State Assembly Bill 458
5/01/09 - It's pretty clear to me that Barbara Buckley doesn't understand the power, or the point, of redevelopment.
The purpose of redevelopment is to establish a district, usually encompassing a blighted or less-than-appealing neighborhood...like downtown Reno, downtown Sparks, and some areas surrounding downtown Reno (RDA2). This district can then use the property tax generated from new projects within that district to fund future redevelopment projects, pay off loans and debts incurred from previous redevelopment projects, and fund the actual agency itself. Redeveloping blight increases the amount of property tax coming in, increases or at least stabilizes the amount of sales tax revenue coming in, of which schools directly benefit from. Yes, sales tax revenues are down right now, welcome to a recession. However, most redevelopment projects create sales tax revenue that wasn't there previously. Take the Reno Aces Ballpark for example. There was little sales tax revenue and very little property tax revenue coming in from a dirt lot and weekly motel. Education directly benefits from that increased sales tax revenue. RGJ reported that sales tax revenue from sporting goods in Washoe County rose 46% after Cabella's and Scheel's opened, even after accounting for Sportsman Warehouse closing. Charles McNeely reported on Nevada Newsmakers that the downtown Reno Century Theater is the highest grossing theater per capita in their chain.
It should also be noted that redevelopment districts have a limited life span, typically 20 to 30 years. Whatever loans, advances against property taxes or sales tax revenue, and other tools used to spur new projects in that district have to be paid off or accounted for within the life span of the redevelopment district or else bad legal things happen.
Barbara Buckley has decided to put a major wedge into this system, by introducing Assembly Bill 458. This would take up to 15% of the property tax revenue generated within these redevelopment districts (remember, this has NOTHING to do with STAR Bonds, which is associated with sales tax revenue), and divert the money toward a 'rainy day fund' for education.
So, to 'save' education, according to Buckley, it's worth crippling a system that has absolutely no leeway in order to function properly. The Redevelopment Agency already has a debt incurred, of which the current property tax revenue coming in is paying off. By diverting incoming revenue away, Buckley is preventing the Redevelopment Agency from doing what it is supposed to do, which is take that incoming property tax revenue, and use it to continue revitalizing downtown and surrounding neighborhoods, and increase sales tax revenue which helps fund education. It's funny, she bitches about STAR bonds taking away money from education, but then wants to cripple the agency responsible for assisting in the most dramatic sales tax revenue increases in the city.
This affects older redevelopment districts in particular, like our downtown RDA1 district, and most of Sparks' redevelopment districts. Why? At the same time new property tax revenue is coming in, these older redevelopment districts also have to deal with devaluation and depreciation. Overall, this could reduce revenue by 1/3 for the RDA, and could mean the complete shutdown of RDA1, except for paying off old debt.
Coupled with the 15% Barbara Buckley wants, the agencies will essentially become debt payers, and will no longer be able to fulfill their purpose.
A prime example is the Baseball Stadium. The Redevelopment Agency Board took a substantial risk and gamble in investing in baseball, and the property tax revenue and sales tax revenue for that area will now be astronomically higher than when the property was a dirt lot and weekly motel. This deal would not have happened without the hundreds of hours in labor invested by the redevelopment agency staff, and it would not have happened if the redevelopment agency didn't own property it could swap with landowners so property assemblage could happen, and the redevelopment agency wouldn't have been able to own the properties they had on hand to swap without bonds issued against future property tax revenue from other projects, and it continues in this cycle...until AB458 passes.
I understand that education needs to be funded. But by going down this route, the state will receive very little money from these redevelopment agencies, while causing a lot of massive, permanent damage that is not worth the small amount of money they would gain out of it. I heard things are getting nasty down in Carson. Spies told me Bob Cashell was cut off by the Assembly from fully speaking, as was Mark Lewis. THEY ARE NOT INTERESTED IN HEARING HOW THIS WILL ESSENTIALLY SHUT DOWN REDEVELOPMENT AGENCIES.
Redevelopment Agencies are there to assist development in areas that would otherwise be very difficult-to-impossible to develop in. Every city I can think of has one, large cities like New York and Los Angeles, Sacramento, and then smaller cities like Sparks and Reno and Chico.
Buckley complains about STAR bonds taking sales tax revenue money away from schools, yet wants to cripple the agencies responsible for taking blighted neighborhoods/properties and assisting in turning them into viable projects that produce MORE sales tax revenue than they were prior to redevelopment. Yeah, that's smart politics!
Post your comments
Posted by: MattO - 5/1/2009 4:47:33 PM
Reno is larger than Chico Mike
Posted by: Kevin - 5/3/2009 8:44:31 AM
Posted by: Chris - 5/3/2009 9:41:18 AM
I hope for Reno and Sparks' sake this does not pass as it reads now. Gibbons is out of control.
Posted by: Travis - 5/4/2009 7:02:57 AM
I understand the need to fund education, but robbing other critical departments to the point they can no longer function is not the answer.
Posted by: Godon Foote - 5/4/2009 8:59:24 AM
I didn't see that you made a distinction between Redevelopment and STAR Bonds. Redevelopment Districts were originally set up to pay for general capital improvements (new curbs and gutters, repaving of streets, new lighting) to generally improve the appearance of an area and that the 'new' property tax would repay any borrowing. STAR Bonds were intended to be an incentive to businesses to be developed and a certain amount of the debt would be covered by these Star bonds to be repaid by the additional revenue from out of state customers paying sales taxes. I feel that both of these 'programs' have been stretched beyond the original intent.
Posted by: Matthew A. - 5/4/2009 10:47:16 AM
Wow! First, to Chris, I am not sure if you are aware, but Barbara Buckley is a democratic member and current speaker of the state assembly. She is actually the primary rival of Governor Gibbons. While Gibbons is definitely not perfect (no politician is), I personally stand behind his stance of cutting spending to balance the budget rather than increasing taxes. Plus I am particularly interested in his agenda item to push green energy production in this state - something I strongly support.
Next, I have to say, I actually am impressed that Barbara Buckley, a democrat, came up with something other than raising taxes to try and fund a shortfall in education. This method, however, is extremely short-sighted as Mike has extensively demonstrated in his article above - soo much so that it is honestly surprising that they even proposed it as it displays a level of short-sightedness that is politically embarrassing. It is almost like shooting yourself in the foot from a tax revenue perspective.
Keep this in mind if Barbara Buckley actually does decide to run for governor as she has stated she is interested in doing. Again, I am impressed that she came up with something other than simply raising taxes, but this isn't a logical solution. It is kind of strange the more I think about it. Since democrats are generally in favor or increasing taxes - you would think that they would be strongly in favor of these types of redevelopment efforts (since the end result is that tax revenue goes up). Maybe I just don't understand.
Oh well. I guess the best I can do is write letters to my representatives stating that AB 458 should not receive their support. Thanks for the heads up Mike, wouldn't have heard about it if you hadn't been paying attention. Makes me wonder what else they are up to down there...
Posted by: lakescrossing - 5/4/2009 12:07:31 PM
The whole concept of redevelopment is nothing more than a corrupt scheme to reallocate taxes from all businesses in a community to a few developer friends and buddies of politicians. There's a reason there's dirt lots not being developed. It's UNPROFITABLE to develop there! Nobody wants to go there, be there, visit there, shop there. The baseball stadium is a joke. Where's parking? The RSCVA has dumped hundreds of millions on schemes to boost downtown tourism, stealing room taxes from casinos and sales taxes from everyone. The Bowling Stadium, the Reno Ballroom, the Pioneer Center, Reno Events Center. First of all, where's the fairness in putting everything downtown and not anywhere else, even Sparks whose room taxes contribute to their funding? Don't get me started on the corrupt STAR bonds and turning Reno into some ridiculous Chain City USA. Gaming and tourism is dying in Reno and now make up 10% of employment, low-pay, high social service employment BTW. Why aren't we investing in all the high tech firms moving here from California? Who wants to shop downtown with the traffic and no parking hassles? That's why developers open malls in the suburbs genius. Sure you can subsidize them to open shops downtown so they they can turn a profit for a couple years, but then just watch them die. We need to stop this corrupt redistribution of wealth from the community to a few developers. Let the free market revitalize downtown Reno. All those cool local downtown boutiques and bars never got special loans and deals and they're doing fine. Who cares that Starbucks closed downtown. Good riddance corporate chain scum!
Posted by: Jim Hunting - 5/4/2009 1:49:58 PM
Great write-up. Unfortunately, Redevelopment is not well understood although its benefits in many cities is well documented.
Posted by: Justin - 5/4/2009 6:07:14 PM
lakescrossing, Nice rant! What exactly would you do w/ downtown? From where I'm sitting it seems to me that you're just another self-important blowhard who is incapable of appreciating anything outside of his/her utopian suburban/rural bubble. If the decisions were up to you I'd bet Reno would have blown away like a tumbleweed a long time ago. Do you have any concept of what an urban core is all about? Are you at all cognizant of it's importance to our entire region? Investing in downtown benefits us all! What area do you think most people visiting our area see? Double Diamond? Meadowood? Hidden Valley? NW Reno/Somersett? Nope. They see downtown. Like it or not, perception is reality. If people don't like what they see downtown that reflects badly on the whole city which naturally effects tourism, but also can influence businesses considering relocating to the area, etc. I'm sooooooo sick of people regurgitating the same old, tired complaints about downtown. Given you comments about downtown I have to honestly question if you've ever spent much time in any city core at all.
Posted by: Zen - 5/5/2009 9:41:07 AM
Lakescrossing says,” The baseball stadium is a joke. Where's parking?”
Why should we take anything you have to say serious after such an ignorant statement. I have been to three games, two of them when the place was sold out, and had no problem finding parking. There were several parking garages and parking lots offering inexpensive parking. I chose each time to save the $5, park a few blocks away and walk. I guess your point is that we should have wasted a bunch of tax dollars and precious land area to build another parking garage!
Posted by: Bill Miller - 5/5/2009 11:08:05 AM
Everybody understands that we are in one of the most horrific and dramatic economic downturns in the history of the United States. It is an absolute, that one has to be extremely cautious in these trying times-BUT DON'T throw the baby out with the bath water. The revitalization of our communities is our future. It would be extremely myopic on behalf of the Legislature to even consider reducing, let alone, eliminating the Redevelopment Agency. Please do not trip over dollars to pick up pennies. It is clear that education is a priority, but immediately below it is the lifeblood of our communities and that is redevelopment. There are other ways to balance the budget-THIS IS NOT ONE OF THEM. The Legislature's legacy can not be one of "condemnation of our future".
Posted by: urbanblog - 5/6/2009 8:43:18 PM
I got curious about this bill, if you want to read the actual bill, you can find it and the rest of the bills in the legislature online:
Posted by: DowntownMakeoverDude - 5/7/2009 8:29:41 AM
Hi Urban Blog, nice of you to stop by! I have a link to the bill as well in my post, but maybe it's not prominent enough for people to notice. So, you aren't getting off that easy, K, now that you read the bill what are your thoughts as an urban planner?
Posted by: urbanblog - 5/7/2009 4:57:34 PM
Hey Mike, I guess I was blind to the link you clearly posted in your piece, so mea culpa on that one!
Without knowing the composition of the RDA's 2 general funds and their future projections, I can't really say one way or the other how vehemently opposed I can be to this piece of legislation. But that opposition would be based on business sense, not urban planning sense.
From an urban planning point of view, the unfortunate reality of the situation is that all this government assisted development is playing into the hands of those who would rather not see the market evolve to better support mixed use, dense, infill development. The reason for that from my perspective is that once you get developers used to the notion that there will be tax subsidies, deals on the underlying real estate used for developments, etc, then what you are doing is distorting the market, distorting the real margins of desirable projects, and setting the future development of the market up for failure against suburban projects. I'm not saying suburban projects do it all themselves with no incentives or subsidies (in fact the entire apparatus of public works funding most places makes them even more highly subsidized over the long term) but redevelopment doesn't genuinely pass the sniff test with me. Frankly a well run city should have the whole city be a general improvement district as far as the authorities are concerned, and cities should stick to provision of basic public infrastructure such as sewage systems, streets and sidewalks, parks and recreation facilities.
Be that as it may, from a political perspective, having a rainy day fund for education makes perfect sense. It would make more sense to me to spread burden around to the exsting revenue sources. Where does your 15% number come from? Is that the piece of the local property tax pie that feeds into the education budget? If so where did you find that info? As the bill is worded it appears to merely exempt future redevelopment projects from being excused from paying the amount of property or sales & use tax that would go to public education. In my imaginary uneducated scenario, let's assume that for a sales tax rate of 6.77%, 3% of that goes to education. Now a developer building a retail development in a redevelopment district must pay 3% of receipts to sales tax because it is for education, but that is still 3.77% less than they would be paying in sales taxes if they were built outside the redevelopment district.
So from my perspective what we have is a case of costs going up for developers, not redevelopment agencies being robbed blind.
BUT, as mentioned, I do think this bill is the wrong way to go about setting up a rainy day fund for the schools. You are spot on in your argument - redevelopment agencies add new tax sources to the rolls, and to that I would add that to place this whole burden on the redevelopment agencies' laps is unfair and potentially quite destructive.