City seeks to prolong agency's cash cow

By Tracey Kaplan

Mercury News

Thirty-one years ago, the joke was that the only blight city officials could find in rural North San Jose was pear blight.

But under state law in 1974, the city was able to declare the area blighted and begin funneling into its downtown redevelopment effort millions of dollars in tax revenue from Cisco and other high-tech firms that gradually replaced the orchards.

Today, the blight rules have changed, so much so that now-industrial North San Jose won't qualify as a redevelopment district beginning in 2025, when the current designation is set to expire. No blight means no redevelopment area -- and no special tax money to pay for that redevelopment.

So, what's a city with the largest redevelopment agency in the state to do? Especially when it needs $520 million for traffic improvements if it is to turn North San Jose into a second downtown with high-rise office towers?

It will lobby the state Legislature, of course, to extend the life of the project area for 10 years so it can keep generating the vast bulk of the San Jose Redevelopment Agency's annual revenue. Assemblyman Joseph Coto, D-San Jose, has agreed to sponsor AB 1472 to do just that.

Just to be safe, the city also will back a separate bill to create new redevelopment zones around rail stations because North San Jose happens to be bisected by a light rail line. State Sen. Tom Torlakson, D-Concord, wrote SB 521 to create such zones within a quarter-mile of rail stations and may expand the proposed radius to within a half-mile at San Jose's request.

And both bills would establish new criteria for blight.

``Without blight, you can't get an extension of a project area,'' said Sharon Landers, the RDA's assistant executive director. ``So we're trying to create an alternate definition of blight.''

Under a 1993 state law, a redevelopment zone area must be blighted physically as well as economically. That's a tough sell in North San Jose, where nearly a quarter of the office buildings are vacant, but not dilapidated or out of compliance with the building code.

``Could you start from scratch today and call buildings like that today blighted? Well, no,'' said John Shirey, executive director of the California Redevelopment Association.

New definitions

Torlakson's bill would change the definition of blight to include the lack of high-density development around rail. Coto's bill is still being drawn up, but the criteria could include any economically depressed area in the state with outdated buildings.

Bill Fulton, publisher of the California Planning & Redevelopment Report, noted that other states do not force cities to tie redevelopment to blight.

``Maybe we could give up on the fiction that everything has to be blighted,'' Fulton said. ``A big policy question is why not allow urban redevelopment for the sake of stimulating the economy rather than bending the definition of blight?''

Aside from the blight question, though, both bills face an uphill battle, largely because California needs every tax dollar it can get, and redevelopment areas produce millions of tax dollars.

Redevelopment agencies are funded by extra property taxes generated by new development within a designated zone. In a designated redevelopment district, the redevelopment agency gets that money. Absent that designation, the state gets most of it, and the state is in no mood to pass up money.

`Significant problems'

``Any bill that costs money has significant problems, given the state's finances,'' said Robert Oakes, Torlakson's spokesman.

In San Jose's case, the 10-year extension on the Rincon area, including North San Jose, would allow the agency to net an estimated $500 million to help pay for transportation improvements to North San Jose. The council will vote this summer whether to approve new rules that would allow enough development in North San Jose to house 83,300 new workers and more than 56,000 new residents in high-rise office towers and densely clustered apartments and condominiums.

The Rincon area has long been the agency's economic engine, generating about $100 million of the agency's $150 million annual revenue.

Redevelopment is more popular in San Jose than it was before 1999, when the city began using some of the revenue to upgrade existing neighborhoods. But some still oppose the extension.

``RDA seems like a self-sustaining monster,'' said Dennis Umphress, president of the Silicon Valley Taxpayers Association. ``It has too many fingers in too many pies. It's too controlling, and citizens aren't getting much bang for their bucks.''

But a spokeswoman for Coto said the extension is warranted.

``It would create more jobs and more housing,'' said Lorraine Guerin, Coto's legislative director. ``The assemblyman believes it would be good for the whole economy of San Jose.''

--------------------------------------------------------------------------------
Contact Tracey Kaplan at tkaplan@mercurynews.com or (408) 275-0140.

This article can be found at www.mercurynews.com