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HomeMy WebLinkAboutInitiative Measure to Restore Redevelopment CITY OF PALM DESERT CITY MANAGER'S OFFICE STAFF REPORT REQUEST: REQUEST TO PARTICIPATE IN STATEWIDE INITIATIVE MEASURE TO RESTORE REDEVELOPMENT SUBMITTED BY: John M. Wohlmuth, City Manager DATE: June 27, 2013 Recommendation By Minute Motion, deny the request to participate in an effort initiated by former redevelopment agencies to reinstate redevelopment in California through a Statewide initiative measure in the amount of $50,000 and support in concept at this time. Back�round A handful of cities, primarily in Orange County, are working with the law firm of Rutan and Tucker, LLP, and Forde & Mollrich, a ballot measure campaign management and targeted media services firm. These firms are seeking contributions of $500,000 for Phase I of the project. A combination of ten cities contributing $50,000, or more cities (if their contribution is less), will work with Rutan and Tucker and Forde & Mollrich to assist in drafting the ballot measure initiative language. Rutan and Tucker and Forde & Mollrich are meeting with cities in Southem California that lost significant local dollars caused by the dissolution of RDA in California. Because there is so much uncertainty related to this proposal, I will attempt to provide the "pros" and "cons" to enable the Council to make an informed decision. Pros • If successful, the City could stand to capture significant increment in Project Area 2 due to the growth potential in the North Sphere. • If successful, annexing north of Interstate 10 would be more beneficial. • This effort may assist with former Palm Desert RDA land, depending on disposition strategy and timeline. • This effort could ensure adequate repayment of bonds, especially Project Area 2. • Our contribution, if one is made, would provide the City an opportunity to help craft the initiative language. Staff Report Request to Participate in Statewide Initiative Measure to Restore Redevelopment Page 2 June 27, 2013 Cons • The City is far into the dissolution process, which if passed would create another level of confusion. • The base year or baseline would likely be in this decade; therefore, historic increment will be gone, new increment would be based on a more recent property tax year, and increment would likely take years to grow. • Palm Desert may not be the best participant in the process, as we received Statewide scrutiny related to use of RDA funds on Desert Willow. • It is certainly too early in the process to determine if there is opposition to such a measure from lobby groups. • If these groups are successful toward getting an RDA re-establishment on the ballot, it would likely happen without Palm Desert's support. • By being on the list of contributors, Palm Desert may have a more difficult time getting Oversight Board actions through the Department of Finance (DOF). • City staff and local government officials were adamantly opposed to the dissolution of RDA, but I believe_ the general voters wanted more money for schools and are less concerned about RDA survival. Based on more negatives toward participating than positive reasons, staff recommends a "wait and see" before deciding to contribute. At the point the League of California Cities or Riverside County Division get on board, it may be a more appropriate time. CITY COUNCIL��TION APPROVED DEN�E� SubCnitted By: RECEIVED OTHER � � � MEET G D AYES � `-�-, . � �.. NOES: r . Jol�n M. Wohlmuth, City Manager ABSENT: ABSTAIN: F� VERIFIED BY: ;� Originai on File with Ci lerk's Office ����� Rutan 8 Tucker,LLP ORANGE COUNTY 611 Anton Blvd.,SWte 1400 PO Box 1950 PALO ALTO �► Costa Mesa,CA 92628-1950 (650)320-1500 RU7AtJ �S TUCKER.L�.P (714)641-5100 Fax(714)546-9035 www.rutan.com A PARTNERSHIP INCLUDING PROFESSIONAL CORPORATIONS MEMORANDUM PRIVILEGED AND CONFIDENTIAL TO: Stu Mollrich and Arnold Forde FROM: Philip D. Kohn,Rutan&Tucker, LLP DATE: May 10,2013 RE: Concepts for Statewide Initiative Measure to Restore and Modify Redevelopment This Memorandum briefly outlines the global concepts that can be incorporated into a proposed statewide i.nitiative measure that would, in some form,reinstate redevelopment in California. While such a measure could encompass a consritutional amendment,which might create greater burdens on any future efforts to pare back or eliminate redevelopment laws,we believe it is unnecessary to do so; and the matters described below can be accomplished simply through statutory amendments. We also point out that the constitutionally reserved right of the people to enact laws by way of the initiative process is generally coextensive with the power of the Legislature. Subject to certa.in limitations—for example,the single subject rule and the need to deal with legislative (versus administrative)matters—the state's voters can do anything the Legislature can do. A proposed statewide i.nitiative measure could consist of the following principal components,among others as ultimately determined by the measure's proponents: 1. The restoration of pre-existing redevelopment agencies and authorizing them to continue and complete redevelopment plans and projects on a going-forward basis. This component would repeal and unwind the prior dissolution legislation (AB1X 26,AB1484,etc.)and a11ow for the reactivation of redevelopment agencies and their approved plans and projects. The measure would be written with the goal of protecting redevelopment agencies against prospective legislative attempts to grab taac increment revenues,at least not without voter approval. l30/099999-0084 5596030.1 a05/10l13 Stu Mollrich and Arnold Forde PRIVILEGED AND CONFIDENTIAL May 10,2013 Page 2 2. The inclusion of procedures and provisions that would a11ow restored redevelopment agencies to recoup the loss of tax increment revenues that have been suffered as a result af prior iagislation(A�1�2f,AB 1484,etc.). This component would ensure the ability of restored redevelopment agencies to recover revenues that were lost following the agencies' dissolution. Rather than providing for a one-time lump sum repayment of such losses—which could be problematic for logistical as well as legal reasons—the proposed measure would instead remediate the situation by, for example, (a)providing for an additional share of future tax increment distributions, (b)extending the life of redevelopment plans and the time limit for receiving tax increment and/or(c)providing a period for the implementation of bonding oppornuuties,which would be sufficient(in time and amount)to a11ow the redevelopment agency to receive an amount of funds equivalent to that which was lost. The types of illustrative mechanisms mentioned above would be irnportant in view of the uncertainties and the millions of dollars in revenue losses being experienced throughout the state,including even previously authorized and commenced projects that have been halted mid-stream because of the dissolution legislation. 3. The inclusion of procedures and provisions to ensure that school districts are kept whole and would not be subject to revenue losses as a result of the proposed measure. This component would avoid the need for the state to backfill any losses in school revenues. This goal would be accomplished by re-establishing pass-through agreements and establishing such other future tax increment sharing anangements as may be necessary to provide a revenue-neutral, if not beneficial,impact on school districts. 130/099999-0084 5596030.1 af15/10/t3 Forde&Mollrich Newport Beach otjicr 949.476.9064 4041 MacArdiur CA 92660 f� 949.851.9053 Suite 190 pryf���[ info�rmoLcom u�u•�c formol.com REDEVELOP CALIF4RNIA RESTORE JOBS• REBUILD NEIGHBORHOODS • RETAIN LOCAL CONTROL EXECUTIVE SUMMARY ■ The dissolution of redevelopment has been a disaster ■ Legislation is not solving the problem ■ A statewide initiative is needed to restore tax increment funding for redevelopment projects in California o This initiative could allow restored redevelopment agencies to recoup the loss of tax increment revenues that have resulted from the elimination of redevelopment o This initiative will include provisions to ensure that school districts are kept whole and will not be subject to revenue losses BAGKGROUND In 2012,California dissolved nearly 400 redevelopment agencies in cities and counties throughout the state. It would be nearly impossible to find a publicly assisted urban development,infrastructure or affordable housing project in California that was not supported by development resources granted under redevelopment law. Under redevelopment,local governments paid for infrastructure improvements and affordable housing with property tax revenue from the increased value of the property. The state wanted that revenue back for its own purposes. On February 1,2012, RDAs were eliminated statewide and are now going through a multiyear wind-down process,which is overseen by the California Department of Finance. The California Supreme Court upheld AB 26,which eliminated RDAs,and struck down AB 27,which would have allowed RDAs to make voluntary payments to the state and remain in existence. All parties were unprepared for the dissolution of all RDAs. The Department of Finance (DOF) only planned to administer a small number of agency dissolutions--not a11400. As a result,the process has been confusing and slow. By its own admission,the DOF is understaffed and backed up. r THE DISSOLUTION OF REDEVELOPM�NT HAS BEEN A DISASTER A 2009 study sponsored by the California Redevelopment Association listed annual bene�ts of redevelopment in California,which included: • $40.79 billion in total economic activiry • 303,946 full and part time jobs • 176,600 construction sector jobs (23.4%of all construction jobs) • $2 billion in state and local tax revenues The dissolution of redevelopment has eliminated thousands of good paying,predominantly union jobs throughout California,a state that has an unemployment rate of 9.8%, second only to Rhode Island and 27%higher than the national average. Dissolution of redevelopment will not deliver a fraction of the short-term revenues that were promised to state govern and it has eliminated a multi billion dollar revenue stream that has been used for decades to create jobs,rebuild blighted neighborhoods and energize struggling local economies. Schools do not receive any increased funding from the dissolution or redevelopment. Some counties and special districts do receive a windfall,but these benefits will be short lived as the revenue stream created by redevelopment dies out. ELIMINATION OF REDEVELOPMENT WILL NOT YIELD STATE WINDFALL As of February 112013,the state's finance department reported that it has completed the closure of 17 out of 400 redevelopment agencies. The state has not received the infusion of cash it expected. Governor Brown's January spending plan assumes that redirecting former redevelopment revenue to schools will save the state$2.1 billion in Z012-13 and$1.1 billion in 2013-14. The Legislature's nonpartisan fiscal analyst,which criticized past redevelopment budget benefit estimates as far too optimistic,warned recently that the latest numbers still could change a lot depending on the litigation and other matters. The RDA dissolution process is currently slow,disorganized, confusing and anti-business. The process is also funded with the money being"saved." The current cost for the process exceeds$20 million. STATE DENIAL OF ENFORCEABLE OBLIGATIONS STOPS PROJECTS AND COSTS JOBS About$1.5 billion in California redevelopment agency bond proceeds are in limbo, according to data complied by a local official,as the state government challenges whether the agencies had any right to issue them. An estimated 397 of former redevelopment agencies had a total of$19.8 billion in � outstanding t�allocation bonds. Successor agencies can spend the band proceeds if they are being used on a project deemed to be an enforceable obligation. An enforceable obligation refers to a project in which an agreement was signed between RDA and a developer. The agreement had to be signed before June 28, 2011,when the California Legislature approved the bill dissolving the agencies. If the projects connected to the 2011 bond proceeds are not approved by the DOF,the successor agencies will be forced to defease the bonds or repurchase the bonds on the open market. The RDA successor agencies and the Department of Finance have widely divergent views of what obligations are enforceable. The agencies are generally committed to honoring contracts and completing existing or pending projects. In contrast,the Department of Finance has an interest in accelerating dissolution to free up tax increment funds for other purposes. In December 2012,the DOF sent letters denying funding for 240 successor agencies who had filed appeals on earlier rejections. It also sent out 1201etters regarding disputes on funding left over from affordable housing programs. Of the 420 successor agencies, 240 requested meet and confer sessions after DOF ruled on their Recognized Obligation Payment schedules. The denials impacted 2 major stadium development projects as well as affordable housing projects up and down the state. • One denial involved an appeal to receive funding for a new San Diego Chargers football stadium in downtown San Diego o While San Diego's stadium plans were dashed,the city did receive$30 million of the$76.6 million it requested on appeal • Another appealed$30 million for a new San Francisco 49ers stadium that is already under construction in Santa Clara o Lawsuit hearing brought by the 49ers against Santa Clara County will be heard in Sacramento on March 22 • In Orange County,the state is denying$263 million in funding previously earmarked for affordable housing. Many may be appealed and may sue. 53 municipalities and other entities have sued the state over disagreements concerning the dissolution of the redevelopment agencies and the number of lawsuits is growing. The only jobs that have been created by the dissolution of redevelopment are jobs for lawyers. LEGISLATION IS NOT SULVING THE PROBLEM Last year L.A.Assemblyman Bob Blumenfield (D-San Fernando Valley) co-authored a bill that would have made it easier for local governments to issue bonds for certain public works projects. The Governor vetoed the bill. In 2012,the legislature passed three bills (AB 2144, SB 214, SB 1156) to help local governments establish districts to use tax increments to finance urban development, infrastructure and infill project that were previously supported by RDAs. Governor Brown vetoed these bills as"premature"indicating that local governments should remain focused on winding down redevelopment agencies. THE SOLUTION:A 2014 INITIATIVE TO RESTORE TAX INCREMENT FUNDING FOR REDEVELOPMENT PROJECTS IN CALIFORNIA ReDevelop California,a nonprofit organization composed of local government leaders, labor organizations and businesses,is working to draft and qualify a constitutional amendment for the November 2014 ballot,which will restore tax increment funding for redevelopment projects throughout California. The general concepts behind the initiative are: 1. Restoring existing RDAs and allowing them to complete their redevelopment plans/projects and allowing new redevelopment plans/projects for a defined range of purposes 2. Authorizing the establishment of new Community Local Revitalization Districts with the powers to undertake new projects 3. The inclusion of procedures and provisions that would allow restored redevelopment agencies to recoup the loss of tax increment revenues that have been suffered as a result of prior legislation (AB1X26,AB1484, etc) 4. The inclusion of procedures and provisions to ensure that school districts are kept whole and would not be subject to revenue losses as a result of the proposed measure Language for the initiative will be developed by the board and supporters of ReDevelop California and will be informed by public opinion research. QUALIFICATION TIMETABLE AND BUDGET Key dates in the Initiative Qualification Timetable: June 2013 -August 2013 Draft initiative and build support coalition September 2013 Conduct public opinion research and fine-tune draft October 2013 Submit draft to Attorney General for title and summary December 2013 Receive title and summary and begin initiative circulation Apri12014 Submit signatures to County election officials for validation June 26, 2014 Last day for Secretary of State to verify qualification Budget Phase I*:April 2013 -October 2013 $500,000 Initiative drafting,polling and coalition building Phase II: IVovember 2013 -Apri12014 $3,000,000 Signature collection,fundraising and public education Phase III: May 2014-November 2014 $10,000,000 Campaign,voter communication *public funds may be used to finance Phase l REDEVELOP CALIFORNIA RESTORE JOBS • REBUILD NEIGHBORHOODS • RETAIN LOCAL CONTROL Redevelopment Initiative Research and Drafting Fund Public Agency Contribution Form Thank you for your support of our effort to research and draft an initiative to reinstate tax increment funding for redevelopment projects in the State of California. Your contribution will be placed in a separate,segmented fund established by ReDevelop California, a nonprofit 501 (c) (6) corporation,and used solely for initiative research and drafting. It is not a political contribution. Donations to ReDevelop California are not deductible as charitable contributions for Federal Income Tax purposes. City or Agency Amount of Contribution Please make check payable to"ReDevelop California,R and D Fund,"and send to: Reed&Davidson, LLP 3699 Wilshire Blvd.,Suite 1290 Los Angeles,CA 90010 For more information about the ReDevelop California initiative,contact: Stu Mollrich Forde&Mollrich 4041 MacArthur Blvd,Suite 190 Newport Beach,CA 92660 949-476-9064 stu@formol.com