Legislation that would permit certain redevelopment agencies to extend the life of redevelopment project areas has stalled for the year. Four Assembly bills hit a roadblock in the Assembly Housing and Community Development Committee when Chairman Gene Mullin (D-South San Francisco) decided that a broader discussion of redevelopment time extensions was necessary.

Also stalling in the Capitol was a bill that would permit the Port of Los Angeles to tap redevelopment tools. Meanwhile, a bill that would alter the definition of “blight” to allow tax-increment financing of transit-oriented developments remains alive but faces an uncertain future this year.

Under the last major round of redevelopment reform (AB 1290 from 1993), redevelopment projects must expire by January 1, 2009, or after 40 years, whichever is later. In 2001, lawmakers approved SB 211, which permits 10-year project extensions within tight constraints (see CP&DR Insight, July 2001). However, only one redevelopment agency (Sacramento) has been able to take advantage of SB 211.

It appears that SB 211's requirements are too strict, said California Redevelopment Association (CRA) Executive Director John Shirey. Some agencies are highly leveraged and cannot afford SB 211's mandate that an additional 10% of tax increment be spent on low- and moderate-income housing, he said. Some agencies are reluctant to accept the emphasis on low-, very low- and extremely low-income housing that is required by SB 211 and a follow-up measure, SB 701 from 2002. Some agencies cannot pass SB 211's stringent blight test, even though projects are incomplete, Shirey said.

The CRA did not take a position on any of this year's time extension bills and, in fact, was caught off guard by the legislation, Shirey said. He endorsed Mullin's call for a “holistic approach” to the issue.

One of the agencies sponsoring legislation this year is the San Jose Redevelopment Agency, which backs AB 1472 (Coto). That bill is intended to provide a 10-year extension to a project area in north San Jose's “Golden Triangle” that is scheduled to terminate in 2033. The extension is important now because the city usually issues 30-year debt to finance infrastructure. The bill would permit an extension based, in part, on either physical or economic blight.

“We have been particularly hard hit here with job losses and vacant buildings, but we have a difficult time with the physical blight [requirement],” said Harry Mavrogenes, executive director of the San Jose Redevelopment Agency. Additionally, SB 211's requirement that tax increment get spent on affordable housing within the project area is a problem for San Jose, which pools its tax increment, he said.

The agency has plans for 32,000 housing units and 26 million square feet of industrial and office development on about 600 acres. Such development would need at least $500 million worth of infrastructure, yet the San Jose Redevelopment Agency, the state's largest redevelopment agency, has seen tax increment revenue decline by 25% in recent years to $148 million annually.

Mavrogenes defended the development as “smart growth” because it would be in an existing urban area with a light rail line. If the development does not occur in North San Jose, the growth - especially the housing - will probably move to the edge of the region, leading to further traffic congestion, he contended.

Although the San Jose bill stalled, Mavrogenes endorsed Mullin's decision to take a broad look. “I think it's obvious from the collection of these bills that SB 211, which is the mechanism available to these agencies, has some problems,” Mavrogenes said.

The San Jose bill will apparently get no hearing in the Legislature this year. Neither will AB 517 (Hancock), which would give the Berkeley Redevelopment Agency an extension solely for low- and moderate-income housing projects; AB 921 (Daucher), which proposed 25-year extensions during which a redevelopment agency would keep only half of the tax increment; and AB 1167 (Chu), which would provide a 10-year extension to the El Monte Community Redevelopment Agency for transit-oriented development projects.

A broader transit-oriented development bill appears to still have a chance at passage this year. Senate Bill 521 by Senate Transportation and Housing Committee Chairman Tom Torlakson (D-Antioch) would amend the statutory definition of blight to include the lack of high-density development within a transit village development district.

The measure would permit redevelopment efforts within approximately one-quarter mile of a rail transit station. The area would not have to be “predominately urbanized,” as required by current redevelopment law. However, the project would have to get approval from the California Infrastructure and Economic Development Bank.

The bill also would permit development by-right within transit village development districts adopted after January 1, 2006, meaning that a city or county could not require environmental review or discretionary permits if a project complies with a plan.

Backers of SB 521, including BART and the California Chapter of the American Planning Association, contend the legislation would encourage growth that makes better use of infrastructure. Indeed, a Senate Local Government Committee bill analysis says, “[T]he substantial public investment in rail transit does not pay off if local officials fail to promote private development around rail transit stations.”

Still, plenty of opposition exists. No Republican on the Senate Local Government Committee voted for SB 521. Los Angeles and Santa Clara counties oppose the bill because they fear the loss of revenue and worry about watering down the definition of blight. Even the CRA opposes SB 521.

“While CRA supports the building of more housing closer to transit facilities,” Shirey wrote to CRA members, “we are opposing SB 521 unless amended to address our concerns about a redefinition of blight that will be hard to defend and state approval of redevelopment projects.”

While the debate over the Torlakson bill is likely to continue this year, consideration of a bill that would let the City of Los Angeles establish a redevelopment project area at the port has ended. The bill, AB 1330 by Assemblywoman Betty Karnette (D-Long Beach) met stiff resistance in the Assembly Local Government Committee, where only one of seven members voted for the legislation.

In addition to Los Angeles County, which would lose an estimated $25 million to $50 million in annual revenue, bill opponents included the San Pedro and Peninsula Homeowners' Coalition, a citizen group that has been a port watchdog for years. The redevelopment project, which would be governed by the mayor-appointed Board of Harbor Commissioners, would help fund a 400-acre, eight-mile-long retail, office and residential development along the waterfront.

“It's bad enough that the port wants to do this giant commercial project on the waterfront,” said Homeowners' Coalition President Noel Park. “But we think it's inappropriate for a public agency with a cash flow of $600 million a year to tap into the tax increment for this.”

The Assembly Local Government Committee agreed. A committee bill analysis stated, “[T]he conditions that exist in and around the harbor do not fit the state criteria for declaring blight and establishing a redevelopment area; the port is not an economic burden to the area, but a multi-billion dollar revenue-generating industry.”

The bill appeared to be a way for the port to get past the State Lands Commission, which has jurisdiction over tidelands. The Commission strongly opposes the proposed waterfront development. Neither a Karnette aide nor a port spokeswoman was willing to talk about AB 1330.

One final redevelopment bill that appears headed for approval is AB 1390 (Jones), which has already passed the Assembly. It would extend to 10 years the statute of limitations for enforcing the requirement that 20% of tax increment be setaside and spent for low- and moderate-income housing. The bill is a response to a 2003 court decision that the Escondido redevelopment agency did not have to reimburse the housing fund for underpayments that occurred more than three years prior to a lawsuit seeking enforcement. The appellate court in Hogar Dulce Hogar v. Community Development Commission of the City of Escondido, 110 Cal.App.4th 1288 (see CP&DR Legal Digest, September 2003), cited the three-year statute of limitations.

Contacts:
John Shirey, California Redevelopment Association, (916) 448-8760.
Harry Mavrogenes, San Jose Redevelopment Agency, (408) 794-1000.
Noel Park, San Pedro and Peninsula Homeowners' Coalition, (310) 832-5720.
Assembly Housing and Community Development Committee, (916) 319-2085.