June 28, 2009

A Way Out of California's Financial Armageddon

Dear Governor Arnold,

Great News! I think I can help you with the state budget problems.

Things are pretty much doom and gloom here in Poway. The city laid off employees and cut back. The school district's teachers, bless their hearts, voted for a pay cut so they wouldn't have to fire as many teachers. And yet, last week, the Poway Redevelopment Agency shelled out $3.3 million for fake grass for an elementary and middle school. I think I found where all the money went. I think the redevelopment agencies have it coming out of their ears.

Seriously, Attorney General Jerry Brown is suing the makers of fake grass to force them to say just how much lead is in their product. But our Redevelopment Agency can't wait. They want that fake grass now, lead dust or not. They have so much money to spend, it is burning a hole in their pockets.

So, I'm thinking the state needs to get their hands on some of that redevelopment money. Now, I know you have already tried this and the courts have sided with the well-funded redevelopment lobbyists. If you lose that appeal, you can't just take the money directly from the redevelopment agencies. You are gonna have to be a little more creative about getting it.

So I am going to give you a few suggestions.

1.) Impose an incentive surcharge on redevelopment agencies.
Before we had a redevelopment agency in Poway, we used to pay our taxes and the city would use that money to provide services (police, fire, street maintenance) for us. Since the redevelopment agency was established, very little of our tax money directly pays for our services. First it has to be laundered through a development project.

It works like this. The Redevelopment Agency gives a developer some taxpayer money (often in the multi-million dollar range) as an incentive to get them to build something. They work out the details behind closed doors and finalize the deal with an exclusive (no bid) agreement. The redevelopment agency hopes to get a good return on their investment in the future by getting revenue from future sales tax and/or an increase in property tax. It is a bit of a gamble, all on the taxpayer's dollar, I might add. But hey, don't you think the state deserves a cut of the proceeds?

I'm not keen on gambling myself. Especially with the taxpayer's money. It is risky and also based on a couple of false premises. The big false premise is that these redevelopment projects increase sales tax. For example, giving a subsidy to Wal-Mart or a car dealership doesn't produce more sales tax. It might divert a bigger share of total sales tax to a particular city or entity, but it doesn't produce more sales tax. People don't buy more cars or underwear because there is a new dealership or Wal-Mart in town. Yet, giving tax money as incentives to businesses depletes the pot of tax money that can be spent on services. So, overall, the taxpayers are getting ripped off. There is a reason the Walton's are among the richest people in the world and cities are going broke.

2. Tax All Revenue Sharing Agreements.
I swear, I cringe every time I hear the phrase "win-win". It usually means the taxpayers lose.
Poway had an agreement with Gateway, the computer company that was located in our industrial park for a time. Gateway agreed to designate Poway as the location where their online sales happened. And Poway agreed to split the sales tax haul with Gateway. So Poway may have accrued more sales tax, but some other city was losing it, and Gateway was getting half of the sales tax that would have funded services in some city or other if Poway and Gateway hadn't struck this deal. The state should grab a percent, a huge percent of these deals as a way to discourage cities from stealing tax from each other and giving a big bunch of it to a corporation instead of funding services.

3. Reconfigure the way sales tax is distributed.
Heck, the redevelopment agencies pilfered the tax increment money from the state in the first place. It is time to get even. I encourage you to think big and do something that will have a positive impact on the way cities are zoned and managed. Do something about the way sales tax is distributed. I would suggest that some percent go to the state coffers, and the rest be distributed based on population.

Do you know how that would change the look of our cities and towns? We might be able to rezone thousands and thousands of acres from unneeded commercial zones to some public purpose like parks or a junior college. In Poway, our redevelopment agency made an agreement eons ago with the local junior college to build a satellite campus in town. The redevelopment agency is holding millions of dollars to fund that project. We passed a bond to pay for the campus; the college has millions of dollars in hand, ready to go. There is one obstacle. The college can't find a plot of land to put it on. The city has dibbs on every parcel. They want to use them all for revenue generation. They want to build a new town center even though the old one is losing tenants. Gotta have that sales tax. It is unsustainable, but that is all they know how to do. Sheesh, please take the sales tax away from the cities. You will be doing them us a big favor.

4. Charge redevelopment agencies for the social services the State must pay because of the low-wage projects built in the redevelopment agencies.

I know redevelopment is a state plan that is meant to provide jobs and housing for poor people. It is a noble purpose. Too bad it is so abused. Most of the development projects that redevelopment agencies produce are low-wage jobs in retail or the tourist industry. Someone is making a lot of money off of these projects but it isn't the workerbees. If a job produced in a redevelopment agency doesn't pay a living wage or benefits, then the state or federal government picks up the tab for health care, school lunches, transportation, childcare and food stamps. As I said, someone else is getting rich, while the taxpayers subsidize these projects. To defray some of the state's expenses, the state should audit the jobs created by redevelopment agencies and demand reimbursement for the subsidies that the state will have to provide. And they whine about unfunded mandates!

5. Cancel all grandfathered agreements and require pass-through funds to other taxing entities.
The reason the Poway Redevelopment Agency is spending $3.3 million on toxic turf is because they have an agreement with the Poway Unified School District to build some sports fields on school grounds. Poway did not want to pass through the money directly to the school district. As a result, our schools were crumbling and the district asked the voters to pass 2 bond measures in the past few years. If all redevelopment agencies were forced to pass through all the money to the other taxing entities, then the money could be spent where it is most needed and reduce pressure on the taxpayers and state funds.

6. Tax redevelopment agencies for refinancing debt.
I think they have a goose that lays golden eggs. Every time the city refinances, they say they are saving oodles and oodles of money. That is amazing because they have to pay millions of dollars to these lawyers and bond brokers every time they refinance. So if they are saving so much money, they should do it as often as possible and give the state a little cut each time. Share the goose. Well, let the redevelopment agencies keep the goose, but make them share the golden eggs.

7. Purge the property rolls.
Poway was one of the cities that abused the redevelopment program. Poway put a large chunk of undeveloped land in the boundaries of their redevelopment agency. Most of the land was not urban or blighted. In fact, most of it had only native scrub on it. Today there is an industrial park and acres and acres of very fancy housing and a world class golf course in the Poway Redevelopment Area. The estate-size lots and multimillion dollar houses are zoned rural residential. Poway also has additional zoning restrictions that prohibit building denser housing and/or retail or commerce developments in these areas without a public vote. Much of the Poway Redevelopment Area does not meet the purpose or goals of the law that provided for the creation of a redevelopment area. The state should require that property tax from rural residential property in a redevelopment area be returned to the state and no longer be diverted to a redevelopment agency.

Our city was not blighted before the Poway Redevelopment Agency was formed. But because of the rampant overbuilding and speculation, our city is now suffering from blight. Car dealerships have bailed. Stores are vacant. Industrial property is empty. All of the multi-family housing is concentrated in one part of town. That part of the city has very few acres of parks to serve the needs of residents who have no back yards of their own. Our schools are income segregated. The redevelopment projects contribute little property tax to the general fund. Our sales tax is lagging. This year would have been the 45th anniversary of our community parade, but the city cannot spare enough money to pay for it. Something is way out of wack when our general fund is depleted but our redevelopment agency has millions to spend.

Governor Arnold, I am not suggesting that you "steal" money from the redevelopment agencies. I am suggesting that you restructure redevelopment, maybe even shrink it. Drown it in a bathtub, if necessary. Restructure state financing so that the taxpayer's money is spent on services and not on funding the developers. There is nothing wrong with businesses funding themselves. Or making a profit. Heck, that is what businesses are supposed to do. What government is supposed to do is provide services. You know, of the people, by the people, for the people kind of stuff. So, could you guys please quit laundering our tax dollars through these redevelopment schemes?

Good luck with your budget impasse. Feel free to use any of my suggestions.


Chris Cruse

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