Many are in smaller towns with high unemployment  such as Calexico, Delano and Shafter.
But those towns have received little benefit compared with businesses within San Francisco’s enterprise zone, which received 12 percent of the credits granted in 2008, and businesses in Los Angeles’ five zones, which claimed 20 percent of all credits.
Businesses located in enterprise zones receive tax credits  for hiring workers, amounting to $273.5 million in 2008. But the credits are for new hires, not new jobs.
“In other words,” the budget project noted, “businesses could perpetually claim hiring credits for eligible workers who refill positions that open up due to normal turnover, without creating any new jobs over the lifetime of the enterprise zone.”
Enterprise zones were well-intentioned efforts to bring jobs to urban cores. But like many government programs, this one has not proven its worth, and needs to go away. As it goes, it will help solve the state’s budget mess.
The Bee’s past stand
“One [problem] is that businesses just outside the zones don’t get a break for hiring. Another is the zones are supposed to be in distressed areas. Some are. Others are not, like one in the bustling South of Market area of San Francisco. Worst of all, businesses can receive a tax break  retroactively for up to four years after they’ve made a hire.”

Dan Walters: Questions abound on Brown budget plan
 Four weeks after Gov. Jerry Brown unveiled his complex plan to balance the budget, those affected by his spending cuts continued Monday to beseech legislators for relief.

Advocates of health and welfare services targeted by Brown packed the Capitol for two weeks, some saying cuts could be death sentences for some recipients.

They’re back this week, and educators and advocates for libraries, redevelopment agencies and enterprise zones are joining the parade of the aggrieved.    

 The heads of California’s three systems of higher education told lawmakers Monday that while the $1.4 billion in support cuts Brown proposes will hurt, they’re worried about long-term deterioration.

“We are turning people away,” Community Colleges Chancellor Jack Scott told reporters prior to the triumvirate’s appearance. “What I see looming is the access issue,” University of California President Mark Yudof added. “At the end of the day (UC) may have to be smaller.”

Brown’s 60-day window for hammering out a budget deal  – tied to staging a special election in June on extending temporary taxes – is half gone, and there are no overt indications of a breakthrough.

Republicans have steadfastly opposed placing the $10 billion a year in tax extensions before voters. Democrats have hinted that if the GOP doesn’t provide votes to do it, they may try to do it on their own.

However, Democrats haven’t fully signed on to Brown’s prescription either, and are getting big-time heat from recipients of the “safety net” services he would cut.

The Capitol is seething with rumors, trial balloons and unanswered questions about what may happen in the next five weeks – if anything.

What would it take for Republicans to let the tax election proceed? A hard spending cap on the same ballot? Some tough public pension reforms? Public employee unions, which have great sway with Democrats, would oppose both.

Will business groups help Brown round up Republican votes because the governor has not sought specific tax increases on business that the Democratic left would prefer to taxes on consumers?

Can Democrats be persuaded to cut billions of dollars in services to the aged, poor and disabled, which also would affect the unions whose members deliver the services?

Would the unions trade spending cuts for their long-sought goal of making child caregivers public employees who could be unionized, similar to what happened with in-home service workers a decade ago?

Would the 400-plus redevelopment agencies Brown wants to eliminate buy their way off the target list by permanently shifting some of their multibillion-dollar revenue stream to other purposes, such as schools and police agencies, thereby saving the state money?

Many questions. As yet, no answers.     

City Aggressively Moving Forward with Redevelopment Projects

When Mayor Gina Belforte and City Manager Gabe Gonzalez met with the Senate Budget Subcommittee last week to discuss disbanding redevelopment agencies, as scores of California’s leaders did, one thing stood out, said Belforte: the senators asked city leaders for their opinion on how to keep the tax increment dollars.

“What really surprised me and encouraged me was that Senator La Malfa [R-Richvale] asked for our ideas … on how we can keep redevelopment agencies, but possibly tighten up on the rules a little bit,” Belforte said. “Some cities may have used the funds inappropriately.”

“Nothing’s been decided so we’re moving forward as planned,” Gonzalez said.

So, what should Rohnert Park residents expect?

Patch sat down with Linda Babonis, who’s in charge of all redevelopment projects here, after the City Council agreed to fast-track 13 new redevelopment projects on Jan. 25 for $22.5 million — here’s a run-down on the projects currently underway.

We’d like to hear from you, readers. What do you think of the projects? How will they impact Rohnert Park, either for the better or the worse?

1. Recreational and Community Facilities Improvements: City allocated $3.2 million to improve the city’s recreational and community facilities. Some possible projects include building an aquatic facility, installing an all-weather field and building a sprinkler park for kids. Babonis said she’s unsure of where these projects will be located as of yet.

“We’re moving forward on those projects pretty quickly,” Babonis said.

2. Community Center Improvements: City allocated $2,463,824 for improvements of the Community Center campus. That includes possibly installing solar and switching to energy-saving lighting, for example.

3. Community Building Improvement Program: $1.6 million was allocated for the Commercial Loan Rehabilitation Program, which is the program that allows the city to give below market-rate loans to commercial developers who want to renovate their dilapidated shopping centers and office parks.

4. Rohnert Park Housing Rehabilitation Loan Program: $535,000 was allocated to help make health and safety improvements on housing for low-income families, seniors and people with disabilities.

“Most of those loans are forgivable,” Babonis said. “In many cases, maintenance and improvements to these people’s homes have been delayed to the point that they pose a risk to the residents’ health and safety.”

5. Assistance to Community-based Organizations: the city allocated $843,000 to area nonprofits such as SCAYD , COTS , and Rebuilding Together . Read the story here  about how redevelopment funds keep nonprofits afloat.

“This allows us to step in and help when needy families and individuals need emergency assistance,” Babonis said.

6. Temporary Fire Station Facility: $267,500 was allocated to provide funding for public safety officers to operate out of a new fire station on the west side of Rohnert Park.

7. Community Sign Program: $377,571 was allocated for the city to install new signs all over Rohnert Park, that highlights major attractions in the city, public facilities and schools, for example.

“This will help with tourism and economic development,” Babonis said. “People from outside of the city will be directed towards our main attractions.

8. Neighborhood Beautification Program: The city is setting $30,000 aside in case a specific neighborhood needs improvement.

“If an area is blighted or a neighborhood needs to be cleaned up, residents or community service organizations may apply for grants through the city’s neighborhood beautification program,” Babonis said.

9. Avram Development and Former City Hall Rescue: The city is giving more than $4.7 million to subsidize the development of affordable housing at the former city hall, 100 and 120 Avram avenues, Babonis said.

“We want to explore mixed-use development and include possible some retail or commercial use on the ground level, and build affordable housing on top,” she added.

10. Southwest Boulevard Shopping Center: City is setting aside $1,840,400 for the development of a possible mixed use affordable housing complex at the Southwest Shopping Center, Babonis said.

“That complex also needs to be retrofitted for earthquake safety and it needs safety improvements,” she said.

11. Subsidies for Nonprofit Development: $3.3 million is allocated to help fund affordable housing.

12. Southwest Fire Station Reuse: The city says this $2.14 million set aside could be used to create a nonprofit incubator at the former Southwest Fire Station, and could include low-income housing.

13. Acquisition of Affordability Covenants: This $1.16 million is set aside to pay property owners who agree to allocate a portion of apartment complexes to low-income people. The city would pay for any repairs that need to be done, such as replacing roofs, resurfacing a parking lot or even installing solar paneling, and in return, the property owner would designate a portion of the housing on site as low-income housing for a set period of time.

Can Redevelopment Agencies Be Saved?

Gov. Jerry Brown ‘s proposal to eliminate redevelopment agencies (and replace them with a system that makes it easier for local communities to raise taxes for economic development) has momentum. So supporters of redevelopment are trying to stave off elimination by suggesting reforms to redevelopment.
The most thoughtful example of this sort of suggestion comes from Madeline Janis, who heads the Los Angeles Alliance for New Economy , a labor-backed think tank, and a board commissioner on LA’s Community Redevelopment Agency (which is known for, among other things, renting goats, shown in photo, to clear a hillside of grass and weeds).
She writes in the LA Times that the rules on redevelopment should be updated to eliminate the biggest boondoggles and prevent agencies from taking too many tax dollars from other public services for too long. She also suggests stricter legal definitions of what constitutes “blight” so that redevelopment is limited to communities that “have high unemployment, high poverty or abnormally high rates of foreclosure.”
While she makes a good argument, the case is still unconvincing, because it doesn’t really reckon with the two main problems posed by redevelopment.
The first is that redevelopment inevitably is a process that local officials can use to reward the connected and the powerful. Even with new limits, the incentives of locals to use this power to help campaign contributors remain and pick winners and losers reain.
The second is that California has too many rules already governing the local-state relationship. What’s great about Brown’s proposal is that it is simple–it eliminates and clarifies by simply eliminating redevelopment agencies. If communities want to do economic development, they can raise taxes themselves with a 55-percent vote, under a companion constitutional amendment Brown is proposing.
That sort of local control creates the right kind of incentives. If local leaders want to do economic deveopment, they should have to make and defend a decision on raising taxes for those projects. That should make it harder to fund boondoggles by the well-connected — and focus economic development on areas that truly need it. Which is exactly what Janis wants too. 

Poster Children for Abolishment

Many Californians were not aware of the Redevelopment Law that allows (but does not mandate) the creation of a Redevelopment Agency (RDA) in order to eliminate “blight.” But Governor Jerry Brown upset the serenity of Redevelopment in California by focusing a beam of light on RDAs, their massive burden of debt on the State and local budgets, and one of RDA’s draconian powers, Kelo-type Eminent Domain.

With a bright light on Los Angeles’ Redevelopment Agency (CRA/LA), the biggest in the State, and its neighbor, the City of Glendale, and their Redevelopment Agency, the Glendale Redevelopment Agency (GRA), both Agencies became poster-children for abolishing all RDAs in California.
A hastily prepared plan was first hatched in Los Angeles to shield almost $1 Billion in unused Property Tax increment funds from Brown’s plan to return them to “…schools, counties, special districts, and city general purposes.”

Glendale quickly followed its “Big Brother” one week later with the same short 24-hour Special Meeting notice which had a hyperlink that was supposed to link to a detailed report, but instead lead to single a page with only the following text: “REPORT FOR SPECIAL JOINT CC GRA HA[D] TO BE POSTED SOON.”
Then with all of California watching, the RDAs of Los Angeles and Glendale stepped up to the plate to protect and nurture an often misunderstood species, LA’s Billionaires.

In Los Angeles, the CRA/LA moved to help out LA’s good friend, Billionaire Eli Broad by providing taxpayer funding of $52 Million to build a new a “City-owned” parking garage for his “personal” project, a museum to house Broad’s art collection.

The LA City Council’s approval came on the heels of a fierce City-wide debate over the Mayor’s insistence to “sell off” City-owned parking lots. He used City Employees as pawns in a twisted report that included a layoff threat if his “P3 plan” wasn’t approved. Angelenos were rightfully confused by the contradicting messages sent to them by the City Council and Mayor.
Of course Glendale also let the rest of California know that it too cares about Billionaires as it sought to protect, comfort, and please, Los Angeles resident and developer, Rick Caruso, who is seeking its support to obtain ownership of a property that is not for sale.

Ray Patel, the owner of the Golden Key Hotel, which is located next to Caruso’s “Americana at Brand”, has said that he wants to keep his family-owned business and that he has submitted plans to redevelop his hotel. (Link)

Under California Redevelopment Law, Glendale is required to offer Mr. Patel an opportunity to submit his own Redevelopment plan to their GRA. After that, Glendale will still move ahead and Condemn Mr. Patel against his will and forcibly seize his business, property, and source of livelihood for his family unless public pressure is put on the Glendale City Council to stop this travesty of justice.
To give you a little history, the GRA previously acquired the current Americana site’s properties by exercising its Kelo Eminent Domain powers from other private owners. Then the GRA handed over the properties to Mr. Caruso for him to build on in exchange for a “profit sharing agreement.” But according to a September 13, 2010 Curbed LA article by Dakota Smith, Caruso is under performing and Glendale hasn’t seen a cent from the Billionaire who gets to keep sales proceeds at or below “11.75% return on its investment and 8.25% return on residences.”

With this background, Caruso sent a letter to the Glendale City Council (remember, they double as its Redevelopment Agency – how convenient is that?) and the City Council made no secret that it would side with Caruso.
The type of abuse of power demonstrated by Glendale’s City Council was in retired US Supreme Court Justice Sandra Day O’Connor’s dissenting opinion in Kelo v. New London when she wrote: “The specter of condemnation hangs over all property. Nothing is to prevent the State from replacing any Motel 6 with a Ritz-Carlton, any home with a shopping mall, or any farm with a factory.”

The State Legislature needs to be made aware of the reality of Redevelopment that siphons away funds that should be used for education, public safety, and other critical local services. Instead, Redevelopment Agencies run up massive debt which serves to benefit  wealthy developers, financiers, and development-related law firms and supplies trickle-down benefits for the less fortunate in the most ineffective and inefficient way.

Allowing the power of Eminent Domain to forcibly sieze land, small businesses, and homes, and hand them over to a larger, wealthier private entity should not be acceptable anywhere in the Country and especially not in California and Los Angeles where we have a history of forward  thinking and appreciation of freedom and protection of our basic rights.

If you feel the same way, please make a difference and look up and contact your State Representatives (in the Assembly and in the California Senate) letting them know that the time to abolish RDAs is long overdue. And also feel free to contact the Glendale City Council and ask them to stop harassing a small business owner on behalf of a Billionaire.
Viewpoints: Find compromise in redevelopment war
California  is buzzing – and steaming in some cases – over Gov. Jerry Brown’sproposal to dismantle the state’s 400 Community Redevelopment Agencies as part of his budget. A scandalous suggestion to some, but let’s not forget: He is trying to square the circle of a monster $25 billion budget deficit. Moreover, both supporters and opponents of the plan have strong arguments.

Is there a middle ground? The answer is yes – if the two sides realize that both have legitimate points leading toward potential compromise.

On the pro-redevelopment side, there is a legitimate claim that these agencies  have played an important role in helping to build California.
Developers wanting to invest in urban communities, particularly areas that are underdeveloped and need it the most, face daunting challenges. There are fights with local zoning boards, a potential lack of appropriate infrastructure for a specific project, and huge environmental remediation costs for urban land. Having a local redevelopment agency behind the effort can be an enormous help, as can the right to declare an area blighted, something a redevelopment agency has the power to do.

Some developers go so far as to say that the soft money from redevelopment agencies is the “make or break” difference in a project. This is especially true for affordable housing projects,  which California  desperately needs.

Redevelopment agencies  also bring much-needed organizational principles to the table. A fancy entertainment zone will not be profitable without local draws such as sports venues and hotels. No single developer will be willing to make an investment unless others are willing to make them as well.

Redevelopment agencies  act to coordinate these efforts. They guide the collective actions of multiple developers, provide technical expertise and take risks where local bureaucrats won’t. Without this kind of central, guiding force, many profitable projects might never start at all. This is particularly true for very large projects – think Downtown Los Angeles Live.  

There are also serious cons to the redevelopment argument. Brown and his supporters make valid points. Most basically, the idea that redevelopment must be funded during this period of intense fiscal crisis is simply wrong. Pick your standard cliché here – rearranging the deck chairs on the Titanic, or fiddling while Rome  is burning. Clearly there are more pressing uses for the state’s funds in the short run.

The governor is right to focus on essential services. The money is still spent with associated multipliers; robbing Peter to pay Paul  creates the same economic impact on local markets.

There are also valid questions as to how the money is actually spent. Land developers and local governments are often uncomfortably close as it is, and with a large pot of money involved and little direct oversight by the people, the potential for abuse is very real.

Additionally, while there are significant success stories, money shifted to redevelopment agencies may not be used in the most effective way overall. Redevelopment sources claim to have built 98,000 affordable housing units already. But that is a cumulative total since 1993 – a pretty meager number for 18 years and one that doesn’t come close to keeping up with population growth, or meeting the housing shortage challenge that may end up being one of the greatest long-term barriers to growth in California.

In other cases, such as when funds are being used to build firehouses or other public infrastructure, it often appears as if local governments are using the money as ad hoc municipal slush funds, rather than to meet the specific mission of the redevelopment agency.

So there’s good, bad and ugly in the world of California’s redevelopment agencies. However, strategic changes can be made to preserve the good while helping to eliminate some of the waste and potential for abuse.

There should be more democratic oversight. Specific, transparent accounting rules should be implemented to guide how the money is spent and how the priorities are set.

Funding should occur on an as-needed basis, following tough due-diligence exercises rather than simply pouring the cash into a pool indiscriminately.

There should be a mechanism to partially divert funding to state operations in times of need, but on a temporary basis with explicitly stated time limits.

Redevelopment agencies should be mandated to explicitly identify and then focus their efforts on what California and its local communities really need. Today, that is clearly much more affordable housing and less of other kinds of development.

As always, the devil is in the details. But opening a clearing and having a general framework for compromise is always the starting point. Isn’t that what our democracy is all about?    

Editorial: Tough times call for tough measures toward redevelopment agencies

WE’RE DISAPPOINTED by city officials’ complaints about Gov. Jerry Brown’s plan to stop redevelopment agencies from grabbing property taxes that’s needed for other critical public services.

Rather than continuing hyperbolic protestations in a bid to hang onto more than their fair share of property tax money for projects in their communities, these leaders should consider the greater good and engage in reasoned analysis of whether redevelopment is a responsible expenditure of public funds during such drastic fiscal times.

There is no question that, as city managers and council members across the state insist, redevelopment funds have helped worthwhile commercial projects and affordable housing around California. Conversely, it is abundantly clear that, as the Los Angeles Times has documented and as we’ve seen here in the East Bay, there are widespread misuses of the money — a point acknowledged even by redevelopment proponents.

These are not free funds. Much of it is a transfer of property tax money that would otherwise go to schools, counties and local special districts. The biggest loser is the state, which is on the hook to backfill money taken from schools. That costs the state about $2 billion a year, money that could otherwise go for much-needed social services.

Redevelopment agencies were designed to combat serious blight, but in the aftermath of Proposition 13, some city officials have used redevelopment agencies to help cover their budgets and to fund staff.

In the early 1980s, redevelopment agencies received less than 4 percent of all property tax money collected in California. Today, it has mushroomed to 12 percent. And in some cities, including some here in the East Bay, half or more of the property tax money collected goes to the redevelopment agency.

The argument for preserving the state’s approximately 400 redevelopment agencies is that the projects built with the money stimulate local economies and raise property values, thereby increasing the total property taxes that can be divvied up. But one study suggests about half the tax increases in redevelopment agencies would have happened anyhow. And, as the state legislative analyst concluded, “the presence of a redevelopment area might shift development from one location to another, but does not significantly increase economic activity statewide.”

Meanwhile, these redevelopment agencies have taken out loans and promised future tax revenues as security. The agencies have run up more than $88 billion in debt, including $35 billion in bonds — bonds that required no voter approval even though taxpayers are on the hook.

With Brown threatening to end future borrowing, local officials are shamelessly rushing to seal more deals before lawmakers close the door. It’s time for them to realize they’re hurting other public services.

At the very least, substantial reform is needed in the way redevelopment funds are handled in California.

Almost every city official can point to a project helped by redevelopment money. But with current financial circumstances so dire each leader must ask whether that was the only way to fund the project, and whether it is worth the money taken away from other vital services. Thus far, that case has not been made.

Opinion: Redevelopment is a key to recovery, not a barrier

Last month, Mayor Chuck Reed traveled to Sacramento to re-emphasize what many of us already know: Redevelopment is essential to the economic health of San Jose, the Bay Area and California.

Many have noted the value of redevelopment investments in revenue-generating and neighborhood-transforming projects, such as the HP Pavilion, and redevelopment’s role in providing affordable housing. Less obvious, however, is the redevelopment agency’s critical impact on the North San Jose and Edenvale technology parks.

These two areas not only exemplify Silicon Valley’s role as a global leader in scientific advancement, but they are also crucial to our economic recovery. At a time when businesses are fleeing California for states that can offer better incentives, these technology parks are attracting new companies and allowing existing companies to expand, generating more jobs and tax dollars. This would not happen without redevelopment investments.

The agency has been vital in transforming North San Jose into a vibrant economic area. Home to more than 1,400 companies with 66,000 employees, North San Jose is the world’s most prestigious high-tech address. Since 1977, the agency has invested $174 million in infrastructure, making major improvements in busy areas and stimulating private investment and development. Cisco, eBay, SunPower, Novellus, Agilent and Ericsson have headquarters in North San Jose thanks to the agency.

The agency has also attracted and retained more than 3,400 employees by providing $5.6 million in incentives to Brocade Communications, Intermolecular, Solar Junction, SolFocus and Ultratech. It recently announced the relocation of SunPower to accommodate its planned expansion and attracted Maxim Integrated Products to relocate to North San Jose. Ongoing plans will facilitate the development of 26.7 million square feet of industrial space with the potential to create 83,000 new jobs as well as retail space, parks, residential units and transportation improvements.

In the Edenvale Technology Park, the agency has attracted more than 300 companies employing more than 13,000 people since 1980. Since 2007, it has attracted or retained companies that have created more than 800 jobs. They include Stion, which will add 400 jobs by 2014, and Shocking Technologies, which soon will open a manufacturing plant with the assistance of a redevelopment grant. Hospira, a global pharmaceutical delivery company, will soon build a new facility in Edenvale.

All this activity in these two technology parks underscores a critical fact: Despite the recession, growth in redevelopment areas has continued. A recent Wall Street Journal article said it best by noting that the recent recession has “only tiptoed” through the Edenvale Technology Park. The same can be said of North San Jose.

It is true that the downturn and the resulting decline in property tax assessments have posed a serious challenge to the agency, which relies on property tax revenue to fund projects. But reports of the agency’s demise are both exaggerated and premature, as sales of some agency assets can keep it operational for the next year or two until assessments go back up.

Furthermore, recent signs of an economic rebound portend that the agency can and will continue to play a crucial role in San Jose’s economic growth.

There is no question that difficult decisions must be made to solve the current economic crisis. We must ensure that future redevelopment projects lead directly to more jobs and revenue. But eliminating redevelopment is not, as Gov. Jerry Brown stated, merely “pulling the Band-Aid off quickly.” It is an unnecessary amputation.

Redevelopment is part of the solution to this crisis. The companies that are moving to or expanding in North San Jose and Edenvale are definitive proof.

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