Update 4:50 PM – The League of California Cities, a redevelopment and city lobbying group, is going straight to the California Supreme Court for a ruling on the constitutionality of the new laws.
Update 2:40 PM – Governor Brown has signed the twin kill redevelopment bills.
Reminder: Lew Wolff will be on The Chris Townsend Show (95.7 FM) at 5:30 PM today.
At the end of Howard Bryant’s first column on the state of the A’s, it might have been easy to lose track of something Lew Wolff said.
Though the clock is ticking on the A’s, sources also say the committee has not expressed any time pressure to present Selig of its findings.
“That’s very true,” Wolff said. “The pressure isn’t on them. It’s on me.”
Starting today, the pressure will definitely be on Wolff – despite the fact that this pressure will come from circumstances beyond his control. At the Capitol, Republicans briefly delayed the inevitable passage of the budget, which was constructed from a combination of realignment and suspect revenue projections. The final package includes the two redevelopment bills (one to kill, one for ransom/rebirth) that were passed by the legislature two weeks ago. Cities throughout the state are lawyering up, though it’s hard to see what settlement could arise since any compromise on the state’s part would have consequences for the budget.
Legal challenges or not, all cities have to deal with the repercussions of the budget passage. Redevelopment advocates have called the twin bills little more than an extortion scheme to allow them to continue to work, and they’re not wrong. As mentioned last Tuesday, here are the amounts that would have to be paid for cities and counties to keep their RDA’s functional:
- Alameda County: $7.7 million
- Fremont: $9 million
- Oakland: $39.7 million
- San Diego: $69.8 million
- San Francisco: $24.6 million
- San Jose: $47.6 million
- Santa Clara: $11.4 million
The figures are the extortion amounts. See how the Oakland amount is nearly as high as the San Jose amount even though it has less than half the population? That’s because so much land in Oakland (most of the flats) is in one redevelopment zone or another. Oakland North reports that the ransom payment won’t be factored into whatever budget is passed by the City of Oakland, which is understandable since it’s such a recent happening. As of this writing, Oakland is still choosing one of several budget proposals to approve, with the tough battle to gain union concessions won by Mayor Jean Quan. For Oakland, the issue with redevelopment becomes a matter of what they’ll be allowed to do once October 1 hits. Unlike San Jose, Oakland hasn’t gone to the trouble of winding down ORA’s activities, which makes extracting ORA from City Hall difficult. Currently, 17 police officers have their salaries paid by ORA, as well as half the salaries of the mayor and city council (who serve on the ORA board). As they scramble to figure out how some of those needs will be met, it’s not hard to see how actual projects which haven’t started in earnest could fall by the wayside.
Worse, not operating a RDA doesn’t mean that the state won’t get its pound of flesh. It’ll still entitled to the $40 million, only it gets to decide at a later point how it will extract the money from the city. If a city decides it can “play ball” it can pay the vig this year and a smaller amount for next three years, and whatever’s leftover can be used for RDA uses by a successor agency, or as I called it previously, “Son of RDA”. If a city decides it can’t play ball, a successor agency will be created for them, much the same way a defendant can get a court-appointed public defender. That agency’s sole purpose will be to tally up and distribute tax increment as it comes in, none going to new projects. Most importantly, in the can’t-play-ball scenario cities won’t be able to issue new debt. That’s a killer for Oakland, which was counting on being able to tap into new bonds to pay for some of the Victory Court project (land/infrastructure) cost. It’s even more important now that ORA had to absorb some of the city’s budgetary cost by acquiring HJKCC. Without that ability to issue new debt, Oakland’s liable to say, at “Our hands are tied, sorry we couldn’t do more.” And they’d be perfectly within their rights to do so. Thanks for killing the A’s again, Governor Moonbeam.
Then again, there may be a loophole, one that some of the largest RDA’s have been looking to exploit – and one that may have the biggest legal test. When Oakland initiated $100 million in property transfers from ORA back to the city two weeks ago, my response was, “What took so long?” Los Angeles transferred $1 billion worth of assets in a similar fashion in January. While these transfers may have occurred before the 2011-12 fiscal year begins, language written into ABX 26, the redevelopment killing bill, allows state-appointed auditors to determine if any transactions done January 1, 2011 or later (effectively after Brown took office) to be reviewed. What that means for those assets is anyone’s guess at this point, and probably will be the focus of more legal wrangling should the state start looking to liquidate assets to get its revenue.
There’s also the case of San Jose’s newly and hastily created SJ Diridon Development Authority. All thats missing from the name is “Re”. The whole affair seems like an overreaction to Brown, though there may be some hidden wisdom in there somewhere. Regardless of whether work is done through the skeleton crew at SJRA or SJDDA, at some point San Jose will also have to decide if it wants to pay to play. Recently, Mayor Chuck Reed and Lew Wolff have been adamant that they will find the necessary funds to cover the rest of the ballpark land acquisition and infrastructure change, $27+ million total. However, San Jose will also have to pay its $47 million soon if they want to be clear of the state’s reach. That would preclude merely piecemealing the remaining land sales/buys, as they have suggested. Instead, the onus may be on Wolff to deliver on the $89 million price of the Airport West (Earthquakes Stadium) land renegotiated last December. That money isn’t due until 2015, yet here we are with pushed up deadlines thanks to the death of redevelopment. $89 million would provide enough cash for SJ to complete its work and fund other infrastructure in the area it wants to be known as Silicon Valley’s Times Square (I thought it was Grand Central?).
Soon, a coalition of the ten largest cities in the state (including SF, SJ, and Oakland) will put together a lawsuit to vigorously challenge Brown’s redevelopment pay-to-play-or-die scheme. Their case is supported by the passage of Proposition 22 last November, which prohibits state-based redirects of property taxes. Legal murkiness started during the gubernatorial transition when Governors Schwarzenegger and Brown signed off on declaring a fiscal state of emergency, which set the framework for the redevelopment reform bills. Which has greater precedence, a new law or an even newer declared state of emergency? That’s what the courts will have to decide.