Redevelopment was recently tapped as the cash cow to pay off the City of San Diego’s PETCO Park debt. In Sacramento, Assemblyman Nathan Fletcher was able to insert a couple key sentences into last year’s budget bill that “removed the cap” from downtown’s “tax increment.” Now Gov. Jerry Brown proposes to get rid of the 400 or so redevelopment agencies statewide and use their local revenues to help close the state’s enormous budget deficit.
But what is redevelopment? How does it work, how is tax increment revenue generated — and what, exactly, does “removing the cap” mean?
In short, redevelopment is a complicated government program, one that has been vilified as a give-away to wealthy developers and lauded as a panacea to urban blight. Gov. Brown has said that when he was Mayor of Oakland he viewed redevelopment as “almost magic.”
In San Diego, the inherent complexities of redevelopment are multiplied by an organization structure that has been called “unique,” and a committee has been formed to look into reorganizing the Agency.
So how well do you understand the complex subject of redevelopment in San Diego? This quiz will help you find out. Click on the word answer to reveal the correct choices.
1. The San Diego Redevelopment Agency is (choose one):
- a state agency
- a city agency
- a joint powers agency
- all of the above
answer
a.) All redevelopment agencies in California technically are state agencies, even though the agency boards are local. Redevelopment agencies are authorized and governed by state law, via the California Health and Safety Code beginning at sec. 33000, not by city charters or local ordinances. The purpose of redevelopment is to eliminate blight. Any redevelopment agency employees (the San Diego Agency has no employees of its own) are covered by CalPERS retirement.
2. The Centre City Development Corporation (CCDC) is one of San Diego’s redevelopment agencies. True or false?
answer
False. Centre City Development Corporation is not a redevelopment agency. CCDC is a nonprofit corporation that operates under a contract with the redevelopment agency to carry out redevelopment in the downtown area.
3. CCDC and the Southeastern Economic Development Corporation (SEDC) are best described as (choose one):
- a 501(c)(3) charitable nonprofit corporation wholly owned by the San Diego Redevelopment Agency
- a 501(c)(3) charitable nonprofit corporation wholly owned by the city of San Diego
- a 501(c)(6) lobbying corporation wholly owned by the San Diego Redevelopment Agency
- a for-profit development corporation chartered by the State of California
answer
b.) CCDC and SEDC are 501(c)(3) charitable nonprofit corporations chartered by and wholly owned by the city of San Diego. This is misunderstood by many. Many media outlets regularly refer to CCDC as the “Downtown Redevelopment Agency,” which is technically incorrect.
4. The San Diego Redevelopment Agency Board of Directors consists of (choose one):
- members appointed by the City Council
- members appointed by the Mayor
- the members of the City Council
- members elected by residents in the project areas
answer
c.) The San Diego Redevelopment Agency’s board of directors is the City Council. State law allows the local legislative body to either serve as the board of directors or to appoint a board of directors. Like most cities, San Diego has chosen the former. Before the San Diego City Charter changed to a “strong mayor” form of government, which removed the mayor from the City Council, the mayor was part of the board of directors and the City Manager was Executive Director. On an interim basis, the City Council (sitting as the agency board) has appointed the mayor as Agency Executive Director, but is currently considering hiring a professional.
5. The relationship between the San Diego Redevelopment Agency and the city of San Diego is best described as (choose one):
- the redevelopment agency is an agency of the city
- the redevelopment agency is a contractor to the city
- the city is an agency of the redevelopment agency
- the city is a contractor to the redevelopment agency
answer
d.) The City is a contractor to the Redevelopment Agency. The Agency contracts with the City, CCDC, and SEDC to administer redevelopment on behalf of the Agency. They in turn each have both their own employees and subcontracts. The San Diego Redevelopment Agency itself has no employees.
6. San Diego has how many current (active) redevelopment project areas (choose one)?
- two (the original downtown area plus the 1993 expanded area)
- two (one for CCDC and one for SEDC)
- three (one for CCDC, one for SEDC, and one for the city)
- eight (one for each City Council district)
- 17
- 128
answer
e.) There are 17 project areas, all but two south of I-8: 11 are administered by the city of San Diego’s Redevelopment Department (one of its project areas, City Heights, is the largest project area in the state), four project areas are administered by SEDC (Southcrest, Mt. Hope, Gateway Center, and Central Imperial), and two project areas are administered by CCDC ( Horton Plaza and Centre City). The agency also contracts with the city for the city to provide agency budgeting, legal services, docketing, and other functions, in addition to administering the 11 project areas. Some project areas have been designated, implemented, and allowed to expire. The first project area in San Diego was City College at 12th and B St. The Linda Vista project area will expire soon. The four original project areas downtown were combined and expanded into a single project area in 1992.
7. San Diego’s redevelopment project areas expire when (choose one):
- all expire at the end of 2032
- all expire at the end of 2024, except downtown expires at the end of 2032
- each expires after the City Council passes a resolution directing the conclusion of that project area’s collection of tax increment revenues
- project areas adopted prior to 1994 expire 30 years after being adopted, and project areas adopted in 1994 and later expire 40 years after being adopted
answer
d.) Project areas adopted prior to 1994 expire 30 years after being adopted and project areas adopted in 1994 and later expire 40 years after being adopted. The process for adopting a project area is that a city or county proposes an area to be studied, sets boundaries, appoints a “project area committee” consisting of local residents and businesses to advise it on designation, adopts the project area, and then turns over the responsibility of eliminating blight to the Redevelopment Agency. The whole process was tightened up in 1993 by AB 1290, which was effective on Jan 1, 1994. It closed some of the abuses and loopholes of redevelopment (e.g., wealthy cities declaring themselves blighted and open vacant areas being designated as project areas), and also lengthened the project area lifespan.
8. What is a redevelopment agency’s revenue source for revitalizing a project area? (choose one)
- all the property taxes collected in the project area
- all the locally collected taxes (property, sales, hotel/motel, utility, etc.) in the project area
- all the increases in property taxes in the project area resulting from new development, property improvements, and appreciation after the project area is designated
- all the increases in locally collected taxes (property, sales, hotel/motel, utility, etc.) in the project area resulting from enhanced economic activity after the project area is designated
- special assessments to pay off bonds
- c. and e.
- d. and e.
answer
c.) The redevelopment agency’s revenue source is all the increases in property taxes in the project area resulting from new development, property improvements, and appreciation after the project area is designated. When the project area is established, a property tax baseline is established. All revenue in excess of that baseline (the incremental increase, or “tax increment”) goes to the redevelopment agency for use in the project area. In San Diego, property taxes outside redevelopment project areas and below the baseline in project areas are distributed 19% to the city (general fund), 14% to the county, and 63% to school, with the remainder to special districts. (The property tax distribution formula is different in every county of the State. San Diego County has the highest local percentage directed to schools.) Some redevelopment agencies also tried to collect incremental increases on project area sales and other taxes, but this practice was halted under AB 1290. In many cases, redevelopment agencies will issue bonds (called “tax allocation bonds”) to pay for project expenses, with the bonds repaid by tax increment revenue.
9. Senate Bill 863, the state budget amendment that lifts the cap on collecting downtown redevelopment revenues, is (choose one):
- a good deal for the city of San Diego
- a bad deal for the County of San Diego
- neither a good deal nor a bad deal for San Diego schools
- a bad deal for the State of California
- all of the above
- none of the above
answer
e.) SB 863, which lifts the cap on the downtown project area’s tax increment, is a good deal for the city, a bad deal for the county, neither a good deal nor a bad deal for the schools (because Proposition 98 adopted in 1989 requires the state to make up for any local revenue loss to schools), and a bad deal for the state.
10. Senate Bill 863 specifically authorizes using redevelopment revenue to build a football stadium downtown. True or false?
answer
False. SB 863 says nothing about tax increment revenue being used for a football stadium. How tax increment revenues will be used is a local decision. There are IRS regulations that restrict how bonds can be used, but there may be ways around these restrictions. For example, Petco Park was funded by city (not redevelopment) bonds, and now CCDC is loaning the city the money to pay off these bonds. There is a proposal that CCDC pay also for the Convention Center expansion. It’s an open question whether, even with the cap lifted, there are sufficient downtown tax increment funds to pay for all of these expenses, let alone a new football stadium.
bonus question. Which of the following organizations have formally called for a reorganization of the San Diego Redevelopment Agency, specifically asking that a professional, rather than the mayor, serve as the Agency Executive Director? (choose all that apply)
- the League of Women Voters San Diego
- the San Diego City Council
- the San Diego Grand Jury
- the Strong Mayor Charter Review Committee
answer
a.) and b.) Both the League of Women Voters and the San Diego City Council have formally called for a reorganization of the San Diego Redevelopment Agency and stated specifically that a professional, rather than the mayor, should serve as Agency Executive Director. The San Diego Grand Jury has called for a sweeping reorganization of the Agency, but did not specifically address the issue of Agency Executive Director. The Strong Mayor Charter Review Committee proposed a City Charter amendment to designate the Mayor as Agency Executive Director, even though redevelopment agencies are governed by State law and not local government charters or ordinances.
Michael Jenkins, now a retired lawyer, has worked in redevelopment and economic development since 1972. He served as the acting deputy executive director of the San Diego Redevelopment Agency (1998-2000), and assistant director of the City’s Community and Economic Development Department (2000-2003). This quiz was originally prepared as an education program for the League of Women Voters.
