Redevelopment in bull’s-eye

$1.7B at stake as Brown proposes closing agencies
Wendy Leung and Liset Marquez, Staff Writers
Created: 02/12/2011 07:07:18 AM PST

Gov. Jerry Brown has a lot of ideas on how to close the $25.4 billion budget gap.

But it’s the idea that would get him $1.7 billion closer that has all the local officials in an uproar.

Ever since Brown proposed last month to shut down the state’s redevelopment agencies to help balance the budget, city leaders have been vocal against the move, calling it illegal and irresponsible. In recent weeks, with the state controller announcing an audit of 18 redevelopment agencies, local government officials have stepped up their rhetoric.

San Bernardino Mayor Pat Morris called Controller John Chiang’s audit “tantamount to a crucifixion” of the agencies.

Montclair Councilman John Dutrey, whose day job is housing specialist for the Rialto Redevelopment Agency, said the governor is using every tool he has to put redevelopment agencies in a bad light.

“He’s at war with us,” Dutrey said.

In addition to slashing funds to state universities and for health care for the poor, Brown wants to do away with municipal redevelopment agencies, a plan that he projects would save the state $1.7 billion.

The plan would take those funds and send them to schools, counties and Sacramento.

But city officials believe such a plan would be disastrous and cripple an already teetering economy.

“It would devastate the city, and I don’t use that word lightly,” said Linda Daniels, Rancho Cucamonga’s deputy city manager.

Fifty one of the state’s 397 redevelopment agencies are in San Bernardino and Riverside counties.

Together the Inland Empire agencies have a total tax increment value of $1.3 billion, or 23 percent of the state total.

Tax increment represents the main source of revenue for redevelopment agencies, which is a portion of property taxes.

Redevelopment agencies help cities fund affordable housing, parks, fire stations, shopping centers and other developments.

“Our agency focuses on removing the barriers to economic development to create job growth and private investment,” Daniels said. “That’s where we’ve focused on, and that’s what’s at stake if the state eliminates redevelopment.”

Tool for local government

In the 1940s, redevelopment agencies were created to curb blight and return life to neglected areas.

When Proposition 13 passed in 1978, limiting cities’ abilities to collect property taxes, municipalities rushed to form redevelopment agencies.

It was a tool that allowed cities to sell bonds that would be later repaid with increased tax revenues coming from increased property values.

Today, city and county redevelopment agencies throughout the state receive approximately $5 billion in property taxes each year to run their projects.

Supervisor Josie Gonzales, a former Fontana councilwoman, remembers the days of a dismal downtown when graffiti covered the streets.

“It was just a place to dump trash,” Gonzales said.

The supervisor said without redevelopment agencies, cities would be stuck with “perpetual ghettos.”

Today, many of Fontana’s stories of success come courtesy of redevelopment dollars. More than $40 million went to Fontana Park, the 39-acre project in the city’s northern limits. Redevelopment also helped pay for:

Baseline Avenue storm drain from the city’s western boundary to Mango Avenue

Fire Station 79

Chaffey College campus expansion

Refurbishing Center Stage Theatre

Lewis Library

Fontana Community Senior Center

More than 1,000 affordable housing units

“At the end of the day, if we lose our economic engine, we lose our future,” said Fontana Mayor Acquanetta Warren.

Revenue streams

In terms of tax increment, Fontana and Rancho Cucamonga have the two biggest redevelopment agencies in San Bernardino County.

Formed in 1981, Rancho Cucamonga’s redevelopment agency has helped construct three fire stations, provide subsidies for mobile home renters, build libraries, construct more than 760 units of affordable housing and convert more than 900 units for low-income families.

Redevelopment agencies are required to set aside 20 percent of their funding for affordable housing.

In 1996, the redevelopment agency purchased a piece of land on Feron Boulevard for Northtown Housing Corp. to build an affordable townhome development. Villa Del Norte, an 88-unit complex for low-income families, helped kick-start the revival of a once-troubled neighborhood.

One of the most visible redevelopment projects is Victoria Gardens, which occupies a piece of land that was once considered undevelopable until major infrastructure work was done.

The redevelopment agency worked with multiple property owners and formed a financing plan that allowed the agency to sell bonds to raise the $50 million needed to pave the way for the retail center.

Approximately $22 million of redevelopment money also went to the Victoria Gardens Cultural Center.

Tony Canzoneri, a real estate attorney for the international law firm McKenna Long and Aldridge, said Brown’s budget plan might be viewed as a “unique approach,” but wiping out redevelopment agencies would actually wipe out a program that brings in revenue.

“Victoria Gardens wasn’t going to happen on its own,” Canzoneri said. “If we took Victoria Gardens out of there, you’d have to go look at the hole in the budget in that idea. Redevelopment agencies are creating value and taxes that otherwise wouldn’t be there.”

An example of that is the Hermosa Avenue storm drain project, which was completed in 2003.

The once flood-prone Rancho Cucamonga street was flanked by vacant land.

Within months after the city went out to bid on the $7 million storm drain project, which was entirely paid for by the redevelopment agency, the city received $1 million worth of development proposals.

Once the project was complete, about 2 million square feet of industrial and commercial land was developed.

“Capital investment leads to private investment which leads to jobs which then supports services like the libraries and animal shelter,” Daniels explained. “If you no longer have development, it will affect the number of services this community can provide.”

With the elimination of the agency, Rancho Cucamonga would not likely construct storm drains in the east side of town or make 15 Freeway improvements at Base Line and Arrow Route.

Projects in limbo

With redevelopment agencies in doubt, a big question mark looms over a number of planned projects in Ontario.

The Historic Guasti District is expected to feature wine bars, music venues, specialty retail and a hotel. Last year, the City Council agreed to acquire historic preservation easements on several of the buildings, including Guasti Mansion, on the 55-acre site.

It will cost $604,000 to acquire the historic easement but in return, it gives the city the authority to approve and deny any future modifications made to those buildings, said Redevelopment Agency Director John Andrews.

The agency is still in negotiations with the developer on the majority of the property.

When completed, the Piemonte project will include several office buildings, roughly 1,600 apartments, condominiums and three retail shopping centers.

To date, the Citizens Business Bank Arena and the Target and Best Buy shopping center on Fourth Street west of Milliken Avenue are completed.

In 2008, City Council authorized a $24 million agreement with Sunkist Growers Inc. to acquire 11.5 acres of land. The city has not closed on escrow. As part of the agreement, redevelopment officials are waiting for the project site to be cleared. Once that happens, the city will solicit a development proposal, Andrews said. The redevelopment agency may play a role in the process.

Throughout the years, the agency has provided funds to a number of civic projects including $2.5 million toward renovating the Ovitt Family Library, $5 million toward improving the Ontario Plaza on Mountain Avenue and $8 million for street widening, curbs and a sewer system for Fourth Street between Milliken and Haven avenues.

“The premise of a redevelopment agency is the investment we make as an agency that has a catalytic effect,” Andrews said. “Developers see it economically feasible to do their projects in the city.”

But not all projects are a success.

One redevelopment investment with a lackluster outcome is downtown Ontario.

“The downtown has been the most challenging,” Andrews said. “We’ve made a significant amount of investments in facade improvements and some public infrastructure, and that hasn’t reaped the benefits we would hope for.”

Andrews said the agency has a lot more work to do in downtown including bringing in more housing opportunities.

Negative reputation

In the recent debate over the future of redevelopment, opponents have argued that agencies are no longer focused on their original mission of removing blight but instead line the pockets of private developers.

Next month, the state controller is expected to unveil findings from an audit of 18 redevelopment agencies including Riverside County, Palm Desert, Desert Hot Springs and Los Angeles. None of the 18 chosen is from San Bernardino County.

The intent, according to Controller Chiang, is to determine whether redevelopment agencies are indeed the state’s economic engine or if they are “simply scams providing windfalls to political cronies.”

Local leaders have called the move political grandstanding and are wondering why Chiang is auditing now. They fear Chiang selected some bad apples to prove a point about redevelopment agencies.

“It’s very ironic and very suspicious to me that the governor has called on the controller to do an audit. The controller should have been doing it all along,” said Rancho Cucamonga Mayor Dennis Michael. “If there are RDAs that have problems in the state, then address those communities. Don’t take a machete when a scalpel is necessary.”

Garin Casaleggio, a spokesman for Chiang, said there is anecdotal evidence of malfeasance in some redevelopment agencies so the controller wants to collect some evidence for the Legislature before lawmakers vote on Brown’s proposal.

“The controller believes it’s important to get some facts in the debate,” Casaleggio said.

The 18 agencies represent a balance between urban and other areas, with some in Northern, Southern and Central California, Casaleggio said.

“We’re not going in with prejudgment,” he said. “If we find no problems in RDA, we hope that will inform the budget debate as well.”

Earlier this year, the Rancho Cucamonga redevelopment agency entered the spotlight during the trial of former Councilman Rex Gutierrez. Daniels testified at the trial that as the redevelopment agency director, she did not support allocating $42.5 million to an affordable housing agency to extend its covenants to keep rental units at a low rate for 99 years.

Nevertheless, the City Council backed the deal. The vote was used by prosecutors to help prove political conspiracy on the part of Gutierrez during his employment with San Bernardino County. Gutierrez was eventually found guilty on charges including conspiracy.

Mayor Michael, who supported the $42.5 million deal, does not think the move showed any weaknesses in the city’s redevelopment agency in terms of allowing developers to gain the upper hand.

“I don’t see that at all,” Michael said. “I see that as extending the affordability to 550 families and protecting the covenants into perpetuity. Similar decisions in projects were made before.”

On the offensive

Local leaders are not about to let some “bad apples” contribute to redevelopment agencies’ demise. Earlier this month, a group of mayors, city managers and other officials held a strategy session to go on the offensive. They talked about providing open letters for supporters of redevelopment to send to legislators, the governor and the press. They talked about putting signs in front of projects to declare “redevelopment money at work.”

They discussed ways to inform the public about redevelopment, a topic that even civically engaged residents are hard pressed to fully comprehend.

“We’re not up against the big guns,” Warren said. “We’re up against the unaware and uninformed guns.”

Morris believes Brown, as a former Oakland mayor, understands the merits of redevelopment agencies but knows the general public doesn’t know enough about the government tool to oppose the plan.

“It’s policy by polling,” Morris said. “We’re the weakest link in terms of getting us to bail the state out.”

Morris is the mayor of San Bernardino, a city that has relied on redevelopment to fund infrastructure and land transfer for the new state courthouse on Third Street and pay for repair work for approximately 100 distressed properties and prepare them for re-sale.

“Weak link” could be an apt description when it comes to public perception of such a complicated and hard to understand agency. In a recent poll by the Public Policy Institute of California, 63 percent of likely voters back Brown’s proposal to get rid of redevelopment agencies.

Among those who back the plan to phase out the agencies are teachers unions. Brown’s proposal leaves K-12 education intact; although public school cuts are still possible pending a special election this summer.

In shoring support for his plan, Brown said the money saved by eliminating redevelopment would go back to schools, counties and the state.

Rick McClure, president of the Ontario-Montclair School District teachers union, said in recent years, public schools have been subject to 60 percent of the state’s budget cuts.

“Schools have taken more than their share at this point,” McClure said. “(Redevelopment supporters’) argument is that it’s going to cost jobs. What’s the difference if jobs are lost there rather than teachers getting laid off? If teachers get laid off, or if a construction worker gets laid off, it’s the same impact to the economy.”

But the issue isn’t redevelopment vs. schools, say local officials, because agencies have “pass-through” money that goes back into schools.

“To pit us against schools is near criminal in my view,” Morris said.

Experts believe the final outcome won’t be an end to redevelopment agencies but a watered down version of Brown’s proposal such as a freeze on the issuance of debts for a certain number of years.

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