Jan. 26 (Bloomberg) -- The mayors of California’s biggest cities say they plan to present an alternative to Governor Jerry Brown’s proposal to eliminate redevelopment agencies in the most populous U.S. state to help fill a $25.4 billion deficit.
Los Angeles Mayor Antonio Villaraigosa and leaders of eight other cities emerged from a meeting with Brown in Sacramento today and said they have formed a working group to produce a substitute to the governor’s plan. He seeks to gain control over $5 billion in property taxes allocated to the local agencies.
“When the federal government faces a deficit, it prints money; when the state faces a deficit, it balances its budget on the backs of local governments,” Villaraigosa said. “This is absolutely the wrong time to move away from these agencies and their job creation and revenue generation.”
Brown, a 72-year-old Democrat, has proposed an austerity budget that pushes spending back to 2005 levels and counts on voters agreeing to extend $9.2 billion of expiring temporary tax increases to prevent deeper cuts. The governor also wants to shift more of the costs and responsibilities for health, welfare and public safety to local governments and make it easier for them to raise taxes and fees to pay for the services.
Brown plans to use $1.7 billion of the redevelopment money to shave the deficit by paying for courts and health care for the poor, while sending $1.1 billion to schools. The rest would pay debt service and other obligations.
Message to Mayors
“My message to them is, if not you, who,” Brown told reporters in his Sacramento office today before his meeting with the mayors. “If you want that $1.7 billion, where do we get the money to replace that money. These hallways here will be filled with people saying ‘please keep the money coming,’ and my message to them is that the money isn’t there.”
Under California’s 65-year-old redevelopment law, if a city or county creates a redevelopment area to address urban blight, the agency receives related property-levy revenue increases that may result, known as the tax increment. Absent a redevelopment district, schools and local governments such as cities and counties would get those receipts.
According to the state’s Legislative Analyst’s Office, redevelopment authorities pass about $1.1 billion of their $5 billion of tax revenue to local agencies based upon negotiated agreements and state statutes.
Of that $1.1 billion, approximately $300 million goes to schools, with only $40 million of that offsetting state obligations. California then replaces property-tax revenue that was diverted to the agencies from schools, at a cost of more than $2 billion a year out of the general fund.
Benefits of Agencies
The state’s 398 active redevelopment authorities supported 304,000 full- and part-time local jobs annually, mostly in construction, according to the California Redevelopment Association. It said agencies have used some of their allocated funds to build 98,000 affordable-housing units since 1993.
“It’s a terrible idea to abolish redevelopment up and down this state right now,” said Sacramento Mayor Kevin Johnson.
Proponents of redevelopment agencies say Brown’s plan may violate a new ballot measure approved by state voters in November known as Proposition 22, which bars the state from raiding revenue meant for local governments.
“We would hate to have to take the state to court in order to uphold the will of the voters, but we will do it if we’re forced to,” said Chris McKenzie, executive director of the League of California Cities.
In his fiscal 2012 plan, Brown also called for ending enterprise-zone tax incentives. One benefit gives businesses credit for creating jobs in targeted areas. Brown has said the incentives, projected to cost $581 million next year, merely shift economic development from one region of California to another and don’t provide a net benefit to the state.
To contact the reporters on this story: Michael B. Marois in Sacramento at email@example.com;
To contact the reporter on this story: Michael B. Marois in Sacramento at