The Redevelopment Sinkhole

Years of reckless borrowing have sent the city's Redevelopment Agency spiraling into debt. Mayor Brown's pet projects may flush it down the drain entirely.

Lesser mayors might have been disheartened by the news, but Brown is not one to let his grand visions bog down in a pesky financial quagmire.

Judging by the mayor's public proclamations, you wouldn't think there was much of a problem at all. Brown has continued to tout the Redevelopment Agency, pledging its help for myriad projects. Just two weeks ago, Brown and his cadre of department heads and aides announced a tentative plan to lure a Bloomingdale's department store to downtown. Sure enough, there were promises of some Redevelopment Agency money to grease the deal.

There is no way, of course, that the agency can possibly pick up the tab for all the plans Brown has floated. He knows that, and so does James Morales, Brown's handpicked executive director of the agency. "Somewhere along the line, people became enamored of the potential of the Redevelopment Agency," Morales says. "We cannot do all the things that have been promised to communities." What the agency does in the next few years, Morales acknowledges, will be dictated by what Brown wants.

For almost a year after receiving the Gamble Memo, Brown remained silent on the agency's financial troubles. The city's daily newspapers, blissfully ignorant, continued to prattle on about the mayor's redevelopment plans.

The problem was suddenly discovered in mid-December, when Brown appeared unannounced before a meeting of the agency's board of commissioners, which he controls by virtue of appointing the commission members. At the meeting, Brown acknowledged the state of the agency's finances, and for the first time signaled his designs on the limited financial resources the agency has left.

Back off of revitalizing mid-Market Street, the decayed stretch of San Francisco's main drag that has begged help for years, Brown instructed the commissioners. Forget about the promises to remake the neighborhood around the Transbay Terminal. Those projects, long in the planning, aren't going to make the cut.

Instead, Brown told the board to concentrate its remaining resources on two major projects that he wants.

Foremost is Mission Bay, a massive development of housing, stores, and office buildings straddling China Basin planned by the Catellus Development Corp. Back when Brown was Assembly speaker, Catellus paid him handsomely to be one of its lawyers. Now, Brown's Redevelopment Agency is going to help Catellus build its long-stalled Mission Bay complex.

The other project Brown wants is development of Hunters Point, the abandoned Navy shipyard that now sits mostly vacant and laced with toxic waste. It lies smack in the middle of Brown's political base, and is central to his long-shot dream of spawning a veritable urban renaissance in the city's southeast quarter.

So far, Brown and his aides have been notably vague about just how much Redevelopment Agency money they hope to pour into the two projects. Remarkably, both Morales and David Prowler, the mayor's point man on the Mission Bay development, say they have absolutely no idea how much money the Redevelopment Agency will kick into the deal.

Both Mission Bay and Hunters Point are complex, time-consuming undertakings, and it will be years before either begins generating new tax revenue for the city.

But as other long-planned projects are canceled and the Redevelopment Agency's financial health wanes, the mayor seems intent on using its dying gasps to breathe life into the two huge new projects closest to his heart.

Most of what the public knows about the Redevelopment Agency -- as told by elected officials and reported in the daily newspapers -- is an alluring web of myths, a theory almost totally disconnected from reality.

In theory, redevelopment is a logical way for a city to rebuild its rotting areas without draining taxpayer dollars from other government services. The Redevelopment Agency, the theory goes, would use special powers granted by the state legislature to condemn property, amass land parcels, build amenities like streets and sidewalks, and lure development to blighted areas. After fancy new buildings go up, the city would reap a bounty of increased property taxes from the developed area. The new property tax revenue -- called a tax increment -- would repay any bills the agency racked up while planting seeds for the project.

The myth holds that all the tax increment money would flow back to the Redevelopment Agency, making its projects self-sustaining islands of prosperity. After the agency paid off its debt, any money left over could be used to launch new projects, and to build affordable housing for low- and moderate-income families, the type of housing that is at a premium in San Francisco's crushing housing market.

But reality is much messier than theory.
Before the Redevelopment Agency gets its hands on a dime of tax increment money, the cash first passes through the hands of the city. The tax increment dollars generated by redevelopment projects pour into the city's General Fund, like all property tax revenue, and then are divvied up by the Board of Supervisors. The Redevelopment Agency submits its budget to the supervisors every year, and gets only what the supervisors decide to give.

In most of the state's other major cities, the tax increment revenue is almost automatically passed along to the Redevelopment Agency. But, as best can be told from city financial records, the San Francisco Board of Supervisors has never actually given the Redevelopment Agency all of the tax increment funds that have been collected. Instead, year after year, the supervisors have kept some of the money to shore up the city's own budget.

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