10:00 PM PST on Tuesday, January 11, 2011

By JIM MILLER
Sacramento Bureau

SACRAMENTO – The state and local governments seem headed for a legal showdown over Gov. Jerry Brown’s proposal to eliminate a pair of economic development programs.

Brown’s plan to phase out redevelopment agencies would have a major impact in Riverside and San Bernardino counties, where about 25 cents of every property-tax dollar — the highest rate in the state — goes to anti-blight projects such as Riverside’s Renaissance program and improving the Hemet library.

The two counties also are home to four enterprise zones, a smaller program that offers various tax breaks to attract businesses and jobs.

Both programs are on the chopping block as Brown tries to close a $25.4 billion hole over the next 18 months.

“We’re spending money at the local level that the state doesn’t have,” Brown said this week, promising to give local governments and schools some of the $5 billion that now goes to redevelopment agencies.

Local officials vow to fight redevelopment’s elimination.

Riverside Mayor Ron Loveridge said he and other city officials will mount a “full-scale campaign” against Brown’s proposal. In 2008-09, the city redevelopment agency reported $76.7 million in revenue and $86.1 million in expenditures.

“(I’m) not saying the governor is wrong, but if you’re interested in jobs, if you’re interested in affordable housing, if you’re interested in revitalizing cities, you can’t abolish redevelopment,” Loveridge said.

REDEVELOPMENT SCRAP

Brown’s budget proposal describes eliminating “subsidies” of $1.7 billion for redevelopment agencies and $924 million for enterprise zones. It’s the latest salvo in an ongoing fight between the state and local governments over the issue.

Both sides are in court over lawmakers’ July 2009 approval of shifting $2.05 billion in redevelopment to the state. An appeals court ruling is expected this spring.

In November, meanwhile, voters approved Prop. 22, which significantly reduces the state’s ability to take local fuel tax and property tax revenue.

State officials believe the redevelopment proposal complies with Prop. 22. Tuesday, though, the League of California Cities said the proposal “violates the will of the voters.”

Cities, counties and schools normally collect property tax revenue. In places with redevelopment agencies, a portion of the money is diverted to pay for projects. The state reimburses schools.

Some school officials have applauded Brown’s proposal, saying it would mean a net increase in school funding.

But it’s not that simple, said Riverside County schools Superintendent Kenn Young. Some county districts have borrowed against revenue they receive from redevelopment agencies, he said.

“To think it’s an automatic windfall for schools is not understanding the complete picture,” Young said of the governor’s plan.

INLAND PROJECTS

In Inland Southern California, redevelopment money has paid for new building facades in Banning and help for struggling car dealers in Norco.

In Riverside, redevelopment-backed borrowing covers $182 million of the $1.48 billion Renaissance program, a citywide public works initiative that has built parks and libraries and upgraded streets and sewers.

Counties, which rely heavily on property tax revenue, sometimes are skeptical of city redevelopment projects. Riverside County, with a redevelopment agency that has $100 million in revenue, is one of the exceptions.

Supervisor John Tavaglione, president of the California State Association of Counties, has met with Brown and stressed the importance of redevelopment.

“The projects we have completed help provide those core services” to the public, he said.

Supervisor John Benoit, a former state lawmaker, also raised concerns about the governor’s redevelopment proposal.

“Redevelopment as we know it may be coming to an end. That is a huge issue for this county,” he said.

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