San Jose’s storied redevelopment agency — the state’s second largest as measured by property tax revenue — will end on Feb. 1 with a whimper, not a bang.

Even before last summer, when the state Legislature signed off on Gov. Jerry Brown’s proposal to shut down all of the state’s agencies and divert their funding to pay for schools and local government services, the city’s redevelopment agency had axed dozens of positions. Its history of issuing too much debt, recent plunging local property tax assessments and continued cash grabs by the state had prompted those cuts, beginning in late 2009.

While that inadvertently helped to dull some of the pain here, other cities are feeling the impact all at once. Oakland, for example, recently announced it may have to lay off up to 400 employees whose pay is subsidized by redevelopment money. As the state’s Feb. 1 deadline looms to dissolve the agencies and establish successor entities to oversee their payments and priorities, the redevelopment fallout from Morgan Hill to San Mateo is reverberating around the South Bay.

“I guess we are fortunate that we had layoffs a few years ago due to the realities of the economy,” said San Jose Mayor Chuck Reed of the latest turmoil. “Many other cities are not, and are having to do it in very short order.”

San Jose’s once robust agency, with 134 employees at its zenith in 2002-03, has only 14 employees left, half of whom are contract workers. Even the agency’s

largesse that had helped pay the salaries of police officers, city workers and elected officials — about $11.2 million in 2010-11 — ended last summer.

“I’m very proud of what the agency has been able to accomplish over the last 20 years,” said agency managing director Richard Keit. “But there’s also sadness, not only for the staff that’s gone, but for the loss of a powerful tool that has created economic development for our city.”

Over the decades in San Jose, the agency financed such downtown marquee projects as the Fairmont Hotel, the HP Pavilion and the convention center. Now, its revenues will just cover the cost of the agency’s remaining staff salaries, a handful of projects already approved, and payments on its massive $3.8 billion of debt. It will take years to pay off those obligations before any money can be sent to local schools or services.

Yet other agencies with less debt will be able to help schools and special districts immediately, as Brown intended.

In Santa Clara County, nine cities maintain some kind of redevelopment agency; in San Mateo County, 12 cities have redevelopment agencies. Santa Cruz County’s agency went dormant last year, but its four cities all have redevelopment agencies.

The state Legislature created redevelopment in 1945 to eradicate blight that hampers economic development in a community. When a blighted area with low property value is developed, its property value increases and the difference, called “tax increment,” is collected by the agencies. That money is used to issue debt to pay for the next redevelopment project, a process that’s helped agencies finance major civic projects, affordable housing, community centers and business and neighborhood improvements.

Critics, however, say agencies have abused the definition of “blight,” and that development has increasingly come at the expense of taxpayers, who have been subsidizing private real estate ventures.

As city officials are crunching numbers to determine how many redevelopment-related jobs and projects will have to be cut, this newspaper found:

Article source: http://www.mercurynews.com/bay-area-news/ci_19793159