As the reality of the state Supreme Court's decision on redevelopment settles in, the overarching question looms what now? The court's controversial judgment may actually provide the single biggest opportunity in decades to remake, for the better, the difficult relationship between the state and city governments.
We come to this point because last year, as part of addressing the state's budget deficit, the Legislature eliminated redevelopment and then recreated it at a reduced funding level. We took this unorthodox action because Proposition 22, sponsored by cities in 2010, prohibited the state from slimming down redevelopment, even to help fund schools.
The cities sued, hoping the court would stop the state from touching redevelopment in any way. Instead, the court ruled that the elimination was legal; our attempt to soften the blow by reconstructing redevelopment was not. This was not our desired result, but too often, all or nothing leads to nothing.
The outcome was especially unfortunate because most redevelopment in Sacramento and other state localities accomplished important advances. Downtown projects like the Citizen Hotel and the Maydestone Apartments rehabilitated historic Sacramento buildings while kick-starting downtown business and expanding workforce housing. McClellan Park created 15,000 jobs, becoming a model for converting shuttered military bases.
The positive prospect in the aftermath of redevelopment's demise is that the court's decision did not close all doors. This is the opportunity to take a defeat, turn it around, and regenerate an even better job creation and economic development approach for California's communities.
Though the rules are arcane, the Legislature has one major financial tool to revive some form of redevelopment. Since the Supreme Court now disallows redevelopment in its current form, absent any other actions, redevelopment agencies must divest buildings, leases and other assets they own, and return the value of those assets to the state, schools, counties and cities. Preliminary estimates indicate those assets statewide are worth billions of dollars. Instead of returning those assets to the entities above, the Legislature and governor may legally direct some or all of that value to local government for economic development.
But here's the challenge: The governor appears uninterested in recreating anything related to redevelopment. The Legislature, the League of California Cities and the Redevelopment Association, however, must move beyond our disagreements of the past by embracing a broader, bolder approach to save local economic development. The governor and skeptical legislators, including myself, might be much more interested in allocating funding if doing so acts as a catalyst for fundamentally fixing the state-local fiscal relationship and advances our mutual goals of changing land use patterns to ensure long-term transportation and environmental sustainability.
I propose that the Legislature appropriate all or part of the multibillion-dollar asset pool to local governments, if they meet the following five conditions:
1. The new resources must be used to attract and retain industries providing high-wage jobs.
2. Investments must be consistent with state policies underlying my Senate Bill 375 of 2008. Infill, transit-oriented development and growth which locate housing, commercial and retail closer to each other are essential for economic growth and environmental progress.
3. Affordable housing must be a priority.
4. These first three policies must cross city and county boundaries. Regions that think and act as regions should be rewarded with a larger allocation of resources to accomplish our goals.
5. Condition receipt of new economic development funds on cities and counties within a region agreeing to voluntary sales tax sharing. The so-called "fiscalization of land use" using development and land use planning to generate revenues is the most insidious consequence of our failure to change the state-local financial relationship over the past 35 years. Cities and counties must have incentives to work together to build more housing and a high-wage manufacturing and employment base, rather than basing their budgets primarily on outwitting their neighbors to land the next "big-box" store or auto mall.
Others may have better approaches. However, of this I am certain the old debate which led to last year's controversies cannot continue.
State and local governments represent the same Californians and must find common ground. Redevelopment in its current form will not continue. But our present challenges of job creation, housing, removing blight and improving air quality are greater than ever. Let's move forward together.