Transcript Steve Andrews, Special Assistant to Los Angeles Mayor Antonio

WHAT THE #*@%!
HAPPENED TO ECONOMIC
DEVELOPMENT
IN CALIFORNIA!?
Steve Andrews
Senior Policy Advisor
Mayor’s Office of Economic Development
City of Los Angeles
What Happened????
1
2
2010 – 2011: A perfect storm
3
4
Now what? (who is still in the game)
Economic development impact
Organizational responses
2011-2012:
A PERFECT STORM

Bottom line:
 425
California redevelopment agencies dissolved on
Feb 1
 60 year tax increment financing structure for
economic development eliminated
 $57
billion in direct tax increment financing over last 11
years
 Funds are not coming back – disbursed to “taxing entities”
 Some
key economic development tools are
eliminated or potentially compromised
 Huge professional resource in public agencies and
supporting private firms will be lost
2011-2012: A perfect storm


SETTING THE STAGE: “ballot box budgeting”
1970’s -- Proposition 13 skews state and local
budgets; growing shift of tax burden to residential
over 30 years
 But,

Prop 13 is still called the “third rail” of Calif. Politics
“fiscalization of land use” – cities chase sales tax
(retail) to support local budgets

other sectors: not so much
2011-2012: A perfect storm

Recently:
State budget over-reliant on income tax;
huge swings in revenues; structural deficits
 Proposition 98 – schools are guaranteed
specific share of state budget
 Proposition 22 – cities, redevelopment
agencies, uniformed services freeze out state
from taking “local tax resources” to balance
state budget

2011-2012: A perfect storm

2011 – Governor Brown proposes to end
redevelopment, so more $$ would flow to schools
 Relief
to state budget by reducing Prop 98 “backfill”
requirements

Legislature says “no” (sort of)
2011-2012: A perfect storm

SPECIAL LEGISLATIVE SESSION COMPROMISE
 Two
bill package deal:
AB 26: Dissolves redevelopment and tax
increment structure ….. Unless….
AB 27: Cities allowed to pay “voluntary”
ransom to state to keep tax increment
structure
2011-2012: A perfect storm
 Cities
sue AB26 and AB27as a violation of
Proposition 22
 Supreme
Court: AB 27 IS in fact a ransom –
so “no deal” under Prop 22
 BUT,
AB26 stands – redevelopment
agencies and the tax increment structure
are dissolved
ECONOMIC DEVELOPMENT IMPACT

Between 1998-1999 and 2009-2010,
redevelopment agencies in California received $56
billion and produced:
 New
Commercial
 New Industrial
 Public Improvements
 Other (Community, etc)

181 million sf
200 million sf
30 million sf
114 million sf
Total 525 million sf
Economic development impact
Rehabilitation of commercial, industrial
and other:
128 million sf
Affordable Housing created:
-- New:
94,887 units
-- Rehab:
58,518 units
PLUS: “pass through” payments to counties,
schools, special districts:
$9.7 billion
Estimated Jobs created:
682,000
Economic development impact
•
Primary Redevelopment Economic Development
Tools:
– Infrastructure rehabilitation and development
– Land assembly
– Brownfields remediation
– Catalyst for commercial/industrial attraction
– Affordable housing development
– Community facilities
– Local match for federal, state, private funding
– Professional staff capacity – public and private
NOW WHAT?
(who is still in the game?)
•
Federal (partial list)
–
–
–
–
–
–
–
–
–
CDBG
Transportation
New Market Tax Credits
Investment Tax Credits
USDA for rural areas
SBA
EB5 Visa Program
EDA
More….
(who is still in the game?)

State
 GO
Bond Programs
 Enterprise Zone Program
 Focused Tax Incentives
 Infrastructure Funds
 More….
(who is still in the game?)
•
Local
–
–
–
–
–
–
–
Infrastructure Tax Districts (Mello-Roos)
Business Improvement Districts (BIDS)
General Fund Allocations
Fees, exactions
Public-Private Partnerships
Property Tax Rebates
Other (non fiscal): density bonuses, protective zoning,
code enforcement, expedited environmental review
(who is still in the game?)

Remaining Economic Development Pipeline:
 Will
take 2-3 years to complete any economic
development projects with “enforceable obligations”
 Local Governments can “retain” all housing assets and
obligations, but no new funding
 Local Governments will capture some % of the former
tax increment $$, but only as pipeline projects are
completed and bonds are paid off
 BUT
– huge competition for these funds, as cities generally
have major resource constraints last five years and before
Organizational Response

How do California local governments now organize
for economic development?
 New
charter/ordinance authorities for using economic
development tools?
 Creation of new structures?
 New
city economic development departments
 New non-profit economic development entities
 New hybrid structures

Questions and discussion