City officials often differ on the use of RDA funds
James Rufus Koren, Staff Writer
Posted: 02/26/2011 04:08:51 PM PST

After Gov. Jerry Brown proposed eliminating redevelopment agencies, a seemingly unanimous chorus of city and county leaders up and down the state called Brown’s plan a bad idea.

But officials in San Bernardino are singing a slightly different tune. They say the state should keep some redevelopment agencies and eliminate others.

“There are hundreds of communities for which redevelopment almost seems like a cruel joke when you compare it to Oakland and San Bernardino…and other places where true urban revitalization needs to occur,” said Jim Morris, son and chief of staff for San Bernardino Mayor Pat Morris.

Emil Marzullo, the interim director of the San Bernardino Economic Development Agency, said state leaders should reach a compromise and prevent redevelopment agencies from being used to develop untouched land.

“Instead of throwing the baby out with the bath water…find what’s wrong and surgically remove that by legislation,” Marzullo said. “Take out what’s wrong with redevelopment and keep what’s right.”

Those views put San Bernardino at odds with the California Redevelopment Association, the group representing most redevelopment agencies in the state. Association spokeswoman Crista Ninon said redevelopment agencies “are not looking at alternatives” to Brown’s plan but, rather, are focused on defeating the proposal outright.

“I think the cities who have redevelopment agencies, I think they are all in this together,” Ninon said. “They’re representing themselves right now as one united front.”

San Bernardino, though, appears to be an exception. That’s because San Bernardino has used its Redevelopment Agency to do real redevelopment, while some cities have used redevelopment agencies to less worthwhile ends, Morris said.

“There’s a whole lot where it’s not legitimate,” he said.

Purpose

In the 1960s, when he was planning director in La Habra, Wes McDaniel said the city had some areas that were “going in the tank.”

“There were dirt streets, no curbs, inadequate water systems,” said McDaniel, now a Highland resident. “Absent this new tool called redevelopment, these places would have continued to just go in the hole.”

So La Habra created a redevelopment project to put in paved streets and other improvements. McDaniel said it was a success – the neighborhood looked better and property values went up.

“The house that was worth $15,000, maybe in 10 years it was worth $25,000,” he said.

That story provides a simple outline of how redevelopment works – or at least how it’s expected to work: A city or county finds a run-down area, takes out a loan, uses the money to pay for new streets or other improvements, watches as the property values around those improvements increase, then pays off the loans with the additional property tax money that comes from the increase in property values.

Fontana

In some local cities, redevelopment bears little resemblance to McDaniel’s example.

In Fontana, much of the work done by the Redevelopment Agency hasn’t been redevelopment at all. It’s been development.

Over the past few decades, the Fontana RDA – one of the largest redevelopment agencies in the state – has built or helped build freeway interchanges, storm drains and roads. In many cases, those projects have been built not with the goal of improving run-down areas, but with the goal of opening up vacant land to new development, City Manager Ken Hunt said.

“People build homes, they build establishments, because there’s a road, because there’s a sewer system, because it doesn’t flood when it rains,” Hunt said. “When you have those conditions, they will build.”

Without redevelopment, Hunt said Fontana would not have been able to build roads and other projects. And without those projects, he said, developers either wouldn’t build or would build somewhere else.

For instance, he said, a $30 million project that widened Base Line and built a storm drain underneath the road allowed developers to build new homes in north Fontana without having to spend millions on flood-control projects of their own.

“The truth of the matter is they would not build here if the infrastructure wasn’t here,” Hunt said.

San Bernardino

But officials in San Bernardino argue – with some backing from scholars and economists – that developers are even less likely to build in places like downtown San Bernardino, where large tracts of land are hard to come by and available properties might have derelict buildings that need to be torn down or cleaned up.

That’s why, Marzullo said, the city has focused much of its redevelopment work over the years on what’s called “brownfield remediation” – that is, getting rid of old buildings and preparing previously developed land for new development.

“For a private developer to come in and buy an old facility at its market price, tear it down, then deal with brownfield remediation, the land value and market rent would not justify a private investment,” he said.

If a developer bought a site and had to tear down an old building, Marzullo said they might have to clean up asbestos or other hazardous materials. When the EDA tore down an old motel on Fifth Street, Marzullo said the city discovered an old oil tank buried underneath.

“We’re dealing with issues that were back in the ground in the 20s,” Marzullo said. “Unless redevelopment is there to reduce the capital cost of the blight … it’s a lot cheaper and simpler to build in an area that used to be an orange grove or grape vineyards.”

Conflict

Without redevelopment, Hunt says developers wouldn’t build on undeveloped land, and Marzullo says they wouldn’t build on previously developed land.

To an extent, said Redlands-based regional economist John Husing, who focuses on the Inland Empire, they’re both right.

“Unless you make it even so that the cost in the inner city is competitive with the cost of that nice virgin lot, nobody would ever build in the inner city,” Husing said.

He also said that developers aren’t likely to build – or aren’t likely to build anything close to affordable – in undeveloped areas without roads and flood-control systems and the other types of projects built by the Fontana RDA.

“If you say to a residential developer, `That’s got to be part of your project,’ you’ve just said we will never have an affordable house built in Southern California,” he said.

Gary Painter, director of research at the USC’s Lusk Center for Real Estate, said it’s not so clear cut.

“We can’t make blanket statements that it can’t be done without public subsidy,” he said. “I think there are certainly cases where public subsidy might be warranted, but it really can be reviewed on a case-by-case basis.”

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