The loss of $1.7 billion from redevelopment agencies was one of the biggest casualties in the passage of the state budget last month, and Culver City, like many municipalities, is bracing for the repercussions of the Legislature’s action.
The agencies, considered by many cities to be a prime tool for eradicating blight and revving up a municipality’s economic engine, were eliminated with the stroke of Gov. Jerry Brown’s pen on June 27, 11 days after the governor vetoed an earlier budget submitted by Democrats.
At the budget signing ceremony, Brown signed Assembly Bills 1x 26/27 and Senate Bill 15, effectively putting an end to state redevelopment agencies.
State Sen. Curren Price (D-Culver City) said he was dismayed that redevelopment agencies became a liability in the state’s fiscal crisis.
“I am very disappointed that the budget crisis required such drastic measures because many of us in the Legislature understand the unique role that redevelopment plays in eliminating blight in our urban core,” the senator said.
In March, Price expressed hope that the agency could be spared, but also sounded a realistic note regarding the reality of the current fiscal crisis.
“Coming from a background in local government, I certainly value the role that redevelopment plays,” he said.
“However, in the midst of the severe budget challenges that this state is facing, every program has to be reevaluated and reconsidered in the context of cuts. Everything is on the table: education, health, social services and redevelopment.
“That said,” Price added, “I am not willing to cut redevelopment unless there is going to be an alternative mechanism for cities to use to eliminate blight.”
Culver City Chief Financial Officer Jeff Muir said the governor’s action could limit future plans for development.
“The redevelopment agency may not have sufficient funds to go forward with existing redevelopment programs except those that are tax-exempt bond-funded because all new tax-increment proceeds will be diverted to the state through the ‘voluntary’ payments,” Muir told the News.
The news that redevelopment agencies would be abolished comes as no surprise to many, as Brown has publicly advocated for their elimination since he took office last November. In January, he recommended closing down the state’s 397 redevelopment agencies as a means of reallocating revenue back to local governments and school districts.
The $1.7 billion can now be appropriated to public safety and local school districts, the governor’s office says.
Some high-ranking state officials also anticipated losing redevelopment agencies. “The redevelopment fight is over,” state Treasurer Bill Lockyer told a Culver City Chamber of Commerce audience on March 3.
Lockyer said because of legal restraints, one way to get additional funding to school districts was to take them from redevelopment agencies.
“The state can’t transfer redevelopment funds to schools,” he explained. “All the state can do legally is blow them up.”
At a joint city council/redevelopment agency meeting on July 11, Culver City’s governing entities passed a new ordinance that would allow Culver City to “opt-in” to an alternative redevelopment program.
“AB 27/SB15 establishes a ‘voluntary’ alternative redevelopment program whereby the city may choose to continue redevelopment upon enactment of an ordinance by the city to make payments to the state,” Muir explained in an interview before the ordinance was passed.
“In response, agencies will need to make significant decisions in a very short amount of time related to making the ‘voluntary’ payments and adjusting the agency’s budget and work plans relative to substantially diminished operating funds.”
Muir said the Culver City Redevelopment Agency payment for the fiscal year 2011-12 is approximately $13 million, and then approximately $3 million in fiscal year 2012-13 and each year thereafter.
Some condemned Brown and the legislators outright for the decision to abolish redevelopment agencies.
“Make no mistake about it: AB 1x 26/27 would lead to the elimination of redevelopment agencies throughout California,” said California Redevelopment Association Executive Director John Shirley in a statement last month. “Legislators and the governor did this despite being warned repeatedly that the $1.7 billion they have budgeted to receive from this illegal legislation will never materialize.”
Both Shirley and Muir used terms that implied that the Legislature was extorting the agencies in the budget process.
“Since the [legislative] passage of these bills, we’ve heard from dozens and dozens of agencies that will not be able to make the ‘ransom’ payment, and thus will be forced to shut down, eliminating hundreds of thousands of jobs in the process,” Shirley asserted.
“It is our understanding that if we elect to make these ‘ransom’ payments, we can continue to operate without challenge from the state,” Muir added.
Many municipalities, including Culver City, took action on a number of items at the beginning of the year to safeguard certain assets after Brown began discussing the elimination of redevelopment.
City Councilman Andrew Weissman said it was important that the public know what the possible consequences would be if redevelopment entities were eliminated.
“One reason [for holding the special meeting] was we felt that it was important to talk about how significant redevelopment is to the community,” the councilman said.
The Kirk Douglas Theater, City Hall, the city’s Senior Center and Westfield mall are all projects that have been funded with redevelopment revenue.
Donald Barr, a developer with properties in Culver City, said dissolving redevelopment agencies was a smart move. He says many redevelopment agencies were often essentially cash cows for a hand-selected group of developers in many cities, but now that will come to an end.
“This is a step in the right direction,” he said.
After reports of how some cities had misused redevelopment funds, state Controller John Chiang announced an investigation in March of 18 redevelopment agencies.
The probe examined how redevelopment agencies define a “blighted” area, whether they are appropriately paying for low- and moderate-income housing as required by law, whether they are accurately “passing through” payments to schools within their community, and how much redevelopment agency officials, board members and employees are being compensated for their services.
Proponents of redevelopment indicated that they would seek legal recourse.
“We’ll quickly file a lawsuit to prevent these unconstitutional measures from becoming law,” Shipley vowed.
Now that the agency will be stripped of nearly $2 billion, legislators face a new challenge, as cities will largely lose what many consider to be an effective economic stimulator. “We will be diligently looking for other ways to leverage limited resources to benefit inner-city development,” Price pledged.
At the July 11 meeting, a resolution reducing the affordable housing allocations for 2012-213 was also approved.
Assemblywoman Holly Mitchell (D-Culver City) did not return calls for comment.
