Fremont Citizens Network

Second (and last) part of a short history of redevelopment in Fremont and California

Here's the rest of my history of redevelopment - bringing us up to the present moment of great uncertainty as to what will happen to California redevelopment and its annual $5 billion in tax increment revenue.

 

RAISING THE CAP

 

Ten years after the 1998 merger the Industrial Redevelopment Area was once again approaching its tax increment cap, due largely to the development of the Pacific Commons project. The Redevelopment Agency, showing its usual foresight in guaranteeing its funding into the foreseeable future, started an effort in 2007 to raise the cap on tax increment by $1.1 billion. In the document supporting this extension, the Agency reported that after twenty years of redevelopment in Irvington and Niles, their downtown areas still had high business vacancy rates, low lease rates, and low sales tax receipts compared to the rest of Fremont. Though Niles had received more redevelopment dollars than any other historic area, its sales tax per business establishment during the years between 2002 and 2006 was 92% less than the Fremont average. In spite of this evidence that redevelopment spending in Fremont had failed to achieve its original goals the effort to raise the cap sailed through the City Council with no opposition save that provided by FCN. The Redevelopment Agency was now in a financially enviable position, with a net worth of over $100 million, able to retire all current debt and provided with about $37 million a year in tax increment revenue.

 

THE END OF REDEVELOPMENT AS WE KNOW IT?

 

Unfortunately for Fremont's and all other California Redevelopment Agencies, the global economy collapsed in 2008, and this on top of the chronic budget problems created by Proposition 13 created a fiscal crisis for California. The State could no longer afford its commitment to provide schools with guaranteed per-pupil funding. It didn't take long for financially savvy and desperate State officials to realize that local redevelopment agencies were sitting on big pots of current and future money. California passed legislation in 2009 that required redevelopment agencies to return  $2 billion to schools. The redevelopment agencies retaliated by placing a proposition on the 2010 ballot that made any such future transfers illegal. It passed. Then Jerry Brown was elected, and declared that part of his solution for the 2011/2012 and future budgets would be to eliminate redevelopment in California, returning all its tax increment revenue not needed to pay off existing bond obligations to the local cities, counties, and schools. Fremont, along with many other cities, responded to this proposal by trying to grab as much land and money as it could before the Redevelopment Agency was eliminated. Fremont's City Council gave up a holiday to meet as their alter egos, the Redevelopment Agency Board, so they could approve a last-minute bond issue by the Agency for all projects that could be possibly be considered underway, thus ensuring that the salaries paid by the Redevelopment Agency would continue for a few years even if Governor Brown managed to end redevelopment. These salaries include the one-quarter of the City Manager's (total $274,502 annually), City Attorney's ($287,685), Finance Director's ($220,172), and Community Development Director's ($190,129) salaries currently funded by the Redevelopment Agency. The main project to be funded by these new bonds would be the Irvington BART station. The main problem with the bonds is that no one could say what interest rate the Agency might have to pay on bonds that could turn out to have been issued illegally. Under Brown's proposal, the Irvington BART station could still be funded by having 55% of Fremont voters pass a special tax for the construction of the station. But Council knows that it's a lot harder to ask the voters to pass a special tax for a project than to use magical redevelopment money that appears to fall from the sky, since its actual trajectory is so convoluted and difficult to follow.

 

The high prevailing interest rates on shaky redevelopment bonds caused the City Council to postpone the bond issuance in their March 8th meeting. By then they had taken a few other steps to keep their redevelopment funds out of the hands of the Fremont Unified School District. One was to spend all of the cash in the Agency's Housing Fund on purchasing two City-owned properties in Centerville for future affordable housing projects. The $10 million total cost of these properties actually exceeded the $7.9 million in the RDA's housing fund, but the City was willing to extend credit to the RDA for the $2.1 million balance, and who wouldn't, as this will work out to be a really sweet deal for the City if Brown succeeds in abolishing redevelopment. Probably the two properties would be transferred back to the City, so it would still own the land plus get a $7.9 million windfall. 

 

The California Redevelopment Association has made a compromise proposal to the State, one that would keep Redevelopment alive by sacrificing a small part of its revenue to the schools, mainly at the expense of affordable housing. Since Brown's proposal to eliminate redevelopment failed by one vote on its first introduction in the State Assembly, I'm not going to try to predict what the future holds for redevelopment in California. But there is one question I'd like to have answered: who is going to pay the one-quarter of the city salaries currently funded by the RDA if it is abolished? Though the total of $243,122 is a small part of the City budget, this will be a year of extreme budget pain for Fremont, and even that small amount could make a difference in other areas. 

 

Tags: California, FUSD, Redevelopment, Redevelopment Agency, budget, fiscal, increment, tax

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Great summary and analysis, Charlotte.

Thank you.

 

 

IT is an aside, but, "...the chronic budget problems . .. " you (and others) allude to are certainly a result of restrictions imposed by Prop 13, but also, can only result in the company of unwillingness by voters to pass other revenue-producing measures

 

In this manner, Prop 13 is widely scapegoated and, I believe, erroneously so. 

 

Having plugged the rising (or falling ?) tide of tax revenue which would otherwise result from periodic property tax reassessments the questions emerges -  Why have we been so ineffective at convincing constituency of the need for addtional revenue measures ?

 

Prop 13 simply insures that the significant increases in tax revenue come before the constituency as opposed to being an ongoing windfall.  It has done nothing to prevent communities and agencies from presenting their respective case to the taxpayer and securing additional revenue for important and well explained and planned needs.

Thanks for explaining in plain English.  I read the Chronicle recently and remembered someone stating that the original goal of eliminating blight has turned into a slush fund for politician and their well-connected developers.  It goes even to subsidize sport team while the school and taxpayer indirectly foot the bill.

 

http://www.insidebayarea.com/argus/localnews/ci_17715449


http://www.insidebayarea.com/argus/localnews/ci_17727576

Looks like Charlotte's choice to make this her "last" word on Redevelopment Agencies may have a bit prophetic -

 

http://www.sacbee.com/2011/12/29/4151446/califsupreme-court-upholds...

 

 

 

 

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