The future of development and affordable housing projects in Sacramento is starting to look pretty grim. Gov. Jerry Brown signed the state budget into law June 29, putting two new bills into effect that significantly impact redevelopment agencies: ABx26 and ABx27.
“There is no good news in any of this,” said La Shelle Dozier, executive director for the Sacramento Housing and Redevelopment Agency (SHRA). “It’s very detrimental, given the fact that we have an economy that’s struggling.”
The two bills go hand-in-hand. ABx26 says redevelopment agencies can opt to discontinue redevelopment activities and be dissolved.
ABx27 says that if redevelopment agencies pay a first-year lump sum payment and then commit to annual “continuation payments,” they will be allowed to continue their redevelopment activities – with additional limitations and without any tax increment funding from the state.
Tax increment funding through a redevelopment agency is one way cities and counties are able to finance redevelopment and affordable housing activities.
Over the last six years, tax-increment funding has resulted in the production of 7,329 housing units in the Sacramento area, including 3,189 units for very-low income and homeless families, Dozier said.
According to the provisions of the new legislation, redevelopment agencies have until Oct. 1 to either dissolve or make the first-year continuation payment to continue redevelopment activities.
“We are conducting an analysis of current projects to see how we would generate (our) estimated $22 million payment as well as an evaluation of projects if the agency must be dissolved,” Dozier said.
Each redevelopment agency is subject to a specific first-year and continuation payment schedule, calculated using a formula outlined in ABx26.
For SHRA, which is an authority of both the city and the county of Sacramento, the “year one” payment amount would be $22 million, Dozier said, and continuation payments are estimated to be approximately $5 million every year after that.
Once the SHRA governing boards have an opportunity to review the completed analysis, Dozier said, they will give the agency their recommendations on the options available.
Once the agency has an opportunity to review the completed analysis, Dozier said, she will give the SHRA governing boards recommendations on the options available.
“Right now, we’re in a state of limbo,” Dozier said.
At this point, several major redevelopment projects in Sacramento are currently stalled, Dozier said.
These include the 800 K Street project, a mixed-use development to help revitalize the center of downtown; the 65-acre Township 9 project, which is a $1.7 billion mixed-use urban fill development, and Veterans Village, a proposed new construction development in the Mather Redevelopment Area that would provide affordable housing for veterans.
Some projects that have already been approved, however, would not be affected by the new legislation, including the Seventh and H streets project, the La Valentina project on 12th Street, and the Hotel Berry renovation project, Dozier said.
These three projects are slated to provide, in total, nearly 250 affordable housing units and create more than 400 jobs, according to Dozier.
"(Redevelopment agencies) do great work – phenomenal work,” said Eric Rasmusson, a Sacramento lobbyist who works on local housing issues. “But we can’t afford them the same way anymore. That’s the message of this state budget."
By eliminating redevelopment agencies, Brown anticipates a $1.7 billion savings in cost offset to the state general fund.
“Right now, we’re prohibited from engaging in any new redevelopment activity,” Dozier said, “so we’re focusing on existing projects to keep them moving forward.
“We’re hoping for relief from the courts so that we can continue working on projects that were heading toward various stages of approval,” she added.
Kathy Fairbanks, a representative of the California Redevelopment Association (CRA), said the association plans to file a lawsuit in the next couple of weeks challenging the new legislation.
“It’s unconstitutional,” Fairbanks said. "Proposition 22 passed last November by an overwhelming majority, and it specifically prohibits the state from doing anything with local funds, including redevelopment funds.”
Fairbanks said that, if ABx26 and ABx27 are allowed to stand, it will mean redevelopment agencies that are not eliminated will be forced to abandon projects – and any resulting jobs and economic opportunity – in order to make the required continuation payments to the state.
In the lawsuit, the CRA will seek an immediate stay of the two bills. If the court grants a stay, some or all of the provisions of the bills would be suspended until the court makes a final decision. Until a stay is issued, however, the legislation will remain in force.
There are 397 active redevelopment agencies throughout California, according to the CRA website.
The elimination of redevelopment in Sacramento would have significant unintended consequences, according to the SHRA website, including “no way to monitor affordable housing developments, no funding to put more money into affordable housing projects in the future, as well as direct and indirect job losses.”
“With the economy in its current condition,” Dozier said, “this is not a time to be putting redevelopment agencies out of business.”
Melissa Corker is a Staff Reporter for The Sacramento Press. Follow her on Twitter @MelissaCorker.
Editorial Note: Corrections have been made to this article after it was published. The incorrect information has been struck out and the correct information has been added.