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Assembly Hearing Discusses Redevelopment Dissolution and Economic Development Tools

March 9, 2012
The Assembly Local Government and Housing and Community Development committees held a joint hearing on Wednesday, March 7 focused on post-redevelopment tools for creating economic development. Legislators were also briefed on the current progress of redevelopment dissolution.
Speaker John Pérez (D- Los Angeles) was the first to address the committees, saying, “It was never our intent to eliminate redevelopment.” He outlined his intentions to move forward and create successful tools which provide local governments with useful economic development tools. He also spoke about his efforts to make various technical fixes to AB 1x 26 to clarify the functions of successor agencies and oversight boards and protect affordable housing funds through his bill, AB 1585.
Progress of Redevelopment Dissolution
Pedro Reyes, chief deputy director of policy, Department of Finance (DOF), reported on the progress of AB 1x 26. DOF is currently working with successor agencies to create oversight boards in advance of the May deadline in order to bridge the gap in the timing contained in AB 1x 26. Reyes reported that DOF was working with Controller John Chiang and local auditor controllers to clarify the allocation of revenues.
Reyes also said that because initial surveys showed that many redevelopment agencies would have opted-in to AB 1x 27, the administration had not expected the elimination of 425 agencies, and may not be sufficiently prepared to administer such a large project. However, Reyes did suggest to the committee that oversights board were the best parties to determine the importance of local projects and decide on enforceable obligations.
Marianne O’Malley presented testimony similar to that heard by the Senate on Feb. 22 and highlighted the Legislative Analyst’s Office handout “Local Economic Development Tools.”
Discussion of New Tools
Michael Coleman, League fiscal policy advisor, provided an overview of remaining tools available to cities in order to address infrastructure needs, affordable housing, brownfield remediation, military base re-use and other functions for which redevelopment agencies had previously been responsible.
Coleman told the committee that while there are some grants available to cities, they cannot replace the level of funding redevelopment agencies offered. Additionally, without matching funds from redevelopment agencies, many of these grants would be hard to obtain. Further, taxes, bonds, and fees which are already being used to fund core municipal services, will be a very limited tool for economic development due to low voter tolerance.
Coleman also highlighted other financing techniques, but emphasized the potential of Infrastructure Financing Districts, which have not been thoroughly explored due to difficulties under current law, but could become a powerful tax increment tool.
Coleman told the legislators that the two biggest challenges to creating new economic tools are: simply recreating the high level of funding that redevelopment made available and the absence of a well-crafted tax increment tool. When questioned about how a new tax increment tool should be structured, Coleman noted that with passthroughs many taxing entities are held harmless, but future tools might be structured to allow entities the option to participate on a voluntary basis. Voluntary participation in future tax increment tools was an idea supported by a number of other speakers.
Assembly Member Luis Alejo (D-Salinas) remarked that currently many of the remaining tools for economic development are not realistic and would lead to a greater inequity for the poorest communities in the state.
The committees also discussed various options including:
  • Downtown development authorities modeled after programs in other states which could utilize public-private partnerships and be funded using only the city portion of tax increment for a limited and specific project. However, Assembly Member Steven Bradford (D-Inglewood) was concerned that this type of program would not benefit smaller cities without a “downtown destination point.”
  • Zoning changes which would allow higher density housing and infill projects were also suggested. Russ Branson, Roseville assistant city manager and treasurer stated that the challenge to zoning changes is that current infrastructure in many cities would not support higher density without infrastructure upgrades, which would be costly to finance.
Reality seems to be setting in among legislators that the loss of redevelopment is a major blow to many of their priorities: infrastructure, affordable housing, brownfield remediation, and other goals that help to ensure that the state’s poorest neighborhoods do not get left behind.
The League is continuing to work to develop proposals within its task force and with legislators to create and expand tools helpful to California cities.

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