QUESTIONS & ANSWERS ABOUT THE STATE’S PROPOSAL TO ABOLISH REDEVELOPMENT AGENCIES AND THE JOBS THEY CREATE
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1.    What are the impacts of abolishing redevelopment?

As part of his 2011-12 budget proposal, the Governor has proposed permanently shutting down local redevelopment agencies.  This proposal represents more of the same misguided and unconstitutional State budget raids of local government funds that voters have repeatedly sought to end. It will bring little financial benefit to the State, but will inflict significant and permanent economic and other damages, including:

• permanently destroying more than 300,000 jobs annually, including more than 170,000 construction jobs;
• killing the source of more than $40 billion in local economic activity, annually;
• eliminating a key local government tool to meet the state’s environmental land-use objectives, and;
• killing one of the state’s leading tools to build affordable housing for families in need.

2.    Who is opposed to abolishing redevelopment?

A strong and diverse coalition of mayors, council members, cities, local governments, affordable housing advocates, business leaders, construction trade unions, labor and environmental leaders all oppose abolishing redevelopment.

3.    What is redevelopment?

Redevelopment is a process authorized under California law that enables local governments to identify blighted and/or contaminated areas in their jurisdictions in need of revitalization and clean up. Redevelopment agencies develop a plan and provide the initial funding to launch revitalization of those areas.  In doing so, redevelopment encourages and attracts private sector investment that otherwise wouldn’t occur.  Redevelopment activities create jobs and expand business opportunities, provide housing for families most in need, help reduce crime, improve infrastructure and public works and lead the cleanup of environmentally-threatened and rundown areas.

4.    Why is redevelopment so important to my community?

Redevelopment revitalizes downtrodden and contaminated areas that otherwise would remain blighted. Agencies breathe new life into specific project areas in need of revitalization, economic development and new opportunity by:

• Stimulating local job creation and construction projects;
• Building or rehabilitating housing for working families;
• Building and upgrading roads, water systems and other public works and infrastructure;
• Cleaning up hazardous sites and abandoned parcels by eliminating contamination so the property can be put to better use;
• Building and rehabilitating community centers, parks, libraries, public safety buildings and other community facilities;
• Helping small businesses by rejuvenating downtowns and injecting new life and economic activity into older retail and downtown shopping districts;
• Revitalizing rundown or blighted neighborhoods, which can help reduce crime and increase opportunity for struggling communities; and
• Beautifying communities through landscaping, improvement of neighborhood streets and creation of greenbelts.

5.    Shouldn’t everyone have to share in the pain to solve the State’s budget deficit?

Solving the budget deficit will require significant sacrifice from all, and a combination of revenue increases and painful cuts. But in the quest for short-term budget solutions, we have to avoid making permanent mistakes that will plague our state’s economy for decades.  Abolishing redevelopment is fiscally foolish. It will provide relatively small, one-time savings for the State, while permanently destroying tens of billions of dollars annually in economic activity, billions in annual state and local tax revenues, and hundreds of thousands of jobs each year. This proposal is penny foolish AND pound foolish.

It’s also important to remember that local governments are already contributing billions of dollars each and every year in property taxes (through ERAF) directly to fund the State’s budget obligations. Furthermore, redevelopment agencies just contributed $2.05 billion in local property taxes in the past few years to fund the State’s budget obligations. And, lastly, cities and local governments throughout California have been forced to make serious budget cuts of their own due to the down economy.

 6.    Didn’t voters just pass Proposition 22 in November 2010 to stop these types of State raids of local funds?

Yes. In November 2010, more than 5.7 million voters, a resounding 60.7%, voted to pass Prop. 22, to stop the State from taking, borrowing or redirecting local government funds - including local redevelopment. It was a clear mandate to Sacramento politicians that voters want to stop state raids of local funds. It’s unfortunate that certain state politicians seem to be poised to ignore the clear and overwhelming mandate of the voters they are elected to represent.

7.    The Administration says that this money is needed to fund schools, public safety and other local services.

First, it’s important to note that redevelopment activities, by targeting investments in designated areas, increase the tax base, and thus the taxes that are paid by private property owners in the area.  On average, 22 percent of these increased taxes are paid to schools, counties, cities, and special districts. That’s because when redevelopment improves and revitalizes blighted communities, the property tax base increases and all local entities receive a share of that increase.

More to the point, abolishing redevelopment will provide very little financial benefit to other entities in the short-term. According to the State Controller’s Office, redevelopment agencies have more than $87 billion in bond and other contractual obligations that legally must be repaid before revenues are available to any other purpose.  After all these obligations are met, there is very little funding available.

8.    The Administration says funding schools is a social justice issue and we need redevelopment funds for schools.

We agree schools are important and must be adequately funded. But we believe the Administration is creating a false choice. We can – and must – have strong schools while also encouraging a vibrant, strong economy with good jobs and local communities free from blight, crime and hopelessness.  Socioeconomically distressed children also face additional problems like violence, gangs, poverty, sub-standard housing and crime… all of which redevelopment exists to eliminate. Killing redevelopment is not the solution to improve our schools or our communities.

9.    Is shutting down redevelopment agencies even legal?

Shutting down redevelopment agencies is a clear violation of multiple State constitutional provisions, including Article XVI, section 16 which requires tax increment to be paid to redevelopment agencies to repay the public cost of redevelopment projects and Article XIII, section 25.5 (Proposition 22 -- passed just last November) which explicitly prohibits the State from taking tax increment from redevelopment agencies.

Additionally, killing redevelopment could violate the U.S. and California constitutions which prohibit impairment of contracts. Redevelopment agencies have more than $87 billion in bond and other contractual obligations with bond houses, bankers, developers and others. The Legislature cannot constitutionally abrogate those contracts or unilaterally substitute a new party to replace the redevelopment agency without the consent of the other parties to the contract.

10. Why are redevelopment agencies rushing to commit funds?

Faced with the prospect of complete abolishment, many agencies are finalizing projects that had been in the works for many months or years. These projects are vital to revitalize downtrodden communities, to create local jobs and to bolster the local economy. If the State is successful in shutting down redevelopment, there is no guarantee that these local dollars will ever make their way into the community improvements so desperately needed locally.

11. How will abolishing redevelopment impact the environment?

Eliminating redevelopment will take away one of the few tools local governments have to comply with state requirements to plan for more compact urban development supported by transit-oriented development, housing, jobs and infrastructure. Redevelopment agencies have the experience and tools needed to help implement the requirements of AB 32 and SB 375. Redevelopment agencies focus their efforts in urban areas.  By promoting urban-centered growth, redevelopment activities help preserve the environment and open space, reduce urban sprawl and commute times and improve the quality of life for Californians.

12. What will happen to affordable housing funding?

Redevelopment is the second largest funder of affordable housing, behind only the federal government. Over 98,000 units of affordable housing have been constructed or rehabilitated since 1993. Twenty percent of property taxes generated from redevelopment activities must be spent on affordable housing.  If redevelopment is abolished, these housing funds will go with it and many critical projects won’t be built.

13. Won’t local governments be better off receiving property taxes directly?

Redevelopment activities increase property values – and thus property tax revenues – for all local jurisdictions within a project area. When a redevelopment project area is established, other taxing jurisdictions continue to receive property taxes levied on the assessed value of property in the project area at the time the redevelopment plan was adopted. This is called the “base.” Additionally, jurisdictions share in a percentage of the increase in property tax revenues resulting from redevelopment activities (called “increment”). Redevelopment agencies keep a greater portion of these increases in order to pay back the debt that was incurred to jump-start revitalization of an area. However, all local government entities within a redevelopment project area also receive a proportional share of the increase (or increment).

14. What will happen to all of the current redevelopment projects being constructed in my community?  

If the State abolishes redevelopment, all future redevelopment activities will stop. That means any future construction, rehabilitation, revitalization activities will come to an end. Blighted communities will remain downtrodden, with no hope of revitalization. Hundreds of thousands of jobs will be lost. And tens of billions in economic activity will grind to a halt.

15. What can I do to help?

The Governor and Legislature hope to pass a budget in the coming months. You should get involved in the campaign to defeat the redevelopment proposal right away. You can:

1)    Visit our website at www.ProtectOurLocalEconomy.com;

2)    Sign up to be listed in formal opposition to this proposal;

3)    Write or call your State legislator and the Governor and let them know you’re opposed to this proposal. Sample letters are available on the website;

4)    Write a letter to the editor to your local paper (samples on the website); and

5)    Send an email to your friends, colleagues or members of your organization asking them to get involved.