The notion of using redevelopment to help solve the state's budget deficit continues to percolate in Sacramento. Meanwhile, analyses of the governor's proposed 18-month budget that was released on New Year's Eve are trickling out.
In today's column, the Sacramento Bee's Dan Walters lays out the redevelopment scheme, which we first described two weeks ago. Essentially, in exchange for a portion of proceeds from the sale of tax increment bonds, the state would permit redevelopment agencies to extend their activities for decades.
Most of the discussion so far has concerned the legality and fiscal ramifications of such an approach. But what of the implications for redevelopment itself? State lawmakers have been "reforming" redevelopment since the early 1990s to limit the opportunities for abuse. Among the most important reforms is a mandatory end date for redevelopment activities, which is forcing a number of the oldest redevelopment project areas to shut down by the end of this year. Permitting redevelopment agencies to extend their activities for as much as 40 years without having to make new legal determinations that blight still exists could cancel out many of the reforms.
You won't find the redevelopment extension scheme in the governor's budget proposal. But you will find a truly remarkable array of revenue increases and spending reductions for the remainder of the 2008-09 fiscal year and for 2009-10. Some of the proposals are tried-and-true and typically DOA, such as eliminating Williamson Act subventions. More interesting is the administration's attempt at what would appear to be the impossible – cutting billions from the state budget while using state spending to juice the economy.
Among the measures that get our attention, in no particular order:
• Elimination of $459 million in funding for transit operations, with the money shifted to education.
• Spending an additional $1.15 billion in Proposition 1B funding for building local transit projects.
• Speeding up engineering, design and environmental work for the high-speed rail project by $123 million. This would be funded by the $9.95 billion Proposition 1A bond approved in November.
• Redirection of $100 million in tribal gaming revenues from transportation projects to the state general fund.
• A $2.2 billion push for highway building framed as an "economic stimulus package." This includes "exemptions for a limited number of projects from the California Environmental Quality Act."
• Spending $487 million from the Proposition 1C housing bond for affordable housing, infill development, transit-oriented development and parks.
• A $248 million reduction in the Cal Fire (nee CDF) budget for fire suppression. This is a cut of more than 50%.
• Spending $648 million from Proposition 84 and 1E bond funds for flood control projects in the Central Valley and Bay Delta.
• $5.6 million for environmental work related to renewable energy projects in the Southern California deserts. Included is $3 million for development of a Natural Communities Conservation Plan.
• Elimination of Williamson Act subventions. This saves the state about $35 million a year and makes counties fully liable for reduced property taxes paid by agricultural landowners.
• A $7.2 million increase in a revolving fund to pay for retrofits that reduce energy consumption in state buildings.
• A 9.9% tax on oil production that could generate about $1.2 billion.
• And, of course, the increase in the state sales tax from 5% to 6.5%.
We'll be following all of these proposals and more as the budget evolves in coming days (and weeks and months).
You may find the California State Association of Counties' budget analysis here.
The League of California Cities' brief budget analysis is here.
The California Budget Project analysis is here.
– Paul Shigley
