The pending demise of California redevelopment agencies, following a state move to abolish nearly 400 of them, has local planners and developers pondering what will become of civic projects long deemed key to leveraging private investment through public dollars.
“It’s a blow to lose them,” says David Malmuth, owner of David Malmuth Development LLC in San Diego, who has been active in attempts to revive downtown San Diego’s East Village. “What the redevelopment agencies have demonstrated is what can be accomplished with these public-private partnerships, and not having them around is going to be a challenge.”
San Diego City Council recently approved more than $213 million in spending committed to redevelopment projects citywide through the first half of 2012, based on existing contractual obligations and subject to state approval.
Officials in coming weeks will consider the fate of other obligations coming due on large past projects, such as the convention center expansion and costs related to completion of Petco Park. Financing for most large new projects, including the next convention center expansion, has yet to be finalized.
At a recent real estate forum, presented by University of San Diego, Mayor Jerry Sanders said the state shutdown of redevelopment has cost downtown one of its only true job generators during the past decade, and will now likely force the layoff of “70 to 80 percent” of city staff now handling redevelopment-related matters.
“We’re looking at all of the possibilities for financing these projects that are now not going to be covered under redevelopment,” said mayoral spokeswoman Rachel Laing.
Alternatives to Financing Stadium
Anticipating the end of redevelopment agencies, the mayor in October hired an adviser from financial services firm Lazard Ltd., to devise alternatives to help the city and county finance a proposed $800 million San Diego Chargers stadium.
The city wants to see the stadium built on a Metropolitan Transit Agency bus storage site in the East Village, which would require significant environmental cleanup and other infrastructure improvements.
“We remain focused, with the city, on the downtown bus yards site in the East Village,” said Chargers special counsel Mark Fabiani in an email. “And without redevelopment funding, we are exploring all kinds of other alternatives.”
Also uncertain is the long-term fate of some lower profile projects considered crucial to addressing quality-of-life issues in places such as downtown San Diego.
For instance, redevelopment officials have been working for several years on a series of urban parks, including the proposed 4-acre East Village Green, deemed critical to efforts to turn the northern part of East Village into a new arts and design-focused commercial and residential hub.
“You can’t just put up a bunch of buildings and expect to bring people in,” said longtime local developer Pete Garcia, who with Malmuth is spearheading planning for the proposed IDEA District, emphasizing innovation, design, education and the arts. “You need to have those lifestyle elements that help people decide where they’re going to settle in.”
Green Space Is Critical
Garcia said green space is critical to giving the proposed district a sense of place, and making it attractive to young people who would want to reside nearby. That in turn is crucial to the success of commercial businesses that would consider locating there.
“If you don’t have the money now for the park, you have to come up with a way to express the public’s will, make adjustments and do the right thing,” Garcia said.
Robin Madaffer, a land-use attorney and board chair for San Diego’s Urban Land Institute chapter, said the end of redevelopment agencies will force the government, business and philanthropic communities to come together and get more creative in addressing community needs.
She said governments may need to create alternatives similar to project financing districts already in place in several communities, where property owners contribute through tax assessments to the cost of specific local improvements.
Some cities might explore the commercial equivalent of the state’s Mello-Roos program, which collects taxes from homeowners to fund civic needs, although the current local environment does not favor new taxation.
There are likely to be disputes in coming months as Sacramento tussles with cities over what constitutes existing obligations under the fading redevelopment program, which Madaffer said could further prolong local attempts to find alternatives. However, an improving economy could encourage private developers to take on more risk with less city assistance, provided communities can streamline their master-planning and approval processes.
“I work with a lot of developers as clients,” Madaffer said. “Most of them tend to be optimistic, and they usually manage to come up with a Plan B.”
