Redevelopment: Complex, diverse agencies in fight

A recent poll appears to show that California approves of redevelopment agencies’ spending. But the better question might be: Do voters even understand redevelopment? And better yet, how many people around the Capitol understand it?

Redevelopment agencies can work under a variety of rules, but one thing all of these arrangements have in common is that they’re fairly complex.

There are about 400 redevelopment agencies — RDAs, for short — in California. They redirect local property taxes toward a variety of economic development programs. The state has traditionally made up the difference to the locals – or “back-filled” as the process is called in the Capitol.

Gov. Brown’s fiercely contested plan calls for the state to pull back $1.7 billion in this backfill money over the next 18 months and redirect it, mainly to schools. The locals, meanwhile, have been racing to push their projects forward.

This may point to the veteran political savvy of Gov. Jerry Brown — picking a concept many people have heard of but few people truly understand, which involves billions of dollars but wasn’t really on the radar screens of most Sacramento political players. In one swoop, Brown has changed the budget conversation by introducing a new topic — one which he and his allies may be able to define for the electorate.

This is exactly what Brown seems to be doing, according to Republican pollster Adam Probolsky — looking among the $5.7 billion in annual redevelopment money spent around the state and cherry-picking the worst examples.

“You find examples and use them to seize the assets,” Probolsky said. “That’s what I see them doing. It may be a brilliant strategy.”

A Probolsky Research survey released last week found that 59 percent of respondents said that redevelopment agencies were a “good idea,” while 30 percent said they were a bad idea. Sixty-four percent said they should be allowed to continue operating, while only 23 percent said they should be shut down.

But less than half — 23 percent — of the support for redevelopment came from respondents who said RDAs were “very good.” Some have said the questions in the survey emphasized the good that many RDAs do, like building affordable housing. It also referenced the possibility of the state losing 300,000 jobs if RDAs are eliminated — a figure that came from the California Redevelopment Agency.

The telephone survey of 753 people was conducted Feb. 21 to 24. The margin of error was plus or minus 3.7 percent, Probolsky said.

Probolsky also noted that his survey did ask about health care and education spending, and still found that respondents didn’t want to do away with RDAs completely. He also found widespread support for the idea of realigning government towards more local control, as Brown has suggested — an idea that would appear to support allowing local governments to keep their redevelopment projects.  

“Voters, time after time, chose keeping the dollars local,” Probolsky said.

Brown himself has said repeatedly that RDAs do good works, some of which he saw firsthand as mayor of Oakland.

“I’ve said all along the fact that he was the mayor of Oakland created a different set of experience for him but also presents a different set of credentials,” said PPIC CEO Mark Baldassare. “That provides some different leverage for him.”

It’s a set of credentials that helps Brown pull off the delicate balancing act of saying that RDAs do many good things, but the state can’t afford them right now. It’s a rhetorical style that Republican lawmakers have often used when talking about popular but expensive social programs.

Redevelopment also doesn’t cut across political lines quite so neatly as many other issues. While RDAs are generally supported by Republicans, with Democrats being more critical, there are a lot of exceptions. Libertarian-leaning Republicans — Assemblyman Chris Norby, R-Fullerton, is the best example in the current Legislature — often oppose RDAs. In the Probolsky survey, on the other hand, political progressives and racial minorities showed greater than average support for RDAs.

Examples of this ambiguity can be seen in the blocks surrounding the Capitol itself. Redevelopment supporters point to projects like the upscale Citizen Hotel or Dive Bar, a K Street watering hole complete with mermaids swimming through a large tank with fish. Those projects, they say, have revitalized a moribund downtown stretch better known for the large number of homeless and mentally ill.

Many of these local redevelopment projects even carry signs now stating they were “made possible by redevelopment money.” But opponents point to those very same projects and ask why public money is being used to offer more entertainment options to well-paid elites.

Not only do different redevelopment agencies choose to fund different types of projects, they also have somewhat different means of funding and backfilling redevelopment coffers. One of the biggest differences is that while most redevelopment agencies are set up in such a way that they won’t take money from local education, but some do under certain circumstances.

Jed Kolko, associate director at PPIC, summed up the financial bet that unites all redevelopment projects: “Redevelopment is basically borrowing against future increase in property tax revenues.”

In other words, Kolko said, you spend money in the near term hoping to create economic activity that will pay that money back in terms of increased property and sales taxes in the future. There’s also the matter of if that spending just moves economic activity from one area to another for no net gain, or whether it improves the overall economy.

It may be a measure of just how far off the radar screen redevelopment was in that the mainstream polling organizations in California have yet to survey likely voters on the topic, even though the political class in Sacramento has been abuzz over Brown’s redevelopment ideas for weeks. PPIC pollsters are adding a question to a survey they’ll conduct later this month.

The last time the PPIC looked deeply at redevelopment in a report was 1998. That analysis looked at the 1994-95 budget fiscal year, a time when redevelopment agencies in the state spent about $1.5 billion, just over a quarter of their size today.

The researcher who wrote the report, Michael Dardia, left the PPIC a decade ago and is now the deputy director of management and budget for New York City, but Kolko said he’d had a look at the report recently. He said that Dardia found the redevelopment agencies had some positive effects, but in terms of actual return on investment, only delivered 51 cents of benefit per dollar spent – though it’s also important to note that Dardia wrote that his study “does not provide an overall cost-benefit analysis of redevelopment in California.”

It’s also interesting to note what hasn’t changed in 13 years. Dardia noted that the study of redevelopment agencies was hampered by the lack of any quantitative definition of “blight” and “ill-defined goals” of many projects. “An area that is worse off than the rest of an affluent city is not necessarily a ‘serious physical and economic burden’ to that city,” he noted.

Kolko was the author of a widely-quoted 2009 study that was critical of enterprise zones, where tax breaks are offered in order to provide incentives for businesses to hire in economically-depressed areas. With both RDAs and enterprise zones, there is a hug
e variety in how effective they are.

“As with enterprise zones, different people point to different goals,” Kolko said. “If there is disagreement or ambiguity about goals, it’s very difficult to discuss whether the program is effective.”

Education spending is one of the most controversial aspects of RDAs. While most operate under a formula that ensures they don’t take money directly from local education spending, some don’t.

These RDAs were singled out for particular scolding in an audit released on Monday by state controller John Chiang. He found that RDAs had shortchanged schools of at least $40 million.

This is the kind of revelation that could turn the still-forming redevelopment debate against RDAs.

“In general, people value money going to schools above anything else,” Baldassare said.