Calif. Nonprofits and Communities Face Loss of Redevelopment Agencies

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January 28, 2012; Source: San Jose Mercury News | The controversial dismantling of California’s 65-year-old redevelopment agencies (RDAs), part of Gov. Jerry Brown’s cost-cutting plan to balance the state budget, is underway with concerning results for local communities and nonprofits. Those results include infrastructure project cancellations, property sales, job losses, and general uncertainty about community investment for future generations. Local RDAs and partnering nonprofits are currently sorting out the complex issues around debt repayment, property ownership, and aborted projects, among others. Nonprofit organizations, particularly affordable housing developers that obtained acquisition and predevelopment financing from RDAs, will be hard-pressed to find replacement financing sources (especially for early-stage financing) from the private sector.

RDAs were created to eliminate blight. They did so by dedicating 20 percent of their funds to affordable housing, while other projects included the development of public libraries, transit villages, community and senior centers, and outdoor public spaces. The biggest beneficiaries of RDAs have been the state’s largest cities, including Los Angeles, San Jose, San Diego, San Francisco and Oakland, as well as some rapidly growing areas like Riverside County. The two main arguments waged against RDAs have been that the criteria used to define RDA projects have been too broad and the cost of RDA project financing has been too expensive.

On the latter point, RDAs were criticized for accumulating large amounts of public debt and diverting property tax funds from other public agencies and schools to repay this debt through a mechanism called tax increment financing. Recent figures indicate the magnitude of the financial impact on the state. The Santa Clara Weekly reported that, “In 2009, California’s 425 RDAs ended the fiscal year with $5.7 billion in tax and assessment revenues, $8.1 billion in expenses, and $29.4 billion in outstanding bonds.”The San Jose Mercury News contextualizes these figures, calculating that the per capita debt burden in the East Bay region, which formerly had 29 RDAs, is $4,740—or, put more starkly, “if every dollar the agencies received was applied to the debt—at an annual rate based on the past fiscal year’s revenues allocated to redevelopment—repayment would take 30 years.”

California has a long history of developing and renewing its communities through RDAs with projects like Providence Senior Housing(which provides housing for low and very low income seniors in an underserved area of San Francisco) and the City Heights Urban Village(a mixed-use project including affordable senior housing and a mini-park). The loss of these resources will be hardest felt in California’s biggest urban cities. It’s unclear how local agencies will address blight and private disinvestment in the future, or how local nonprofits and the communities that they serve will be impacted by the loss of these resources. Most likely, it will take much longer for projects like City Heights to get off of the ground (if they can at all) due to the lack of available financing and subsidies, and increased administrative hurdles. –Paula Smith Arrigoni