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Redevelopment agency on the brink of being eliminated

Alhambra may have to pay $4.4 million to keep its redevelopment agency, City Manager Julio Fuentes said at Monday’s City Council meeting. The prediction was based on two bills Governor Jerry Brown had prepared, requiring cities to either eliminate their redevelopment agencies, or preserve them by paying money to the state. The bills were signed into law on Wednesday.

“It’s a substantial amount of money, and after that it'll be a little over a million a year to sustain the agency," Fuentes told the Council. "We'll have to see what the returns would be, and if we want to do that,  because that's a lot of money we'll have to recoup."

Alhambra would have to pay a portion of the $1.7 billion that the state expects to collect from all municipalities choosing to retain their agencies. After the 2011-2012 fiscal year, the city will continue to pay annually a portion of $400 million, which will go toward education, transit services, and other local projects. 

The price tag is even steeper for larger cities – in the Inland Empire cities like Fontana and Rancho Cucamonga will have to pay more than $20 million to keep their agencies, The Press-Enterprise reports.

If Alhambra chooses to keep its agency, it will have to adopt by October 1 a resolution stating its intention to pay the state. As such, the proposed budget for the next fiscal year funds the agency’s administrative costs only up till October. After the City has decided on whether or not it will keep the agency, the budget will be amended to reflect those changes. If redevlopment comes to an end, two project managers and a secretary from the agency will be moved into positions covered by the water fund.

The role of redevelopment agencies has been hotly debated as the state attempts to fix its budget. Proponents say that the agencies are instrumental in turning blighted areas into vibrant business centers, while opponents say they have been a source of corruption and mishandled money.

State Controller John Chiang said in a recent review that a large number of redevelopment agencies have failed to file reports, and that money has been inappropriately used to cover costs such as lobbyist expenses. “The lack of accountability and transparency is a breeding ground for waste, abuse, and impropriety,” Chiang said on the State Controller’s website.

Fuentes expressed a more positive view, stating that Alhambra has been “at the forefront of development” with the aid of the redevelopment agency.

The League of California Cities—an association of city officials—plans to sue the state over the bills. The association claims that the bills violate Proposition 22, which prohibits the state from taking money away from redevelopment, transportation and other local services.

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2 thoughts on “Redevelopment agency on the brink of being eliminated”

  1. A lot of this goes back to Prop 13. After it passed, Prop 13 caused many local governments to have budget shortfalls. To ease the blow, the state made up for a lot of the shortfall in local revenues. One way has been to subsidize redevelopment agencies.

    Redevelopment agencies pull a certain amount of property tax revenues related to a project that would otherwise go to local agencies including cities and schools. The state has stepped-in to generously make-up for a large percentage of those revenues that went to redevelopment agencies.

    Ultimately, I think Californians need to seriously consider modifying Prop 13. The reasons it passed are valid but there are better ways to accomplish its goals. For example, instead of applying Prop 13 to all property in California (including corporations, trusts, and the uber-wealthy) only senior citizens earning under a certain amount would qualify for Prop 13-like protections. Or, perhaps only the first $500,000 in assessed value would be protected (the amount would be pegged to real estate inflation).

    Moreover, Prop 13 took away local control over revenue and centralized it in Sacramento. We still pay a lot in taxes. But instead of real estate taxes set locally, we now pay high sales and income taxes set by our central government in Sacramento. Add in all the higher fees for government services and we end up paying just as much in the end. My personal feeling is that if people want to set their property taxes high to pay for a high level of services then so be it, and vice versa, if people want low taxes and receive a low level of services, good for them.

    1. Prop 13 has both good and bad points. While it does have problems like you mentioned, it did stop runaway assessments that drove away people from owning their homes, because they couldn't afford to pay their property taxes any longer.

      One problem with what you suggest (ex: limiting Prop 13 to seniors earning a certain level of income) is that without a corresponding reduction in overall taxes (property, sales/use, income, etc), more people would be encouraged to find loopholes, or worse, owning a home would be relegated to the “über rich” who can perhaps afford to pay the taxes. It's difficult to achieve any kind of balance–for example, the State of Texas has no income tax, but has a very high (compared to CA) property tax where depending on county, you might pay 3% of the assessment value. So instead of paying $5500 on a home assessed at $500K (1.1% tax rate), you might pay $15K in Texas. Imagine if the CA rate were to be raised to 3% or more–it would effectively drive many middle-income homeowners out of their homes, especially without reduction in other taxes (income, sales, etc).

      Effectively, if this were to happen, CA would become a State of renters than a State of homeowners. Perhaps one can argue that everyone owning their homes is unsustainable, but it would be equally true of everyone just renting their homes. 

      If this is really an issue of control–local vs. state, then I would like to think that there are other solutions than eliminating Prop 13 or modifying it to the point where the vast majority of homeowners would not qualify.