On February 1, 2012, if no other urgency legislation gets passed, the two Redevelpment Agencies (RDA) in Emeryville will be dissolved. I want to give you a little background as to how we got here, and what we might expect as we move forward.
Emeryville has two redevelopment areas that collectively cover 95% of our town, everything except the Watergate Condominiums. The 1976 Redevelopment Agency was established in 1976, and the Shellmound Redevelopment Agency was established in 1987. Over the years both agencies have issued bonds to finance projects that have cleaned up our town and assisted with public and private development of parcels. Redevelopment agencies use tools like eminent domain to assemble parcels. Emeryville was left with a large amount of toxic waste when industry left, and we have used these funds to clean up brownfields, and are still doing so. Some of the most visible projects of redevelopment have been the Bay St. development, along with IKEA and the Courtyard Marriott, and the East Bay Bridge mall where we have many big box stores.
When a redevelopment area is established, all future increases in the property taxes come back to the redevelopment agency as "tax increment." In other words, whether the property taxes in that area might have gone up on their own or not, the gains are attributable to redevelopment and help to pay back the debt that redevelopment has accrued. Redevelopment may indeed have contributed to increasing the property taxes, but all other agencies that normally take a slice from the property tax pie (Alameda County, the City of Emeryville, the Emery Unified School District, AC Transit, Peralta Community College District to name a few) do not get any of the tax increment. Their amount of property tax revenue was frozen back when the RDA was established.
Because our RDAs have helped to build hotels and retail, our city's general fund has benefited from hotel taxes (TOT) and sales tax revenues as a result of redevelopment as well.
Over the years, the state has had to fill in on school funding when the district did not get adequate funding from the property taxes collected locally. Today, our EUSD gets only about 20% of the funding from local funds, and 80% comes from the state. The burden on the state has increased, which has led to serious budget issues (I know you know about these), and the State has again and again turned to local funds to try and balance their budget. In 2010, cities and counties successfully passed Prop 22 which again stated that the state could no longer take local government funds. That seemed like a good thing to protect our dollars, but there was an unintended consequence.
Last year, Jerry Brown, proposed ending redevelopment as we know it to free up tax increment funds, allowing more money from property taxes to flow to schools and counties, reducing the state's burden. The legislature ending up passing 2 bills, AB 26 and AB 27. The first one ended redevelopment; the second one re-established RDA with a "voluntary" program and extortion payments from RDAs to pay for the opportunity to continue to exist. Emeryville would have had to pay $13 million this week in order to play. We were planning to do so, as by continuing to exist, the RDA would hold onto assets of around $120 million.
But last summer, the statewide CA Redevelopment Association challenged AB26 and AB27 in court. The CA Supreme Court decision, released on Dec. 29, 2011, upheld AB26, but struck down AB27. Essentially, they said that the legislature had the power to eliminate redevelopment, but under the constitution (which now included Prop 22) the legislature could not require payment to re-establish RDAs. It is ironic that Prop 22 was the reason that AB27 was struck down.
There are many people talking about how this was not what was intended by state legislators. There may be a new form of redevelopment that is considered, one perhaps that allows RDAs to continue working toward affordable housing goals. Some bills are already in the works.
In Emeryville, we have a number of RDA projects in various stages of completion and planning. The real question on everyone's mind around the state (there are 400 redevelopment agencies) is "How far along does a project need to be to be considered an 'enforceable obligation' and allowed to continue?"
When RDAs dissolve on Feb. 1, a "Successor Agency" will take over to assist with the wind down of affairs. In Emeryville it is likely that the Successor Agency will be the City Council (decision comes this evening). All actions by the Successor Agency are subjected to an "Oversight Board" which has on it representatives of the other taxing entities that serve to benefit from the release of tax increment funds, such as the County, Schools representative, the Community College Board, AC Transit, etc. We will also have a representative on that Board, appointed by me, the Mayor. Additionally, the County Auditor-Controller and the State Controller and Department of Finance have oversight of the actions of these agencies. Tax increment will still be allocated to pay off the debt of the RDAs, which is about $14 million per year, and other pass-through payments that are "enforceable obligations."
Because the intent of RDA dissolution is at least partly to assist the schools, we feel confident that the joint-use facility called the Center of Community Life will be allowed to move forward. We have "enforceable obligations" in place with the School District already in the form of MOUs, and we hope that with our accelerated design and construction plan due to federal funds we are receiving, we will have no problem on that project. Other projects are not as clear at this time. I can speculate, but do not know the fate of projects such as the Bike/Ped bridge to Bay St. that has been planned, but has been waiting these past 9 months or so to move forward, pending these decisions.
One thing that is very clear to me is that the future of Emeryville will look very different without the RDA there to assist with development. For that reason, it is imperative that the council and the community come together and talk through our priorities moving forward. On Feb. 28, 2012, at 5:30, at City Hall, the Council will meet for a long term visioning workshop. I hope you can attend.
Tonight, Jan. 17, 2012, at our Council meeting at 7:15 pm we will have a couple of items discussing these developments. Please consider attending to learn more. As always, feel free to send questions my way.
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