Sometimes it seems like California has been reforming redevelopment law longer than it took the original urban blight to be created.
The first reform law was passed so long ago – 1977 – that it predates some of the neighborhoods that are now declared blighted by redevelopment agencies around the state. Every few years, a new round of reforms comes along. And the state's redevelopment establishment – not just the redevelopment agencies, but the lawyers, financial consultants, and investment bankers who swirl around the system – must decide whether or not to bite the bullet and accept some further constraints on their activities.
Now California is on the verge of reforming redevelopment again. This time it looks like the redevelopment establishment is willing to take the hit. Senate Bill 211 by Sen. Tom Torlakson (D-Antioch) would allow redevelopment agencies to stay in business a while longer. But it would slap some new restrictions on the agencies, including a requirement that they figure out what parts of their longstanding redevelopment project areas are still blighted and that they spend their tax-increment money cleaning up those areas.
Torlakson's bill passed the Senate in June and is now pending in an Assembly committee. The measure is likely to become law because the California Redevelopment Agency (CRA) appears willing to accept its terms. CRA's lobbyists and lawyers are working on the bill's concepts and language, and the association will likely not stand in the way of passage.
The reason for CRA's acquiescence is that redevelopment agencies around the state are quickly running out of time. Under the terms of the last redevelopment reform bill, passed in 1993, many agencies will be required to stop issuing new bonds in 2004 and to go out of business altogether in 2009. (Even if they stop operating, they can continue to repay the bonds until 2019.)
With the deadline looming, a few cities have sought individual extensions. Not surprisingly, San Francisco – whose mayor, Willie Brown, was the masterful Assembly speaker for 15 years – got in fast, getting a bill passed last year to permit the city's redevelopment agency to continue taking tax-increment dollars until 2044. (Brown agreed to limit future use of redevelopment money to housing projects only.) This year, Oakland and Sacramento turned up looking for similar treatment. But Torlakson cut them off by introducing a comprehensive bill that would cover all project areas created before 1984 – a list that includes about 60% of the projects in the state, controlling about 80% of the redevelopment tax money. It would affect many of the biggest and oldest redevelopment areas, such as the Los Angeles Bunker Hill project area (adopted in 1959) and the Sacramento downtown project area (adopted in 1966).
Redevelopment is a big deal in California because practically everybody does it. Three-quarters of the cities and half the counties have active redevelopment agencies. There are more than 800 redevelopment project areas in the state. The flow of tax-increment dollars to redevelopment agencies in 1999-2000 totaled about $1.6 billion, or about 8% of all the property tax generated in the state. According to the most recent controller's report, redevelopment agencies in California have about $42 billion in outstanding debt.
In many places it seems as if redevelopment has been going on forever. Some 150 localities have had redevelopment for at least 25 years, and in about 30 jurisdictions redevelopment has been in place since the 1950s. Of the more than 800 project areas, only about two dozen have ever been closed out. Many of San Francisco's project areas date back to the '40s, '50s, and '60s. With those projects now extended to 2044, Mayor Brown is apparently confident that his community can eradicate blight in less than a century.
Admittedly, redevelopment – which is essentially a program to focus infrastructure and private real estate investment in a particular geographical area – is a long-term process based on long-term debt. Cities that undertake redevelopment typically float bonds almost immediately to make public infrastructure improvements, buy land, or provide other financial breaks to developers.
But redevelopment is a unique power. It permits local governments to acquire land via eminent domain and then turn it over to private developers. And it allows local governments unilaterally to appropriate a big share of property tax revenues – a major enticement under Proposition 13, which restricts property tax rates and gives locals little control over how the revenue is divvied up.
For a quarter-century, the state has gradually cleaned up redevelopment. In 1977, the state forced redevelopment agencies to start sharing tax revenue with other taxing entities and also to set aside some money for housing. And after an orgy of project area creation following the passage of Proposition 13 in 1978, the state adopted more reforms in 1993 to reduce further the property-tax share that agencies get and to tighten up the definition of "blight."
Indeed, the question of what "urban blight" really is usually lies at the heart of debates over redevelopment reform. With such important powers and so much money at stake, cities and their consultants have always been highly motivated to find blight wherever they want. But the 1993 reforms, which the redevelopment establishment accepted as a way of avoiding more onerous change, reigned in the blight requirements a lot. Among other things, the blighted area must be predominantly urbanized; blight conditions must be prevalent and substantial; and the blight must be both a physical and an economic burden to the community. This last provision is intended to prevent cities from using lagging sales-tax revenue in an otherwise healthy and successful commercial project as the basis for a blight finding.
The '93 blight reforms are especially important in the context of the current reform debate because what blight is and where it is found is likely to be a key issue. It is probably significant that a measure to loosen the blight standard, AB 1653 (Robert Pacheco), went nowhere this year.
In working out the Torlakson bill with Senate staff members, the Redevelopment Association proposed something that sure seems like a good idea. In exchange for extending the life of the redevelopment projects, the agencies eoulf be required to spend redevelopment money only in those portions of the project area that are still blighted.
This, however, raised the question yet again of what blight really is, because most of the old project areas that would be affected are grandfathered in under the old definition of blight. But the way the Torlakson bill currently reads, the agencies would have to assess remaining blight under the stricter 1993 definition. The implication is obvious: If you want to extend an old project area past 2009 – which is necessary almost immediately if you are going to issue new bonds – then you are going to have do a whole new blight finding in your old project areas based on a tighter definition.
We will see what happens now that the bill is in the hands of Democratic Assemblyman Alan Lowenthal, chair of the Assembly Housing Committee and a former city councilman in Long Beach. But one thing is clear: It is often said that change in Sacramento is incremental, and probably no planning and development issue in the state proves that old saw more correctly than redevelopment. When the Legislature is contemplating another extension of the redevelopment law in 2025 or so, maybe we will be a little closer to figuring out what blight really is — and closer to wiping it out in less than a century.
