Local Redevelopment In Question As Lawmakers Go Back To Drawing Table

Wednesday California lawmakers passed a state budget that was sent swiftly on its way to Gov. Jerry Brown's desk for what turned out to be a prompt veto today.

It's back to the drawing table for legislators, but one of the fiercest policy debates yesterday over the budget was the phasing out by Oct. 1 of local redevelopment agencies as they exist today. Earlier this year, denouncing the potential elimination of these agencies.

Redevelopment is a process that allows local government, under the auspice of local redevelopment agencies (RDAs), to use increased property tax to obtain and repay bonds that cover the cost of redevelopment projects in designated blighted areas.

Ongoing redevelopment projects in Lake Elsinore include the that has been in the works for several years. The 113-apartment project located at W. Pottery Street between N. Langstaff Street and N. Riley Street is expected to be complete next spring.

In addition to the Pottery Court project, Lake Elsinore’s Redevelopment Agency is in the process of having 152 aging apartments refurbished at Lakeview Apartments on Riverside Drive. The Redevelopment Agency purchased the existing units at the site as part of a plan to renovate those needing upgrading.

The approximate $4.56 million project should conclude this summer. (See a list of Lake Elsinore projects made possible by redevelopment here.)

Two bills that address redevelopment were included in yesterday's budget package: ABX1 26, which eliminates redevelopment agencies and creates successor agencies; and ABX1 27, which states that agencies that make annual payments into the General Fund -- to the tune of $1.7 billion collectively -- are exempt from elimination. The annual payments for cities and counties would be calculated by the Department of Finance.

Standing in strong opposition to the bills are the California Redevelopment Association and the League of California Cities, which announced they are considering a legal challenge if the bills pass.

“We have been preparing for this contingency and have a legal team on board and ready to take action. The legal team’s review of ABX1 26 and ABX1 27 has already found a long list of challengeable issues,” according to a statement Wednesday from the California Redevelopment Association. (Click here to see the issues.)

At the local level, Lake Elsinore City Councilwoman Melissa Melendez, who also chairs the city's Redevelopment Agency, said Lake Elsinore's existing RDA projects are expected to move forward, regardless of what happens in Sacramento.

"If the bills become law, the Lake Elsinore Redevelopment Agency's debt service obligations on existing bonds and contracts are not in jeopardy to our knowledge," she said. "We did not scramble to produce 'phantom' projects from the shadows as some other cities have done. Those cities who did take those actions will surely face legal challenges in court. All of our projects are contracts that are legally enforceable by contract."

On Thursday morning, Assemblyman Kevin Jeffries (R-Lake Elsinore) painted a picture of the situation in Sacramento yesterday.

"RDAs were effectively eliminated for about five minutes before the legislature immediately re-created them after taking $1.7 billion from locals and dumping the money in the black hole of the state General Fund," the assemblyman said. "We had a real opportunity to reform RDAs so that they would focus on public infrastructure projects and prevent future abuses of eminent domain and giveaways, but instead the state simply took the money and rejected meaningful reforms."

A March report from the state Controller's Office (see attached PDF file) blasted some of California’s RDAs. The criticisms pointed out loose definitions for what constitutes a blighted area, failing to pay about $33 million owed to the state's public schools, poor tracking when it comes to the number of jobs created by redevelopment projects, accounting deficiencies, questionable payroll practices, faulty loans and the inappropriate use of affordable housing funds. 

"Taxpayers across the state have grown justifiably weary of the abuse of the redevelopment 'system,'" Melendez said. "Many of us are concerned about the standards for blight, which are extremely ill-defined. They include phrases like 'nearby incompatible land uses that prevent the development,' or 'a high crime rate,' or 'conditions that prevent or substantially hinder the viable use or capacity of buildings or lots.' This is a license to sin for municipalities who choose to take advantage of the power and authority given them."

If the governor signs off on the bills, Melendez believes redevelopment may shift from public to private.

"The impacts, if this goes into law, will be such that private development will once again take the lead in cities across the state," she said.

Riverside County Supervisor Bob Buster, 1st District, said he believes the county's main redevelopment priorities should be creating new jobs and improving health care.

“Given that majority Democratic legislators would have siphoned off hundreds of millions from local redevelopment coffers to balance the budget, we can still expect significant reforms to redevelopment in the bi-partisan compromises that are now necessary to gain the Governor’s signoff," he said.