Category Archives: Politics

03.11.11
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Days of Reckoning

Governor Jerry Brown’s self-imposed budget deadline has come and gone, though Brown has asked for more time to work out details with the legislature. That body is trying to line up a floor vote next week, and they can waive the advance requirement for a public vote if they can get the budget basics outlined. If a compromise can’t be reached in the Capitol, Brown has warned of an “all cuts” budget in which every state agency and employee group will be in an “every man for himself” mode. It’s hard to conceive, but not out of the realm of possibility. It’s too early to know what such an impasse would mean for redevelopment, and for the various stadium projects throughout the state.

Speaking of redevelopment, Santa Clara County’s lawsuit against the City of San Jose and SJRA will have a hearing on Monday. The immediate issue at hand is the County’s request for an injunction against the transfer of the Diridon land to SJDDA. It’s a move that could have a paralyzing effect on ballpark efforts in San Jose, at least if the state goes through with the elimination of redevelopment agencies. One thing to keep in mind is that unlike many other Bay Area counties, Santa Clara County has no redevelopment agency of its own. That makes the County unique in that advocacy for curtailing or eliminating redevelopment presents no potential conflict of interest. San Jose has tendency to throw its weight around, so you can see why the County might feel it has to resort to a legal action.

If redevelopment goes away, it wouldn’t only threaten San Jose. Oakland, Santa Clara, and at least two or all three of SoCal football concepts would both see their stadium projects vanish (San Diego, City of Industry for certain, Downtown LA unclear).

Under Brown’s proposal, redevelopment agency property would be sold and the proceeds divided among the cities, counties, school districts and other local entities, finance spokesman H.D. Palmer said, so moves to protect the assets – transferring parking lots, buildings and other properties to a city, for example – could limit the amount those other local government bodies get if lawmakers eliminate redevelopment agencies.

Assuming that whatever lawsuits stem from the seizures get resolved, that would leave the various cities to work out deals where agreements and contracts already exist. That would include the Coliseum in Oakland and the Airport West property in San Jose.

In other news:

  • Chuck Greenberg is resigning from his CEO post with the Texas Rangers today, after only 8 months on the job. A shocker, and the background article is a worthwhile read.
  • The A’s will raise funds for victims of the Sendai earthquake and tsunami on April 3, a game against the Mariners. The day will also be called Japanese Heritage Day.
  • NFLPA appears to be ready to decertify itself, a move that would preempt a lockout. It would also set off a series of lawsuits. The two sides are said to be some $600-700 million apart n terms of sharing revenue, with the league offering 43% of the full pie ($9 Billion) and the players wanting 50%. By going down this path, both sides are setting a highly contentious precedent that could well be followed by the NBA this summer, MLB not so much. Update 1:19 PM – The league has reportedly upped their offer to 46%. Last minute talks are underway. Update 2:16 PM – False hope. Union is decertifying. Begin lockout posthaste.
  • Tim Kawakami continues to carry the torch for Larry Ellison’s NBA team ownership bid.

I need a drink.

03.09.11
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San Jose’s Two Front War

If you follow this blog’s Twitter feed, you’d have seen this on Tuesday afternoon:

SJRA: Item 8.1 – Creation of San Jose Diridon Development Authority – approved unanimously. Objection by Santa Clara County.

The approval took all of a few minutes and had no speakers for or against. Compared to what was discussed during the rest of the session, it was highly anti-climactic. I left Council Chambers wanting more. After the swearing in of the SJDDA board (mayor + city council), there was a brief stretch used to establish a few ground rules, then an adjournment and a return to regular city agenda items. I didn’t realize what that last bit meant until I got home, when I saw an article in the Merc describing Santa Clara County’s $62.9 million lawsuit against San Jose.

To settle prior lawsuits over redevelopment tax grabs, the agency since 2001 has paid the county a portion of the tax dollars it collects, but agency chief Harry Mavrogenes stopped those payments as the economy soured.

By July 1, the agency will owe the county $62.9 million to fund such essential services as mental health, drug rehabilitation and juvenile justice.

San Jose city officials said they weren’t surprised by the suit.

“They need to protect their interests against whatever the state is going to do, so I understand their action,” Mayor Chuck Reed said Tuesday night. “But we also have to protect our interests as the state takes action.”

Reed said the lawsuit would not stop negotiations with the county, which have been going on for more than a year.

By acting to preempt a raid by the state, San Jose raised the ire of the county. The city and county have often clashed over funding and development priorities. I guess I’m surprised the peace lasted this long. Now we wait for the other shoe to drop in Sacramento, if it happens at all.

03.07.11
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State Controller’s Redevelopment Audit Released

As promised, State Controller John Chiang’s audit of 18 different redevelopment agencies was released. It paints a picture of obligations not met, bloated salaries, and limited returns. Here’s the summary of findings from the report (PDF):

  • All 18 redevelopment agencies made deposits into the Low and Moderate Income Housing Fund in accordance with statutory requirements.
  • Of the 18 redevelopment agencies, 5 failed to deposit a portion of their tax increments into the Supplemental Educational Revenue Augmentation Fund (SERAF). Collectively, the amount was $33.6 million. On a statewide basis, we identified another three redevelopment agencies that collectively failed to deposit a total of $7.1 million into the SERAF. As a result, the state General Fund had to make more than $40 million in backfill payments to meet minimum funding levels for the schools for FY 2009-10.
  • Ineligible charges were made against the Low and Moderate Income Housing Fund. These charges were identified through review of a limited number of transactions.
  • Questionable charges were made to the RDAs. Again, these charges were identified through a review of a limited number of transactions.
  • All of the 18 redevelopment agencies reviewed had reporting deficiencies.
  • All of the 18 redevelopment agencies’ independent auditors failed to identify major audit violations and did not include all required information in the audit reports.
  • The City of Calexico has failed to repay the RDA for principal and interest for a loan. Under current legal standards, virtually any condition could be construed to be blight.

Specific observations include:

  • The redevelopment agencies do not have a consistent methodology to capture accurate and reliable data regarding the number of jobs created or retained as a result of redevelopment activities.
  • Significant variation exists among the redevelopment agencies for how indebtedness is determined.
  • Significant differences exist among redevelopment agencies for accounting for planning and general administrative costs.
  • Compensation of redevelopment agency officials appears to be in line with other local government officials.

Regarding the last charge, San Jose’s RDA appears to be an exception in that its top five highest paid employees earned more than $180k last year, the head making nearly $300k. 25% of salaries for Mayor Chuck Reed, the City Council, and 40 of their staff members are under the SJRA budget. In Fremont, the City Attorney and City Manager are on RDA payroll. Richmond’s agency neglected to pass through over $10 million in education-bound revenue. And then there’s Palm Desert, which will go down in ignominy by somehow declaring one of the best public golf courses in the state, Desert Willow Golf Resort, “blighted.” The report’s finding:

The fact that the RDA continues to insist that a 4 1⁄2 star golf course to be blighted further illustrates our point that virtually any condition could be construed to be blighted. Moreover, the renovation of all 18 greens, reshaping of greenside bunkers and fairway bunkers, new bunker drainage improvements, bunker liners, new sand, and restoration of all lake edges to maintain the publicly owned golf course is in violation of Health and Safety Code section 33445(a)(3) which prohibits RDAs from paying normal maintenance or other improvement of publicly owned facilities.

If you’re looking for that one item that the media, especially the national media, will pick up and run with, that’s it.

03.06.11
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San Jose Diridon Development Authority

The what?

That’s the name of the soon-to-be-formed joint powers authority. Joint powers are defined as the City of San Jose and the San Jose Redevelopment Agency. Despite the distinct possibility that the SJRA will be no more in a few months, the creation of this organization will effectively ensure that some kind of redevelopment arm will continue on for the next several decades. Here’s the full text of the resolution under consideration this Tuesday at the weekly SJRA meeting (1:30 PM, SJ City Hall Council Chambers):

RESOLUTION NO. ____

A RESOLUTION OF THE COUNCIL OF THE CITY OF SAN JOSE AUTHORIZING THE CITY MANAGER TO EXECUTE A JOINT POWERS AGREEMENT FOR THE SAN JOSE DIRIDON DEVELOPMENT AUTHORITY

WHEREAS, the City of San Jose and the City of San Jose Redevelopment Agency have many potential development and redevelopment projects on the horizon in the Diridon area including high speed rail, BART, and a potential sports stadium; and

WHEREAS, the Agency wishes to have the benefit of the City’s expertise and the ability to use the joint powers of the City and the Agency for the purposes of considering and facilitating future redevelopment in the Diridon area; and

WHEREAS, the City and the Agency desire to create an independent joint powers authority empowered to finance, develop, redevelop, implement, and operate future projects in or serving the Diridon area; and

WHEREAS, the City desires to enter into a joint powers agreement with the Agency to form the San Jose Diridon Development Authority (the “Authority”); and

WHEREAS, there are no specific projects proposed for the Authority at this time and any future projects will be considered by the Authority Board in a manner consistent with applicable law; and

WHEREAS, pursuant to San Jose Municipal Code Section 4.32.010, in order to enter into a joint powers agreement creating a joint powers authority with the power to issue revenue bonds, the City Council must find that the public interests and necessity demand that (a) the Authority acquire, construct, maintain, and operate the properties and the projects undertaken into pursuant to the Authority joint powers agreement, and (b) the Authority be empowered to exercise the power to issue revenue bonds; and

WHEREAS, those findings can be made based on the information in the memorandum dated March 4, 2011 from the City Manager and the Executive Director.

NOW, THEREFORE, BE IT RESOLVED BY THE COUNCIL OF THE CITY OF SAN JOSE THAT:

  1. The City Council hereby determines, based upon the information contained in the memorandum from the City Manager and Agency’s Executive Director dated March 4, 2011, that the public interests and necessity demand that:
    1. The San Jose Diridon Development Authority be empowered to acquire, construct, maintain, and operate properties and the projects undertaken into pursuant to the San Jose Diridon Development Authority joint powers agreement; and
    2. The San Jose Diridon Development Authority be empowered to exercise the power to issue revenue bonds.
  2. The City Manager is hereby authorized to execute the San Jose Diridon Development Authority joint powers agreement.

The Diridon area is not itself a specific redevelopment area, but it falls under the guise of redevelopment as part of San Jose’s Strong Neighborhoods Initiative. Approval of this resolution and other related actions would create a “son of RDA” just for Diridon. The new agency would be tasked with planning and infrastructure for a ballpark (or alternative), transit hub, and a whatever ends up in the six acres between the arena and ballpark site. Included would be properties in the Autumn Parkway project.

Creation of SJDDA does not mean the City has somehow sidestepped the public referendum requirement for a ballpark, as that is enshrined in municipal code. It does mean that the new body would have potentially broad and sweeping authority to raise funds for projects within the area. At this point my guess is that fundraising would be limited to transit infrastructure, as the cost to construct San Jose’s “Grand Central of the West” will be enormous – well into nine figures on its own. Attempts to include the ballpark would be unpopular and highly transparent, creating a situation in which one project could drag another down. This is especially critical as it applies to raising bonds, as bond issuers have been very skittish about dealing with California’s cities in light of the near and long-term prospects for RDAs.

One of SJRA’s related actions is a one-year extension of the time limits for both redevelopment activity and indebtedness for all existing project areas. Diridon has the latest dates on the schedule, with a current activity end date of July 2033 and a debt end date of July 2048. BART and HSR should be in place by 2034, right? Er… By extending the dates for project areas, the relinquishment of tax increment to state/county would be further delayed. SJRA is by far the most indebted in the state.

I mentioned last week that I wasn’t thrilled about the possibility of this happening, notably because it replaces one bureaucracy with another. This is clearly a reaction to what’s coming from Sacramento, and cities feel they are being backed into corners by the Governor’s demands. It’ll be interesting to see how the Governor’s office reacts to these types of arrangements, and to find out what new funds will be recognized by the state after these “sons of RDAs” squirrel away their share. Whether a ballpark or something else gets built at Diridon, that new development will be extremely important as its tax increment (or possessory interest taxes) will help fund the future transit hub.

03.04.11
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Redevelopment is a dead man walking

Governor Brown is lining up votes to get his budget proposal finalized before next Thursday’s deadline. Now he has the backing of Democrats in the legislature, including Assembly leader John Perez. Redevelopment proponents are starting to admit that their only tactic going forward may be litigation, as an attempt to broker a deal by borrowing has gone nowhere in the Capitol. The last step is to get a few Republican votes, and that’s more a matter of compromise than a lengthy debate. Perez:

That would clear one of the most contentious hurdles confronting Democrats. “My preference is to not eliminate them, but the realities of the day indicates there’s not yet a viable alternative to elimination,” Perez said. “It’s a likelihood that we’ll see action to eliminate redevelopment agencies.” Mayors from California’s largest cities had proposed a borrowing scheme to keep the current redevelopment agency system intact, but Perez said Brown’s approach of replacing it with more localized efforts to focus on blight and affordable housing is a better way to go.

Seeing the writing on the wall, Oakland moved to secure some funds slated for redevelopment projects. Mayor Jean Quan took a wait-and-see approach going into this week, and now that the barbarians are at redev’s gates, it might be a good time to take what you can. Unfortunately, this puts the Victory Court plan in a fiscal limbo. No one knows how much the final cost will be, and VC would have to get in line behind other projects for a very limited pool of funds.

Should the League of Cities or its individual members decide to sue, chances are that it wouldn’t be 400 lawsuits against the state. However many there are, the courts would probably combine them into one and then rule on the issue. That issue may have to be decided sometime before the start of the fiscal year so that a state budget could be finalized. The Governor’s office is extremely confident in its stance and the cities are by-in-large showing desperation, so it’s easy to guess which party feels like it’s on more solid footing. No wonder San Jose is getting ready to create a new joint powers authority to handle the ballpark deal – a drastic step born of not being willing to take chances when so much is at stake.

The other side of the legal scale is the Governor’s office looking to stop the individual RDA’s from tying up funds or keeping assets. That part isn’t so clear as various cities are going to different lengths. The court(s) would have to set a standard by which the RDAs are/were overstepping their authority, and it’s hard to know what that standard would be. San Jose, which is somewhat unique in its landbanking strategy, may have a different standard applied as it relates to seizing or liquidating property.

Looks like we’re in for a bumpy ride, folks.

03.04.11
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Sacramento is now Plan B, Anaheim is Plan A

Sacramento Mayor Kevin Johnson came out of a 40-minute meeting with the Maloofs with the notion that Sacramento is only a fallback in case a deal between the Kings and Anaheim’s Honda Center doesn’t work out. The team was granted an extension to April 15 (tax day!) to get its affairs in order.

More and more I think the tipping point for this was the Lakers creating their own network, thus creating an opening for Fox Sports to hook up with the Kings. It’s a potentially huge deal which makes the LA market superior to any other potential relocation spot.

I know many of you are Kings fans and this has to hurt. Look on the bright side though – at least you’ll never have to worry about this again:

Pithy commentary provided by “The King” Jerry Lawler, of course.

03.03.11
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News for 3/3/11: Quakes site demolition + Redevelopment

A couple of A’s business-related items from the Silicon Valley Business Journal:

  • Neil Kraetsch was named the team’s general counsel. He had previously been assistant general counsel. His predecessor left to take a similar position with the Tampa Bay Buccaneers.
  • Darrin Gross, who spent more than a decade with the Sacramento River Cats, was hired by the A’s to become the Senior Director of Corporate Partnerships.

Today’s a pretty big day for Quakes fans, as a ceremony for the demolition of the remaining FMC plant will happen at noon. The entire demolition process should take 12 weeks, including cleanup, and should be followed by groundbreaking shortly thereafter.

Articles in the Oakland Tribune and the San Francisco Business Times go over Oakland’s challenges in saving redevelopment.

The Merc’s Tracy Seipel reports that as the Cinequest Film Festival begins in San Jose, the City’s redevelopment agency must decide if it should subsidize over $800k in rent for operator Camera Cinemas on the Camera 12 multiplex, which is owned by Forest City. Absent that freeze, the multiplex would probably shut down and remain vacant for years, just as it did when UA vanished over a decade ago. The Camera 12 is the flagship venue for Cinequest and it would be a shame for downtown if the Camera 12 closed.

An almost hidden item in the article above is San Jose’s interest in creating a joint powers authority that would hold the Diridon ballpark land in case Sacramento wanted to seize or liquidate it. That’s different from the successor agencies that other cities have been creating, and I’m curious as to why they’d move in this direction. I’d also like to know what the joint powers would be (two or more public agencies) and what its “powers” would entail. Frankly, I don’t like where this is headed. Next Tuesday’s City Council meeting should explain this further.

02.26.11
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Boxer leaves Oakland Planning Commission (updated: Russo pursuing Alameda City Mgr job)

Found this item about now ex-Planning Commissioner Doug Boxer in Trib scribe Angela Woodall’s Friday entry interesting:

Boxer, however, looked relaxed because it was his last meeting. He was appointed to the commission nearly six years ago and stepped down a few months shy of being termed out. His resignation wouldn’t attract much attention except he is behind Let’s Go Oakland, the group leading efforts to keep the A’s in Oakland. And he is well known as the son of U.S. Sen. Barbara Boxer, who has a condo in Jack London Square and is a client of his political consulting firm, Boxer and Associates.

Critics and people who are fighting against keeping the A’s in Oakland raised an eyebrow way up high at Boxer’s connections with developers and politicians and his seat on the commission when talk about a new ballpark near Jack London Square began heating up. Boxer dismissed the accusations — and they were accusations even though spoken in whispers by people with an agenda. And anyway, he said, the commission only makes recommendations to the City Council, which would have the ultimate say so over a ballpark.

“It’s time to go,” he said. “I will keep fighting the fight on the A’s.”

I’m not on the inside in terms of Oakland politics, so I don’t really know what to make of this. Either this frees Boxer up so that he can be a more forceful advocate for Let’s Go Oakland or he knows that nothing can be done prior to the expiration of his term so he’s bailing early (or both). Either way it’ll be interesting to see if Boxer’s public profile is raised in the coming months.

Update 7:30 PM – Almost forgot! In addition, Oakland City Attorney John Russo is a finalist for Alameda’s City Manager position. Russo, who famously threatened lawsuits against the A’s for anything from breaking the lease to censorship, may be looking to head across the estuary. He’d get a raise in Alameda and an escape from Oakland Mayor Jean Quan, which given their friction, may be a vacation for him. Should Russo get the job, it would set off a chain of events in Oakland in which his successor would have to be chosen or elected. One or more current City Council members may be interested in Russo’s job, maybe even Doug Boxer?

02.21.11
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Redevelopment alternative submitted in Assembly

Update 2/21 1:24 PM – At the SF Business Times, Eric Young has the details of the cities’ alternative proposal:

  • 5% of tax increment from each city’s RDA will be sent to Sacramento to service the $1.7 Billion loan
  • Higher pass-throughs of revenue to counties and school districts, and perhaps a cap on the amount that can be used for “economic development activities”
  • Restrictions on how and how much land and area can be placed in a redevelopment zone

I still don’t think it’ll work for the Governor, but at least it’s game attempt. Not sure how this works for San Jose, whose RDA is so poor in terms of ongoing revenue stream that the 5% being discussed may be problematic going forward.

The day of reckoning for redevelopment is coming. The State Senate appears to be in lockstep with Governor Jerry Brown regarding redevelopment, which is to say it should be eliminated. A budget is working its way through the State Assembly and has been approved in two committees. Like Brown’s budget proposal, this one calls for $1.7 Billion in cuts to redevelopment. While the big number appears to be the same, the approaches couldn’t be more different.

The plan approved by the Assembly budget committee, for example, calls for a $1.7 billion cut to redevelopment, as did Brown’s plan – but instead of eliminating the economic development program, the committee seeks to achieve the savings “through reforms in lieu of elimination.”

These reforms come courtesy of numerous mayors and other interests, who pressured worked with their local Assemblymen to come up with the alternative. The mayors of the 10 largest cities in California, headed by Los Angeles Mayor Antonio Villagairosa submitted an alternative redevelopment proposal to Brown. The alternative calls for a $1.7 Billion loan to cover the redevelopment-related deficit and would send $200 million per year in tax increment to the state. Already, sources within the governor’s office are calling such a loan a nonstarter, and Republicans are casting doubt as to whether cutting redevelopment will truly result in $1.7 Billion in savings.

Brown has been criticized for not attacking the biggest issues in the budget, such as entitlement and state employee pension reforms. Such criticisms are similar to what’s being debated in Washington, where no budget proposals from the House, Senate, or President Obama are tackling Medicare, Social Security, or the Defense budget. Instead, these politicians are going after what seems to be the low-hanging fruit, which is no way to structurally address the deficits at the state or federal levels. Whether Brown is saving his bullets for those battles down the road or he simply sided with the unions because that’s his base is unclear. What is clear is that there are no easy answers to balance the state’s budget, and if Brown wants a budget passed by July 1st, he’s gonna have to look beyond scapegoats and start making the difficult choices sooner rather than later.

02.20.11
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Santa Clara to create Authority, sew up stadium money

Pressed by the uncertain future of redevelopment, Santa Clara is set to move the 49ers stadium project forward by making two major actions this Tuesday:

  • “Memorialize” the terms of the stadium development agreement. This would effectively put the deal under contract and allow the City to start raising the initial $40 million for the project.
  • Create the quasi-public Stadium Authority that would be responsible for getting loans/bonds for $330 million needed to finish the stadium.

The article by the Merc’s Lisa Fernandez has the scoop. Despite bullet #1 above, there remains a chance that a wholesale shutdown of RDA activities could render Santa Clara incapable of raising the money. That seems unlikely given the gaps in budget proposals among the State Senate, Assembly, and the Governor – at least as it relates to redevelopment in general. Should that shutdown occur it could be up to the 49ers to raise the money, for which they were going to provide a partial advance to the RDA anyway.