By Larry J. Kosmont, CRE, President & CEO, Kosmont Companies
By Brandon Phipps, Project Analyst, Kosmont Companies
As the Redevelopment dissolution process continues for the 14 former Redevelopment Agencies comprising the High Desert Cities region, new partnerships between unlikely members are forming and new tools for regional economic development are being explored.
Redevelopment Dissolution Status in the High Desert Cities:
The 14 former Redevelopment Agencies, now called “Successor Agencies,” located in the High Desert cities region are: Adelanto, Apple Valley, Barstow, Bishop, California City, Hesperia, Lancaster, Needles, Palmdale, Ridgecrest, Tehachapi, Twentynine Palms, Victorville, and Yucca Valley.
During the past three (3) years since the State-mandated redevelopment dissolution process began, many cities, including some of the High Desert cities, still have much to do before their redevelopment wind-down process is complete. The timeline for winding down former RDAs has, for many California cities, been extended. The Department of Finance’s deadline to review and approve Long Range Property Management Plans (PMPs) is now January 1, 2016, per AB 1963, approved in 2014.
Out of the above 14 listed agencies, 6 have received their PMP approval from the State’s Department of Finance (DOF), 4 are still waiting to receive their Finding of Completion (FOC), which is only the first step in the process, and the remaining 4 are somewhere in the middle, working on their PMP, waiting for the DOF’s approval, or working through litigation.
Figure 1 highlights the status of redevelopment dissolution in High Desert cities:
Individual Successor Agencies within the High Desert region will need to achieve PMP approval prior to the DOF’s new deadline of January 1, 2016, or potentially be exposed to a loss of control as the unwinding process moves forward.
Once these cities complete the wind-down process, they can begin working on new and existing economic development assets and implementing new projects of community-wide significance.
High Desert Obstacles and Opportunities:
The cities of the High Desert Region share reasonably comparable demographics in many categories, as well as fairly compatible regional water, sewer and transportation issues. For years the region was hit hard by the recession and has experienced the impacts of diminishing revenues from falling property values, high foreclosure rates, and an unemployment rate that peaked at approximately 16%. These issues, coupled with the loss of redevelopment funding, have created cash flow problems for the area. Although the majority of California cities and counties see redevelopment dissolution as unfavorable to furthering economic development projects, for some regions like the High Desert Cities, there may be a silver lining as follows:
- Former RDAs are forced into maximizing the value of their properties by preparing them for development opportunities, primarily through a liquidation or re-use strategy.
- Instead of jurisdictions acting as independent RDAs amidst fierce competition sometimes involving closed “negotiation” meetings, new and collaborative regional solutions such as “Opportunity High Desert” (OHD) have an improved chance of prevailing.
- A new economic development tool called Enhanced Infrastructure Financing Districts (EIFDs) is now available to communities in the High Desert which, with some refinements, may emerge as a viable economic development tool.
“Opportunity High Desert”— Example of Regional Cooperation:
OHD, the region’s newest economic development marketing entity, which is a result of redevelopment dissolution, is one example of a creative regional solution to High Desert funding issues. OHD promotes cross-jurisdictional collaboration between 5 communities with one singular vision: to market the High Desert cities region to attract and retain business. Apple Valley Town Manager Frank Robinson spoke on OHD and regional collaboration expounding on the fact that: “Wherever a company locates, if they bring jobs to our citizens, we all benefit.”
The communities that consist of “Opportunity High Desert” are: Adelanto, Apple Valley, Barstow, Hesperia and Victorville.
OHD has experienced dramatic growth since its inception. Interested businesses and developers appreciate the value of meeting with an entire business-friendly region as opposed to meeting individually with jurisdictions. As a result of the program’s success, the collaboration is expanding into other areas of government and may grow to include joint public services and other cost-sharing endeavors. OHD serves as an example for other regions in California on how collaborative approaches to regional economic development can be more effective than locally sourced endeavors.
EIFDs: A New Economic Development Tool for High Desert Cities:
This shift in the High Desert Region complements new economic development tools such as Enhanced Infrastructure Financing Districts (SB 628), which return the potential to secure and use tax increment to California cities and counties (so long as school district property tax is not touched) and demonstrate a trend towards creating collaborative and sustainable funding mechanisms that promote cross-jurisdictional cooperation.
Enhanced Infrastructure Financing Districts (EIFDs), through SB 628, were signed into law on September 29, 2014. The new legislation provides legislative bodies such as cities and counties with a potentially powerful tool to assist in the economic development of their communities. Similar to former redevelopment agencies, EIFDs can use tax increment financing (TIF) to fund projects or to pay debt service on outstanding bonds.
Unlike former RDA’s, EIFDs cannot collect tax increment from K-12 School Districts, Community College Districts or County Offices of Education, so the amount of tax increment generated by EIFDs will be relatively less. However, in addition to tax increment financing, EIFDs can draw from numerous funding sources such as Proposition 1 (a water bond of over $7.5 billion); cap and trade proceeds through the Greenhouse Gas Reduction Fund (estimated to provide billions of funds annually in the coming years); infrastructure user fees; Vehicle License Fee backfill; and private sector investment, among many other options.
EIFDs can use any powers enumerated under the Polanco Redevelopment Act, which permits EIFDs to engage in brownfield remediation, as well as exercise eminent domain under specific circumstances. With such a broad array of funding sources, EIFDs are permitted to develop or implement a diverse array of projects with “communitywide significance that provides significant benefits to the district or the surrounding community.” Various infrastructure projects may be eligible, including storm water recharge and wastewater treatment, transportation infrastructure, as exemplified by public light rail and Bus Rapid Transit, affordable housing, childcare facilities, construction or retrofit of industrial structures, and open space, just to name a few.
Taking the High Desert Cities’ new collaborative approach to development, EIFDs are one example of a regional economic development tool that exemplifies a creative method of financing that the state has approved since redevelopment dissolution. Victorville’s Southern California Logistics Airport, a long-term economic development engine, is just one project that could potentially receive funding through an EIFD.
Sustainable Economic Development without RDAs; A Bright Future for Cities & Counties:
Although California lost its most powerful economic development tool when Governor Brown and the legislature dissolved redevelopment, new tools such as Enhanced Infrastructure Financing Districts demonstrate that there may be a viable economic development project financing program that would enable cities and counties to induce new projects that generate jobs and taxes. In addition to EIFDs, there is a variety of recently approved legislation that promotes economic development that reduces carbon footprint impacts and advances environmentally sustainable practices.
Propelled by these recent legislative approvals, the High Desert cities region, much like the rest of California, will soon be moving into a new era of “sustainable” regional economic development, driven by regional collaboration and sustainability, with an emphasis on infrastructure, which is motivated by a collection of creative and progressive new tools and regulations as listed in Figure 2.
As development expands beyond the Inland Empire, High Desert Cities should set their sites on regional collaboration such as the “Opportunity High Desert” initiative, as well as EIFDs, as a way to fund the necessary infrastructure improvements needed to attract private investment that will, in turn, bring new jobs and revenues to the region.