What Goes Around Comes Around

I love me some Governor Moonbeam. And not just because one of those "job killing" government regulations he imposed during his first stint as governor is keeping me cooler this hot July morning. Brown made home builders put insulation in the attic. It seems a sane thing now, doesn't it?

I also love Governor Brown for having the guts and strength to eliminate redevelopment agencies. It is the sane thing to do. I am going to summarize all the redevelopment developments and how they affect Poway, but first I want to tell you a funny little story.

This year was a tough year for state legislators because California had a $26 billion deficit to fix. Plus, the taxes that were passed under the former governorator were due to expire at the end of June. So the state was in a deeper hole and had less revenue coming in. Jerry Brown wanted to deal with the deficit, half with cuts and half with revenue from extending Arnold's taxes. But all of the republican legislators stood firm and refused to put the tax extensions on the ballot for voters to decide. So, in the end, Brown had to settle for an all cuts budget that defers some of the deficit 'til next year.

That's not the funny story. That's a sad story. I didn't get to the funny part yet. Hang in here for a little bit, I'll get there. While the republicans were crowing about standing firm and not approving the tax extension ballot measure, unbeknown to them, something they did (or didn't do) was going to have a consequence that hurt them. One of the budget trailer bills, senate bill 89, cut the $130 million in vehicle license fees (VHF) revenues that used to be given directly to cities and counties down to about $75 million. The $75 million wouldn't go directly to cities' general funds, it would be given to cities through specific grants for law enforcement.

This change affected all cities and counties in California. But a couple of cities and at least one county really felt the impact. Orange County had been getting a bigger chunk of money from that fund to help finance their way out of bankruptcy. Since they had refinanced their bonds to pay off the bankruptcy, their funds were cut. They plan to sue to try to get it back.

Wildomar, Menifee, Eastvale and Jurapa Valley are four new cities with not a lot of money in their general funds. They VHF revenue they were planning on was about 25% of their total budgets. And now, it is gone. Ouch! That's going to hurt.

For some reason, they did not think that an "all cuts" budget would or should impact them. Local officials and Republican legislators from the area signed a letter to Governor Brown begging him to send SB89 back to the legislature and have them throw in $15 million more for them. (Note: Swanson is mayor of Wildomar.)

In her letter to the governor, Swanson wrote that the reduction to her city's budget would be "effectively forcing fiscal insolvency."

Wildomar and Menifee officials said they did not believe legislators approving the measure understood the implications for the new cities.

"At this point, I'm assuming they missed something when they rushed to put this together because of the unfairness to the four new cities," Swanson said.

School children, college students, seniors, the poor, the disabled, and, yes, newly incorporated cities, are all going to suffer from this budget. It certainly didn't have to be this painful, but Republicans refused to even let the voters decide if they wanted to soften the pain by extending taxes that were already in place. And now local Republican leaders want the budget changed just for these 4 cities and to hell with everyone else?

The irony of the request for more car tax money for 4 cities whose republican leaders refused to put the car tax extensions on the ballot was not lost on Gov. Brown. He would have loved to have an extra $15 million to help them, and millions more to help many others who are going to be hit very hard by this new budget. But he could not get 4 Republicans to give a damn about the implications to college students, the elderly, the schools, the poor and disabled or even, the courts. This budget sucks and the people who could have done something about it, only cared about themselves. Brown signed SB 89 without making any changes.

So now, the Republicans are saying Brown swiped the money from the 4 new cities in a Republican area just to spite them for not voting to put the tax extensions on the ballot. And here is where the story gets a little wacko. Jeff Stone, Riverside county supervisor, has proposed that Riverside, Imperial, San Diego, Orange, San bernardino, Kings, Kern, Fresno, Tulare, Inyo, Madera, Mariposa and Mono counties secede and form a new state, the 51st state to be named "Southern California".

Stone's Southern California would do away with term limits and have part-time legislators who get paid $600 a month and few benefits. The state would focus on enforcing border laws and do away with environmental regulations that protect air and water. Taxes would be minimal. Southern California, eh? Throw in a Sheriff Joe Arpaio and this could be West Arizona.

Brown's spokesman, Gil Duran, wasn't too worried about Stone's well publicized ploy. He told the Press-Enterprise, "A secessionist movement? What is this 1860?"

I must admit that I thought Jeff Stone's proposal was really wacko, an attempt to get Stone a lot of political attention among the crazy. Little did I know that there have been some secessionists around since the beginning of California statehood. According to Wikipedia, there have been 27 attempts to split up the state since 1850. The last proposal in 1992 advocated a 3-way split. None of these proposals came close to succeeding. I doubt that Stone's will get very far. But then I looked at his map. Stone's Southern Cal (not sure if I am taking liberties calling it that) wouldn't have too many liberals. But it also wouldn't have water, most of the coast, Hollywood or Silicon Valley. Most of California's wealth is in the northern half and Los Angeles. As contentious as the recent budget debate has been, I would be hesitant to show Stone's proposal to too many northern legislators. They may just find some common ground.

An Open Letter to PUSD School Board

Dear PUSD Board Members: Todd Gutschow, Penny Rantfle, Linda Vanderveen, Andy Patapaw, and Marc Davis,

Times are tough. Teachers and other non-teaching staff have taken pay cuts and furloughs. Programs have been cut. The classrooms are getting more crowded. As if this wasn't enough, the governor is planning to defer funds that are owed to the school district. You are planning to take out a loan to cover the costs until the deferred funds finally arrive.

I certainly can sympathize with School Board President Penny Ranftle when she complained that the new governor's budget "wasn't good enough". Certainly, the budget shortchanges schools and everything else. But what is Jerry Brown supposed to do? He can't print money like the feds.

The primary method of funding schools has been through property taxes. For the last 28 yrs or so, property taxes collected in Poway have been diverted from the schools. And yet, I have never heard Mrs. Rantfle or any other PUSD school board member complain about that.

Redevelopment is the program that diverts property taxes from the schools and local governments. Redevelopment is a state program that was meant to revitalize poor, blighted urban areas. The state allowed cities and counties to form a redevelopment agency to "clean up urban blight". The redevelopment agencies get to keep any new property taxes from new developments in the agency area. There are now about 420 redevelopment agencies in the state of California and they suck up 12% of all property taxes collected in the state.

In San Diego County, redevelopment agencies are diverting about $400 million in property taxes each year. About half of that would be going to the schools if there were no redevelopment agencies. San Diego County redevelopment agencies divert just under 11% of all property taxes, a little bit less than the statewide average. Poway's Redevelopment Agency manages to divert about 50% of all property taxes. How did Poway manage to do this? In 1983, when they formed their redevelopment agency, Poway put an astounding 8200 acres of mostly undeveloped land in their agency area. When developments like Old Coach Estates, Bridlewood, Rancho Arbolitos, and the entire Industrial Park were built, the new property taxes went to the Poway Redevelopment Agency instead of to schools and local services.* I estimated that the schools are currently losing about $19 million/yr from the diversion of property tax to Poway's Redevelopment Agency.

It is true that Poway uses some redevelopment money to spiffy up the schools. The Performing Arts Center, various sports fields, and multipurpose rooms have been built with redevelopment funds. Getting new athletic facilities is nice, but it isn't equivalent to PUSD getting $19 million/yr to spend as they see fit for academic programs like reading, mathematics, and science.

As part of his budget, Governor Jerry Brown plans to eliminate the redevelopment agencies and pay off their debts and return funding to the schools. Of course all of the cities with redevelopment agencies complained quite loudly. Not unexpected. They can borrow millions and billions of dollars every year without voter approval to build shopping centers, stadiums, golf courses, and car dealerships. They can pay it back over the next 25-40 years with all the property tax that they steal from the schools.

Perhaps you don't really understand the enormity of the brewing disaster. Do you remember that "doubling a penny"exercise? The first day you give someone a penny, the second day you give him 2 pennies, the third day you give him 4 pennies, the fourth day you give him 8 pennies, etc. In 30 days, you will have given him over $10 million dollars. That's a great exercise to explore the concept of exponential growth. Redevelopment agencies property tax grab is also growing exponentially. It isn't doubling every day like the pennies, but it is growing exponentially. In 1970, only 2% of all property taxes were diverted to redevelopment agencies, By 1980, the percentage doubled to 4%. By 1995, it doubled again to 8%. Currently, redevelopment agencies are grabbing 12% of all the property tax. That's unsustainable. No governor is going be able to make up an ever increasing diversion of property tax funds from the schools.

I haven't heard a single peep out of any PUSD official in support of Brown's plan to eliminate redevelopment agencies and return the property tax money to the schools and local government. I am wondering why the cat has got your tongues. I did notice that you all are supporting a lower threshold to get a parcel tax measure passed. Really? Parcel taxes are regressive. A parcel tax levies the same fee on a mansion with 6-car garage as it does on a 2-bedroom condo with carport. I would not be able to support a taxation system which diverts property taxes to help build car dealerships and shopping centers and then makes up the money with new taxes that affect the little guy way more than the richer folks.

If redevelopment agencies are axed, I would begrudgingly support a 5-yr extension of taxes that are set to expire. I don't like having to do that to make up for shoveling tax money to rich developers over the last couple of decades, but at least the tax extensions are only for 5 yrs (unlike a new parcel tax). The Republicans have refused to put the tax extensions on the ballot, unless their long list of demands were met. Have you seen this list? Some of the items would affect the teachers you employ. In particular, the Republicans want pension reforms that would affect current and future employees. They want to increase the health and pension costs that teachers pay and to decrease or delay pension benefits. They want voters to get to vote on any pension increases. (Uh, so they are for voters to decide pension issues, but not tax issues????) They want the pension based on the highest 5 yr average, and to be capped. They also want to reform teacher seniority rules allowing layoffs based on performance instead of seniority. Where does PUSD stand on these issues? Do they support them? Did anyone from the PUSD board lobby any legislator to get the tax extensions on the ballot with or without this list of demands being met?

I am pleased to hear that a local chapter of Service Employees International Union ( SEIU ) will be marching at a May 13th rally to "bring not just education but the government back to the people." Will anyone from the PUSD board be marching with them? It is kind of late, but at least it would be a start at advocating "for the kids".

Sincerely,

Chris Cruse

* Property owners in these developments do pay for school bond issues. In this article I am not referring to bond issues that add additional tax to the regular 1% property tax bill.

"It's mine...my own...my precious"

In January, Gov. Brown announced his intention to get rid of redevelopment agencies as part of his plan to balance the state budget. Brown planned (and still plans) to dissolve the agencies, pay off their debt, and redirect local property tax back to schools, safety services and other local entities that have been "robbed" by the redevelopment agencies.

Fears that the goose-that-lays-golden-eggs will soon be gone has redevelopment agencies taking actions to horde their assets and commit to spending future assets. In less than 3 months, California redevelopment agencies have issued over $770 million in new bonds, and committed billions to new development projects. Meanwhile, 19,000 California teachers got pink slips last week. The number of laid off teachers could grow higher. Much higher.

California's deficit is $26.6 billion dollars. Brown wants to make up the deficit, half with cuts and half with extensions of the temporary taxes that were enacted under Schwarzenegger, but he needs the votes of 4 GOP state legislators to get the tax extensions on the ballot. He is unlikely to get their votes. They keep expanding what they want for those votes. I think the GOP legislators are just messing with Brown. I don't think they have any intention of negotiating in good faith or voting to put the extensions on the ballot so people can choose between them or more cuts. They just want to see him fail, and if that means thousands of teachers lose their job, so be it.

Brown also needs to dissolve redevelopment agencies to get the budget balanced. What does redevelopment have to do with teacher's pink slips? Redevelopment grabs property taxes that normally would go to schools. The state has been giving extra money to schools to make up for the loss, but they can no longer afford to do that.

The chart below is from the County of San Diego's website and it shows how property taxes will be apportioned in FY 2010-2011. Click on the graph to make it larger.

Redevelopment agencies are taking $400 million of local property taxes in San Diego county. That is 10.7% of all property taxes in the county. That is a bit less than the statewide average of 12%. The percentage of property taxes that has been going to redevelopment agencies is increasing steadily. In 1970, only 2% of all property tax in California went to redevelopment agencies. By 1980, the percentage doubled to 4%. By 1995, it doubled again to 8%. And now we are at 12% statewide. It is possible that redevelopment could consume more than half of all property taxes, even more. The bonds that the redevelopment agencies sell have to be paid back with future property taxes.

After redevelopment agencies are dissolved, Brown plans to use some of the money to pay off their debt. The rest of the money will be distributed among the other local agencies. Eventually, after the debt is paid off, all of our local property taxes would be distributed to provide local services. If the money that is diverted to redevelopment agencies were proportionately redistributed to all other entities, here is what the distribution would look like for FY 2010-2011:

Schools would receive 5.3% more of the county's property taxes, in the 2010-2011 FY just in San Diego county. The school's share of that diverted $400 million is almost $200 million this year.

Poway's redevelopment agency took almost $40 million in diverted property tax last year. Almost half of that would have gone to the school district if Poway did not have a redevelopment agency. And while Poway does have an agreement with the school district to spend money on the performing arts center and some joint use sports fields, the amount of money Poway redevelopment agency has given the school district is NOWHERE near $19 million a year. That $19 million could be used for teacher's salaries instead of the $5 million or so that went for artificial grass and bond payments on the performing arts center.

Redevelopment agencies are taking money from more than schools; they are also taking from libraries, the county, special districts and the cities' own general funds. General fund money is what pays for police and fire and city workerbees. The City of San Diego just approved $4.1 billion in redevelopment spending, and that doesn't even include an estimated $800 million they want to spend for a new Charger's stadium. But San Diego also plans to cut back on city services because their general fund is hurting pretty bad. They can't even man all of their fire stations. The choice is clear. We can use our tax money for schools and safety services and local needs or we can use it to fund development projects, like stadiums, shopping centers and luxury golf courses.

It is kind of surprising that school districts and teacher's unions, and other city worker's unions and safety services unions haven't said "Boo!" while cities have gone on this gluttonous rampage, selling bonds and grabbing assets and moving them around to keep them from being used by the state to pay off the redevelopment agency's debts. Why so silent?Poway didn't run out and sell bonds, but they did have a special meeting last Friday at 7:30 A.M. They transferred 75 properties owned by their redevelopment agency to the city and to a new entity they created, a housing authority.

No kidding, a public housing authority?

Yes, Poway created a public housing authority. The same Poway that has supported legislation to allow cities like Poway to pay some other city to build our low income housing. The same Poway that tried to get Sandag to let Poway pay National City to build our fair share of low income apartments in the last housing distribution cycle. The same Poway that sold all of their mobile home parks because they wanted OUT of the affordable housing business. The same Poway that built retaining walls instead of using 20% of their redevelopment money to build low income apartments and got sued by the Legal Aid Society and lost. The same Poway that makes an annual declaration that they need an exemption to state law that requires them to allow granny flats to increase the supply of affordable housing. That same Poway decided they had to have a housing authority to replace the slums of Poway.

In order to create the Housing Authority, Poway first they had to declare by resolution, that there was a need for an authority to function in Poway. According to the California health and safety code 34242 and 34243

34242

The governing body may adopt a resolution declaring that there is need for a housing authority if it finds either of the following:

(a) That insanitary or unsafe inhabited dwelling accommodations exist in the county or city.

(b) That there is a shortage of safe or sanitary dwelling accommodations in such county or city available to persons of low income at rentals they can afford.

34243

In determining whether dwelling accommodations are unsafe or insanitary the governing body may take into consideration:

(a) The degree of overcrowding.

(b) The percentage of land coverage.

(c) The light, air, space, and access available to the inhabitants of such dwelling accommodations.

(d) The size and arrangement of the rooms.

(e) The sanitary facilities.

(f) The extent to which conditions exist in such buildings which endanger life or property by fire or other causes.

When Poway created their redevelopment agency in 1983, the council made a finding that 8200 acres of mostly undeveloped land was so badly blighted, that private enterprise alone could not successfully make a go of any development on it. The city used a program that was meant to help poor, urban communities spiffy themselves up while providing housing and jobs for poor people. Here we are, twenty eight years later and the city has done such a bang up job of creating housing and jobs for poor people that they now need to create a housing authority so poor people don't have to live in slum-like conditions.

To be fair, nobody in the city has really pretended that this housing authority is anything more than a greedy grab for as big a chunk of the taxpayer's pie as they think they can get. The dishonesty is in blaming the state for "stealing" local money. In fact, the real choice is about what our local property taxes should be used for. Should it be used for safety services, local municipal services,libraries and schools? Or should it be used for development projects that enrich the likes of the Spanoses, Moores and Waltons?