San Jose RDA asks rule shift

Timothy Roberts
Published: March 21, 2005
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The San Jose Redevelopment Agency is lobbying the state legislature for
two bills that would allow the RDA to extend the life of its most
prosperous development district by 10 years and allow it to create new
redevelopment zones around rail and transit stations.

One bill would give the agency the ability to sell bonds once again for
its North First Street district, which is home to some of Silicon
Valley's most widely known technology companies, including eBay, Cisco
Systems Inc., and BEA.

The other would create one-quarter-mile redevelopment zones around rail
transit stations, although San Jose is pushing to have the radius
extended to one-half mile. The legislation is being pitched as a help in
solving California's chronic housing shortage, a popular political
cause. But it is likely to run up against opponents of the widespread
use of redevelopment powers, who see the agencies as arrogant and
aggressive.

"This would turn the city upside down," says Dale Warner, a retired
lawyer who is president of the Independence High Neighborhood
Association in northeast San Jose. "It would really empower RDA."

Redevelopment officials acknowledge the challenge that lies ahead.

"It's difficult to extend the life of a redevelopment zone unless you
can make a very good case," says RDA Assistant Executive Director Sharon
Landers. "We look at this as something that is critical to our
community."

The bill granting the 10-year extension was filed by Assemblyman Joe
Coto, D-San Jose. The San Jose Redevelopment Agency is adamant that the
bill is not just to benefit San Jose, and it is worded to affect all
agencies statewide.

"The bill is broader than just San Jose," Ms. Landers says.

But statewide, the legislation is seen as an effort to keep San Jose's
cash cow alive.

"This is a San Jose bill," says John Shirey, executive director of the
California Redevelopment Association.

San Jose does have a good reason for pushing the bill. The city wants to
redevelop its North First Street technology boulevard to accommodate 20
million square feet of new research and development and office space,
30,000 new housing units and 68,000 new jobs. But to spark that
development, the city estimates that it needs to spend about $500
million to improve roads and other infrastructure. A new lease on life
could provide much of the funding, although there is no official
financial projection, the RDA says.

Redevelopment agencies derive their income from tax increment funding,
which is based on the increase in property values and the taxes paid on
them after an agency creates a redevelopment district. The efforts of
the agency are expected to improve an area, and property values are
expected to rise as a result.

At its peak early in the decade, the San Jose Redevelopment Agency was
receiving $198 million annually in tax increment. And three-quarters of
that money came from its North First Street redevelopment zone.

The economic slowdown and a drop in property values has reduced that
income to an estimated $150 million in the current budget year, and just
two-thirds of that amount comes from North First Street.

Born in the 1950s, redevelopment agencies were designed to clean up
blighted areas. But cities have found an increasing need for
redevelopment as they have struggled to keep downtowns alive, meet the
need for housing and attract industry. They have convinced the
legislature to extend their lives, in part by redefining the blight they
were to clean up.

San Jose's redevelopment agency, the largest in the state in terms of
revenue, has some looming deadlines. The taxing authority of the lower
part of the North First Street redevelopment zone expires in 2025. The
newest, most northern part, in what is sometimes called the Golden
Triangle, expires in 2033. The redevelopment agency usually sells
30-year bonds. Now that it no longer has the ability to guarantee the
revenue stream for the full term, the agency is unable to sell any new
bonds.

The legislation that would allow redevelopment areas around rail transit
stations comes from state Sen. Tom Torlakson, D-Antioch, an advocate of
so called smart growth policies that encourage the development of
housing and jobs near transportation.

"This kind of growth is better for California, healthy for the economy
and good for families," Mr. Torlakson says. "Longer and longer commutes
to far away suburbs is wearing people down."

Because redevelopment agencies are only supposed to be in the business
of eradicating blight, the Torlakson bill redefines blight to include
low-density areas around transit stations.

The California Redevelopment Association has mixed feelings about
changing the definition of the word "blight."

"That's not to be done lightly," says Executive Director John Shirey. He
notes that redevelopment agencies are frequently criticized for defining
"blight" broadly so they can create new redevelopment zones. "People
won't intuitively agree that lack of density is blight."

The Redevelopment Association also is concerned about a provision in the
Torlakson bill that would require state approval of plans by local
redevelopment agencies for transit stations.

"We are not about to enter into some sort of arrangement where RDA
projects are subject to state review and approval," he says.

Moreover, he says, the state needs to take a comprehensive look at how
to increase the supply of affordable housing at a time when, according
to the California Association of Realtors, only 18 percent of California
residents can afford to buy a median-priced home. Piecemeal legislation
nipping at the edges of the problem may not be the solution, he says.

"What is really gong on here is a real struggle over what it is we do
about our housing crisis," Mr. Shirey says.

This article can be found at http://sanjose.bizjournals.com/sanjose/stories/2005/03/21/story1.html