Jerry Brown's ploy to save $1.8 billion for California schools

A key element of California Gov. Jerry Brown's bid to close a $28.1 billion budget gap could hinge on the fate of hundreds of little-known government agencies that siphon local property taxes from local schools.

Governor Brown is proposing the elimination of nearly 400 local redevelopment agencies (RDAs), which use a portion of local property taxes in certain blighted areas to invest in construction, redevelopment, and beautification projects. With the state on the hook for reimbursing schools for that lost tax money – to the tune of about $1.8 billion a year – Brown is suggesting that California can no longer afford that cost.

He has come under criticism from dozens of mayors who say the move will be catastrophic. Some have gone out of their way to call his idea “hypocritical,” in that Brown’s own residential loft in Oakland was an award-winning example of development funded partly by the kind of agency Brown wants to eliminate. Moreover, Brown's eight years as mayor of Oakland were arguably one of the most ambitious urban-restoration periods in modern California history.

“This budget proposal to eliminate redevelopment is more budget smoke and mirrors that will bring little financial gain for the state but will cause widespread and significant economic pain in communities throughout California,” wrote John Shirey, head of the California Redevelopment Agency, in a statement.

But Brown says all that happened before the current economic downturn, which has socked California with the biggest state deficit in American history. “I’m sure glad I got it built before this damn budget came out,” he said to the Los Angeles Times of his renovation of Oakland's renovated Fox Theater, which houses one of the charter schools that Brown pointed to during the gubernatorial campaign as evidence of his keen support of education.

Now Brown is on a public-relations campaign with the public. California assumes an unusual amount of spending that, in most other states, is done by localities – one of the reasons behind the chronic budget crises. Brown's RDA plan is one way to readjust that, officials say.

“Californians need to understand this [redevelopment idea] is part of Brown’s larger proposal that he campaigned on to entirely change the state’s relationship to local communities,” says H.D. Palmer, spokesman for the state Department of Finance. “This is what he told voters he would do and now they’ve given him the mandate to do it.”

It is part of a broader, three-part budget plan. First, Brown needs the legislature to pass nearly $12 billion in spending cuts, then voters will vote in a special election to extend certain tax rates, and then the legislature will need to pass a final state budget.

Whatever the political cost, many analysts say Brown's redevelopment plan is precisely what California needs to do.

“It’s basically a brilliant Jerry move to separate a more powerful constituency – teachers union and parents – from a more narrow constituency, land speculators, connected lawyers and developer. Machiavelli would be proud – and it’s basically the right choice,” says Joel Kotkin, an expert on urban development at Chapman University in Orange, Calif.

A report by the state legislature’s independent budget analyst found that there is "no reliable evidence that redevelopment agencies improve overall economic development in California." Instead, redevelopment tends to "shift development from one location to another but does not significantly increase economic activity statewide."

More than 60 years ago, the original idea of redevelopment agencies was to address blight, but a complex fiscal mechanism known as “tax increment financing” has allowed RDAs to accrue significant amounts of revenue at the expense of local governments and schools. Now that the state is in dire fiscal straights, say a growing chorus of voices, it’s time to undo that.

“From our perspective, the money diverted into redevelopment projects is money that is then not available for core services like firefighters, schools, and police,” says Carroll Wills, spokesman for California Professional Firefighters, which represents 30,000 federal, state and local-union firefighters.

Decrying millions that are currently set aside for a parking lot next to a proposed downtown museum, Mr. Wills says, “we are in a mess in California right now because of the fiscal challenges we face, and it seems to be that what in many cases ends up being welfare to the wealthy should not be kept ahead of keeping class sizes down, and putting more deputy sheriffs on the street.”