And now let’s join RSG Principals Tara Matthews and Jim Simon do their impression of Jane Curtin and Dan Aykroyd debating the changes they’d like to see to help California communities, moderated by Suzy Kim, Senior Associate.
Suzy: So, we know the new “gigamajority” of Democratic control in the California State Legislature and a new governor have got people buzzing about more tax increment financing tools to bring capital back to local communities. With EIFDs, CRIAs, NIFTI’s and other tools, does California really need “Redevelopment 2.0” and “Affordable Housing and Infrastructure Agencies” proposed by Assembly Bill 11 (Chiu), or Local-State Sustainable Investment Incentive Program proposed by Senate Bill 5 (Beall)? We’ve asked two of our Principals to debate these questions. First off is Tara Matthews, Principal from our Vista office. Tara’s work tends to focus around the areas of affordable housing. Tara is also a member of the San Diego Housing Federation. Tara will be debating with Jim Simon, Principal from our Irvine office who is also an Advisory Boardmember and technical committee co-chair of the California Association for Economic Development (CALED).
Starting with you Tara, how do you feel the current tools available to communities meet the needs for affordable housing and economic developers?
Tara: What tools? Just kidding, there have been efforts to generate a permanent source of funding, but I honestly don’t think they are very effective which is why we haven’t seen them utilized by many communities. Many of the tools double or even triple dip on revenue generated in communities, meaning that the “bucket of money” everyone is fighting for is very limited. This coupled with the costly process to get your hands on the bucket of money makes the tools very inefficient.
Jim: Like Tara, I’d agree that the current tools offer limited financial incentives to communities unless other agencies participate.
Suzy: And why are these issues in your opinion?
Jim: Because we are asking a single taxing agency to bear the risk for stimulating economic growth that benefits all taxing agencies, as well as the state itself. This is particularly true in the case of economic development investments that can expand the economic base, provide living wage jobs, and fund needed infrastructure investment. As it stands now, communities with the greatest needs aren’t afforded any advantage over those that simply have the fortune of having a larger share of the property tax base.
Tara: Plainly stated, there is no great incentive to use these tools to address economic and housing issues. After you run the numbers and look at various legal requirements and restrictions, the drawbacks often outweigh the benefits. Many of the other taxing agencies that have a greater share of the revenue just don’t want to part with it.
Suzy: What kinds of changes do you feel are needed to make these tools better?
Tara: Finding a way to make these tools benefit more of the taxing agencies and thus enticing more participation to reach common goals. One idea is to more clearly define a pass-through payment formula and removing “opt-in” provisions. Thus, making it easier to create a permanent financing source for capital projects.
Jim: I think AB 11 needs to establish some formula for any pass-through negotiations, with either a fixed formula or a maximum share.
Suzy: Ok, let’s talk about SB 5 and AB 11. Do you feel that either of these bills is going the help communities with affordable housing or economic development?
Jim: I’m not sure yet. I like the idea of the State finally getting involved in supporting community development again, but there are a lot of unknowns here.
Tara: TBD. SB 5 is very intriguing since it’s the most different from existing tools and provides a clearer path to funding. But I agree with Jim that it is exciting to see the focus on community development again coming from the State Legislature.
Suzy: What would you like to see changed in SB 5 or AB 11 to improve the situation?
Tara: Lessen reporting requirements if the entities illustrate collaborative solutions or meet specific goals, such as creating affordable housing in proportion to RHNA requirements working in collaboration with County or State entities, while improving surrounding infrastructure. I guess an easy way to say this is – reward good behavior. Some of the administrative burdens placed on communities makes it difficult to administer and takes away funding that could be used towards completing projects.
Jim: First, it feels like the amount of oversight the State needs to play is a bit heavy to me. I also think they need to give local communities an opportunity to make a program work by requiring some basic level of participation from at least a few taxing agencies. And, maintenance should be an allowable use of expenditures.
Suzy: Finally, how much should be set aside for affordable housing in your opinion?
Jim: I personally feel that anything more than 50% is too much. There is very little funding available for local communities to create a sustainable economic development program to combat issues like gentrification, stagnant wages, and limited wealth building in communities.
Tara: Well affordable housing is my passion and I would love to see as large of a set-aside as possible. But I also recognize that the communities must balance multiple issues and failing infrastructure is a major issue. Additionally, once housing is built those residents need a thriving community to live in, meaning that economic development is also a critical need. So, I think I would be willing to say that a 50/50 split would be fair, though I’d like to see the 50% that isn’t set-aside for housing spent in or around areas that are serving affordable housing projects and housing development.
Suzy: So are you saying that affordable housing funding is a bigger priority than economic development?
Tara: Since you are putting me on the spot, I have to stay true to my passion…yes. But I feel that a thriving community is at the intersection affordable housing, a strong business community, and workforce training options. When it comes to economic development, everything is interlinked.
Jim: I believe affordable housing is a key aspect of a successful economic development program, but not the only one.