01-18-2011 - Letter in Opposition to Governor Jerry Brown's Proposal to Eliminate All Redevelopment AgenciesC6
TO: Andrew G. Pasmant, City Manager
and City Council
FROM: Chris Freeland, Deputy City Manager
City of West Covina
Memorandum
AGENDA
ITEM NO. 11
DATE January 18, 2011
SUBJECT: LETTER IN OPPOSITION TO GOVERNOR JERRY BROWN'S
PROPOSAL TO ELIMINATE ALL REDEVELOPMENT AGENCIES
RECOMMENDATION:
It' is 'recommended that the City Council instruct City staff to forward a letter to Governor Jerry
Brown, Senator Ed Hernandez, and Assemblymember Roger Hernandez in opposition to any
1 effort to eliminate redevelopment agencies in California.
DISCUSSION:
Redevelopment is a process authorized under California law that enables local government to
partner with the private sector to revitalize deteriorated and blighted areas in our community.
Redevelopment agencies or Community Development Commissions develop a plan and provide
the initial funding to launch revitalization of identified areas. In doing so, redevelopment
encourages and attracts private sector investment that otherwise wouldn't occur. Redevelopment
activities create jobs and expand business opportunities, provide housing for families most in
need, help reduce crime, improve infrastructure and public works, and cleanup of
environmentally -threatened and rundown areas.
There are hundreds of communities throughout California with neighborhoods and business
districts that are struggling economically and socially. Often, the private sector is reluctant to
invest in such areas because the risk and costs associated with doing so outweigh the benefits.
Redevelopment serves as a catalyst for private investment by providing the initial plan and seed
money that ultimately breathes new life into areas in need of economic development and new
opportunity. In essence, redevelopment agencies make these projects more attractive and
economically feasible for the private sector to undertake.
Formed in 1971, the West Covina Community Development Commission (CDC) is responsible
for redevelopment, economic development, and affordable housing for the community. For forty
years, the CDC has implemented responsible redevelopment throughout the City that has
removed blight, rehabilitated old and dilapidated uses (commercial shopping centers, residential,
industrial and offices), created jobs, and attracted new businesses and development.
Redevelopment is the only real tool that local municipalities have to effectuate proven positive
land use change.
Over the last ten years, the CDC has utilized redevelopment practices to develop over 7.6 million
square feet of new building area with an assessed valuation of over $380 million; creation of over
5,300 new jobs; and over $8 million in new revenues (sales and property tax) to the City of West
Covina. The CDC is the economic engine that drives and protects the City's economic tax base,
encourages new development in the community, and protects & enhances property values. The
sales and property tax revenues generated from the CDC projects have greatly contributed to the
and maintained public services (police, fire, parks, and community events) that West Covina
residents continue to enjoy. Without redevelopment and its continued efforts, the City's
economic tax base would have severely diminished over the past years, which is currently being
witnessed by adjacent communities.
The CDC plays a critical role in providing for affordable housing for its residents. Under
California Redevelopment Law, redevelopment agencies are required to deposit at least 20
percent of the property tax increment revenues generated from their activities into a special fund
called a "Low and Moderate -Income Housing Fund". These funds can only be used for the
purpose of increasing, improving, and "preserving the community's supply of affordable housing
0 a
for very low, low, or moderate -income households. The CDC has been a leader in providing
assistance to increase and improve affordable housing within the City. Since 1971, the West"
Covina CDC has provided funding to rehabilitate over 2,113 affordable housing units through its
(home improvement) housing programs; assisted 142 first time buyers through the previously
implemented First Time Homebuyer Program; and has developed 705 new affordable housing
units in the community.
The CDC currently has two home improvement programs. The Home Improvement Loan
Program (HILP) provides up to $10,000 to help low-income property owners to rehabilitate and
maintain their home. The loan is provided at no interest. and payment is deferred until the
property is sold, refinanced with cash out of equity, or upon death of the property owner. The
CDC also has the Home Preservation Program (HPP) that provides home improvement loans up
to $10,000 to families of moderate income. Under the HPP, loans repaid within the first ten (10)
years will not accrue interest and after the tenth year, loans will. accrue simple interest at a rate of
five (5) percent per annum until they are paid in full.
In addition to housing improvement programs, the CDC also utilizes Low and Moderate -income
Housing Funds to construct new affordable housing units. The CDC has assets for the
construction of 630 senior housing units, with an additional 65 currently under construction.
Some of these senior developments will provide affordable apartments for seniors for the next 99
years.
On January 10, 2011, Governor Jerry Brown announced his plan to eliminate all 400
redevelopment agencies in California in an effort to balance the State of California's budget.
The City of West Covina and cities across California believe this plan makes no sense in a State
with unemployment rate of more than 12 percent, a monstrous infrastructure deficit and recently
passed legislation promoting new developments championed by redevelopment projects.
Redevelopment builds and improves communities; it spurs job growth and taxes; and is the most
significant provider of infrastructure, urban development and affordable housing in the state.
A lack of budgetary discipline is a significant cause of the State of California's problems. This
has been exasperated by the State of California raiding local government funds to balance their
budget, rather than making the needed cuts in Sacramento. The elimination of redevelopment
agencies will not generate new revenues for the State of California in the immediate future, but it
will forever cripple the economic engine that has fed and driven the California economy for so
many years. In the event redevelopment agencies would be eliminated, the City would continue
to be obligated to pay the debt owed on bonded indebtedness. As a result, it is likely that the tax
increment revenues generated from redevelopment project areas will continue to pay for debt
service on redevelopment bonds, thereby not being available to balance the State budget woes.
The City also has serious concerns over the potential adverse impacts to the availability for local
governments to obtain bonds and our bond rating with the Governor's proposal. With the
Governor's proposal still being examined, the City is also concerned that this may impact the
CDC's ability to obtain bonds to repay the $10 million the CDC currently owes the County of
Los Angeles.
City staff is seeking the City Councils authority to send a letter to Governor Jerry Brown
opposing any effort to eliminate redevelopment agencies in California.
FISCAL IMPACT:
The CDC's 2010-2011 annual budget is $21,985,082 of which approximately $14,820,164 pays
for annual debt service on bonds. In addition, the CDC has notes outstanding with the City of
approximately $23 million that may be at risk.
Prepared by:
Chris Freeland
Deputy City Manager
Reviewed by:
Christopher. J. Chung
Community Development Commission Director