Unless the legislature and Governor act quickly, on February 1 redevelopment agencies statewide are dissolved and we enter a brave new world. These agencies were the primary source of funds local governments used to help turn around blighted neighborhoods and commercial areas and provide funds for affordable housing. They are banished with a stroke of the Governor’s pen and a supportive Supreme Court decision.

What happens next? Confusion. On January 30, the League of California Cities sent a letter to Governor Brown asking him to support clean-up legislation that would help resolve difficulties in the new law. The major concerns described in the detailed eight-page letter include:

  • Possible bond defaults
  • Loss of taxpayer funds
  • Possible violations of federal law
  • Stranded public infrastructure projects
  • Loss of critical staff to implement law

Hopefully, the sub issues under each major topic can be resolved before major problems arise. While the confusion is understandable when legislation is changed frequently up the last minute, the situation is not acceptable. In response, two rating agencies either downgraded or put a negative outlook on all California redevelopment bonds until conditions stabilize.

The letter does not touch on one of the greatest impacts of the new legislation, the loss of funds for affordable housing. The twenty percent of all redevelopment revenue, equal to about $1 billion annually, that was set aside for housing just went away. Housing advocates have as many questions about the new law as do those who focus on economic development. Many people in Sacramento profess to support affordable housing and legislation was introduced to make up the loss of RDA funds. However, those bills are in their early stages and the outcome is uncertain.

There is also talk in Sacramento of creating new funding sources for economic development. Again, however, the outcome is uncertain and, given the state’s fiscal situation, any state funding for such efforts is likely to be small. Instead, there may be initiatives to allow local residents to tax themselves to support economic development.

Compared to other redevelopment issues statewide, Lafayette’s RDA was small and straightforward. In addition to supporting affordable housing, most of our redevelopment funds went into two major projects. The first is a new Veterans Memorial Building created in partnership with veterans’ organizations, Contra Costa County and the City of Walnut Creek. Most of our funds were committed to the building of the Lafayette Library and Learning Center. We have only two public-private agreements that require on-going funding and we transferred all staff out of the redevelopment agency last year.

As expected under redevelopment law, our agency used debt to build the two focal projects. That debt, with the exception of the loans made from the City to the RDA that were outlawed by the legislation, must be repaid with the funds that would have gone to redevelopment. As a result, all funding for the next several years will go to debt repayment. The taxing entities that were supposedly the beneficiaries of the dissolution of redevelopment will receive almost nothing during the next several years. Redevelopment agencies statewide told Sacramento that this would be the result of their proposal, but they were ignored.

The prologue of the dissolution of redevelopment exists.  The next chapters are waiting to be written.

 

-Don Tatzin, Lafayette City Council