Redevelopment reform has been gridlocked in the state capital for two years, but Governor Jerry Brown issued new clues on where he's heading in the state budget that was released in January.
The governor proposed changes to the Infrastructure Financing District law, a tool that allows tax-increment funding for infrastructure improvements that formerly were handled by redevelopment agencies. The governor's office is expected to send specific language on the proposal to the legislature by February 1. The real action should begin then.
IFDs allow cities to use tax-increment financing without a blight finding. They have been part of California law since 1990, but have rarely been used, in part because they require two-thirds voter approval. Brown's budget calls for lowering that voter threshold to 55 percent of the vote, as has been done for some forms of local school funding. But that's still a far cry from the past, when redevelopment agencies could approve individual projects and bonds without direct voter input.
But the bill would also require cities to finish up the redevelopment wind-down and conclude all post-redevelopment litigation against the state before they can take advantage of the new law.
Groups such as the League of California Cities, which opposed the redevelopment changes, are waiting to see the actual legislation before they comment, said Chris McKenzie, the group's executive director.
McKenzie expressed concerns about the public vote requirement for IFDs.
"This is hard to get--even a 55 percent vote," he said. But he seemed relieved that the governor had made some movement on redevelopment.
"We appreciate the fact the governor has started the conversation," McKenzie said. "There's going to be a serious conversation. We're encouraged by that."
Other leaders, such as Sen. Lois Wolk, D-Davis, chair of the Senate Governance and Finance Committee, were also glad to see the governor's proposal.
"I'm really delighted that he's engaging," she said, noting, "We haven't seen the language. The devil's in the details."
"Many believe local governments could make good use of [IFDs] if requirements were eased or eliminated," said John Shirey, city manager of Sacramento, and former head of the California Redevelopment Association.
Wolk's own bill to make it easier to use IFDs, SB 33, passed the Senate in 2013. It is now awaiting a final vote on the assembly floor. She said a final vote was delayed because Brown's office "gave clear signals last year that he wasn't ready to sign it."
But Wolk's bill doesn't require a public vote on IFD projects, like Brown's does.
"That's a stark difference," she said.
And Brown vetoed an earlier version of her legislation SB 214 in 2012. In his veto message then, he said the new law would have changed the focus to new tools, "instead of winding down redevelopment."
Wolk's bill on IFDs would improve accountability by requiring annual audits
Other legislative measures to restructure redevelopment have been on hold as well. SB 1, another key redevelopment bill was introduced in 2013 by Sen. Majority Leader Darrell Steinberg-D-Sacramento. It is a re-tooled version of a measure that Brown also vetoed in 2012.
At the start of 2014, Shirey remains unconvinced that anything will happen.
"The governor seems to have launched a preemptive strike in his budget proposal by making his own proposal rather than embracing any of the pending bills in the Legislature," he said. "I think he is signaling that he will not sign any bill that isn't his proposal and so it appears there will be no relief for IFDs again this year."
Brown's proposal on IFDs did more than re-start the conversation on redevelopment in Sacramento. It also offers an inducement to cities and counties to speed up resolution of claims with the Department of Finance. At the time of redevelopment's demise, there were about 400 redevelopment agencies in the state, and the Department of Finance has sought reimbursement for specific expenses made by those agencies.
Currently, 100 lawsuits are pending against the department by former redevelopment agencies, according to H.D. Palmer, the press spokesman for the department. Brown's new proposal requires city and counties who want to use IFDs to have no outstanding lawsuits against the state regarding the redevelopment wind-down, to comply with all State Controller's Office RDA audit findings, and have a "finding of completion" from the state.
Wolk noted that many of the agencies have wound down their operations and resolved issues with the Department of Finance in the past two years.
The new proposal on IFDs would expand them beyond infrastructure uses to include military base reuse, urban infill, transit priority projects, affordable housing and "associated necessary consumer services."
"The goal is to maintain the IFD focus on project which have tangible quality-of-life benefits for the residents of the IFD project area," Brown said in his budget message.
The governor suggested IFDs could be used in former redevelopment project areas. He called for retaining the current ban on using tax increments from school districts, which means the state general fund would be held financially harmless.
Despite Brown's embrace of IFDs, they have only been approved three times in the past twenty years. One was to fund public works for a hotel adjacent to the Legoland theme park in Carlsbad in San Diego County, and two others were in San Francisco. One IFD was for improvements in San Francisco's Rincon Hill neighborhood, and the other was to finance waterfront improvements by the Port of San Francisco for the recent America's Cup races.
San Francisco may latched onto IFDs early on because it is both a city and a county, making it easier to negotiate among taxing entities.
Most point to the two-thirds voter approval requirement for IFDs as the main impediment to their use. In the Port of San Francisco's IFD, the legislature granted San Francisco an exemption from holding an election, according to Peter Detwiler, a retired legislative staffer.
Detwiler thinks the state is in the middle of figuring out the next steps on redevelopment, and he sounded optimistic about the governor's IFD's proposal.
"IFDs are the correct policy response in this early redevelopment reset," he said.
IFDs may appeal to Governor Brown because they don't take money from the state, as redevelopment once did.
Redevelopment lost popularity because it became a drain on the state's general fund, said Detwiler, explaining that the state had to make up money to school districts that they lost to redevelopment. But with IFDs, "it's not diverting schools' property tax," he said. "There's no cost to the state general fund."
