WHAT THE HAPPENED TO ECONOMIC DEVELOPMENT IN CALIFORNIA!? Steve Andrews Senior Policy Advisor Mayor’s Office of Economic Development City of Los Angeles

What Happened???? – 2011: A perfect storm 2 Economic development impact 3 Now what? (who is still in the game) 4 Organizational responses

: A PERFECT STORM  Bottom line:  425 California redevelopment agencies dissolved on Feb 1  60 year tax increment financing structure for economic development eliminated $57 billion in direct tax increment financing over last 11 years Funds are not coming back – disbursed to “taxing entities”  Some key economic development tools are eliminated or potentially compromised  Huge professional resource in public agencies and supporting private firms will be lost

: A perfect storm  SETTING THE STAGE: “ballot box budgeting”  1970’s -- Proposition 13 skews state and local budgets; growing shift of tax burden to residential over 30 years But, Prop 13 is still called the “third rail” of Calif. Politics  “fiscalization of land use” – cities chase sales tax (retail) to support local budgets other sectors: not so much

: A perfect storm  Recently:  State budget over-reliant on income tax; huge swings in revenues; structural deficits  Proposition 98 – schools are guaranteed specific share of state budget  Proposition 22 – cities, redevelopment agencies, uniformed services freeze out state from taking “local tax resources” to balance state budget

: A perfect storm  2011 – Governor Brown proposes to end redevelopment, so more $$ would flow to schools  Relief to state budget by reducing Prop 98 “backfill” requirements  Legislature says “no” (sort of)

: A perfect storm  SPECIAL LEGISLATIVE SESSION COMPROMISE  Two bill package deal: AB 26: Dissolves redevelopment and tax increment structure ….. Unless…. AB 27: Cities allowed to pay “voluntary” ransom to state to keep tax increment structure

: A perfect storm  Cities sue AB26 and AB27as a violation of Proposition 22  Supreme Court: AB 27 IS in fact a ransom – so “no deal” under Prop 22  BUT, AB26 stands – redevelopment agencies and the tax increment structure are dissolved

ECONOMIC DEVELOPMENT IMPACT  Between and , redevelopment agencies in California received $56 billion and produced:  New Commercial181 million sf  New Industrial200 million sf  Public Improvements 30 million sf  Other (Community, etc)114 million sf Total525 million sf

Economic development impact Rehabilitation of commercial, industrial and other:128 million sf Affordable Housing created: -- New: 94,887 units -- Rehab: 58,518 units PLUS: “pass through” payments to counties, schools, special districts: $9.7 billion Estimated Jobs created:682,000

Economic development impact Primary Redevelopment Economic Development Tools: – Infrastructure rehabilitation and development – Land assembly – Brownfields remediation – Catalyst for commercial/industrial attraction – Affordable housing development – Community facilities – Local match for federal, state, private funding – Professional staff capacity – public and private

NOW WHAT? (who is still in the game?) Federal (partial list) – CDBG – Transportation – New Market Tax Credits – Investment Tax Credits – USDA for rural areas – SBA – EB5 Visa Program – EDA – More….

(who is still in the game?)  State  GO Bond Programs  Enterprise Zone Program  Focused Tax Incentives  Infrastructure Funds  More….

(who is still in the game?) Local – Infrastructure Tax Districts (Mello-Roos) – Business Improvement Districts (BIDS) – General Fund Allocations – Fees, exactions – Public-Private Partnerships – Property Tax Rebates – Other (non fiscal): density bonuses, protective zoning, code enforcement, expedited environmental review

(who is still in the game?)  Remaining Economic Development Pipeline:  Will take 2-3 years to complete any economic development projects with “enforceable obligations”  Local Governments can “retain” all housing assets and obligations, but no new funding  Local Governments will capture some % of the former tax increment $$, but only as pipeline projects are completed and bonds are paid off BUT – huge competition for these funds, as cities generally have major resource constraints last five years and before

Organizational Response  How do California local governments now organize for economic development?  New charter/ordinance authorities for using economic development tools?  Creation of new structures? New city economic development departments New non-profit economic development entities New hybrid structures

 Questions and discussion