Senate Bill 863 removes the tax increment cap on what the Centre City Development Corporation can take away from the City of San Diego's general fund tax revenues in the CCDC redevelopment project area. SB 863 was part of a number of legislative maneuvers required before there could be a state budget agreement in a process that was already over three months late in sending an adopted budget to the Governor for his signature and seal of the Secretary of State.

Previously, local agency representatives were discussing a raise in the cap from $2.9 billion to $9 billion, but the text of SB 863's Section 7 amends California's Health and Safety Code by adding the following section in two parts (a) and (b):

"33333.14. (a) The Legislature hereby finds and declares that the Redevelopment Agency of the City of San Diego's Redevelopment Plan for the Centre City Redevelopment Project, as approved and adopted on May 11, 1992, by the City Council of the City of San Diego by Ordinance No. 0-17767, as amended, contains an unrealistically low dollar limit on the receipt of tax increment. The Legislature further finds and declares that this limit severely restricts the ability of the Redevelopment Agency of the City of San Diego to address conditions of blight which remain within its Centre City Redevelopment Project."

"(b) Notwithstanding any other law to the contrary or any redevelopment plan previously adopted by the City of San Diego, commencing on the effective date of this section and in each fiscal year thereafter until the expiration of the time limit on the receipt of taxes and repayment of indebtedness set forth in the redevelopment plan adopted by the City of San Diego for its Centre City Redevelopment Project pursuant to subdivision (b) of Section 33333.6 and other applicable statutes, the dollar limit on the receipt of tax increment for the Centre City Redevelopment Project is eliminated, and the Redevelopment Agency of the City of San Diego may receive tax increment revenue from the Centre City Redevelopment Project without a dollar limit" (emphasis added).

Current law in Section 33333.6 sets time limits on the number of years that the tax increment may be diverted to CCDC, but SB 863's legislative amendment by inserting Section 33333.14 into the Health and Safety Code sets a precedent. The people of California now know of the mayor's willingness and the legislature's ability to modify the controlling legislation over CCDC and the Redevelopment Agency as they choose, in the manner they choose, with or without consulting local agencies or the public.

Assemblyman Nathan Fletcher stated that the Section 7 provisions of SB 863 are subject to a number of restrictions and were made with specific intentions to create more jobs, but specific authorizing language for the claimed restrictions and specific intentions do not appear to have made it into law. According to Fletcher's prepared statement PUTTING JOBS FIRST: "Private investment will increase another $10 billion in the next 20 years, reducing the need for additional taxpayer-funded projects" but no legal consequences for private investment not to increase at least another $10 billion in the next 20 years or less actually made it into the Health and Safety Code.

On that basis, and with a continued soft economic outlook, only time will tell how many jobs are generated by the Fletcher bailout amendment. Funding from Fletcher's CCDC bailout may take time to filter down to currently idled workers in the construction trades, and additional time will be required for individual project vetting and approval by the Redevelopment Agency and then the City Council when it is not acting as the Redevelopment Agency.

The County of San Diego and other local agencies will find that Nathan Fletcher did not include provisions for a sharing of tax increment income with them in the amended SB 863. The "Notwhithstanding any other law to the contrary" clause appears to invalidate the legislative basis for any previous tax increment splitting agreement or on-going negotiations that did provide some funding for those agencies.

While Fletcher insists that the earmark-like amendment was fully debated in Sacramento, other sources have stated the secretive nature of SB 863's amendment and passage was in part to keep Los Angeles-area representatives from opposing it, possibly where SB 863 conflicts with plans in the City of Industry to build a stadium in a regional municipality without NFL franchises.

According to Fitch Ratings debt servicing training material made available to the San Diego City Council on October 11, a multi-billion-dollar diversion of future tax revenues to unspecified multiple construction projects, where each project is subject to review and potential community opposition, may be a system of potentially negative factors in a ratings agency analysis of San Diego's ability and willingness to repay general obligations. The failure of Proposition C and/or D would be additional negative GO rating factors, providing a price signal to investors as to the residential willingness to raise taxes or make other policy decisions for paying off debt. Current real estate doldrums leading to lower tax revenues is another analyzable factor. A sufficient number of negative rating factors could increase the annual debt servicing load, further contributing to the City's current total deficit from mandatory pension contributions, unfunded health care liabilities, contingent lawsuit liabilities in the Kessler v. City of San Diego whistle-blower matter, and other causes.

Without Fletcher having a thorough analysis of the economic factor impact on San Diego GO ratings, it is possible that a modest increase in interest and principal payments on lower-rated City debt would negate at least some of the sales tax income generated by the passage of Proposition D, especially given the short length of the temporary half-cent sales tax hike compared to the much longer period over which redevelopment will be be financed with tax-supported debt.


SB 863 as amended by Nathan Fletcher

http://leginfo.ca.gov/pub/09-10/bill/sen/sb_0851-0900/sb_863_bill_20101007_amended_asm_v98.html

Nathan Fletcher Fact Sheet PUTTING JOBS FIRST

http://arc.asm.ca.gov/member/75/pdf/20101019_RDA_Fact_Sheet.pdf

Comments

alpoat Oct. 29, 2010 @ noon

Downtown has produced more jobs, tax revenues and housing units that any part of our region in recent years - not to mention become one of the most vibrant entertainment districts in the City. Assemblyman Nathan Fletcher deserves credit for keeping redevelopment live with this legislation - which simply amended State law so that San Diego will be treated like all other redevelopment districts are now treated.

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a2zresource Oct. 29, 2010 @ 2 p.m.

RE "Downtown has produced more jobs, tax revenues and housing units that any part of our region in recent years - not to mention become one of the most vibrant entertainment districts in the City":

Downtown also appears to have lost more than enough jobs and has enough vacant residential units that local tax revenues are down year over year. Downtown also has the greatest concentration of homeless south of the Los Angeles dead zone between LAX and the Greyhound depot, and it doesn't take an accounting degree or a Mensa-level IQ score to see that.

A local economy that is dependenct on entertainment and tourism was listed as a negative Fitch Ratings factor possibly leading to a downgrade San Diego's AA- credit rating, with a subsequent increase in interest payments on municipal general obligations. Since that information was included on the October 11 city council agenda, I'll have to assume that's now common knowledge.

For people who didn't have the chance to download the Fitch Ratings training materials for city council members earlier found at the City Clerk's website, I have copies at:

http://sdreader.stickywebs.com/

As a former president of a California legislative body, I expect that my constituents would have run me out of office for doing anything like the secretive Sacramento process that our mayor has already had to apologize for in advance of next week's election.

Personally, I am greatly flattered that of all of the interesting things going on in the Reader, you chose my blog post to comment on first!

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a2zresource Oct. 29, 2010 @ 2:21 p.m.

RE "While Fletcher insists that the earmark-like amendment was fully debated in Sacramento, other sources have stated the secretive nature of SB 863's amendment and passage was in part to keep Los Angeles-area representatives from opposing it":

Also see:

http://www.kpbs.org/news/2010/oct/18/officals-apologize-redevleopment-deal-county-may-s/

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a2zresource Oct. 30, 2010 @ 5:21 a.m.

Fletcher's earmark amendment to SB 863 appears to include certain language that deserves an entire blog post in analysis. At this point, the legislator has no clue as to the effect of the CCDC bailout, unless his Mirror Upon The Wall can show him all future amendments to San Diego's redevelopment plan over CCDC.

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laplayaheritage Oct. 30, 2010 @ 8:22 a.m.

www.tinyurl.com/20100924

Please see the 1992 Agreement for Cooperation between CCDC and the County of San Diego for pass through payments starting on Page 16 for facilities and programs for the homeless, mentally ill, alcohol and drug rehab, children's services, etc.

Currently CCDC is suppose to be giving the County of San Diego 7.0 percent ($8,396,958) this year. I do not know if this money was given to the County or what it was used for. However, from 1992 to 2005 we believe CCDC stole money that should have been given to the County in pass through payments.

In 2011 all 4 triggers in the 1992 Agreement will be met requiring CCDC to increase pass through payments to 14.7 percent of CCDC's tax increment totaling @ $17.6 million. Also the San Diego Unified School District pass through payments will increase from the current 4.0 percent to 13.6 percent (see Page 7).

www.tinyurl.com/20100816a

In total, in theory, in 2011 CCDC has to give away 30.58 percent of Tax Increment ($36.7 million) in pass through payments to the County and schools.

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laplayaheritage Oct. 30, 2010 @ 8:27 a.m.

If the normal process for increasing CCDC cap was completed, then CCDC would have to increase the Affordable Housing Set Aside funds from 20 percent to 30 percent. Now Affordable Housing advocate have no leaverage.

We have very big problems with how the CCDC cap was raised. Earlier this year as part of the negotiations to raise CCDC's cap for everyone's benefit, the San Diego Organizing Project (SDOP) received assurances that any new Redevelopment funds would expand employment opportunities for the poor, provide training in San Diego less fortunate neighborhoods, and solve our Homeless problem. SDOP is a coalition of faith-based community and civic groups that advocate for children and families in less desirable parts of town.

http://www.sdop.net/

Because of the midnight Sacramento deal, the poor San Diegans that actually need Redevelopment help no longer have the same Leverage to get their piece of the Redevelopment pie.

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a2zresource Oct. 31, 2010 @ 10:48 a.m.

The only thing I can add to the last two comments is to make the links active:

www.tinyurl.com/20100924

www.tinyurl.com/20100816a

http://www.sdop.net/

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a2zresource Nov. 1, 2010 @ 11:24 p.m.

There may be concerns regarding statements made in this blog post regarding FITCH RATINGS and how rating factors are applied to credit ratings. I am awaiting mention of specific concerns, so that I may respond by making appropriate corrections and/or clarifications to my above blog post; otherwise, I believe that my interpretation of factors that may result in positive or negative ratings treatment is supported by materials provided to CITY COUNCIL OF SAN DIEGO for training in debt servicing, as those documents have been made available to the public via agenda item supporting documents by CITY CLERK.

To the extent that FITCH RATINGS is able to identify those concerns by making comments available here, I am sure that those comments will be helpful and informative in the course of the elections being held through November 2.

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a2zresource Nov. 2, 2010 @ 12:36 a.m.

RE "To the extent that FITCH RATINGS is able to identify those concerns by making comments available here, I am sure that those comments will be helpful and informative in the course of the elections being held through November 2":

I meant "helpful and informative" to natural persons with the capacity for casting a vote. I have no financial interest in what happens in bond markets except as to the effect of ratings agency acts and omissions that may be reflected in number of decades we have to keep paying interest on the same City of San Diego debt.

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