No doubt, Jerry Brown's got big problems to work out in Sacramento to deal with the state's $28 billion dollar deficit. But word on the street is that he's contemplating ending redevelopment, the economic and property development engine that's played a huge role in revitalizing California cities over the last several decades. As the Mercury News reports, Governor Brown may be making an announcement as early as Monday that he'll be raiding redevelopment in order to cover shortfalls in education budgets statewide, something that is sure to be putting many real estate industry professionals and city employees on edge. About $5.5 billion in annual property tax revenue is currently diverted to redevelopment, and this promise of annual funding is used to issue bonds to fund construction projects.
What is redevelopment, you ask? Well, it's somewhat complicated and often controversial, but it's a way for cities to direct revenue into development projects in what they consider "blighted" areas. In San Francisco, for instance, the SF Redevelopment Agency used property tax funds to develop much of what we now know as Yerba Buena Center, and projects like the new Transbay center and the renovation of the Metreon rely in part on redevelopment funds. In Oakland, where Jerry was mayor not that long ago, redevelopment funds were integral in renovating the Fox Theater and building the entire Uptown complex that surrounds it.
Redevelopment has its foes, however, especially when the issue of eminent domain comes in. Buildings that fall within the borders of a redevelopment project area are subject to taking by eminent domain -- owners are compensated, of course -- and this is always a rough subject for liberals and libertarians alike. And definitions of "blight" vary widely, with many saying that redevelopment funds are just being used to line the pockets of developers. Large portions of redevelopment funds, by law, have to go toward affordable housing, but this may not be enough of a saving grace in the current economy. San Jose, meanwhile, fears that their baseball stadium idea might go right down the toilet if redevelopment money dries up.
Correction: Helen Duong at the San Jose Redevelopment Agency writes to clarify that though the Agency is responsible for assembling the property for the stadium, the developer will be responsible for the construction, but we suspect that redevelopment funds disappearing still might sting a little!