Governor Brown’s Plan for California’s Redevelopment Agencies

Jerry Brown, a significantly mellower governor in 2011 than he ever was back in 1975, has once more taken the reins of government in Sacramento with the stated goal of reducing the deficit. One of his most controversial cost-cutting strategies is to eliminate all redevelopment agencies statewide. This strategy would purportedly allow $1.7 billion in tax revenues to flow directly to cash-starved cities and counties, rather than letting those funds “bank” with the more than 400 redevelopment agencies for the purpose of addressing “blight” at some future time.

Redevelopment agencies and their development partners are deeply concerned about Governor Brown’s idea, as precious little real estate lies outside the sphere of influence of these agencies. Redevelopment agencies are very powerful and each is permitted to target what it may deem as “blight” anywhere in its jurisdiction.

While the mayor for the City of Oakland (1999-2007), Brown successfully created low-cost housing projects with the able assistance of the Oakland Redevelopment Agency. Absent the assistance of such an agency, many of these projects would not have been completed. Why? Because few developers and even fewer lenders are willing to accept the risk inherent in the typical redevelopment project, which comes with other “requirements” such as new headquarters for the agency, as well as multiplex movie theaters to complement the required 20% affordable housing.

To find the riches produced by an active redevelopment agency, one need look no further than the adjoining City of Emeryville. Emeryville, once a map of brown fields and abandoned or underutilized industrial space, is now a hub for live/work space, shopping and commerce. Emeryville is solvent, an oddity among city governments these day.

Emeryville has aggressively used the redevelopment process for the last twenty years to turn itself around. How may we attribute this success to the city? Let’s return to the issue of the power of the local redevelopment agency. A line could be, and probably has been, drawn around the entire City of Emeryville, including all of its real property within an area of blight (excepting those properties already redeveloped.) There is not much real estate left outside of this area and the center of the agency’s energy today remains litigation to get reimbursed for the redevelopment it has accomplished to date.

Along with the ominous strength of the local redevelopment agency comes an even more powerful arrow in its quiver, the “Polanco Act.” This piece of legislation allows a highly contaminated city to clean itself at the expense of owners and any identifiable polluters. In practice, the agency requires whoever owns the contaminated property to clean the property pursuant to current California clean air and water environmental standards.
Few individuals can afford this level of remediation. The owner of a property (that was polluted many years ago by a major concern) is on the hook for the removal of the contamination, the restoration with clean material and the prohibition against allowing ground water to become contaminated.

Add to the above formula the added impact that the same innocent owner (with exclusions in all insurance policies) must pay not only his own team of experts in an attempt to defend but also related expenses from the redevelopment agency. In the foregoing example, the innocent owner must sell his property to the city for a number that deducts the cost of the cleanup by the agency and the city’s attorney fees. Recently, a $5 million property became worth less than $1 million overnight and the only winner was the City of Emeryville and its legal counsel. The blight is gone, the tax base for the City is swollen and the former owner has paid in excess of $4 million for this project. Can you imagine any injustice close to this scenario without the power of a redevelopment agency? The City of Emeryville would have never seen its PIXAR and IKEA. It would have continued with its reputation as the city on the bay with the spare tire artworks at low tide, and who knows, the schools and public services may well have been the winners.

Is the Redevelopment Agency, armed with a license to steal, necessary to the orderly development of California cities and counties? Perhaps, if the lobby for the agencies is not able to stop the Governor with his plan, we shall find out. You may recall an attempt to eliminate the California Department of Transportation when Mr. Brown ran for office the first time twenty-eight years ago. I recall colloquy about the wisdom of building Interstate 5 when State Hwy 99 was adequate. You might recall improvements to the highway system, affectionately termed Caltrans by the governor, were pretty much eliminated for the following 8 years. Is redevelopment next?

– Thomas C. Nagle is a Walnut Creek attorney who has been practicing in the field of eminent domain from graduation of law school in 1965 to the present. He worked with the State Department of Transportation for 24 years for both Jerry Brown and Pat Brown.

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