With all the talk about schools, it’s no wonder that Action Alameda thought that the best way to express their displeasure with redevelopment in Alameda was to give us the oh so familiar report card format. A lot of organizations use this method to make their point, but then they also give us narrative and a methodology as to why they gave a score of A, B, C, D, or F, plus any of the additional + or – values to give extra padding. Personally, I have always thought that a D- looked a lot worse than an F. Has there ever been a case of an F+? Ah, but I digress. Most recently Action Alameda, and by “Action Alameda” I mean the one very vocal member of Action Alameda has been touting their Redevelopment Report Card, in which apparently, redevelopment issues score a big fat F for everything. Why you may ask? Who knows, you’ll have to ask Action Alameda because the report card itself makes no explanation.
So for those not satisfied to take Action Alameda at its word that Redevelopment is indeed failing us, Stop, Drop and Roll has broken down each element that was given an “F”. For those that are satisfied with Action Alameda’s “report”, you may scroll past everything and continue to defend. Excerpts from SDR, but reading the whole post is highly recommended:
Assessed Value: The report card lists how much the redevelopment area is assessed at— $1.2 billion—and gives it an “F.” Presumably because it’s an impressively big number, but without context, explanation or anything, we have no idea why $1.2 billion is a bad amount. The appendix of the report (page 22) shows that the number is actually more like $1.3 billion. More importantly, it shows that when the redevelopment area was formed it was worth a paltry $300 million. So $1 billion of the $1.3 billion is in increased value. So maybe the large number isn’t what gets the city’s redevelopment an “F.”
Perhaps the argument is that redevelopment has not been responsible for the quadrupling in value. This is a discussion that can be had, but the report card doesn’t address it. We have no idea what “F” means. But for the sake or argument, one could ask would the value of this land be the same if it hadn’t been redeveloped?
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Tax increment collected: Again, no explanation as to why it gets an “F.” Given past writings, one would be safe to assume that there were only two possible grades “A” which is given for no redevelopment, and “F” meaning there is redevelopment. But again, we’ll assume that this grade is meaningful and that it critiques the use of tax increment funds.
First off, as covered here in the past, the money collected as “tax increment” for redevelopment does not come directly out of the city and school’s share of property taxes. Some of it does, but a very small percentage.
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Pass-through agreements make sure that schools continue to get their share, as do other local entities, so the overall effect on schools, services, etc. is very small.
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Debt Amassed: This is where the report card veers into crazy town. The report give redevelopment an “F” for $285 million in amassed debt. But that’s not how much debt has been amassed. The number is $83 million. The $285 million is the amount of payments when made over 30 years.
Like a mortgage, redevelopment bonds essentially allow an entity to borrow money for a project now, and pay it off over time with interest. Anyone who’s taken out a mortgage knows that the debt you have on your home is the amount of your mortgage (for fun let’s choose $500,000). But over time, you’ll pay 3+times that (over $1.5 million). But nobody refers to the $1.5 million as the debt on the house. Bonds are the same.
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Lastly, Job Created: The state reporting requirements for the form (page 19) are very strict. If you look at it, you’ll notice that only two cities in all of Alameda and Contra Costa Counties reported “jobs created” during the reporting period.
This is because they can’t count any of the construction jobs in creating projects, so all the home builders and construction workers at Bayport, Bridgeside, Park Street Streetscape, Webster Street renaissance, Ruby Bridges, etc. go uncounted.
Further, the report card rates a small timeframe for redevelopment in Alameda, a time when many projects were under construction or being planned, but not when any came on line. This month, the redevelopment agency will report 153 new permanent jobs created for half a year at Bridgeside with more reported next year. Jobs are being created at the Alameda Theater. This report card, while trumpeting the total “debt” of the redevelopment agency doesn’t report the total number of jobs created in places like Marina Village….
Okay, so my “excerpt” is longer than I wanted it to be, but it was hard to redact when there were such salient points made. I suppose the main critique of the Report Card can be boiled down to “compared to what?” Without context and a baseline all we have are letters than anyone could put together in two seconds. Speaking of the Alameda Daily Noose, today’s news is absolutely hilarious.
If I read howards latest post on ADN correctly (and he doesn’t make it easy, believe me) he is calling on ACLO to perform an opera about the redevelopment debt, with Myshak and Faris playing the lead roles. Excellent idea!
Comment by notadave — December 12, 2007 @ 8:20 am
Wow, with live elephants and mice on stage, Mr. Howard’s production is sure to be a bigger spectacle than both “Carmen” and “Aida” combined…especially once the elephants catch sight of those mice!
Comment by Michael Krueger — December 12, 2007 @ 9:18 am
Ah, redevelopment. It’s free money!
Here, have some more kool-aid, dear.
Comment by dave — December 12, 2007 @ 9:22 am
Nobody said redevelopment is “free money.” It’s an investment of taxpayer money—usually in conjunction with private-sector funds—in the community, and one can have a meaningful debate about whether or not a given redevelopment project is a wise investment. One can also have a legitimate discussion about whether debt or administrative costs for a project are excessive.
The point is that the Action Alameda report card does nothing to further rational discourse on redevelopment in Alameda. In fact, it muddies the waters by confusing important concepts like debt itself and the interest to be paid on that debt. I fail to see how pointing this out marks one as a mindless member of some kind of pro-redevelopment cult. If anyone is acting mindlessly, it is the redevelopment opponents who put together the report card.
Comment by Michael Krueger — December 12, 2007 @ 9:52 am
Michael, are Dave Howard’s numbers roughly correct regarding redev/debt?
Comment by Jack B. — December 12, 2007 @ 9:56 am
A few points in random order:
-If, as JKW obtusely insists, that the money doesn’t come out of the school district’s or the city’s share, then who is surrendering said revenue?
-While the principal value of the debt is the operative term to use in such matters, the 285MM figure is worth examining because it is the amount of cash that must be farmed from the tax base to pay the loan. It is not the primary sum to consider but it is certainly illustrative. I’ll hazard a guess that its presence is disliked both for its uncomfortable accuracy as well as its source.
-Job creation. First, given how much of MV is vacant, and how little tax revenue it generates, one is to be forgiven for laughing at its description as a job-creation measure. Second, construction jobs et al should NOT be counted in the job creation figures. They are by nature temporary WRT to a project. If these temporary jobs were the point of redevelopment, well then we’d simply fall into Keynes’ example of borrowing money to pay people to move piles of dirt. (Ooops, I shouldn’t have said that, it’ll just give em ideas.)
Comment by dave — December 12, 2007 @ 10:24 am
To point 1 – The first question that needs to be asked is, if the redevelopment money was not spent, would there be tax increment at all. (a fair question, but one continuously overlooked).
Then one needs to look at the pass through agreements of the redevelopment areas. The older ones have their own specific one, the newer ones are state mandated. All of them pass through the school district’s money, so the supposed “stealing of funds” is not what it’s made out to be. {I wrote an entire post on the subject here with actual dollar amounts.}
To your second points, my biggest problem is issuing a report card that compares 30 years of bond debt and repayments with job creation over a limited number of months. Months during which no new jobs came on line. It’s not a valid comparison, and with absolutely no narrative the “grade” is completely meaningless.
Comment by johnknoxwhite — December 12, 2007 @ 12:12 pm
Mr. Howard’s number itself is correct, but he has slapped a very misleading label on it. The debt is $83 million; $285 million is the total amount ($83 million principal plus $202 million interest) that will be repaid over 30 years, which I believe is properly known as the “total debt service.”
When people see a number labeled “debt,” they will naturally assume that the debtor is on the hook for that amount plus interest. So, when Mr. Howard refers to “$285 million in redevelopment debt” he implies (assuming the City’s current ratio of debt to total debt service) a total debt service of nearly a billion dollars!
We could have a conversation about the fact that the $202 million in total interest payments is rather large compared to the debt of $83 million. A typical ratio is 1, sometimes approaching 2, whereas Alameda’s ratio is 2.4. This is something that could have been included in a “report card” in a meaningful way, by comparing our ratio to those of other cities…but no, Action Alameda—whether due to incompetence or an intent to deceive—produced misleading sensationalism instead.
Comment by Michael Krueger — December 12, 2007 @ 12:32 pm
Why couldn’t there be an increment? Private activity has a far better track record of increasing property values than does government. Private activity is also far more likley to create viable projects (unlike movie houses that can’t get get private investment because they are unviable); and viable projects create far more taxable wealth than failures.
If the city & school district aren’t losing funds, who is? The State, who happens to be the source of nearly all of AUSD’s and a fair piece of the city’s funding.
And to say they don’t lose funding is disingenuous ast best. Redevelopment zones are effectively off the tax rolls once so designated. New property taxes for your precious buses, for example, can’t come from redevelopment districts. Future public projects are hamstrung financing costs for dubious projects.
Comment by dave — December 12, 2007 @ 12:38 pm
Dave, those are exactly the kind of arguments that belonged in the “report card,” instead of a bunch of big, fat F’s without further explanation. I think Action Alameda should give you a call the next time they decide to produce a document…maybe then we could begin to have a real conversation!
Comment by Michael Krueger — December 12, 2007 @ 12:46 pm
They can’t afford me, but in any case, it’s the blind faithful at the redevelopment temple who need conversion.
Comment by dave — December 12, 2007 @ 12:48 pm
And what of the blind faithful on the anti-redevelopment side? Do they get a free pass?
Comment by Michael Krueger — December 12, 2007 @ 12:51 pm
I’m not blind, I’m for redevelopment when I get the contract.
Comment by dave — December 12, 2007 @ 12:53 pm
Just to clarify: Dave, I’m not including you in the camp of the “blind faithful on the anti-redevelopment side.” I would call you a redevelopment skeptic, and a welcome voice in the debate. I only dived into this because I objected to the implication that those who dared to question Action Alameda’s report card had somehow “drunk the Kool-Aid” on redevelopment.
In other words, I hope you and others can respectfully disagree with reasonable proponents of redevelopment, as I respectfully disagree with reasonable skeptics like yourself.
Comment by Michael Krueger — December 12, 2007 @ 1:06 pm
Sorry, Micaheal, the snark stays.
Comment by dave — December 12, 2007 @ 1:13 pm
Seriously, show me a reasonable redevelopment scheme. Just cuz I’m skeptic doesn’t mean I’m a funadamentalist.
Comment by dave — December 12, 2007 @ 1:14 pm
Who are the “reasonable proponents of redevelopment”? Seems there were few in favor of the theater project, but most of those with reason to support the theater project clearly had hopes of direct and indirect personal profit. Perhaps for them, that DOES make a reasonable argument for increasing public debt.
I agree that the debt created by bond issues = total debt, not just the principle. I see this a little differently than personal credit card debt which can be paid at the end of the month. This is also different than the debt on a house because a house has a positive value and can be sold to eliminate the debt.
By watching the goings on at APT we can see that the total debt is more likely to increase by the sale of additional future debt (bonds) to pay off current debts as they come due, thus increasing ‘debt service costs’. David Howard is presenting actual debt, at least until it is increased.
You’ll have to explain to me about the city & school pass-through; I believe the tax increments go to debt, the city loses the 17% or so of the increment they would receive and the state loses the balance. The developers get our money and we the people get less for education, transit, healthcare etc.
Would values increase without the ‘redev’ projects? – almost always! Again check out Norby – studies show that redev has little effect on increasing values. Viable projects will usually be developed privately if developers don’t get the public handouts. The non-viable projects should be avoided with anyone’s money. That should be the general rule, but greed and politics plays its own hand, and now Alameda has re-dev debt of $285M and the state may be well over $.25Trillion. Could someone ‘splain to me what happens as the dept service payments begin to exceed the state’s ability to pay? Is this the direction we want to continue?
Comment by David Kirwin — December 12, 2007 @ 6:53 pm
JKW – You are clearly mistaken, or you are knowingly spreading false info. The reality is that property values do raise without redevelopment, but the tax money from the increase in value goes to pay off debt from the bonds sold to pay developers.
Even if less than 1% of the structures within a “redevelopment zone” are ever touched by a developer paid by those bonds, all of the tax increases for every structure go to Re-Dev bond debt. And developers and the CIC are motivated to keep debt going in each Re-dev zone.
When was each of the R-D zones established? How can the city provide for the citizens if 1/2 the island is part of one of the R-D zones and city can’t collect taxes on present values, but still have to buy material and services at present and future value?
Comment by David Kirwin — December 15, 2007 @ 1:02 am
Lauren – How did this get returned to the category of “TOP POSTS’ if no one has posted on this thread since last December?
With the start of a new school year it is interesting to think of another needed report card – That of the success of the Alameda Theater. Will we get to see how ticket sales and revenue stacked up against the optimistic predictions? I’m expecting our partner Kyle Conner may have met 50% level of his ticket sale prediction. Will there be a CIC report on this investment?
Comment by David Kirwin — September 28, 2008 @ 9:12 pm
“Top Posts” are not determined by the number of comments, but rather by the number of times it has been viewed. For more information about how Top Posts are determined you can read this thread on the WordPress forums.
Comment by Lauren Do — September 29, 2008 @ 12:45 pm