Capitol Alert

Brown, cities scrap over bill on wind-down of redevelopment

A building on K Street in Sacramento in 2013. The ending of redevelopment in February 2012 eliminated a funding source for K Street improvements.
A building on K Street in Sacramento in 2013. The ending of redevelopment in February 2012 eliminated a funding source for K Street improvements. Sacramento Bee file

The issue

California cities and Gov. Jerry Brown have had a rocky relationship ever since lawmakers, pushed by Brown, voted to abolish an anti-blight program over the objections of local leaders who called it a vital tool to improve their constituents’ lives.

Four years later, a new post-redevelopment fight between cities and the Governor’s Office confronts lawmakers as they hurry to finish their work for the legislative year.

An end-of-session priority for the administration is Assembly Bill 113, a 100-page local government budget measure that emerged earlier this summer. The bill alters, and adds to, parts of the 2011 law that shut down hundreds of redevelopment agencies and a 2012 law that fleshed out the process of settling the former agencies’ financial affairs.

The Senate budget committee is scheduled to consider the measure Thursday.

There’s a lot of anxiety within the Assembly on this.

Assemblyman Mike Gatto, D-Los Angeles

Why do it?

The administration says AB 113 improves the redevelopment wind-down process and would mean $200 million more for cities and counties, while offering no fiscal benefit to the state. It also includes some additional fiscal benefits for certain local governments.

Why not?

The League of California Cities contends that the bill would rewrite post-redevelopment rules to nullify city court victories. The bill, critics say, would effectively scrub from the books an estimated $900 million in redevelopment-era loans by cities.

In the Sacramento area, Winters and Oroville would lose out on a combined $8 million, according to the league.

A little history

The debate over the bill underscores the continuing hard feelings between local governments and Brown, a former Oakland mayor, over the demise of redevelopment.

The $5 billion program found itself in Brown’s crosshairs soon after he took office for a third term in 2011. Brown and other critics said redevelopment’s demise has been a fiscal win for all levels of government. Instead of public dollars going to developers, schools will get an estimated $6.8 billion in redirected redevelopment money through June 2016, freeing up an equivalent amount of state money. More money also has gone to cities and counties.

But local government officials say cities, and some counties, lost a valuable way to generate money for projects to help their residents, such as K Street improvements in Sacramento and affordable housing, without raising taxes.

The California Supreme Court upheld the law dissolving redevelopment agencies in December 2011.

Lawyers and loans

Closing the books on redevelopment has turned out to be hugely complicated. Brown’s Finance Department continues to have a large team of people devoted to the issue. Lawyers at the attorney general’s office have represented the state in dozens of lawsuits by local governments challenging state decisions on the law. Forty-six lawsuits are pending in appeals courts.

A big part of the disagreement over AB 113 involves the treatment of loans between cities and their former redevelopment agencies.

State officials say some of the loans would never be recognized as typical borrowing from a bank or credit union. The loans often reflected loaned services, not money, and paperwork justifying a redevelopment purpose sometimes is lacking, Department of Finance spokesman H.D. Palmer said.

Another issue is how much interest cities can collect on the loans. Some of the loans originated in the 1970s or early 1980s, when interest rates were high. City officials contend that AB 113 would artificially cut the interest that cities are entitled to collect, but administration officials say most cities would get a better rate.

208 redevelopment-related cases filed (as of March)

27 active lawsuits in lower courts

46 active lawsuits in appellate courts

On both issues, the cities group points to lower-court victories that the state has appealed. “We’re completely happy with … letting the courts decide what a loan is,” the league’s Dan Carrigg said.

Legislative outlook

Assemblyman Mike Gatto, D-Los Angeles, said lawmakers are divided on the issue and predicted that any vote on AB 113 would be close. “There’s a lot of anxiety within the Assembly on this,” Gatto said.

Gatto’s district includes Glendale, which sued the state over the interest rate issue. Gatto said he was never a fan of redevelopment, but opposes the latest administration-sponsored bill. “Are we going to keep our promises, or break our promises?” he asked.

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