Sacramento redevelopment future in jeopardy

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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.

  • Ben Ilfeld

    Prop 22. I voted for that for just this reason.

  • If you want more affordable housing, how about getting out of the developers’ way and letting them build?

    • William Burg

      Because when you do that, they don’t build affordable housing.

    • Ben Ilfeld

      These funds have been used fairly well in Sacramento IMO. I believe we are the only city in California that consistently hits state goals for affordable housing in our city.

      This is more than just about affordable housing as these funds make large scale redevelopment economically feasible.

      Sucking the money up to the state to pay for state budget gaps simply takes the money out of the local level and stops local developers cold. it injures our neighborhoods, developers and government – not to mention those who need affordable housing.

    • “Because when you do that, they don’t build affordable housing.”

      Supply, demand. Deal with the reality…..

    • William Burg

      First you say they would build affordable housing without regulation, then you say they won’t build it because there is insufficient demand…please figure out what you’re trying to say and get back to me, okay?

    • Ben Ilfeld

      The reality is that urban development has always been a partnership of public and private. This is because the decisions individuals make has a great impact on the other individuals in that area.

      This is essentially the difference between freedom and liberty. Our founding fathers cherished the later. Unconstrained free markets seem so easy, but are impractical messes. They consistently lead to negative externalities in the public sphere.

      That is why nearly every society on earth chooses to mix some public decision making with private ingenuity and liberty. Promoting a common good so that there are fewer, say, homeless people wandering the streets, is of great value. However, individual actors may not have the incentive necessary to act on the problem. Yet the problem can be a weight on the collective value of the community. Therefore the most efficient outcome is for every beneficiary to pay a little money in to combat the problem.

      What we have here is the state government coming in and taking the little money we all put in to solve this particular local problem – one the market fails to solve on its own – in order to solve a state budget crisis in the short term. It is poor policy on several fronts. It is a stop-gap measure that does not address structural problems in our state government and it injures the value of all our homes and this community.

      Worse yet, the voters have spoken directly to this issue with a proposition.

  • If the RDA funds are not saved, then, the funds will probably end-up, either directly or indirectly, into an offshore bank account in the Cayman Islands, owned by a bunch of Goldman Sachs/Wall Street dirtbags.

  • “I believe we are the only city in California that consistently hits state goals for affordable housing”

    MAYBE that’s why we’re consistently unable to bring a vibrant life into the downtown area. I wonder if there is a connection. I think we’re attracting lower income folks from other area’s into our city and especially downtown with all the affordable housing projects and SRO’s being built. I can’t think of a single project that redevelopment has built that would bring middle class singles to the area – WHO SPEND MONEY!!!!!

    Only rich folks and poor folks can afford it – why would you CHOOSE to encourage very poor people to move downtown? It doesn’t make economic sense – it’s the EXACT opposite of revitalization. Too bad the Hotel Berry isn’t getting the axe.

    As far as I’m concerned good riddance.

    • William Burg

      We’re talking about Sacramento as a whole, which is more than just downtown. And please keep in mind that “low-income housing” is not just for the poorest–a lot of that “low-income housing” in the central city is aimed at people making $25-40,000 a year, meaning working people and entry-level professionals, because “average income” in Sacramento County is about $50,000 a year. College students, young people who go to nightclubs a lot, musicians working part-time while working towards their big break–exactly the folks we want in the city, and exactly the folks who want to be there the most.

      And 14.5% of the 15% low income housing requirement in Sacramento (again, the whole city, not just downtown) is in that range. The extremely-low-income housing bracket for the very poor (the bracket that SROs like the Berry is in) is only required to be 0.5% of new units–one in 200.

      There are other tools for creating housing besides TIF-based redevelopment. But because for decades, redevelopment agencies played such a huge roles, most cities aren’t very well-prepared to take advantage of the other tools out there for urban regeneration.

    • Ben Ilfeld

      Bingo. And many of the projects in jeopardy have some affordable housing and plenty of more expensive options.

      This really has nothing to do with the state of downtown which is clearly not an issue of too much housing, but an issue with not enough housing. This change will result in fewer people living downtown and exacerbate our current problems.

    • William Burg

      Actually it might not, depending on how the change is managed–originally, redevelopment efforts were focused on depopulating downtowns, not populating them.

    • Brandon Darnell

      Gov. Jerry Brown’s Sacramento residence (above Mikuni) is a redevelopment project, as is the Citizen Hotel. Not to agree or disagree, but it’s not all aimed at housing for the poor.

  • Dora Bromme

    Instead of focusing our resources on top notch affordable housing detail, especially now in a time when resources are limited, we should focus on the projects which will benefit more people in the long run. Is it more sustainable to continue a top-notch zero energy project in the middle of Alkali Flats, or to provide housing to families with children who need it now? If we can only afford to provide homes or jobs, which do we set our resources on now?

    • William Burg

      What sort of projects do you recommend in their place?

  • SHRA’s track record is giving K.J. $5,000,000 in forgivable loans and properties so he could set up his mother and brother in businesses with marginal economic value.

    SHRA is current spending in excess of $300,000 per unit to build SROs in not just one but two different projects..

    Oak Park would have been better off if it had to take its development ideas to the Council and shows they had real value. As it is Oak Park has wasted almost 40 years of tax revenue to feed the egos of a few.

  • The development-lover in me is sad, even scared, about this. The libertarian in me thinks it’s about time.

  • Eventually, the government runs out of other people’s money. It looks like day has finally arrived here in California.

    • William Burg

      Technically, other people are running out of the government’s money: the state’s problem with redevelopment agencies is not redevelopment per se, it is the requirement that the state backfill local education budgets to make up for tax increment not used for schools because it is redirected to redevelopment funds. This meant that the state had to fork out extra billions of dollars to counties, a financial drain on the state budget.

      The beneficiaries of those funds were primarily the private sector who built the redevelopment projects, for good or ill. Especially during the early decades of redevelopment, downtown residential neighborhoods were destroyed and replaced with commercial buildings and retail projects. The commercial sectors benefited not only from the redevelopment projects but the positive (albeit temporary) effects on their own property values.


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