Prior to last week’s council decision to invest in San Pedro Square, the Mercury News Editorial Board posed an important question that deserves the consideration of every citizen in San Jose. The paper asked, “Should decisions to invest redevelopment money be based purely on a direct dollar payback to the city…or should they take into account less tangible goals, such as creating public spaces, encouraging private investment and keeping the charm and atmosphere of those rare, older parts of downtown?”
Of course, the paper took the broader view and voiced support for the proposed investment. They also reported that the San Pedro fiscal report showed a negligible direct return on the city’s investment to be as low as $40,000 a year. (Not including the “charm” premium.)
I continue to be amazed that so few people seem concerned about the borrowing and spending habits of the San Jose Redevelopment Agency. How is it that, by law, the RDA can issue bonds to subsidize a development without the direct approval of San Jose voters? The law allows for a $300 million expansion of the convention center, but we’re not allowed to borrow money to balance the budget, or help the schools.
Does anyone else find it to be ironic that the City of San Jose Council/RDA Board endorsed a $6 million investment in an already healthy area of the downtown, the same week that the East San Jose School Board voted to eliminate all after school sports programs?
The purpose of redevelopment funds is to foster economic and community development.
Our cities, our schools, our communities. Those are the goals of redevelopment financing. The Governor of California wants to take from every city, ongoing donations, as if Arnold is now starring in a movie where he is gangster boss of a large city, and he is just asking for protection money.
Whether it is for schools, communities, or projects to aid in the development of economic growth, redevelopment is a local process since the decisions by local governments should be done under the eye of local residents. Redevelopment money should not be taken for the continued support of the State Beekeepers Permit Board.
“the borrowing and spending habits of the San Jose Redevelopment Agency”
Peter, if you want to see money shredded and thrown away, take a look at the legal fees, bond counsel fees, and other bond-related costs that are incurred every time a bond is issued by RDA or the City. (These are lease-revenue bonds which do not require a vote.)
For example, when the City engaged in building the new City Hall, it put out a series of three bond issues, each of which cost in the neighborhood of $300K just to issue.
The first one was to borrow money using the old City Hall as a source of cash flow. The second was to replace that bond with a new one using the hole in the ground on Santa Clara & Fourth as a source of cash flow. And the third was to replace that bond with another new one using the new City Hall structure as a source of cash flow.
How do these assets create cash flow to satisfy bond buyers? Easy. For example, in the first case the City Council leased the old City Hall to the Finance Authority at a certain rate, and then the Finance Authority leased the old City Hall back to the City Council for a higher rate, thus generating a cash flow to support the bond whose payments were managed by the Finance Authority. And similarly for the other two bond issues.
That the City Council members are also the board members of the Finance Authority (as well as the members of the RDA board) shouldn’t make us wonder if these were suspect transactions. (Bernard Madoff would have loved this.) RDA works the same way.
And the Mayor supports this madness which is only one tiny aspect of the way the City and RDA shred money with all their bond issuing. It’s all about transparency and accountability, isn’t it?
For more detail (written in 2004):
http://www.dalewarner.com/sub/enron.htm