Steve Andrews
Senior Policy Advisor
Mayor’s Office of Economic Development
City of Los Angeles

What Happened????
1
2
3
4

2011-2012:
A PERFECT STORM

Bottom line:

425 California redevelopment agencies dissolved on
Feb 1

60 year tax increment financing structure for economic development eliminated

$57 billion in direct tax increment financing over last 11 years
 Funds are not coming back – disbursed to “taxing entities”

Some key economic development tools are eliminated or potentially compromised

Huge professional resource in public agencies and supporting private firms will be lost

2011-2012: A perfect storm

SETTING THE STAGE: “ballot box budgeting”

1970’s -- Proposition 13 skews state and local budgets; growing shift of tax burden to residential over 30 years
 But, Prop 13 is still called the “third rail” of Calif. Politics

“fiscalization of land use” – cities chase sales tax
(retail) to support local budgets
 other sectors: not so much

2011-2012: A perfect storm

Recently:

State budget over-reliant on income tax; huge swings in revenues; structural deficits

Proposition 98 – schools are guaranteed specific share of state budget

Proposition 22 – cities, redevelopment agencies, uniformed services freeze out state from taking “local tax resources” to balance state budget

2011-2012: A perfect storm

2011 – Governor Brown proposes to end redevelopment, so more $$ would flow to schools

Relief to state budget by reducing Prop 98 “backfill” requirements

Legislature says “no” (sort of)

2011-2012: A perfect storm

SPECIAL LEGISLATIVE SESSION COMPROMISE

Two bill package deal:
 AB 26: Dissolves redevelopment and tax increment structure ….. Unless….
 AB 27: Cities allowed to pay “voluntary” ransom to state to keep tax increment structure

2011-2012: A perfect storm

Cities sue AB26 and AB27as a violation of
Proposition 22

Supreme Court: AB 27 IS in fact a ransom – so “no deal” under Prop 22

BUT, AB26 stands – redevelopment agencies and the tax increment structure are dissolved


Between 1998-1999 and 2009-2010, redevelopment agencies in California received $56 billion and produced:

New Commercial 181 million sf

New Industrial

Public Improvements
200 million sf
30 million sf

Other (Community, etc)

114 million sf
Total 525 million sf

Economic development impact
Rehabilitation of commercial, industrial and other: 128 million sf
Affordable Housing created:
-- New:
-- Rehab:
94,887 units
58,518 units
PLUS: “pass through” payments to counties, schools, special districts: $9.7 billion
Estimated Jobs created: 682,000

Economic development impact
•
Primary Redevelopment Economic Development
Tools:
–
–
–
Infrastructure rehabilitation and development
Land assembly
Brownfields remediation
–
–
–
–
–
Catalyst for commercial/industrial attraction
Affordable housing development
Community facilities
Local match for federal, state, private funding
Professional staff capacity – public and private

•
Federal (partial list)
–
–
–
–
CDBG
Transportation
New Market Tax Credits
Investment Tax Credits
–
–
–
–
–
USDA for rural areas
SBA
EB5 Visa Program
EDA
More….


State

GO Bond Programs

Enterprise Zone Program

Focused Tax Incentives

Infrastructure Funds

More….
(who is still in the game?)

(who is still in the game?)
•
Local
–
–
–
–
–
–
–
Infrastructure Tax Districts (Mello-Roos)
Business Improvement Districts (BIDS)
General Fund Allocations
Fees, exactions
Public-Private Partnerships
Property Tax Rebates
Other (non fiscal): density bonuses, protective zoning, code enforcement, expedited environmental review

(who is still in the game?)

Remaining Economic Development Pipeline:

Will take 2-3 years to complete any economic development projects with “enforceable obligations”

Local Governments can “retain” all housing assets and obligations, but no new funding

Local Governments will capture some % of the former tax increment $$, but only as pipeline projects are completed and bonds are paid off
 BUT – huge competition for these funds, as cities generally have major resource constraints last five years and before


How do California local governments now organize for economic development?

New charter/ordinance authorities for using economic development tools?

Creation of new structures?
 New city economic development departments
 New non-profit economic development entities
 New hybrid structures

