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Hunt for infrastructure money gathers momentum

With Gov. Brown leading the charge, California’s 400 redevelopment agencies were abolished, but in the Capitol the locals’ quest for money to pay for critical projects goes on – and on.

 

For the second time in as many years, major legislation to boost the authority and reach of entities called infrastructure Financing Districts, or IFDs, is moving through the Legislature. The IFDs are not redevelopment agencies, but the goal is similar.

 

“These IFDs have been on the books for 30 years, and now they need to be modernized in order to fit the current pattern of local government,” said Sen. Lois Wolk, D-Davis, who authored SB 33, which would remove voter approval for the creation of the IFDs and expand the types of projects they can finance.

 

Brown and the Legislature eliminated the redevelopment agencies, or RDAs, in 2011. The goal was to preserve core public services with the tax revenues that otherwise would be used by RDAs, after certain obligations were covered in the complex process of dismantling agencies. During the life of the RDAs, about 12 percent of property tax money – some $5 billion annually – was dedicated to redevelopment. The RDAs drew criticism from Brown and others because some of the funding was spent on things other than reducing blight, the RDAs’ essential mission.

 

Many also believed the RDAs hadn’t met their goal of attracting new businesses or establishing affordable housing. The governor also suggested that these agencies diverted billions of dollars away from public works, such as schools and infrastructure.

 

Republicans, meanwhile, have long questioned the RDAs’ usefulness.

 

“Agencies not only have the power of the public purse, but also expanded powers of eminent domain. Small merchants and homeowners have no property rights in the face of politically-connected developers using the cudgel of condemnation. The Supreme Court’s infamous Kelo decision reaffirmed the politicians’ power to take your property and give it to someone else,” former Assemblyman Chris Norby, an Orange County Republican, wrote in 2011.

 

But with the abolishment of RDAs, cities and counties are facing to the question of how best to pay for critical projects. There remains the problem of balancing needed development with equally important core services.

 

That has made attempt to strengthen IFDs a hotly contested issue.

 

Brown, suspicious of efforts that he saw as attempts to resuscitate redevelopment, vetoed six bills last year meant to give local governments alternative means for economic development.

 

Those measures included Assembly Speaker John Pérez’s AB 2144, which allowed for the expansion of IFD-financed projects. It also proposed a reduction to the voter threshold in order to create an IFD. Even though AB 2144 was approved handily in the Legislature – 53-to-27 in the Assembly, and 23-to-12 in the Senate –it  was vetoed by Brown, who said it interfered with his goals of scaling back redevelopment.

 

“Expanding the scope of infrastructure financing districts is premature,” Brown wrote in his official veto message. “This measure would likely cause cities to focus their efforts on using the new tools provided by the measure instead of winding down redevelopment. This would prevent the state from achieving the General Fund savings assumed in this year’s budget.”

 

Gov. Brown has made it a point during his time in office not to take a stance on any existing legislation until it reaches his desk. But his position on redevelopment agencies also remains unchanged.

 

“We are going to continue the process that we’ve been in for the last two years, continue to wind down the operations of these former redevelopment agencies,” said HD Palmer of the Department of Finance in regards to this new moving bill. “We will also continue to make sure local governments receive additional property tax for core local services.”

 

Wolk’s SB 33 is similar to Pérez’s earlier bill. Thus far, Brown has not announced his position on Wolk’s measure. But given his opposition to AB 2144 and the similarity between the two bills, the outlook for SB 33 is uncertain. But two things are running in Wolk’s favor: It’s been a year since Brown vetoed the Pérez bill, and the budget is in much better shape than it was last year.

 

Wolk’s bill passed a vote in the Senate 24-13, and was approved by the Assembly Local Government Committee on a 5-2 vote. It now makes its way to the Assembly Committee on Appropriations.

 

Not surprisingly, her measure has support from local groups, including the League of California Cities and the California Special Districts Association. They note that SB 33 is written to prevent the diversion of funds destined for school districts. And unlike the RDAs, the infrastructure districts require the consent of other taxed agencies to shifting property tax revenues.

 

“We like it because the bill because it protects the existing core services, by requiring the consent of a special district to ensure funding is not undermined,” said Kyle Packham of the CSDA.

 

“SB 33 allows local agencies to collaborate when it comes to utilizing the existing tax revenue that has a shared purposes: to improve the delivery of core services to literally millions of Californians for neighborhoods or regional services,” he added.

 

But some legislators are concerned over the bill’s complete removal of voter approval for the creation of IFDs. Currently, bond measures and IFDs need to be approved by a two-thirds vote before they can be implemented. Sen. Cathleen Galgiani, D-Tracy, said the provision was the reason she did not support the bill.

 

Although the necessity of a hefty voter approval is no longer required for LFDs under SB 33, these groups would be subject to the Brown Act, which requires openness with the public.

 

“[SB 33] provides for public input in a public hearing, so it’s not done somewhere in the dark of night or in a back room without anyone’s input,” said Nick Cammarota, general counsel to the California Building Industry Association, during the hearing for the Committee on Local Government. “It benefits everybody.”

 

Wolk wrote in the bill these districts would be subject to accountability requirements, including a yearly audit form an independent party that would be given to public agencies and landowners. It would also increase the time for financing projects from 30 years to 40.

 

“The reason for the voter piece is because I believe agencies should be allowed to approve bonds for public improvement without needing to go to the public for approval,” she said. “This is not a tax increase in any way, it’s a financing mechanism.”

 


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