Looking Ahead at Practical Alternatives to Finance Economic Development

By Mario Conde

While the future of the Redevelopment Agencies is in question, a new legislation has been introduced in Sacramento to give cities another financing option similar to redevelopment.

State Senator Louis Wolk (D-Davis) introduced SB 214 to ensure that municipalities still retain some tools to continue their economic development projects even if the Redevelopment Agencies are phased out. Brown’s budget proposal contains $12.5 billion in cuts and five years of higher taxes as a means to close a projected $25.4 billion deficit.

Wolk’s legislation, Senate Bill 214, works as compromise in the ongoing debate to eliminate or not the RDA. SB 214 would allow the Infrastructure Financing Districts (IFDs) to absorb many of the functions of the current redevelopment agencies. Wolk said that his will be a means to continue to provide economic development while ending the fears of school and special districts.

“It’s time to look ahead at practical alternatives that retain the ability of local governments to finance economic development,” said Wolk.

Cities and Counties are allowed to create an Infrastructure Financing District, or a specified area in which property taxes that would ordinarily go to the general fund are diverted to pay for development projects. These projects would include highways, transit, water and sewer projects, flood control, libraries, parks and recreation, and solid waste facilities. Unlike the Redevelopment Agency, an IFD cannot divert school property taxes and must have the approval from other local entities within the district. This legislation will extend the term of IFD bonds from 30 years to 40 years.  Also, IFD’s will not have the power of eminent domain. This legislation removes the statutory requirement for voters to approve the formation of an IFD or to issue debt, just as there is no voter approval requirement for RDAs to do the same.

“It’s not a question of whether redevelopment is good or bad,” said State Senator Wolk, who chairs the Senate Governance and Finance Committee. “As a former city council member and former county supervisor, I’ve seen redevelopment do considerable good for my community and for communities throughout the state. The question is can we continue to subsidize redevelopment agencies at the expense of schools and other core local services? For years, the state has had to pull from its general fund to backfill property tax funds diverted from K-14 education and local governments for the use of redevelopment agencies,” Wolk said. “We can no longer afford to do that without cutting essential services.  That leaves us with some hard choices to make. Californians have to decide what core services we expect government to provide with our limited resources.”