Official: Redevelopment is DEAD

This story will be updated throughout the day as analyses and reactions come in.

News links:

Added 3:37 PM – A brief blurb of my interview with KQED-FM is now up.

Added 3:40 PM – Fremont Mayor Bob Wasserman passed away today at the age of 77. Condolences go out to his family.

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The Supreme Court just came down with an 83-page ruling on the legality of ABX26 and 27, the redevelopment killing and reforming bills passed during the summer budget battle. Here’s the nitty gritty:

We consider whether under the state Constitution (1) redevelopment agencies, once created and engaged in redevelopment plans, have a protected right to exist that immunizes them from statutory dissolution by the Legislature; and (2) redevelopment agencies and their sponsoring communities have a protected right not to make payments to various funds benefiting schools and special districts as a condition of continued operation. Answering the first question “no” and the second “yes” we largely uphold Assembly Bill 1X 26 and invalidate Assembly Bill 1X 27.

Assembly Bill 1X 26, the dissolution measure, is a proper exercise of the legislative power vested in the Legislature by the state Constitution. That power includes the authority to create entities, such as redevelopment agencies, to carry out the state‘s ends and the corollary power to dissolve those same entities when the Legislature deems it necessary and proper. Proposition 22, while it amended the state Constitution to impose new limits on the Legislature‘s fiscal powers, neither explicitly nor implicitly rescinded the Legislature‘s power to dissolve redevelopment agencies. Nor does article XVI, section 16 of the state Constitution, which authorizes the allocation of property tax revenues to redevelopment agencies, impair that power.

A different conclusion is required with respect to Assembly Bill 1X 27, the measure conditioning further redevelopment agency operations on additional payments by an agency‘s community sponsors to state funds benefiting schools and special districts. Proposition 22 (specifically Cal. Const., art. XIII, § 25.5, subd. (a)(7)) expressly forbids the Legislature from requiring such payments.

Matosantos‘s argument that the payments are valid because technically voluntary cannot be reconciled with the fact that the payments are a requirement of continued operation. Because the flawed provisions of Assembly Bill 1X 27 are not severable from other parts of that measure, the measure is invalid in its entirety.

In short, the Court ruled that redevelopment was created by the legislature, so it can be taken away by the legislature at any point. This is the worst possible outcome for redevelopment agencies all over the state. They are effectively dissolved and have no mechanism for reconstituting themselves.

What does this mean for the various cities? Let’s do a roll call:

  • San Jose Redevelopment Agency is done. Dead. The agency owed the City $80-90 million and that’s gone. Start the procession.
  • San Jose Diridon Development Agency exists in a sort of gray area. Its charter is to oversee development in its defined area and it controls land, but it is not expressly a redevelopment agency. We’ll see if it gets (and withstands) any legal challenges in the future. As long as Lew Wolff maintains his stance that he can pay for the rest of the land/infrastructure and, more importantly, follows through on that pledge, the ballpark project is safe. Unfortunately for Wolff, the price tag continues to grow.
  • Oakland’s plans for Coliseum City and Victory Court have to go back to the drawing board, because they were largely dependent on ABX27 passing so that they could continue operation. Now that redevelopment is dead, they’ll have to come up with extremely creative ways to fund their infrastructure projects, and considering how large they are ($250 million for VC, a similar or greater amount for CC) there’s no telling how they’ll do it. That $36 million reserve that Mayor Jean Quan was crowing about? That’s all they have at this point.
  • Santa Clara is safe simply because they got a bunch of contract and lending stuff done before the end of the year. Now their only worry is the fact that their Stadium Authority is liable for $850 million in loans, despite assurances from the 49ers and NFL that they’ll take care of debt service.
  • Sacramento is in a slightly more advanced position than Oakland, because they’ve been exploring alternative ways to finance a Kings arena, such as selling advance parking revenue.
  • The downtown LA football stadium, Farmers Field, was not dependent on tax increment or redevelopment funds. It was to be paid for by increased convention center use and other events at the domed stadium.
  • The City of Industry football stadium was originally highly dependent on redevelopment money (mixed use). I had heard that the funding mix had been altered in light of the new political realities. It seems that with each passing month this project slips further into oblivion.
  • San Diego’s football stadium was also expected to use redevelopment funds. It’s hard to see how they’ll pull it off now.
  • Escondido’s AAA ballpark plan for the Padres is dead.

The only hope redevelopment has now is to lobby hard in Sacramento to reform it through the legislature. At this point, there’s no telling how or when that will happen. During the oral argument, the justices talked about a system in which projects would be voted on by their communities. That may be the future of redevelopment, not the mostly unchecked power of the past. It’s a new day in California. Good luck getting your stadium built.

Who said there’s no news at the end of the year, eh?

Note: I did an interview with KQED-FM shortly after the ruling was handed down. Hopefully part of it will show up later today or tomorrow.

P.S.: I have to clip something off the last Baseball Oakland post, full of sunshine and unicorns:

One final point about the money that would be used for Oakland’s plan. Much of it would come from redevelopment funds. Some of you might be concerned that the state will all destroy redevelopment agencies. However, I asked Fred Blackwell about this at the end of the press conference. He explained that, based on the expected upcoming ruling of a lawsuit filed by California’s cities, redevelopment agencies will continue to exist as normal and everything around ballpark financing would go as planned. If the cites lose, then they will have to make a payment to the state. Blackwell says that Oakland plans on making its payment and still can issue the needed bonds to complete its proposed projects. So, any concerns about the death of redevelopment agencies should alleviated.

Everything’s gonna be fine. Right?

27 Responses to Official: Redevelopment is DEAD

  1. Dan says:

    So Los Angeles Chargers, Oakland Raiders of Santa Clara, San Jose Athletics, and San Francisco 49ers (playing in Santa Clara) are the coming realities of the near future then…

    Don’t see how San Diego gets their new stadium built now. Don’t see how MLB will bother with Oakland (and rule against San Jose) now that they’ve lost the little bit of funding they were wholly dependent on, and the Raiders are in the same boat as the A’s with regard to Oakland being done. Sacramento is interesting since they’ve been finding alternatives. Might be something there as a way around this mess.

  2. Jeffrey says:

    Wait, baseballoakland was wrong about something?

  3. Tony D. says:

    Agree with Dan: Raiders to SC and Chargers to LA. RIP SJRDA!

  4. SierraSpartan says:

    …and boom went the dynamite.

    Regrettably for Oakland, VC and Coliseum City are deader than dogcrap before even getting out of the box.

    Someone, somewhere is going to challenge the SJDDA, and they’re going to draw on the obvious parralels to the SJRA, and some court somewhere may well agree with them.

    Mr. Wolff needs to lean on Selig to get the decision announced muy pronto and get land cleared and stuff in the ground before the lawsuit mongers get up enough steam to file the inevitable lawsuit.

  5. gojohn10 says:

    R.I.P. redevepment. Hopefully not the A’s.

  6. Dan says:

    Wonder what Blackwell’s take is now that the “pay to play” option is as dead in the water as Oakland’s ballpark plans?

    And Spartan you are correct, the SJDDA will get challenged eventually. So the sooner MLB makes this happen the better.

  7. GoA's says:

    @ML- any thoughts on whether or not this will move MLB to make a decision sooner now that Oakland is officially dead- maybe they were they waiting for this decision which was supposed to be after the winter meetings?

  8. Fan says:

    980 Park doers not need RDA. City can fund its share from the $30M reserves.

  9. Dan says:

    980 park is a complete non starter. No one is going to build a ballpark in earthquake country on top of a major freeway.

  10. Nam Turk says:

    How about an underwater stadium in Lake Merritt instead???? That would be like soooooo coooool!!!!

  11. pjk says:

    Good thing San Jose got most of its legwork done years ago, without even any assurances it would ever get a team> Oakland? Asleep at the wheel for so long and now it’s probably too late.Kind of reminds me of the Biblical Parable of the 10 Virgins. From wikipedia: According to the Gospel of Matthew 25:1-13 the five virgins who are prepared for the bridegroom’s arrival are rewarded, while the five who are not prepared are excluded from his marriage feast

  12. Marine Layer says:

    @GoA’s – If there was any kind of tipping point event, this is it. That’s why I stayed on the beat.

  13. pjk says:

    If Oakland’s plans are truly dead (I don’t know if they are), do Oakland-only folks now hop on the San Jose bandwagon or do they root for San Jose to fail, too?

  14. Tony D. says:

    While a legal challenge to the SJDDA is certainly possible, I don’t see any grounds for a lawsuit. Joint Powers Authority’s and Special Facility Districts (Mello Roos) are formed all the time in California. SJDDA appears no different. Worse case scenario; Wolff buys the land and the City of San Jose is forced to send the proceeds to the state. Just my opinion. Perhaps Bartleby will have a different, more legally informed take on this.

  15. gojohn10 says:

    @PJK The fact that they are openly rooting for the Giants to squash the A’s on the TR rights issue should tell you all you need to know.
    .
    @ML With all the talk of $ for land, $ for the payoff, and $ for the ballpark, do we know how much the A’s can realistically afford to spend on this project? How much do we really know about the details of the financing plan?

  16. Dinosaur JR says:

    @gojohn10 good question. Like I said in a previous thread, the burden of proof is on Wolff. A’s fans everywhere can no longer stand by “trust me” as a financing plan. We need real evidence.

  17. Marine Layer says:

    @gojohn10 – My guess is $600 million. Just remember that the financing is out there and corporate sponsors are waiting for the other shoe to drop.

    @Dinosaur Jr – I’m all for it and want to get right into the details. How about the obstructionists step aside and let the process happen, and Wolff provides the details. Does that sound like a good deal?

  18. pjk says:

    Why does Wolff personally need to share his financing plan with us? When Lowe’s hardware moves in, do we get to glimpse their books first?

  19. bartleby says:

    @ Tony Sorry, I’m out of my depth as far as the ins and outs of that alphabet soup of government agencies/districts/authorities goes. Your take is as good as mine.

    @DJR If Wolff and Fisher can’t finance a ballpark plan in one of the richest corporate markets in the country, nobody can privately finance a ballpark plan anywhere, ever again. Your skepticism is irrational.

  20. Marine Layer says:

    KQED regular segment is now up. My blurb is brief.

    In addition, Fremont Mayor Bob Wasserman passed away at the age of 77. Condolences go out to his family.

  21. jeff-athletic says:

    Redev being dead is the final nail in Oakland’s coffin, in terms of Oakland keeping the A’s.

    Off topic a bit, but relevant to another thread talking about G’s. compensation. I think Zito, and perhaps Rowand, are A’s bound.

    Think about it – the A’s have traded stud pitchers for prospects, did not resign own FAs, did so within 3 week span, and now have $23 million payroll.

    Meanwhile, the gnats have done zippo in terms of aquiring some bats, which they so desperately need. The gnats are ham-tied with the Zito and Rowand contracts, and those guys aren’t producing.

    The A’s can easily absorb those contracts, and they could use an experienced OF, and an innings eating pitcher. Plus, it’s abundantly clear the A’s aren’t competing this year or the next, so who cares if Zito or Rowand aren’t worth the money.

    The A’s get their opening for SJ, and the G’s free up money to get hitters and pay off At&t.

  22. Nate B says:

    Didn’t Rowand sign with the Marlins?

  23. Marine Layer says:

    @jeff-athletic – Rowand was DFA’d during the season. If Zito ends up being compensation, I wouldn’t be surprised if, in retrospect, Bill Neukom was sacked for impulsively waiving Rowand when he could’ve been a bargaining chip.

    @Nate B – Yes. The Giants are still on the hook for $13.6 million for Rowand next season (minus whatever the Marlins pay if he makes the roster).

  24. hecanfoos says:

    Didn’t Rowand get released?

  25. jeff-athletic says:

    I stand corrected on Rowand. But the theory still stands on Zito.

  26. Transic says:

    Wow! A lot to digest with this ruling, huh?

  27. Bay Area A's says:

    I was wondering if the reason for the A’s to San Jose issue supposedly not being on the January owners meetings agenda was because of the original supreme court ruling date. Maybe this is the tipping point as you suggest ML. Maybe this is what Selig has been waiting for all along. Oakland is oficially dead in the water with no way to use public funds for a ballpark. Hopefully this pushes the issue to the meeting’s agenda.

    On another note, this is bad news for all municipalities that were robbing Peter to pay Paul with RDA money. As a public employee who works for one of the abusers of RDA, I cringe at what this will do to the my fellow employees, the City of Oakland’s and others. Municipal bankrupcy might be the big story of 2012.

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