Redevelopment’s winners & losersTax benefits wouldn't be spread evenly
School districts have plenty at stake in the battle between Gov. Jerry Brown and the state’s 400 redevelopment agencies that the governor aims to abolish. Schools could see an extra $1 billion in revenue within two years and a few billion more in bursts in coming years if the administration’s plan passes the Legislature and the revenue estimates are right – two big “ifs.”
But as important as how much money districts would get is how the money would be handed out – to all districts within counties or, more likely, just to the lucky districts with big developments within their borders. As is often the case in California school finance, fairness issues are lurking.
Redevelopment agencies underwrite municipal projects and private developments, and then leverage the increase in property taxes that the new projects create to finance bonds for more projects: stadiums, hotels, shopping centers, business parks, roadways, low-income housing. Districts now divert 12 percent of the state’s property taxes – money that could be used to run schools, municipal and county services, and community colleges.
Brown cites studies that the redevelopment agencies don’t create new net jobs and businesses, they just shift them around the state, and that agencies have overstepped their bounds and aren’t accountable or efficient So he wants to end them immediately and seize the $1.9 billion in property taxes that the agencies have not yet committed for future projects. He’d use $1.7 billion to help plug next year’s state budget deficit and send $200 million to counties and cities for extra services the state would transfer to them.
Then, starting in 2012-13, all of the money would revert to local communities, with schools getting the biggest slice: $900 million.
That’s not all. As the debts for agency-financed projects are paid off in coming years, the liberated property taxes also would go back to school districts and local governments – between $2.2 billion and $3 billion over the next two decades, according to estimates.
That’s the concept. But it will be messy. Already agencies from Los Angeles to Fremont are racing to lock up contracts for developments to keep money out of the state’s hands. That $1.9 billion figure is shrinking daily. And agencies will argue that even if the money isn’t bonded yet, in many cases they have made tentative contracts with developers who have spent out of pocket money already, like the 49ers, with plans to build a stadium in Santa Clara. There will be court cases over the projects and the state’s authority to peremptorily abolish the agencies.
A windfall for some, a whiff for others
Brown is proposing that the extra $1 billion for schools would add to to the state’s minimum obligation under Proposition 98. But the Legislative Analyst’s Office suggested at a budget hearing Monday that it replace state revenue for schools instead.
Brown hasn’t released details of his plans for redevelopment taxes, and his outline is somewhat ambiguous. But he seems to suggest that the initial $1 billion from the agencies to school districts be proportionally distributed by the counties in which they’re located.
But redevelopment agencies are not spread evenly. Only 1 percent of San Francisco’s property taxes are tied up in redevelopment agencies, compared with 31 percent in San Bernadino County and 26 percent in Riverside County. There stand to be winners and ciphers.
That would be even more the case in the future, as bonds are paid off. Districts with redevelopment projects within their borders stand to get bonanzas, while an adjoining district, with the same student demographics, may get left out. Orchard, a one-school district in a high-tech corner of San Jose, would eventually get $9 million more in property taxes; next door, Alum Rock Union Elementary School District, with 14,000 low-income children, would not receive a penny more, according to rough estimates for me from the county controller-treasurer’s division. San Jose Unified, with 31,000 students, and Milpitas Unified, with 9,500 students, each would receive about $30 million in extra property taxes. The biggest winner would be well-endowed Santa Clara Unified, which would reap an extra $74 million.
But none of this money is coming anytime soon – at least in Santa Clara County, where the San Jose and Santa Clara redevelopment agencies have bonds extending for decades. Neither San Jose Unified nor Santa Clara Unified would get a cent until 2024.
That would leave plenty of time to settle the equity lawsuits that shut-out districts would be sure to file.