Cities Brace For Raid on Redevelopment Agency Funds

Officials from Milpitas and other Bay Area communities are sitting tight after news that the California Supreme Court recently agreed to hear an argument that challenges the constitutionality of two new laws that would kill or cripple local redevelopment agencies throughout the state.

The Assembly bills, AB 1X26 and AB 1X27, were signed into law by Gov. Jerry Brown on June 30 as part of his effort to help fill a $26 billion shortfall in the state’s $89 billion budget.

Until the case is decided by mid-January 2012, local RDAs can continue to operate, but their long-term future remains unclear.

The first measure would redirect money away from the state’s approximately 400 RDA agencies, effectively killing them. The second measure would allow individual agencies to remain open if cities agree to pay back significantly more tax revenue to the state each year. The payments would generate about $1.7 billion in new revenues for the state.

The idea behind redevelopment is to increase property values with construction projects and to stimulate business in targeted areas. That’s important to cities, because they can benefit from higher property and sales tax revenues, which help fund city services, projects and operations.

“Because of the change in state law and the financing structure in the state of California ... we must rethink and comprehensively change our organizational structure and service delivery models,” Milpitas City Manager Tom Williams warned the City Council in an Aug. 2 report. He noted that Milpitas has been heavily reliant on RDA funding in recent years.

Recent RDA projects in Milpitas include the new community library and the DeVries Senior Housing complex. Redevelopment money in Union City helped fund construction of the Union Landing shopping center, several affordable housing communities and the new Intermodel Station District. In Fremont, officials are hoping to pay for construction of a new Bay Area Rapid Transit station in the city’s Irvington district with redevelopment funds. 

“I think these projects are very important to the local area,” Assemblyman Bob Wieckowski (D-Fremont) told Milpitas Patch, noting that RDA projects often benefit people in more than one community. Wieckowski represents citizens in Fremont, Newark, Union City, Milpitas and parts of Sunol, Castro Valley, Pleasanton and small areas of Hayward and San Jose.

One of the biggest planned projects in his district, Wieckowski said, is the BART extension through Milpitas and into the Berryessa district of North San Jose.

“Milpitas is going to have to do some big infrastructure changes (with) BART and commuter rail coming in,” Wieckowski said. “That project will be the first (direct) connection between the light rail and BART, and the RDA will play a big role.”

If local communities continue to operate RDAs, what will be the cost?

In his report to the Milpitas City Council, Williams noted that if the city decides to continue its RDA, it would need to pay the state $13.9 million in fiscal year 2011 and $3.3 million the next year. He added that the payment would increase in subsequent years if the city continued to operate a RDA.

Officials in Union City estimate the state’s take would be $7.6 million this year and $1.8 million each year that the agency continues. In Fremont the initial fee will be about $9 million, then $2 million annually after that. Fremont officials reluctantly agreed to the plan in July.

Wieckowski said state legislation affecting RDA funding is one of the top concerns for communities in his district, and he plans to tackle it head-on.  

“I met informally earlier this year with representatives from Fremont and Union City Mayor Mark Green to discuss the impact of legislation,” Wieckowski said. He added that in Newark, there isn’t a large RDA, and the state’s legislation likely wouldn’t be as disruptive. Wieckowski acknowledged that he has not yet met with Milpitas officials.

“I plan to go to Milpitas during the (legislative) break and meet with the entire council, but I’m not going to be able to do it right now,” Wieckowski said. He added that it’s important to look at redevelopment projects from a regional perspective. “It’s a timely call, because I do need to sit down with folks to see what they plan to do.”

Under the terms of AB 1X27, cities have until Nov. 1 to enact an ordinance to “opt-in” to continue their RDAs. A state Supreme Court decision on the two measures is expected by Jan. 15.

What alternatives do cities have that can’t afford to “opt-in” and continue their RDA programs? “There’s a long list of folks looking at this,” Wieckowski said. “Other members of the Assembly have volunteered to look at how we might be able to assist.”

What might that assistance look like?

Wieckowski suggested numerous possibilities that state lawmakers might consider, including a funding mechanism to help build local affordable-housing projects or some type of community block grant type program.  

“There’s a lot of discussion going on between now and Jan. 15,” Wieckowski said. He added that he plans to meet with state finance experts, government officials and community leaders in an effort find a solution. “I don’t expect to sit still during that time.”