It’s been a while since I’ve had a chance to post here, a lot has changed since last August. Especially my perspective.
My attitude towards the legislation that killed redevelopment in California has changed significantly. I still think it was poorly written and full of editorial fails. However, I also feel that, in many ways, the legislation could be the best thing that could have happened to redevelopment efforts. Now that admission is akin to heresy in the world of traditional California style Tax-Increment Funded Redevelopment. But like many heresies, that just means there is some nugget of secular truth to be wrested from the dogma of status quo.
It’s the ultimate do-over. And maybe, just maybe, it is the wedge that local governments and supporters of rational tax reform need to break the shackles of Prop 13. …Yeah, it’s a big maybe.
Today I attended a presentation by the Urban Land Institute on the future of Redevelopment in California. I’m not sure that all of the speakers got that topic in advance of their presentation though, because there was a lot of talk about what redevelopment has done, what it could have done if it hadn’t been ended, and what we wish ABx1 26 really looked like. And, I might be out of line here, but I don’t think that any of that really has anything to do with the future of redevelopment.
There were some general ideas thrown out there – things that local governments might have some ability to influence; such as expedited development entitlements. But most of what conversation there was about the actual future of redevelopment revolved around the need to find a funding stream to replace tax increment. A funding stream would be grand indeed. Yet, I’m inclined to think realistically, and realistically, I think that California’s cities and counties need to learn how to do redevelopment without subsidies.
Why? Because subsidies are not long-term sustainable. Because they are unreliable. Because I don’t think that redevelopment has to be so fiscally onerous that it needs a subsidy to be competitive with greenfield development.
The City Manager here said in a conversation a few weeks ago that the role of the City, in regards to redevelopment, is to be the facilitator, not the producer. Until now, redevelopment agencies have facilitated by throwing money and assets into projects until they penciled for private developers. That is no longer an option. But that doesn’t mean that the role of facilitator is as defunct as the old redevelopment agencies. What it does mean is that Cities and Counties are going to have to get nuanced about how they approach the role of facilitator.
There are two parts to this nuance, as I see it. The first part involves the powers of the local jurisdictions themselves. What can Cities and Counties do to help facilitate redevelopment? More than they think. They can:
- Create flexible zoning for projects that qualify as redevelopment to allow for more mixed-use multi-functional development projects.
- Institute sky’s-the-limit density bonuses for redevelopment projects, especially in TODs.
- Reduce development fees (or eliminate certain impact fees) for redevelopment projects.
- Create infrastructure match funds (funded by normal tax revenue or by infrastructure financing districts, or even by municipal bonds – or if we want to get really crazy, funded by additional fees on greenfield development) that can be used to help augment the cost of upgrading infill infrastructure.
- Provide comprehensive specific plans for “redevelopment areas” with comprehensive environmental reviews in place and up-to-date so that infill developers can tier off of existing documents instead of paying full price for new environmental assessments.
- Eliminate the regulations that put the most fiscal stress on infill projects – such as parking minimums that require large amounts of land or costly parking structures.
- Partner with other governmental or semi-governmental agencies like Fire Districts and Regional Transit and other public service providers to provide infill incentives, such as increased public transportation coverage, reduced fees, and improved services.
- Develop incentives for redevelopment that incorporates housing – real incentives, such as reduced fees, expedited processing, increased zoning flexibility, additional infrastructure support.
But before any of these ideas has even the slightest chance of working, jurisdictions will need to recognize two things. First, redevelopment is not economic development. Redevelopment is the re-use of under-utilized urban resources. Legally it involved providing and protecting affordable housing and eliminating blight. Redevelopment was never legislatively intended to be a tool for economic development. The ideas above are not intended to facilitate economic development. They are intended to help encourage the redevelopment of under-utilized, neglected, and deficient urban resources.
Second, it is long past time to realize that the reality isn’t that infill development is more expensive than greenfield development, but that greenfield development is more heavily subsidized than infill development. The best incentive to push developers into infill development is to eliminate the greenfield subsidies – make developers who want to develop in the greenfield pay the full cost of that development. And not just the immediate cost, but the life-cycle cost – the cost that will otherwise get dumped on the parent jurisdiction. For decades the urban areas have helped subsidize development in the green fields. I think it is time to reverse that trend.
There is another component to the nuance of facilitating development, and that is beyond the control of local jurisdictions. I’m talking about new legislation at the State level to help encourage redevelopment without requiring a dedicated funding source. SB 226, which streamlines CEQA review is a good start. However there is more that the state could do to encourage redevelopment without paying for it.
- For example, the state could declare the first $1.5 million (or more) spent on environmental remediation for contaminated infill sites to be tax exempt.
- For infill redevelopment projects that are funded by grants, the State could greatly reduce the reporting burden.
- It could also eliminate some of the labor standards compliance requirements and allow grant funded projects to use market wage rates, instead of prevailing wages.
- It could give Cities and Counties the ability to create redevelopment districts with the power to levy taxes (that are apart and in addition to any taxes already collected).
- And it could allow jurisdictions to have more autonomy, both in terms of regulations and finances.
I was hoping to hear stuff like this at this morning’s meeting, and while there were hints, they were only hints. The old paradigm has been discarded. The cities and counties that are able to effect redevelopment without a dedicated funding stream and without the option of offering subsidies are going to be the jurisdictions that thrive. Redevelopment is dead, and the period for reaction is nearly closed, as I see it. It’s time to get proactive. It’s time to innovate. It’s time for the kind of redevelopment that doesn’t need subsidies.
urbanhistori 