BILL ANALYSIS SENATE LOCAL GOVERNMENT COMMITTEE Senator Dave Cox, Chair BILL NO: AB 1791 HEARING: 6/16/10 AUTHOR: Monning FISCAL: No VERSION: 5/24/10 CONSULTANT: Detwiler REDEVELOPMENT AT FORT ORD Background and Existing Law When the number of redevelopment agencies and project areas exploded after Proposition 13 (1978), county officials complained that cities were declaring farmland and open space as "blighted" and including the properties in so-called bare land redevelopment projects. Legislators responded by requiring redevelopment project areas to be "predominantly urbanized." At least 80% of the land in a project area must have been or is developed for urban uses or is integral to developed urban areas (AB 322, Costa, 1983). A decade later, legislators worried that redevelopment officials were accelerating the fiscalization of land use by using their powers to approve development projects on undeveloped land to generate sales tax revenues. Legislators responded by prohibiting redevelopment officials from providing any direct assistance to auto dealerships and to the development of five acres or more which had not been developed for urban uses and which generate sales or use tax revenues. However, that ban doesn't apply to office, hotel, manufacturing, and industrial developments (AB 1290, Isenberg, 1993). A later bill also banned direct redevelopment assistance to casinos (AB 2063, Isenberg, 1996). The end of the Cold War forced the Pentagon to adjust to new geopolitical realities. Federal officials closed or realigned nearly three dozen military bases in California. To coordinate the transition of the former Fort Ord (Monterey County), the Legislature created the Fort Ord Reuse Authority (FORA) to adopt a Fort Ord Reuse Plan. The County of Monterey and the cities that cover the former base must conform their general plans and zoning to FORA's reuse plan (SB 899, Mello, 1994). FORA adopted its Final Base Reuse Plan in 1997. AB 1791 -- 5/24/10 -- Page 2 To accelerate the redevelopment of former military bases, legislators passed several bills, including special legislation for the former Fort Ord. FORA can establish the Redevelopment Agency of Fort Ord with its own redevelopment project areas. Alternatively, the redevelopment agencies established by the County of Monterey and the cities that cover the former Army base can set up their own redevelopment project areas (SB 1600, Mello, 1994). The Final Base Reuse Plan for Fort Ord lays out the future land uses for the 45-square mile former Army base, including areas for housing, commerce, recreation, public uses, and open space. Of particular interest is the development of about 60 acres near the former base's main gate as a "life-style regional retail center." However, FORA and local officials point out that because this property isn't "predominantly urbanized," redevelopment officials can't provide direct assistance to potential private builders. At the September 2009 joint hearing of the Assembly and Senate Local Government Committee, FORA and local officials told legislators that without redevelopment subsidies, it will be difficult to interest private investors in building the Seaside Main Gate project. Besides the Main Gate project, there are about 300 other acres of undeveloped land that the Final Base Reuse Plan designated for land uses that generate sales taxes. The officials want an exemption from the state law that prohibits redevelopment officials from providing direct assistance to sales tax generating land uses on previously undeveloped property. Proposed Law Assembly Bill 1791 exempts specified territory in a redevelopment project area within Fort Ord from the state law that prohibits redevelopment officials from providing direct assistance to the development of five acres or more which had not been developed for urban uses and which will generate sales tax revenues. For territory to qualify, the Fort Ord Reuse Authority's Final Base Reuse Plan, as the plan existed on January 1, 2010, must designate the territory as a: AB 1791 -- 5/24/10 -- Page 3 Planned development mixed-use district. Business park with light industrial, office, and research and development mixed uses. Neighborhood retail space. Regional retail space. Space designated for visitor services use. Before a redevelopment agency can use this exclusion, AB 1791 requires the agency to adopt a resolution which finds that: Its community has adopted a general plan housing element which the State Department of Housing and Community Development has determined substantially complies with state law. For the past three fiscal years, the agency has not been included by the State Controller's Office on a list of redevelopment agencies that have not corrected major audit violations. The agency has not accumulated an excess surplus in its Low and Moderate Income Housing Fund. AB 1791 -- 5/24/10 -- Page 4 Comments 1. Building on success . Unlike many former military bases, the conversion of Fort Ord to productive civilian uses has earned broad support. Careful preparation and thoughtful collaboration produced a base reuse plan that won the support of the county government and the affected cities. Moving from the planning phase into implementation, each of the underlying cities and the county has its own redevelopment agency to promote private investment in housing, education, commercial, and industrial uses. In addition, the base reuse plan reserved large areas for recreation, habitat conservation, and other open spaces. To accelerate the development of key parcels, AB 1791 exempts five categories of commercial development from the statutory ban on providing redevelopment aid to previously undeveloped property. Without priming the economic development pump, it may take years before those acres attract private real estate investors. Building those high-profile projects will generate the property tax increment revenues needed to redevelop the rest of Fort Ord. 2. Redevelopment, not development . Blight is the gateway to redevelopment. The Legislature gave redevelopment officials the extraordinary powers of eminent domain and property tax increment revenues so they can eradicate the physical and economic blight that drags down older suburbs and central cities. Redevelopment was never meant to subsidize private construction on bare land. The 1983, 1993, and 2006 statutory reforms were reactions to what legislators perceived as local misuses of state redevelopment law. State law specifically prevents redevelopment officials from directly aiding commercial development on larger parcels of undeveloped property that produce sales taxes. AB 1791 is the first exemption to that 1993 reform, but it won't be the last. Why shouldn't other former military bases ask for the same special treatment? If local officials can subsidize retail at the former Fort Ord, why not at the former Mather AFB, Concord Naval Weapons Station, Mare Island Naval Shipyard, or NAS Alameda? Why not let the Richmond Community Redevelopment Agency subsidize the proposed casino at the former Naval Fuel Depot Point Molate? It's a slippery slope. 3. Sales tax generators . The fiscalization of land use AB 1791 -- 5/24/10 -- Page 5 occurs when public officials base their land use decisions on development projects' costs and revenue consequences, not on the need for jobs, affordable housing, environmental quality, or resource conservation. When legislators thought that local officials were luring big box stores, car dealers, casinos, and other sales tax generating land uses into redevelopment project areas, they put a stop to those subsidies. FORA's reuse plan identifies six categories of commercial land uses that could generate sales taxes and AB 1791 exempts all of them except "convenience retail." If legislators accept the argument that builders need public subsidies to jump-start private investment at Fort Ord, the Committee may wish to consider why local officials should subsidize the redevelopment of vacant land for "neighborhood retail" and "visitor serving" projects? Why not just focus on mixed-use development, industrial projects, and regional retail? 4. A Mammoth problem . In its 2000 Friends of Mammoth decision, the Fourth District Court of Appeals explored the redevelopment statute's requirement for predominantly urbanized project areas. That decision rejected the Town of Mammoth Lakes' attempt to count the undeveloped parts of a golf course, a community college site, and a local airport as predominantly urbanized. Relying on earlier decisions, including the 2000 Murrieta case and the 1984 Honey Springs decision, the Court concluded that not-vacant isn't the same as urbanized. FORA and local officials recognize that some of the land planned for future commercial uses was never "urbanized" when Fort Ord was a military base. That's why the exemption in AB 1791 helps to implement the base reuse plan. 5. Who gets what ? According to FORA, AB 1791 allows four redevelopment agencies to subsidize sales tax generating land uses on up to 364 acres of Fort Ord's 28,000 acres: Planned Business &NghbrhoodRegional Visitor Agency Mixed-Use Industrial Retail Retail Serving Del Rey Oaks 0 0 0 05 Marina 83 0 0 0 0 Monterey (city) 0 0 0 00 Monterey (county) 42 54 0 10 0 Seaside 60 0 49 61 0 Totals 185 54 49 71 5 AB 1791 -- 5/24/10 -- Page 6 6. Screening out the bad actors . None of the four redevelopment agencies that AB 1791 helps can use the bill's exemption until it meets the bill's three criteria for (a) adopting a valid housing element, (b) avoiding major redevelopment audit violations, and (c) avoiding an excess surplus of affordable housing money. The City of Marina and the County of Monterey appear to pass those tests. However, the cities of Del Rey Oaks and Seaside haven't adopted valid housing elements. Further, Del Rey Oaks' redevelopment agency has serious audit findings that need correcting. Until local officials fix their problems, they won't be able to take advantage of AB 1791's exemption. Assembly Actions Assembly Local Government Committee: 7-2 Assembly Floor: 50-15 AB 1791 -- 5/24/10 -- Page 7 Support and Opposition (6/10/10) Support : Fort Ord Reuse Authority, County of Monterey, Cities of Del Rey Oaks, Marina, Monterey, Pacific Grove, Sand City, Seaside, Transportation Agency for Monterey County. Opposition : LandWatch Monterey County, 3 individuals.