California governor Jerry Brown’s proposal to shut down the state’s redevelopment agencies (RDAs) to address the state’s $25 billion deficit isn’t going down well in municipalities across California. And Santa Clara is no exception.
At the January 25 City Council meeting, City Manager and Santa Clara RDA Executive Director Jennifer Sparacino recommended that the Council formally oppose the proposal, offering a letter to the governor stating and encouraging Council Members to travel to Sacramento to make their case in person. Sparacino’s recommendation was approved unanimously by the City Council.
Brown’s budget proposal calls for eliminating RDAs as of July 1, 2011, and transferring to the state’s operating budget the part of the property taxes that fund redevelopment projects – called the “tax increment” – not needed to service existing RDA debt. This year, that would close about a fifth of the deficit – $5.7 billion.
The agenda item came at the request of the League of California Cities, which is marshaling opposition to the governor’s proposal. Although the proposal has a long way to go before becoming law, the City Manager’s office is already evaluating its potential impact and developing an action plan that includes accelerating redevelopment projects currently budgeted.
The most immediate impact of the governor’s proposal would be to capital improvement projects currently on the drawing board, but “where we don’t have obligations clearly defined,” explained Sparacino. “The California Redevelopment Association says that projects in planning that haven’t gone out to bid may be at risk. Even if they are in the capital budget, they may be at risk.”
This includes the Northside library, completing the San Tomas Aquino/Saratoga creek trail, and the proposed 49ers football stadium.
Santa Clara’s redevelopment agency has a history of significant achievement, according to Sparacino.
“We can be proud of the accomplishments of our redevelopment agency,” the City Manager said Tuesday night. “We have a very good record…all of these [projects] have led to good benefits for the city.”
These include funding for major infrastructure in the north of Bayshore area – for example, streets, utilities, firehouses – that have enabled development such as the Santa Clara Convention Center. (Alone, the Convention Center area – excluding Great America – brings the city’s general fund about $18 million from services, occupancy tax, and land lease revenues.)
RDA funding also plays a central role in the city’s affordable housing development, she continued, pointing to senior and special needs housing, Habitat for Humanity projects, and first-time homebuyers assistance. In addition, she noted other RDA-funded projects including Ulistac wetlands preservation and the city’s soccer park.
Not everyone, however, agrees with Sparacino on the value of redevelopment agencies to community well being.
Santa Clara resident Linda Estrada, spoke at the Council meeting in favor of eliminating RDAs, and asking Sacramento to “return our prop tax monies that are used to fund them back to the cities. The [California] Legislative Analyst’s Office* found no reliable evidence that redevelopment projects brings businesses to the state and increase economic development.”
Further, Estrada said, redevelopment property tax diversions took $35 million from SCUSD last year, according to the district’s financial reports.
If the governor’s proposal becomes law, Santa Clara could potentially receive $20 million in tax increment revenue. However, the City would still have to pay off $13.8 million of RDA debt. Of the remaining $6.2 million, $2.4 million would go to the Santa Clara Unified school district.
Estrada also referenced one notorious example of a redevelopment project gone awry that surely had city officials wincing – the 1960 project that gave Santa Clara the money to demolish its historic downtown.
However, should Governor Brown’s proposal become law, it was clear that Sparacino wouldn’t advise cities to make plans for the cash currently funding RDAs.
“Although state hasn’t had this money, the state has used many opportunities to take redevelopment money from cities,” she replied when asked by Council member McLeod about the possible increase to SCUSD. “The city’s finance department estimates that the city’s general fund has lost $60 million since 1992.
“Cities have been hurt strongly by the state’s inability to balance the budget,” Sparacino continued. “And we have less ability to do anything about it – most of our ability to raise taxes has been taken away over the years…by the state and propositions. Having a strong local government is just as much a help to the state as anything [else].”
There is a question about the legality of Brown’s plan. According to current state law, the surplus funds (and debts) of defunct RDAs “vest in the community.” Another obstacle to the proposal is Proposition 22, passed last year, which prohibits the state from appropriating local tax revenues.
* The Legislative Analyst’s Office (www.lao.ca.gov,/) provides non-partisan analysis of finance and policy issues for the state legislature.