Financing Village Improvements: RDA the first step?
Posted by: Robert McMahon in VillageHi,
I wanted to test this blog as well as bring up an idea about how Saratoga residents could participate in potential Village renewal efforts. Saratoga may be able to use public financing mechanisms (which are both state and federal tax exempt) to fund Village improvements that would act as the backbone for future public/private partnerships. Public financing mechanisms structured properly could allow us to keep our monies local instead of sending so much off to the state and federal governments, in which we have been donors for decades. (If I had to guess, Saratoga gets back less than 50 cents on the dollar of what we send off to Sacramento and DC) In the long run, if we were to assist in the creation of viable, cash flow generating businesses that meet our community’s needs and desires, Saratoga could become less dependent upon housing development (or the selling of city lands) for our general revenues.
Is the first step towards Village renewal the establishment of a redevelopment agency? (Which begs the question of how to pay for that?)
Here is a link describing Sunnyvale’s effort.
From the Sunnyvale site:
Redevelopment Basics
One of the key tools available to assist in rebuilding and improving portions of a city is redevelopment. The State of California established the redevelopment process to aid local governments in improving areas of physical blight or economic distress.
Perhaps the most misunderstood aspect of redevelopment is its impact on taxes. Redevelopment does not increase taxes. It redirects property tax monies generated by new developments within the project area to the redevelopment agency for reinvestment in the project area.
Another common misperception is that redevelopment funds are simply given as a gift to private developers. The fact is that funds are used as an investment in the redevelopment area. A private developer typically would not invest private funds in the redevelopment area if the redevelopment agency did not make this investment. The agency investment is for a public purpose, such as construction of streets, utilities and other public infrastructure to support the new development.
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Saratoga has tried twice to create a Redevelopment Agency, and was turned down both times. Just wanted you to know that the creation of an RDA is not a new idea to Saratoga, and that doesn’t preclude us from trying again, but with the current status of the state & federal budget, combined with the economic crisis, it is not likely that a Saratoga Village RDA would be approved in the near term. – Chuck Page
Thanks for the information Chuck. (Yeah, I didn’t really think the RDA idea was new.) Do you know the reasons Saratoga’s attempts at establishing an RDA were not successful? I’m trying to understand if the obstacles are surmountable or not, and if they are, what is required to overcome them.
I reviewed the staff report and the redevelopment report. I had the report posted to the City website as well. It should be available on the following page: http://www.saratoga.ca.us/Business/index.html
The answer to Robert’s question is found in the staff report, as follows:
“Conditions of Blight
Many cities throughout California have established Redevelopment Agencies. The vast majority of agencies were established before 1993 when the conditions required to designate an area for redevelopment were very different from those now in place. The definition of blight was so vague that it allowed project areas to be characterized as blighted without the presence of substantial physical deterioration. AB1290 was adopted by the Legislature in 1993 and changed
that definition. Now, conditions of both physical and economic blight must be found and “must be so prevalent and substantial to cause a reduction of, or lack of, proper utilization of the area to the extent that it constitutes a serious physical and economic burden to the community.”l
After conducting a field survey and research of the Village area, RSG concluded that the area has one physical blighting condition-”factors that hinder economically viable use or capacity of building or lots”-but this condition cannot be deemed to be pervasive to pose a serious burden on the Community. No economic blight conditions were found.
Conclusion
Both the consultant and the redevelopment attorney counseled the Village Ad Hoc Committee
that moving forward with redevelopment would be “politically and legally challenging.” The
Committee reluctantly accepted the conclusion.”
Regards,
Dave Anderson
Thanks Dave. It seems to me that CA has put in place way too many constraints on cities, e.g. via things like prop 13 and prop 218, making it near impossible for self reliance and self governance. I wonder if one of the few financial tools left is the use of municipal revenue bonds, interest from which is state and federally exempt, that could encourage citizens to invest in our city’s futures? Protecting these bonds from encumbrances per the state’s perennial budget woes also seems required.
Do you know of any other tools that could be used that haven’t been considered?
PS. Obviously, any projects considering the use of such bond proceeds would need to be viable w/respect to economic benefits to the overall community. I would think that residents purchasing and holding these bonds would act as viable counter party controls.
PSS. The Grist Mill seems to have blight. Maybe we can start there
Assuming the conditions of blight, economic and physical, could be met (which seems unlikely), here are some projections of what tax increment revenues could support (per the report written in 2005.)
“Based on these assumptions, the Agency [RDA] could collect tax increment revenue from a redevelopment project area comprised of Survey Area properties beginning in fiscal year 2006-07 through fiscal year 2049-50. Over this time period, the Agency could receive a total of $90 million in gross tax increment revenue cumulatively. In current dollars, assuming a 6 percent discount rate, the gross tax increment revenue projection is equal to approximately $18 million. After mandatory payments to affected taxing agencies, the Agency would have $18 million available for affordable housing projects and $41 million for redevelopment projects. In current dollars the $59 million of affordable housing and redevelopment tax increment revenues equate to approximately $12 million. Moreover, it is important to underscore that these financial projections likely overstate by more than 50% the probable amount of revenues the redevelopment agency could receive from redevelopment. Within the area, since over half of the Survey Area contains nonblighted residential property that could not be justifiably included in a redevelopment.”
Bottom line: The Village is going to have to find other financial mechanisms.