February 24, 2011

Redevelopment: Going...Going...

Click on the map to enlarge it.
This is a map of Poway's Redevelopment Agency Area.
Most of the property taxes from the blue areas
goes to the redevelopment agency.

Remember Prop 22? It was a proposition on last November's ballot. The official title was the "Local Taxpayer, Public Safety, and Transportation Protection Act of 2010." Unofficially, it was referred to as the measure that would "tell the state to keep their hands off of our local tax money." Prop 22 was sponsored by the League of California Cities, of which Poway is a member. Poway's city manager, Penny Riley, was outspoken in support of the measure.

Prop 22 passed with over 60% voter approval. And why not? According to the official arguments in favor of Prop 22 in the voter guide, Prop 22 would keep the state from swiping money that was needed for for local police, fire and emergency services, libraries, road repairs and public transportation. Nowhere in the arguments for, or the rebuttal to arguments against Prop 22, did the proponents mention that Prop 22 would also prevent the state from taking back redevelopment funds.

Redevelopment is a state program that was set up 60 some years ago to wipe out urban blight and create affordable housing. Here's how it works: A city, like Poway, declares that an area is "blighted". Then they form a redevelopment area comprised of all the blighted properties.
Poway formed their redevelopment area in 1983. They identified 8200 acres within the city that were blighted, 75% of them were undeveloped land. At the time, Poway's redevelopment area was larger than San Diego's. One of the reasons Poway gave for such large swaths of undeveloped land being blighted was that they didn't have enough traffic signals on them.
Today, some of the most expensive real estate in Poway is located in the redevelopment area.

One of the reasons Poway wanted undeveloped land in their agency area is because Poway would get to keep any new property taxes that resulted from an increase of value to the land or from any developments built on that land. Instead of going to schools or to the state, that "tax increment" was and still is diverted to the redevelopment agency. For the fiscal year 2008-2009, Poway Redevelopment Agency got $38.9 million dollars in diverted property tax. There are over 400 redevelopment agencies in the state of California. The amount of property taxes diverted to redevelopment agencies is now 12 % of all the property taxes that are collected in the state.

Redevelopment agencies borrow lots of money to finance their blight-busting projects like car dealerships, Wal-Marts and other shopping centers, hotels and sports stadiums. They use the tax increment money to pay off the bonds and to pay the salaries of the city staff that double as redevelopment staff. The state has been forced to fund the schools because so much of the property tax has been diverted to these redevelopment agencies. Last year, the state just couldn't make ends meet, even with smoke and mirrors, so Arnold "stole" some redevelopment taxes to shore up the state coffers. That pissed off the cities and they retaliated by putting Prop 22 on the ballot.

In addition to approving Prop 22, the voters also elected Jerry Brown last November. The first thing Gov Brown did was make a new budget plan. In a surprise move, Brown announced that he planned to eliminate the 400+ redevelopment agencies and use the billions of dollars that redevelopment has been using (or abusing) to fund essential services, particularly for schools.

If you are a reader of my blog, you might remember that last year I sent a letter to Arnold (and every state legislator) suggesting some changes he might make to redevelopment agencies. I thought my ideas were pretty good, but dissolving the redevelopment agencies was something I never dreamed could happen. Brown's plan is way better than mine.

Brown may have been forced to go that route because Prop 22 doesn't give any wiggle room for wheeling and dealing with redevelopment agencies. The state can't take any redevelopment funds. Period. Just last week, the mayors of several cities got together and proposed a futile plan to try to save their redevelopment agencies. They want the state to sell $1.7 billion in new bonds and then the redevelopment agencies will chip in $200 million and 5 percent of their revenue each year to help pay off the bonds. That's a nonstarter because of the way they slipped redevelopment funds into Prop 22. It would take a public vote to undo it. Now Brown is forced to eliminate redevelopment agencies altogether. Sweet schadenfreude!

Brown's plan to shutter the redevelopment agencies isn't a done deal, but it is getting close to the finish line. The state and assembly budget committees are working on the final measure. Brown's plan for dissolving the redevelopment agencies was posted on the California Department of Finance's website yesterday (Feb 23).

In the meantime, cities have gone on a greedy multi-billion dollar spending spree, trying to beat Brown's March 1st deadline and lock up as much redevelopment cash and assets for their own jurisdictions. Recession, what recession? These guys will build a stadium and new town center in every city if you let them. But Brown is on to them. He plans to give the state a 3-year window to examine any redevelopment agency spending or activities from Jan 1st on. They better have followed all the rules and the proper procedures, dotted every "i" and crossed every "t", if they don't want to see their actions rescinded.

So, what does all this mean for Poway? If redevelopment agencies get axed, there will be big changes for Poway.

In FY 2009, income from regular property tax was $8.7 million v $37 million for redevelopment tax increment. 81% of Poway's property tax income was from redevelopment. Poway won't get that $37 million any more, although a portion of the tax increment (about 20%) will come back to the city's general fund as regular property tax. Ironically, redevelopment money cannot be used for fire, police and regular city services. But the portion of property tax that will come back to the general fund after Brown dissolves the redevelopment agencies can be used for those services.

According to the 2009/2010 Poway Redevelopment Agency Annual Report, the Poway Redevelopment Agency has $176 million in assets and $286 million in liabilities. Note: California cities are required to balance their budgets, but redevelopment agencies don't have to. In fact, they are required to go into debt. Brown's plan is to create a successor agency to the redevelopment agency that will pay off the debt in 3 yrs. I imagine that the successor agency will also sell off property and other assets to pay off the agency's debt.

Redevelopment supports about 9+ positions in the city. Redevelopment also sucks up city employees' time. Expect some staff cutbacks. With the staff freed up from planning shopping malls and moving car dealers around, maybe they can look into those lopsided sewer rates.

Poway redevelopment agency owns a lot of land that the city plans on using for affordable housing and/or commercial ventures, like the town center. On March 1 the city plans on forming a housing authority. After years of saying they want out of the affordable housing business, the city will now attempt to jump in in a very big way. Will it pass the Brown smell test? I don't know. Will the city be able to keep all of the land they bought by transferring it to the housing authority? I don't know.

If the city does form a housing authority, will it have to abide by state law that says affordable housing cannot be located in an area that is already over-saturated with such housing? Or will the housing authority be able to hide behind private developers to avoid that law?

What will happen to the agreement with Toyota? As a contractual agreement that was signed before Jan 1, it will likely be a valid agreement, but who will be the owner of the property that is leased to Toyota as the successor agency disposes of redevelopment property?

What about the Performing Arts Center? Is that still owned by the redevelopment agency? What will happen to agency owned property where there is a joint use?

Is McMillan still getting redevelopment tax increment? What happens with that deal?

Will the sewer fund ever get back all the money that was stolen from it and given to the redevelopment agency?

What will happen to all the bond sellers in Newport Beach without the billions they got from refinancing redevelopment debt?

The answers to these and many more questions are still unknown. Stay tuned in.

February 17, 2011

What did the November Election Mean?

Poway politics is all about land use. Our city council makes no decisions about gay marriage, abortion, "death panels", gun control or "obamacare". They do make decisions about who gets variances, where apartments and affordable housing will be located, just how big of a Wal-Mart can be fit into our "downtown" and who gets to have an auto repair shop right next to their backyard.

Poway council positions are nonpartisan. But if they were, traditional parties like Democrat or Republican or even "Tea Party" wouldn't really fit. Poway political divisions are geographic: North v South and zonal: "large lot" v "small lot".

Poway really isn't the "city in the country", despite that being our motto. Poway is a suburb in the San Diego metropolitan area. We are not "country" in the sense that people living on rural acreage have farms or agriculture related entities as their primary business. Some do, but most do not. Most commute to a job in another city and they also shop and play somewhere besides Poway.

The "city" part of Poway is not the traditional urban area either. What city has such long blocks or sidewalks that abruptly end at entrances to retail establishments? The multifamily housing that is being built in Poway's urban area doesn't quite fit with the shallow commercial corridor that was designed from behind the steering wheel of a car. The "highest and best possible use" of the urban areas is to increase the revenue stream of Poway, not to enhance the quality of life of the people who live there. Quality of life is for north Poway.

Poway politics did not start out as North v South (or "big lot" people v. "small lot" people). Originally, it was us v the county. We incorporated to get control of our own destiny, especially to keep developers from foisting something crappy down our throats and near to our backyards. The first couple of years, we were all in the game together, at least, in my opinion.
Then three things happened. The first was that Poway formed a redevelopment agency in 1983. The second thing is that Don Higginson and Linda Brannon were elected to council in 1986, defeating incumbents Linda Oravec and Mary Shepardson. Higginsons and Brannon's election meant that the door was open for developers and that the entire Poway city council was from north Poway.

The third thing that happened was that North Poway got Prop FF passed. Prop FF was a very trickily worded proposition that primarily prevents any density increases, commercial or industrial development or any affordable apartments from being built in north Poway. We were no longer "in this together". South Poway has struggled to get a fair shake ever since. Most of the decisions about land use in south Poway are made by people who live in north Poway and do not have to deal with the consequences of their decisions.

People in south Poway do not feel well represented. The November 2010 election results clearly demonstrate that the results in both the council and mayoral elections correlate with both the north/south divisions and big lot/small lot divisions. Click on the map to make it larger.

In the race for mayor, incumbent Don Higginson won with 54%. Nick Stavros, the challenger got 46% of the vote. Those results are the closest results ever for a mayoral re-election in Poway. Last time Higginson won by a landslide. Not so this time. Stavros, like Higginson, is a north Powegian. But he tapped into the angst and dissatisfaction that is more predominate in south Poway. When I graphed the results on a precinct map, I found that the results were very zonal and correlate to the land use. Precincts that are predominately zoned for large lots went for Higginson in a strong way, especially in the northern part of the city. On the other hand, Stavros' support was strongest in small lot/ south Poway, particularly in the areas near to Poway Rd.,Community and Midland Rds. The only part of South Poway that Higginson did particularly well in was part of Rancho Arbolitos.

The same pattern shows up in the council race. Click on the map to make it larger.

Incumbents John Mullin and Carl Kruse both did far better in north Poway than in south Poway. Challengers Dave Grosch and Pete Babich were just the opposite. Their strength was in south Poway. The precincts that were most unhappy with the incumbents were the precincts near to the Arbolitos Sports Field and the precincts near to Poway, Community and Midland Rd.

John Mullin did the best of all the candidates. He did particularly well in the big lot areas of north Poway. He came through and got their water rates reduced. Advantage to the big lots. He is their guy.

Carl Kruse also voted to restructure the water rates, but Carl didn't even bother campaigning. I would also like to point out that Carl Kruse has never once even responded to my emails about the unfair sewer rates.

Pete Babich and Dave Grosch's results are similar, although Grosch's numbers are stronger. Grosch's election is an upset. It is only the second election in Poway history where an incumbent lost. This time, an incumbent north Powegian lost and was replaced by a south Powegian.

So what does it all mean?
Does Poway need term limits? District elections?
Is the south now ascending?

My best guess is that south Poway will still be under-represented for a long time. This election was unique because the death of Mickey Cafagna and the recall of Betty Rexford got rid of some oldies from the council and opened the door to some newbies. Well, at least one newbie. Mullin has been around for awhile, but Grosch is a new face. Term limits and/or district elections would be a useful way of shaking things up every once in a while and possibly getting someone in who listens to the folks in south Poway, as well as to the folks in north Poway. The real problem with electing the same people over and over again is that they become tone deaf to all but their base, and they quit even pretending to care about the rest of us.

Term limits will be discussed at the council this Tuesday. If you support or oppose term limits, please send an email to the council and share your thoughts with them. There is a chance that the new guy just might listen.