Redevelopment door may be shut Redevelopment door may be shut (January 21, 2004)

Governor's proposes snatching city funds to balance budget

by Don Kazak

As the city grapples with tough budget decisions, a potential door to financial growth may be shut before Palo Alto can even use it.

Gov. Arnold Schwarzenegger's proposed state budget hopes to cure the state's fiscal ills in part by taking away money from municipal redevelopment agencies, which is sure to trigger a sharp and angry response around the state.

The redevelopment agencies are attractive for cities because they can trigger new development and then allow cities to keep more of the resulting sales and property tax revenue than normal.

But the governor wants the state to have a bigger share of the increased revenue, reducing the incentives for cities to pursue redevelopment efforts.

"It is one of the few tools we have to grow the economy," said City Manager Frank Benest. But he adds, "It is a proposal. Just because the governor makes a proposal doesn't mean it will stick."

Palo Alto formed its agency in 2001, when it intended to redevelop the Edgewood Plaza Shopping Center. That effort was abandoned last February, in part because redevelopment area was too small to make it work.

If the city looks for another redevelopment project, "it would have to be large enough to take that kind of hit" the governor's budget is proposing, Benest said.

Both Menlo Park and East Palo Alto have long made successful use of redevelopment agencies. Menlo Park used its agency for a facelift along Willow Road and in its Belle Haven neighborhood east of the freeway, where new housing and a new neighborhood shopping center were built.

East Palo Alto has used its redevelopment agency as the engine for its growing economic self-sufficiency and success. The University Circle office towers, the Four Seasons Hotel under construction, and its shopping center with large retail stores like Home Depot and IKEA are all results of redevelopment agency efforts.

Don Kazak can be e-mailed at dkazak@paweekly.com

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