As some of you might know, I have never been much of a Redevelopment fan. Two important pieces of RDA conflict with my core political belief system. 1) Eminate Domain 2) Growth of Government.
Some now say Lodi will be neither, so I am trying to be as opened minded on the topic as possible to allow for the greatest benefit to the greastest number of Lodians.
At the same time, I believe we need to be concerned with and educate ourselves on RDA's across the state that have had challenges. In the end we might be able to learn from others mistakes and lack of vision or both.
I will be posting articles written by others over the years who have case examples of certain stumbling blocks facing Redevelopment agencies in local communities. The following is an article about the City of Downey.
Enjoy!
JoAnne


The dollars don't always add up
By Jerry Andrews

The project at Patton Rd. and Firestone Blvd. provides an interesting object lesson about Redevelopment. It is common to "blue sky" a Redevelopment agency project such as in estimating the amount of sales tax dollars, property taxes generated and jobs created.
When talking about the number of new jobs, it is more correct to tell the number of "net" jobs created. That is, subtracting the number of jobs lost from the existing stores or businesses closed to make way for the new project and also the number of jobs displaced (lost) in the surrounding area from stores that will be forced to close from the new competition. Historically, when big box discounters come into a town, they kill off the local stores, thus creating blight. Because of "economy of size" most Redevelopment projects with new large stores will end up with a net job loss, not a job gain.

A slightly different scenario applies to the sales tax dollars. The total volume of sales will be greater from a new project. It could reasonably be expected that the new project would generate $6 million in gross sales of which the one percent sales tax portion to the city would be $60,000 into the general fund. However, the new property tax increment or increase does not go to the city's general fund to pay for police and fire services, but instead goes to the Redevelopment agency - ultimately be given away to developers in the form of land value write-downs, street work, interest free loans or even direct rebates. So, in fact, the city gets less money to perform essential services.

With this as background, the new proposed development here in Downey at Firestone and Patton provides an example of how all this works. The city had the old tire store (Downey Tire and Brake) for years. Generally cities make lousy landlords. They don't keep the property up, they don't repair the roofs, fix the hot water heater, etc. Then the tenants don't want to pay the rent and it's downhill. Signage comes into question; tenants will not put up a new sign for month to month occupancy. Evictions come and now we have blight. The City paid $400,000 for the half-acre Tire and Brake property plus the cost of hazardous materials abatement and demolition.

The developer has to pay market value for the rest of the property, purported to be $1.6 million, and then tells the city in order to make the project "pencil out," they have to sell him the Downey Brake and Tire piece for only $100,000 instead of the City's $400,000 "investment." On the surface this is true, but there are several things going on. First of all, the write-down on the Tire and Brake land would create a "sale" at about $5 a square foot. This has a marked impact on other property values in the Redevelopment Area. Secondly, because there are existing businesses on the corner, it is unlikely there will be a net gain of jobs. And thirdly, while Starbucks is a very fine coffee house, the proposed location across the street from a high school seems questionable. And furthermore, any idea that a Starbucks at that location is going to revitalize Downey Ave. is an idle dream. Even if Starbucks were on Downey Ave. itself, it would no more revitalize Downey Ave. than Cardono Square, the Krikorian Theater and the parking garage did.

There is another nuance in Redevelopment law influencing this project. It is called "prevailing wages" which translates into having to pay union wage scale to build projects. It came about several years ago with a project in Rancho Cucamonga where a very large warehouse complex was to be built. They were really banking the land for future retail development, so, for the present, warehousing made sense. However, there was the problem of union pay for government jobs. Even though it was a private development, the union claimed that because of the city's write-down of the value of the land sold to the developer, the city became a "partner" in the project and thus it was a government project where union pay is necessary. The case went to court, the union won and the increased construction costs killed that deal.

This is why cities now are trying to make it appear they are not "contributing" to a project. Typically they get low-ball appraisals to justify the giveaway write-down prices. That's why the price of the old tire store land is of more than passing interest.