Unless the state legislature and governor do something drastic, all redevelopment agencies (RDAs) in California will cease to exist as of Feb. 1. Last Monday evening, Robert Zur Schmiede, Long Beach deputy development services director, told a small gathering of people that cities and many of the state’s poor will feel the pain of the RDAs’ demise for many years.
Zur Schmiede was the featured speaker at the monthly Wrigley Area Neighborhood Alliance meeting, which took place in the Veterans Park Recreation Center. About 25 people attended the meeting.
Zur Schmiede told the audience that Sacramento’s decision to pass legislation abolishing the RDAs was not carefully thought out and it would take months, perhaps years, to fully understand the ramifications of that decision. “I don’t think anyone knows how it’s all going to play out,” he said. “But we do know that a lot of good programs and planned projects are going to come to an end.”
The deputy director reminded WANA members that redevelopment has been a very important program in Long Beach for 50 years and the RDA has been instrumental in removing blighted conditions, reinvigorating business districts, undertaking massive development projects (including the construction of affordable housing for low-income families), helping create new jobs, and bringing additional revenue into the city’s General Fund.
Zur Schmiede noted that last year Governor Jerry Brown signed two bills adopted by the legislature pertaining to redevelopment agencies. “ABx1 26 was the bill to dissolve the redevelopment agencies,” he said. “ABx1 27 was the pay-to-play bill.” He explained that under AB 27, cities that wanted to keep their RDAs intact could do so if they paid an annual fee to the state.
“Under that law, Long Beach would have had to pay the state $34 million in 2012 beginning with a $17 million installment due on Jan. 15,” he said. “Long Beach and many other cities joined together to challenge the constitutionality of ABx1 26 and ABx1 27.”
According to Zur Schmiede, the California Supreme Court could have ruled that both laws were in violation of the state constitution, it could have ruled that both were in compliance with the constitution, or it could have ruled that one of the new laws was constitutional and one was not. “Unfortunately, the court decided on the worst possible scenario,” he said. “It ruled that ABx1 26– the bill abolishing the redevelopment agencies– was constitutional, and ABx1 27– that could have given us a way to keep the redevelopment agencies operating– was unconstitutional.”
Zur Schmiede also explained that according to the provisions of ABx1 26, city governments can assign the dissolution of their RDAs to a successor agency, and in Long Beach the successor agency is composed of the members of the Long Beach City Council. “The successor agency is like a bankruptcy trustee,” he explained. “Its job is to liquidate the assets of the bankrupt entity, which in this case is the RDA.”
The deputy director added that the legislature included provisions in ABx1 26 that will make the job of dissolving RDAs a very complex undertaking. He explained that an oversight board made up of city and county officials will review all decisions made by the successor agency, and even after the oversight board approves the decisions, the State Finance Department has the power to approve, reverse or modify any decision made by the successor agency.
“We are in unchartered territory, and we don’t know how this is all going to work,” Zur Schmiede said. “ABx1 26 is replete with ambiguities. We are going to try to protect the assets as best as we can.”
He explained that the law does provide for “enforceable obligations” such as the bond indebtedness of the RDAs. That means that a portion of the property taxes collected from redevelopment projects will continue to be used to pay off the bonds issued to finance those projects.
“The language of ABx1 26 also says that we can have five percent of the (tax increment) revenues for operations and overhead (related to the completion of already started projects),” Zur Schmiede noted. “But at this point we do not know exactly how that five percent amount will be calculated.”
The deputy director also explained that redevelopment projects that already have signed construction contracts will be allowed to go forward. “We have bond proceeds in the tens of millions of dollars, but we don’t have contracts for all the projects (that are financed by the bonds),” he added. “Right now bond attorneys throughout the state are trying to craft language that says if you have bond proceeds designated for certain projects, those projects should be allowed to go forward, but it’s still too early to know whether those efforts will be successful.”
As Zur Schmiede spoke, the picture he painted grew progressively gloomier. For example, he explained that the law that helped cities establish redevelopment agencies many years ago required the RDAs to set aside 20 percent of their revenues for the development of affordable housing. “That 20 percent set aside is the single largest source of funding for affordable housing in the state,” he said. “That funding is now going away, and we don’t know if there is going to be any kind of program to replace it.”
The deputy director noted that no decisions have been made yet pertaining to the future of city employees assigned to redevelopment projects.
“I wish I had better news for you,” Zur Schmiede said. “We are doing our best, and we are hoping that something good will come along.” He encouraged audience members to contact their representatives in Sacramento to urge them to adopt legislation that would allow RDAs to continue their work even in a diminished capacity. He also urged those in attendance to communicate their support of SB 659 to elected state officials. If passed, that bill would delay the dissolution of RDAs until April 15.
Later in the evening, WANA members voted unanimously to have WANA President Maria Norvell write a letter urging legislators and the governor to enact that bill.