Today at the State Capitol a full house has gathered to hear both questions and answers from leaders of every walk of California governmental life.
On the agenda are represenatives of the CSDA. The League of Cities and CSAC are also expected to offer opinions and insights into how California will react and change under the Governor’s Proposed Budget.
One of the topics sure to be discussed is what will happen to California’s redevelopment agencies on July 1st.
The meeting’s starting now. Check back for updates throughout the day:
10:57 AM:
Representatives from the Legislative Analyst Office, including Marianne O’Malley, the General Government Director
In some areas, 1 in 4 property tax dollars go to Redevelopment Agencies. Statewide, 12% goes to them. That leaves 88% for all other purposes, including schools public safety parks and recreation. Should that proportion remain the same?
If a city creates a RDA, it usually gets 2 or 3 times the property taxes from the RDA than from any parts of the city.
Creates incentives for creating Redevelopment Areas, and large ones at that.
Can use these funds to respond to local priorities.
For 50 years, the property taxes resulting from a redevelopment area would stay entirely with the RDA, it wouldn’t go to any other core services. This is unlike other states’ programs.
Flexible tools. Property taxes and values increase. Increase in employment. Useful targeted economic development tool.
The LAO has concerns about Redevelopment Agencies’ use of funds.
Typically, they’ve found that Redevelopment Agencies have limited oversight and transparency.
Among the activities that they do differently than most California government they are allowed to buy and sell bonds without voters’ approval.
Agrees with the Governor’s Budget Proposal on nearly all matters. But they do feel that the school funding decision would further complicate an already complicated funding mechanism.
Implementing this program would be highly disruptive. All cuts of this size would be disruptive, but the choice of what to disrupt would be tough.
Governor’s priority in his Budget Proposal: What responsibilities are best served at the state level; which are best served at the local level?
The proposal, says Cohen, returns the decision making back to the local level as to where a business should locate.
Central to the plan would be the continuation of funding for all legal obligations for previous agencies. Included in this funding obligation are all pass-throughs to various agencies that currently receive funding.
Included in these pass throughs is $1 billion to local school districts. This money will be on top of the current Prop 98 funding guarantee. Cities would receive additional $500 million, counties $300 million, and special districts $100 million.
If the cities wanted to fund redevelopment from these moneys, according to Cohen, the Governor’s office has no problems with that happen.
There are trade offs as to what the best uses of these dollars would be. And those trade-offs would have to be decided by the local governments themselves. In future years, all money would go through to cities and counties, but this year, the state would take those monies to pay for trial courts and medical. The following year the money would start flowing back into core services.
Part of the proposal is a constitutional amendment to reduce the threshold for new taxes or bonds from 2/3 to 55%, if those new levies would be used to continue redevelopment activities.
In other words, it would give local authorities the power to approve bonds or raise taxes specifically for RDA activities.
RDA laws would continue to exist to allow for Eminent Domain or combining properties to increase economic development. Those non-financial abilities would continue.
We are proposing that the entity that authorizes and operates the RDA, usually the city, along with the jurisdictions, to ensure that all legal debts are paid and paid on time, but all money that isn’t required for debt will become available for local core services.
If the city created the RDA, then the city would become the successor entity.
Q from Senator Wolk: Given prop 22, can funding from Redevelopment Agencies help balance the State’s General Fund without legislation or going to the ballot?
A: Prop 22 presumed that Redevelopment Agencies would continue to exist. But it would lock into place current funding (and funding levels) if the Legislature continues to fund Redevelopment Agencies. But because the state is ending the programs, it gets around Prop 22.
Over the last two budget cycles, the Leg has helped balanced the budget upwards of $2 billion. Under prop 22, those options are off the table.
Q: Lot of Land Banking: What happens to land that’s been acquired?
A: It will be a matter of city councils to answer to their constituents as to any decisions they made over the last few months. They would still hold the property, and it would be their decision what to do it in the future. They’ll be required to talk to their voters and find the funding and put in place the financial mechanisms to make the development happen.
10:27 AM:
Bill Lockyer delivered opening remarks to the panel and assembled gallery. A summary, quotes, and paraphrases are included below:
State government has had countless conversations that start with statements like “You’re stealing our money.” But he finds the perception of the issue that is “framed as our money versus their money as both incorrect and unproductive.”
The post Prop 13 California has operated with a virtual pool to allocate all remaining prop taxes. From that pool, more than 70% are transfers to the local governments.
According to Treasurer Lockyer, the Governor’s budget “provides long-term, increased revenues to local agencies and governments.”
This is a question of spending priority, according to Lockyer. How does it serve the state to use local property taxes to prompt inter-regional shifting of economic activity?
He claims that the modest benefits from the spending result from very expensive spending per job created.
Interest rates for Redevelopment agencies range between 6.5% and 10%. These groups pay unconscionably high rates due to the uncertainty of return and the future of the programs.
There are Redevelopment agencies that are on the cusp of financial insolvency, like those in West Contra Costa County, like the small community of Hercules.
And their expense keeps growing disproportionally compared to the property taxes and inflation. This growth is a result of redevelopment agencies spending taking larger chunks. Additional revenues keep getting poured over into the redevelopment pots.
$32.2 billion from schools in the past decade if it wouldn’t be for the current spending structure. That’s a lot of teachers or classrooms or whatever.
“Blow [Redevelopment Agencies] up and start again. It would be the prudent, smart, and efficient way to do it… It is better to reinvent.”