Toe-May-Toe / Toe-Mah-Toe

Any discussion of redevelopment is going to eventually hit an ideological point during which side will have to agree to disagree. {This doesn’t include the school issue, there’s no there, there. At last night’s AUSD meeting, one of the key confusers in this issue stood up and started rambling on about district housing for teachers during a discussion about cuts for operations and salaries.}

I’m going to break this post into more than one, to keep the discussion short and my fingers from getting too sore.

If you don’t believe in taxes or if you don’t believe that government has a role in managing local development then we’re going to end up at “agree to disagree” pretty quickly. So instead lets just try and agree on some things, and then retire to a spirited discussion for the ages.

There are plenty of studies and reports about redevelopment in California. One, and seriously it’s only one, tries to “prove” that redevelopment has no redeeming value across the board. So here’s where we reasonable people should all be able to agree:

  1. Redevelopment is not wrecking our local services…True
  2. Redevelopment shifts public spending from other spending…True (just not for schools)
  3. Nobody votes for redevelopment….False (the argument the other way is like arguing over the definition of “is”)
  4. Redevelopment can create value for a community…True (we’ll agree to disagree about what the value is, and whether it’s worth it).
  5. There are definite, bad redevelopment projects, but many, if not most, are more in an ideological good/bad zone, not a corruption based one as often alleged.

So to point 1.

There are four redevelopment areas (one of which is the Bayport/Catellus area and I don’t currently have last years numbers but 2 years ago it accounted for less than 20% of all tax increment, one can assume it’s probably the same, possibly a bit higher because of new home sales).

Here’s how the taxes all breakdown of where tax increment would have gone if there was no tax increment, and where it goes, with tax increment:

  No Redev. With Redev Difference
Countywide Tax

$5,280,000

$910,000.00

-$4,370,000.00

City of Alameda

$130,000

$20,000.00

-$120,000.00

AUSD

$260,000

$190,000.00

-$70,000.00

School Comm Coll

$140,000

$30,000.00

-$120,000.00

BART

$30,000

$0.00

-$30,000.00

EB Regional Park

$40,000

$30,000.00

-$10,000.00

EBMUD

$40,000

$0.00

-$30,000.00

Total

$5,930,000

$1,180,000

-$4,750,000

As you can see, at the end of the day, the City of Alameda’s collection without Redevelopment would be about $130,000 (in the Bayport Area, the city collects more than it would have without redevelopment so the disparity becomes smaller. I’ll update the numbers when I can). Overall 18% of the county tax collection was redistributed to cities (I don’t have Alameda specific numbers, the county people aren’t very good about calling back). So as the city looks at a $4 million budget deficit, at most, redevelopment is responsible for 22%.

The big number is money sent to the county, of which nearly half goes to the state for schools. And which impacts the state’s budget for non-school items because the state is required to fund schools.

All of these numbers must factor in the fact that places like Bayport, Marina Village, etc. weren’t generating any property tax and it is unlikely that much of it would have been built without redevelopment, therefore, these “losses” look bigger than they would have been had the projects not been completed.

Also lost in this discussion is the Sales Tax generated by both the new residents and the new businesses. At Alameda Landing, it is expected to by $1.5million annually. So while the city will be giving the project $40.5 million dollars of future (not currently existing) tax increment over 30 or so years to pay for infrastructure improvements like roads, the city will bring in an additional $1.5 million in sales tax. More than the redirected tax increment.

Which brings us to what others say about redevelopment.

The Legislative Analysts Office says:

How much does redevelopment cost the state? The answer is not clear, but probably at least hundreds of millions of dollars annually.

The state’s current budget hole is nearing $20 Billion, redevelopment’s effect is significantly less than the Governor’s decision to rescind the Vehicle License Fee which would have totaled $6Billion or so this year. (That fee had been in place since the 1950′s)

CSU-Chico’s Economic Development program did a study of redevelopment in ’01-02 that found that for every dollar of spent on redevelopment, there was a return of $7 in state income.

A well researched PPIC Report that identifies the tax shifts for redevelopment as coming from the State and County. It uses a highly defensible, but also highly conservative methodology to look at large redevelopment projects many in areas that have been cited as being problematic in their use of redevelopment. It found that 25% of redevelopment areas recover 80%+ of their tax increment (not including sales tax revenue). In the study, recovery necessitates a six-fold increase in tax increment over what would have been expected.

At the end, after looking at reams of studies, reports and opinions, it’s clear that talking about “redevelopment” as one big homogenous issue is overly simplistic. There are certainly projects that have met all the goals that redevelopment purports to be for, as there are certainly abuses. In order to discuss redevelopment in Alameda and it’s benefits/limitations, one needs to look at the specific projects it has been used for. But that is for another day.

2 comments for “Toe-May-Toe / Toe-Mah-Toe

  1. dave
    February 27, 2008 at 10:09 am

    No time now to post a lot of data, but a few quick points of riposte and rebuttal:

    -Even if it is a small portion of the deficit, are you saying that a little fraud, waste & abuse is OK? A minor case of leprosy is no big deal? Bad policy is bad policy, regardless of size or one’s ardor for first run movies.

    -Gross sales tax revenue is relatively static. It has a reasonably strong correlaton to population & GNP growth. The sales tax genearted by redevelopment is mostly not new, a lot of it is cannibalized from other places. This annoying little reality significantly dulls the luster of RD’s projections and claims.

    -Many projects funded by redevelopment are simply not economically feasible without the subsidy. I can think of one modest example locally… 2 fold problem:

    A) A govt entity is entering the world of entrepreneurial risk, which is absolutely not its place. They are adminstrators and regulators, not developers.
    B) they are entering into risky deals (deals so risky that private sector pros passed on them) that don’t generate appropriate risk adjusted returns. If ones does take the fiscally reckless tack that govt should enter the commercial RE biz, then it should at least be earning returns commensurate with the risk they are saddling the taxpayers with.

    More later, I’m busy generating tax revenue

  2. dave
    February 27, 2008 at 3:34 pm

    I haven’t completed the CSUH study, but there are already 2 red flags:

    1) It claims a 7-1 multiplier, which is so laughably high it cannot be taken seriously.

    2) It was funded by the California Redevelopment Association.

    Further coments when I get through it.

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