California Redevelopment Faces the Chopping Block

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ALAMEDA, Calif. — Jerry Brown warned that solving California’s budget deficits will be a tough job requiring a lot of sacrifice as he began his second stint as governor Monday.

Reports are rife that local redevelopment will be sacrificed — in its entirety.

California has almost 400 redevelopment agencies, with about $20 billion of outstanding bonds.

Redevelopment has been a tempting budget target before. The state budget for fiscal 2010 shifted more than $2 billion away from redevelopment agencies to the general fund.

According to a Sacramento Bee report, Brown’s budget proposal for fiscal 2012 would include a similar shift, followed by eliminating redevelopment completely in subsequent years.

On Tuesday, Brown spokesman Evan Westrup said the administration has no comment at this time.

 “The details of the budget will be provided when it is announced on Jan. 10,” he said.

The California Redevelopment Association, the lobbying group for redevelopment in the state, is on alert.

“CRA has not been able to confirm that such a proposal will be made, but it is consistent with other rumors circulating in the Capitol,” the organization said in an alert posted on its website.

California law permits cities and counties to form redevelopment agencies to revitalize areas they designate as blighted or deteriorated.

Their primary financial tool is property tax increment. Redevelopment agencies keep the revenue generated by the incremental growth in assessed property values from the base year when the redevelopment district was formed.

In fiscal 2008, redevelopment ­agencies received more than $4.2 billion in incremental tax revenue, after subtracting ­payments they are required to pass through to other local governments and agencies, according to the most recent statewide report published by the ­California ­controller’s office.

Those incremental taxes are used to finance capital projects by issuing bonds. Redevelopment agencies in California had $18.9 billion of outstanding tax increment and tax allocation bonds in June 2008, according to the controller’s report, as well as $1.5 billion of revenue bonds.

“What happens to all that indebtedness of agencies?” said John Shirey, executive director of the California Redevelopment Association.

Much of the tax increment revenue they receive is obligated to repay those debts, he said. “What remains to be captured by putting agencies out of business might be a much smaller number than the Brown administration is thinking,” Shirey said.

It also appears that such a proposal would be part of a much wider review of how responsibilities are divided between state and local governments.

When he was sworn in Monday, Brown reiterated a campaign pledge to return decisions and authority to cities, counties, and schools.

Brown and his staff met Tuesday morning with county government leaders. He told a Sacramento Bee reporter before the meeting that the overall realignment requires shifts in welfare, prisoners, and health care program.

“It’s the kind of complex reordering I want to be very careful about,” he told the Bee reporter.

Brown may be able to take advantage of what appears to be the weakened legal standing of redevelopment following a recent court decision.

Redevelopment agencies lost in Superior Court when they challenged the $2 billion shift in the fiscal 2010 state budget. That setback was delivered by the same judge who ruled against a similar fund shift adopted as part of California’s fiscal 2009 budget. Lawmakers devised different language to enact the 2010 shift.

Redevelopment interests appealed the ruling, and an appellate hearing is expected some time this year.

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