Are there alternatives to redevelopment?
From the NEWS-LEDGER — NOV 30, 2011 —
‘Governor Brown wants West Sac to ‘pay to play’: cost would be $6.5 million up front‘
By Steve Marschke
A “blue ribbon commission” set up by Mayor Christopher Cabaldon is now looking at how West Sacramento can keep doing big things if it loses one of its favorite tools: the local redevelopment agency. The agency’s existence is currently threatened by the governor’s budget-balancing plan.
City Councilman Chris Ledesma is chairing the city blue ribbon commission – and he told the News-Ledger this week that there are some glimmers of hope coming out of his group’s research.
“You can’t minimize what the loss would be to the city,” Ledesma said. “It is a big deal. The agency has facilitated a lot of the things you see in West Sacramento today.”
The local redevelopment agency has helped build the Daniel C. Palamidessi Bridge on Lake Washington Boulevard (which in turn, helped enable development of Southport). It also helped rebuild part of West Capitol Avenue and attract Raley Field and the ziggurat building, for example.
What if the agency goes away?
“There are still some tools out there and some opportunities out there – but it’s going to take a little more work,” said Ledesma, who manages a small business loan division for Wells Fargo bank.
At the moment, the fate of redevelopment agencies across the state is in limbo. Governor Jerry Brown has proposed to make each local agency either dissolve itself or pay a hefty fee to the state in order to stay in business.
“The price (for West Sacramento) to opt in is $6.5 million,” Ledesma commented. “Subsequent annual payments would be set at around $1.5 million. . . Personally, I don’t see us coming up with the $6.5 million, but that’s up to the entire council.”
Mayor Cabaldon has told the News-Ledger that the city just can’t afford it.
And if the city does scrape together the “pay to play” money from its recession-racked budget, Ledesma worries about future state budgets, and future unilateral state decisions.
“What’s to keep the state from raiding us again?”
The governor’s plan is now in front of the state supreme court, under a legal challenge. Local officials expect that Brown’s plan could either get tossed out, or modified, or upheld by the California justices. The court has fast-tracked the hearing and promised a decision next month.
What’s the problem with losing West Sacramento’s redevelopment agency?
One special power such an agency is the ability to sell bonds to pay for big-ticket infrastructure projects in much of the city. The agency can promise to pay back those bonds with some of the new property taxes expected to come in after this work is done and development is enabled. This piece of the new property tax pie in the future is called “property tax increment.” Redevelopment agencies can legally earmark the tax increment for certain local projects.
By fixing streets or sewers, or building bridges or doing other work, the redevelopment agency can spur growth – and then use that growth to pay for the work it did up front.
“The biggest thing you can do with a redevelopment agency is to use ‘tax increment’ financing,” said Ledesma.
But even if West Sacramento keeps its agency alive after January, packaging and selling those bonds may not be as easy as it was before the “Great Recession.”
“Even with our redevelopment agency, the bond market isn’t in great shape, and the financing may not be there anymore,” Ledesma commented. “We might have to learn to get along without tax increment financing anyway.”
So the work of this “blue ribbon commission” may come in handy whether West Sacramento still has a redevelopment agency next February or not, said Ledesma. Committee members are looking hard at other tools in use around the nation to facilitate expensive infrastructure and development projects. For example:
“Washington State doesn’t have redevelopment, but they have been able to get along with ‘community development corporations,’ which are nonprofit agencies.”
These independent agencies are set up in cooperation with local government, and they’re charged with helping to put together up-front financing to take care of obstacles to growth. They’re analogous to the West Sacramento Housing Development Corporation, set up to facilitate affordable housing in this city, said Ledesma.
If West Sacramento can’t or won’t keep its redevelopment agency alive after the state court’s ruling in January, there will be another kind of local fallout. The local agency will be forced to sell off all its various landholdings around town, quickly, regardless of real estate market conditions. The sell-off could include some properties earmarked for use in public roadway projects and so forth – and which may later have to be bought back. And the proceeds from what the mayor has termed a “fire sale” would have to be split among a number of regional agencies – instead of being returned to West Sacramento taxpayers.
The city council has tried to blunt some of the potential fallout from that scenario. For example, it has sold an “option to buy” the redevelopment agency’s Stone Lock District acreage near the barge canal to the Port of West Sacramento. The port is controlled by the city. By selling the “option,” the council presumably protected the property from state-ordered liquidation.
Ledesma said his group of public- and private-sector volunteers is winding up its research and will try to provide some guidance in a final report.
“We’re trying to provide a path for the city council,” he said.
One thing that surprised him a little bit as that the commission hasn’t found a lot of other cities or counties out there doing the same kind of exhaustive study.
“For whatever reason, a lot of redevelopment agencies are simply planning to (pay the state) and opt in. We’re one of the few in the state that’s looking at this so hard.”
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Copyright News-Ledger 2011