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Governor Jerry Brown Proposes Elimination of Redevelopment Agencies

Governor Brown details the budget at State Capitol today. Photo: Governor's Press Office

Governor Brown details the budget today at the State Capitol. Photo: Justin Short

The following story is republished with permission from the California Planning and Development Report [1]. Streetsblog SF will be following this story in the coming weeks as it develops.

As expected, the budget proposed today by Governor Jerry Brown budget calls for the wholesale elimination of redevelopment agencies.  This dramatic move would free up roughly $5 billion in annual tax increments that redevelopment agencies control and would redirect those increments to fund a range of local services.

The proposal has set off what will likely be an ongoing debate over the value of redevelopment as it has been implemented in the 59 years since California voters approved a constitutional amendment allowing the use of tax increment financing to combat blight. While the governor described the proposed budget as “a tough budget for tough times,” redevelopment officials have already launched their counter-offensive.

John Shirey, executive director of the California Redevelopment Association, called the proposal ” smoke and mirrors that will bring little financial gain for the State, but will cause widespread and significant economic pain in communities throughout California.”

The proposed budget’s chapter on Tax Relief and Local Government includes a wide-ranging indictment of redevelopment. The budget offers the following reasons, among others, why redevelopment fails to live up to its promise:

The budget lists the following relative detriments of diverting the tax increment:

The budget proposes the following steps to disbanding redevelopment agencies and redistributing their tax increments:

This announcement comes on the heels of what redevelopment officials considered a disastrous year. In May, a judge upheld a 2009 law ordering the transfer of $2.01 billion in tax increment [2] from agencies statewide to help fund schools.

Agencies were then ordered to pay $1.7 billion of that payment, with the rest due this year. “Without decisive action, the state’s severe budget problems will persist, threatening economic recovery, job growth, public education and the quality of life in California,” Brown said in a statement. “The adoption of this budget will position the state to lead the country as it slowly recovers from the Great Recession.”

Redevelopment officials contend, however, that the current system and the use of tax increments can stoke that recovery. ”The state and local governments have very few tools to stimulate the economy, but redevelopment is the exception,” the CRA’s Shirey said in a statement.  “Redevelopment is already a locally-governed service which generates hundreds of thousands of jobs.”

The governor’s spending plan assumes that all statutory changes to implement budget actions will be adopted by the Legislature in March, allowing the necessary ballot measures to be put before the people in a June special election.