Just to clarify: the City of Milpitas lies inside the County of Santa Clara. Judging by their respective interpretations of redevelopment law, however, they might as well be on separate planets.

Having had considerable success using redevelopment project areas and their tax increments to revive moribund industrial sites throughout the city, Milpitas is poised to extend the life of two existing project areas while adding a brand-new project area of roughly 600 acres in the central part of the city, between the 680 and 880 freeways. The plan amendments would increase combined limit on tax increment collection from $2.4 billion to $6.7 billion, and they envision capital improvements for the areas costing up to $1.4 billion.

In 2003 Milpitas adopted an aggressive specific plan to increase density in a redevelopment area in the heart of the city, in part through infrastructure improvements, and it may have similar designs on the proposed addition (see CP&DR Local Watch Vol. 18, No. 11 Nov. 2003).

The Milpitas City Council, acting as the city's redevelopment agency, voted unanimously April 20 to approve the project area amendments and addition, and it is expected to confirm its decision when the amendment is read the second time, on May 4.

After that, the County of Santa Clara will decide whether to sue to stop the amendments.

"The redevelopment law has been beefed up to contain a more rigorous definition of blight," said Lizanne Reynolds, deputy counsel for the County of Santa Clara. "We don't believe that they've shown this blight."

According to city officials, the amendment and especially the addition are sorely needed if the city is to transform deteriorated, under-performing swaths of small, obsolete industrial and high-tech sites – thriving in the age of floppy disks but obsolete today – and unkempt, overcrowded residential areas. Conditions qualifying as economic and physical blight have been extensively documented, say those officials.

"The goal in this particular area is that we have a huge swath of land that is underutilized and in some cases is not utilized at all anymore, with deteriorating buildings most of them old high-tech buildings that were built in the '70s and '80s that no longer are very marketable," said Milpitas Mayor Bob Livengood.

Consultants Keyser-Marston Associates conducted a redevelopment analysis for the city that included the following conclusions: • Of the 26 industrial parcels, the average parcel size was approximately 4.5 acres with 13 under three acres. • A typical manufacturing/assembly facility requires a building size of 25,000 square feet, which would require a parcel size of 75,000 square feet (1.7 acres). Seven of the 26 properties cited are less than 1.7 acres. • Based on these assumptions, the minimum desired lot size is approximately 10 acres. • 62 percent of the parcels in the Added Area are blighted. • Approximately 41 percent of the parcels in the Added Area are within the 100-year floodplain.

Santa Clara County, however, has indicated that these claims matter little in the eyes of current redevelopment law. Over the life of the project areas, the county and the Milpitas Unified School District stand to lose an estimated net of $344 million and $1.23 billion, respectively, through tax money that would be diverted away from the county and reinvested in the project areas. County attorneys county contend that the city has exaggerated the extent and severity of the alleged blight in the plan area addition, which must meet a more narrow threshold set by SB 1206, enacted in 2007.

"The redevelopment law has been beefed up to contain a more rigorous definition of blight," said Reynolds. "We don't believe that they've shown this blight."

"Just like everybody else, the rates are higher because of the economy," said Marie Munson, managing consultant with of Seifel Consulting, which analyzed Milpitas' amendments and reports on behalf of the county. "We didn't see physical blighting conditions in those areas that were causing higher vacancy rates or lower lease rates."

Based on these discrepancies, the county has threatened to file a lawsuit if the plan area addition and/or amendments are enacted.

"We have not discussed this issue in closed session with our board yet, but we will be doing so," said Reynolds.

Seifel conducted a "windshield study" as well as an analysis of Milpitas' own documentation, which concluded that many of the conditions cited by Milpitas could potentially lead to blight but did not constitute blight in and of themselves. The county rejected contentions about lease rates and vacancy rates, noting that neither deviated significantly from comparable areas in the county. It also contends that hazardous waste, while extant, does not necessarily preclude optimal use of the affected properties.

Milpitas officials believe that this analysis underestimates the extent of the area's blight.

"They drive through and see that there are companies there – and there are companies there," said Diana Barnhart, Milpitas Redevelopment and Economic Development manager. "But what they don't see is that in one building there might be 150,000 square feet of which a third of it is for a company and the rest has been vacant for 24 months or 5 years."

The county took issue with smaller, less typical claims as well, including one that suggests that the presence of a private school and churches may indicate economic blight because landlords are renting to traditionally low-rent tenant. According to the county's April 20 report, "the assertion that parcels are ‘blighted' because they are being used by churches and a private school strains credulity." Siefel's report describes a relatively small block of the addition that may meet the threshold for blight; it is dwarfed by rest of the proposed area by a factor of ten. The county also questioned the implication that parcels in danger of a 100-year flood necessarily qualify as blighted.

None of this criticism, however, has compelled the city to alter its redevelopment plan, which, so city officials claim, will eventually benefit city and county alike.

"I think the county is just wrong," said Livengood. "I don't know why they're even bothering to oppose us in this."

"If you want to wait for market forces, good luck," added Livengood. "You could be 10 or 15 years down the road with the same situation we have right now."

The Milpitas Chamber of Commerce has not taken a position on the plan amendments, according to Frank De Smidt, chair of the chamber's Government Affairs Committee.

The city instead has pressed onward, without altering the plan even after receiving comments from the county on April 4 and again on April 20. Those comments contend that the city's response to its concerns were inadequate and do not meet the requirements of the CRL or the California Environmental Quality Act. In its April 20 letter, the county contended that the city's "responses contain conclusory statements unsupported by factual information."

Having used redevelopment funding to transform a shuttered Ford Motor plant into the Bay Area's largest indoor shopping center, the Great Mall, and to attract Cisco's corporate campus the city has historically enjoyed success with redevelopment. Barnhart, however, contends that the county has been reluctant to embrace redevelopment in the past.

"The county has challenged just about every city's desire for redevelopment for the last 25 years," said Barnhart. "I don't think the county gives redevelopment any credit for development, growth, and activity. I think there's this presumption that the private market will do it on its own without redevelopment assistance."

Reynolds insists, however, that the county has supported numerous redevelopment areas but that this one happens not to qualify under SB 1206 or justify the county's loss of revenue – no matter how much the revitalized areas might generate.

"There are many cities in the county that have adopted and/or amended their redevelopment plans over the years and the County has not challenged them," said Reynolds.

The city has not yet released a plan for the new and amended project areas but has indicated that it intends to promote the assembly of parcels and try to attract modern manufacturing and warehousing facilities, which according to current models require far more land than did the facilities that currently occupy the parcels.

While the county's analysis concedes that some parts of the project amendment areas and additions may not be performing well enough to attract new, higher-paying tenants, the county noted that "'lack of investment and development potential' does not correlate with impairment of the physical development of the parcels."

The county further concluded that the city's report "appears to cherry-pick the indicators that show lower property values in the Added Area in comparison of the rest of the City" and, on the count of over crowding, that the city's finding of 1.33 and 1.43 persons per room constitutes "overcrowding but not serious overcrowding, defined by the Census as 1.5 per room."

This month's exchanges between the city and the county has resulted in virtually no concessions or agreements, and all indications are that the Milpitas City Council will in fact give the amendments final approval.

"It's passed through the City Council unanimously so far," said Livengood. "I see nothing that would prevent us from moving forward." If this impasse continues, and leads to the threat of legal action, it would not be unheard-of, especially in the absence of an official system of mediation when such disputes arise.

"You would hope the agency would spend time with county officials even before they start the process," said John Shirey, executive director of the California Redevelopment Association. "It is increasingly rare that there would actually be a lawsuit filed by the county. Typically these things do get worked out."

For now, the city is waiting for the county to be the one to budge.

"The county is broke," said Livengood. "Why they would want to spend a bunch of taxpayers' money suing us over what I consider trivial matters, you'll have to ask them that." Contacts: Bob Livengood, Mayor of Milpitas, (408) 586-3051 Lizanne Reynolds, County of Santa Clara Deputy Council, (408) 491-4200 Diana Barnhart, Milpitas Development & Economic Development Manager (408) 586-3059 Marie Munson, Seifel Consulting, (415) 618-0700