San Jose rebuilt its downtown with redevelopment money

Pacifica could have done that, but who needs a downtown anyway?

Silicon Valley Mercury News, 7/3/11. Once a powerful center of deal-making for developers and financiers, the 14th floor of San Jose City Hall -- home to the city's storied redevelopment agency -- is now a virtual ghost town. The eight employees who make up the skeletal staff are hard to spot as they roam the labyrinth of unoccupied cubicles and meeting rooms that just last year accommodated 90 people. Signs of the missing are everywhere -- from rolled-up maps and building plans, to rows of bulky project binders and piles of outdated office stationery. A wall of plaques and awards reads like a memorial to bygone days when the redevelopment agency spent freely on big-ticket items that helped rebuild downtown San Jose -- the HP Pavilion, the Fairmont Hotel, the Tech Museum and the convention center.

Yet even as redevelopment agencies around the state are confronting their demise after Gov. Jerry Brown last week signed two bills ostensibly sealing their fates, the San Jose agency's remaining staff is hoping that an anticipated legal battle will keep the agency alive, despite the applause of longtime critics who claim that redevelopment agencies have abused power and squandered taxpayers' money. Amid the uncertainty, Richard Keit, the agency's new managing director, is trying to keep spirits high. "Of course there is a sense of sadness," he said Friday. "But we are still proud of what the agency has done in the past." San Jose, he said, "would look entirely different if not for redevelopment."

The downfall of the state's second-largest redevelopment agency is a stunning reversal to San Jose residents who have watched the agency sink billions into resurrecting its downtown, developing the North First Street tech corridor, funding affordable housing and sprucing up neighborhoods and business districts. The agency's most recent misfortunes can be blamed on Brown, who in January proposed killing off the state's 398 active agencies and diverting the $5 billion they collect annually to cash-strapped schools and local governments. Redevelopment advocates fought back, offering reforms and some money to the state. But Brown wouldn't budge until the Legislature returned with a compromise of sorts: Let the agencies survive if they agree to give a healthy share of their property tax revenue to schools and special districts.not for redevelopment.''

Under one of the budget bills signed by Brown last week, agencies can continue to exist until Oct. 1. But they're prohibited from doing anything more than paying debt and handling existing contracts. The agencies can carry on, however, if by Nov. 1 cities adopt ordinances promising to pay their portion of the $1.7 billion Brown wants from agencies this fiscal year. And starting the following year, each agency would have to pony up its share of $400 million annually.  So far, according to the California Redevelopment Association, about 60 agencies -- including San Jose's -- have indicated they cannot make those payments. "It appears impossible for us to come up with enough money to stay alive,'' San Jose Mayor Chuck Reed said of the $47 million the agency is expected to owe the state this year. Even before Brown targeted redevelopment statewide, San Jose's agency was already struggling from a huge drop in property assessments caused by the economic crash and massive debt. The agency estimated that by July 2013 it would have only enough money to pay its debt.

"It's a good thing that we got started a long time ago and transformed our city. Some places "... are just beginning to work on rebuilding their downtowns,'' Reed said. Over the decades, he added, the agency was able to spur enough private-sector investment that "our downtown can stand on its own.''  Keit believes the agency still has a fighting chance of staying alive. The redevelopment association plans to file a lawsuit against the state this month. Attorneys will argue that the $1.7 billion money grab violates Proposition 22, passed by California voters last November to prevent Sacramento from raiding local tax coffers. Meanwhile, he and the seven other employees -- whose salaries add up to almost $1 million annually -- will continue to manage the agency's finances, leases and contracts. Two of the agency's remaining employees are in finance. Two are working with the city's economic development staff to attract more business to the city. One is a project manager. One is a real estate manager. The other is an executive assistant. There are still some previously funded projects to be tackled, including the development of 736 apartments and townhomes in the North San Pedro area. And the agency, through a newly created city authority, will work to buy the last two parcels needed to complete San Jose's field of dreams -- a downtown Major League Baseball stadium where city leaders hope the A's will one day play. Keit said that his staff will soon occupy only a small section at the front of the 14th floor. The rest will be leased to other city departments. For now, though, the sudden silence on the 14th floor is sobering to the few who remain. "I've been with the agency for 20 years, and it's been a privilege for me,'' said finance manager Sandy Shayesteh. "But I don't consider myself lucky, given the way things have gone.''

WHAT IS A REDEVELOPMENT AGENCY? The state Legislature created redevelopment agencies in 1945 to revitalize blighted areas across California. San Jose's agency, created in 1956, is the state's second largest in terms of tax revenue. The agencies are funded by "tax increment'' -- the difference between the property tax generated by an area when it was declared blighted and the property tax level after the area is rejuvenated. Those dollars are used to pay the bondholders who underwrite construction projects such as San Jose's Tech Museum and HP Pavilion.  Of the San Jose Redevelopment Agency's 21 project areas, 12 generate taxes and encompass 8,100 acres. For this fiscal year, the project areas will generate about $180 million in added property tax revenue. Most of that money is now going toward paying off the bonds from years past. 

Reference -  San Jose Redevelopment Agency.  

Posted by Kathy Meeh