The state Capitol is one weird place. Sometimes, I'm not sure if it's even of this earth. 

At the moment when you think major redevelopment "reform" is on the horizon, state lawmakers instead rewrite inconvenient laws that were getting in the way of San Diego's desire to use redevelopment financing to build a football stadium, including a law requiring increased funding for affordable housing.

[Editor's Note: The original version of this blog said the last-minute legislation affected many redevelopment agencies' use of low- and moderate-income housing funds. That was incorrect.]

To step back just a bit: On September 30, the Senate Office of Oversight and Outcomes (a fairly new investigative entity) published a report titled "Where Does the Affordable Housing Money Go? Administrative Spending by Redevelopment Agencies Lacks Accountability." I'll be writing about the details of the report in coming days, but the investigation's message is obvious. Some redevelopment agencies are shirking their state-mandated responsibility to provide low- and moderate-income housing, and the state isn't doing anything about it.

The very next day, the Los Angeles Times ran the first of two stories detailing alleged redevelopment abuse by agencies all over the state. Both the Times and the Senate office documented how some redevelopment agencies – quite a few, but by no means a majority – were spending a large chunk of the 20% of redevelopment revenue that must be dedicated to low/mod housing on planning and administration, and not on actual housing units. A few other newspapers followed up with unflattering reports on their local redevelopment agencies. 

The well-documented revelations had to please affordable housing advocates who have long complained that some redevelopment agencies do everything possible to avoid providing housing. On the other side, limited government advocates who have long complained that redevelopment is one giant sham had to be equally pleased. Either way, you would think that redevelopment reform – carefully crafted or the butcher block variety – would be the Legislature's immediate response.

You would be wrong.

Instead, in the dark of the night (actually it was the early hours of Friday morning, October 8), the Legislature approved SB 863 with no public review at all. [Update: Gov. Schwarzenegger signed SB 863 on October 19.] The bill does two unrelated things for redevelopment.

First, it eliminates the dollar limit on the amount of tax increment that San Diego's Centre City Redevelopment Corporation may receive. (The CCDC is the city's downtown redevelopment agency.) The provision lifts the cap on the amount of debt that the CCDC may issue. With the cap gone, the agency is free to finance a football stadium for the San Diego Chargers, a stadium that could easily cost $1 billion. Apparently, the agency also has plans to finance a convention center expansion, additional downtown trolley lines and new parks.

Now, existing law permits redevelopment agencies to extend their life spans by 10 years – and, therefore, increase their revenue and finance limits – if the agencies are able to make new findings that blight cannot be eliminated without the extension, and if the agencies agree to increase the tax increment revenue set-aside for low/mod housing from 20% to 30%. San Diego city officials were in the midst of a study to document the remaining blight. But the last-second legislation lets the CCDC bypass both of those restrictions. No new blight findings, no increased housing set-aside.

A second provision in SB 863 concerns agencies that did not make payments required by the Legislature's shift of $2.05 billion from redevelopment agencies to school districts and the state over the 2009-10 and 2010-11 fiscal years. A handful of agencies did not make the first payment, which was due May 1 of this year. The legislation says that those agencies – so long as they notified the state Department of Finance in advance and saw property tax increment drop by at least 20% last fiscal year – may spread their payments over the next 30 years. It appears that only Richmond's redevelopment agency meets these qualifications. It's unclear whether Richmond may use low/mod housing money to make the payments.

Senate Bill 863 passed both houses of the Legislature with the requisite two-thirds vote for urgency legislation during the all-night session that concluded with passage of a 2010-2011 state budget. Although the San Diego redevelopment exemptions had been floating around for a while, even the savviest affordable housing lobbyists did not know the exact details of SB 863 until after lawmakers had already voted.

What do these redevelopment maneuverings have to do with the state budget? Nothing, other than they were part of the vote trading necessary to gain approval of the budget. Democrats apparently offered this to get Republican votes.

The CCDC generally gets high marks for its role in transforming downtown San Diego into a vibrant urban place. The agency has invested in infrastructure and many development projects, including the baseball stadium for the San Diego Padres – a stadium that did its job of triggering private investment in a blighted neighborhood. A downtown football stadium, an even bigger convention center, more trolley lines and more parks sound great. But if they truly are great, why do they need exemptions from state law approved with no public review? And at the very moment when people are asking hard questions about redevelopment. 

Concern about redevelopment abuse is not going away. Somebody better grab the baby before the bathwater starts flying.

- Paul Shigley