On the cover North Coast Journal


September 22, 2005

photo of Redevelopment and Its Discontents

story & photos by BOB DORAN

A FEW MONTHS AGO, AT A WORKSHOP CALLED BY COUNTY government's powers-that-be, Virginia Graziani, vice-chair of the Redway Community Services District, was surprised to learn that her own home -- a typical southern Humboldt house in a typical southern Humboldt neighborhood -- was deemed an eyesore.

It wasn't that a county official took her aside to break the bad news to her. Rather, in a long involved report put together to show the degree of "blight" in various parts of the county, Graziani found her house and her neighbors' cited as "deteriorated" dwellings, one step above "dilapidated." Her abode was evidence that the county needed to take action to combat squalor.

Noting that her house is in "a really nice part of town," and not in bad shape, Graziani could only guess at the criteria used to identify her home, and her entire Redway neighborhood, as a "blighted area."

"We don't have sidewalks," she said recently. "We don't have city street lighting. There are streets close to us that are not paved. A few buildings in the business district are in poor condition. There are a few homes that are in poor condition. My neighbors are a retired couple, and Virgil has an old car sitting in front of the house that he hasn't gotten around to fixing. And their house could use a coat of paint. Mine could too."

But for the county, apparently, the case was more serious. Graziani's home, and others like it, was evidence that Redway needed redevelopment.

For many Humboldt County residents, it went unnoticed. In December 2002, the Humboldt County Board of Supervisors passed an ordinance forming a Redevelopment Agency, as the county puts it, "in response to the need for economic development in deteriorating communities affected by the downturn in the resource based industries."

Of course redevelopment is not new. Eureka has had a plan in place since 1973. Arcata got in on redevelopment in the '80s. Fortuna followed suit not long after.

The Eureka Redevelopment Agency is pulling in approximately $3.1 million annually through what is termed tax increment financing. The typically low-profile agency has been in the headlines more than usual of late because a lawsuit brought by the Humboldt Taxpayers' League regarding the award of contracts for two projects on the city's waterfront.

While the scrutiny of Eureka's Redevelopment Agency and its advisory board have little to do with the county's unfinished plan, more people seem to be paying attention as the process set in motion in 2002 heads into the home stretch.

In October, the county's Community Development Services Department is slated to present the supervisors with an updated redevelopment plan encompassing eight unincorporated communities: Orick, Manila, Samoa-Fairhaven, Glendale, Fields Landing, Alton and Redway.

If all goes well, the 45-year plan could be adopted early in 2006. At that point the supervisors, who also serve as the board for the redevelopment agency, would entertain proposals for redevelopment projects. But there are those who would like to stop the plan in its tracks, or at least alter its course.

The community services district boards in Redway and Manila have asked for an advisory vote to determine if residents really want to be part of the plan. Meanwhile vocal critics have been doing what they can to inject their contrary opinions into the mix.

What is redevelopment?

"At one level redevelopment is hugely simple, but at another level it's tremendously complex," said Kirk Girard, who, as the county's director of community development services, serves as point man for the nascent plan. "At the simple level, redevelopment is nothing more than redirecting tax dollars to a community for infrastructure development."

California first adopted the Community Redevelopment Law more than 50 years ago as part of a nationwide "urban renewal" movement. Since then the law has gone through numerous permutations with tightened rules in the '70s and the '80s and major reform in 1993.

At its core the law allows a funding mechanism called "tax increment financing," which is used to repay redevelopment bonds. The basic assumption is that funds invested in any given community will spur growth and thus raise property values. When a piece of land changes hands, the value is reassessed and the taxes for the new owner go up. The increment -- the amount taxes rise above a base rate -- goes to the redevelopment agency instead of the budgets of cities, counties or special districts. (Some of the increment is returned to the special districts -- community service districts, fire protection districts and the like -- over time.)

Fight against blight

At this point, staff for the county agency is finalizing selection of areas to be redeveloped. Girard explained that the process was long and involved. After conducting what is known as a "windshield survey" -- a drive-by eyeball of the county's unincorporated areas -- the field was narrowed based on specific criteria that required evaluating every single parcel in each proposed area to see if it met the state definition of blight.

What are the elements of blight? "Dilapidated, deteriorated buildings are at the top of the list," Girard noted, adding that, "A lot of local communities qualify because there isn't a lot of discretionary income to keep up with maintenance, and maintenance gets deferred."

Other indicators: vacant lots, a lack of parking and adjacent, incompatible land use -- for example, an auto shop in a residential neighborhood, or commercial buildings next to homes.

Since redevelopment is aimed at "urban" areas, some parts of the county with multiple blight indicators did not qualify because they did not meet the threshold of "developed" before they deteriorated.

As Graziani noted, Redway is not your typical blighted community. And she, along with many of her neighbors, aren't sure they want the cure that the county is offering.

Does she want sidewalks and streetlights? "Not personally," she said, acknowledging that others in town might want them, and that there are business owners who wouldn't mind a façade grant or other amenities that could come from redevelopment funds. Do they need them? She doesn't think so.

"If you look at Redway's business sector, it has burgeoned, despite the fact that the county as a whole is economically depressed. Why do we need redevelopment? We're building our business sector without it."

Then why was Redway included in the plan? Graziani figures it was a political decision. Leaving Southern Humboldt out of the plan completely wouldn't look good. Garberville did not meet the blight threshold.

"Of course there are depressed areas: Myers Flat, Phillipsville and Redcrest all had mills once. They were on the windshield list, but they did not meet the urbanization standards. There are not enough people living there. It's unfortunate, because those are communities that could potentially have benefited from redevelopment."

Girard conceded, "Redway is more wealthy than any of the other areas and that automatically made it a questionable candidate. You have to ask, why has it grown? Where is the economic vitality coming from? I think we all know."

Without being specific, Girard was clearly referencing the area's marijuana trade. "In terms of the ebb and flow of economy and capital, Redway was once a timber community, then it became a rural land base for what is largely an illicit economy. In the long run, that illicit economy might not be sustainable. You have to ask, `What might be next? How can we diversify beyond this one particular industry?'"

Rebellion in Redway

Graziani points out that Redway is one of the only areas that put up resistance to the plan. When county representatives came to town for public input, they got an earful of negative comments. The RCSD ultimately placed an advisory measure on the coming November ballot.

"I can't say how it will turn out, but everybody I've spoken to in Redway has been opposed to [inclusion]. We're concerned. We're taking a risk by joining redevelopment. It will be our revenues [the service board's] that will be tapped into for the program, ours and the fire department."

Graziani says she does not oppose redevelopment in general. "It just doesn't look like a good deal for Redway," she said, noting that other communities do have serious problems that redevelopment might be able to address.

"In Orick the infrastructure is virtually non-existent. In Willow Creek they need a whole different kind of [sewage] collection system if they're going to have any kind of expansion in their town. So it's probably worth it for them as an investment. But we have all of our infrastructure in place. While there's always room for improvement, we don't have any critical needs."

Recent plan projections for expenditures show that planning staff currently imagines that the county redevelopment agency would invest $2.8 million in Redway, more than any other community besides Samoa. "That's because we're contributing more than anyone else," said Graziani with a laugh.

"The [property] values in Redway are already quite high and the growth in this area is increasing at a very rapid pace." She figures land prices will continue to increase, with redevelopment or without.

"What will happen, if we get sucked into this thing whether we want it or not, they'll say `We have $2.8 million to spend in Redway, now we're inviting projects.' People will come in and make proposals, and the agency, which is the Board of Supervisors, will select which projects."

It's safe to assume that infrastructure projects and façade grants for Redway businesses would have a positive effect on property values. Also, Girard claims the area has been clamoring for additional affordable housing.

While there is little objection to the county spending some money in Redway, the use of tax increment financing to repay redevelopment bonds has a side effect: Less money goes to the town's special districts.

"When money goes into the redevelopment pool, it's taken away from the services district and from the fire district," said Graziani, pointing out that the RCSD can raise water and sewer rates to make up the difference, but the fire department cannot.

If redevelopment is successful in bringing in new homes and businesses, and the Redway Fire District is stuck with a stagnant revenue stream, the fire district's rating will drop. "That means that every property owner will pay more for fire insurance," said Graziani, "and they'll get less service."

Graziani worries that the costs are distributed unevenly. "If you talk to business leaders, they're all for redevelopment. They don't have to pay for it." While businesses can pass increased expenses on to their customers through higher prices, and landlords can raise rents, the return for residents living in their own homes only comes if they sell their property.

Has Redway's vocal opposition to the plan had any effect? It has.

County Economic Development Coordinator Jacqueline Debets acknowledged that redevelopment staff may suggest that the town be dropped from the plan at the update meeting in October.

Debets still feels that there is support for the plan in Redway, but it's "not motivated" as much as the opposition. "And the need is not as dramatic as in some of the other places," she concluded.

Gadflies and number-crunchers

While they do not live in a community included in the plan, McKinleyville residents David and Penny Elsebusch have taken on the role of political gadflies attacking the plan, which they view as "flawed," whenever they can. At a July meeting of the Board of Supervisors, their suggestion that the plan be put to a vote countywide was rejected.

The Elsebusches' basic premise is that the general public needs a better understanding of the ramifications of bringing redevelopment to outlying communities.

"The redevelopment industry so to speak -- developers, bonding people, consultants and so on -- they thrive on public ignorance," said David, describing redevelopment as "like a credit card" used to buy something you can't afford.

"Manila wants a new community center, but how are they going to pay for that?" he asks. His wife, Penny, contends that generating the necessary returns in some areas will require "building shopping centers and Home Depots, $10 million projects that bring in huge tax revenue."

She offered Willow Creek as an example. "They don't want any big commercial [development]. They don't want industrial. They don't want fast food. They don't want a big motel. They don't want a shopping center. Where's the money going to come from to pay back the bond they'll use to build a sewer system?"

She suggests that Willow Creek and Orick, where failing septic systems are hindering development, would be better served by grant funding from the state.

The Elsebusches' question agency staff's analysis of revenue projections, claiming that the plan "just does not pencil out."

"That's not true," counters Debets, since the projections only assume a "very conservative" 1.5 percent increase in property values per year. "If all you did was make it possible for them to have adequate sewage [treatment] you would see an increase in property values." Commercial development would not be required. "Penny says that all the time; it's a scare tactic."

The prime worry for Glenn Ziemer, fire chief of Humboldt Fire District No. 1, is the effect of the redirection of tax revenues into redevelopment and away from special districts, in particular the fire districts.

Ziemer's own agency will barely be touched by the redevelopment plan as the county currently envisions it. Out of 56 special districts in the county, 17 -- about 30 percent -- will be affected by the diversion of redevelopment funds, some more than others. The budgets of special districts are only affected to the degree that they overlap with redevelopment zones, and only the Field's Landing redevelopment zone is in Humboldt No. 1's area of responsibility.

But Ziemer is still concerned. He sees this as a bad time for such a shift, in light of the financial crunch that has plagued the county budget for the last few years.

"This is a transfer of money. It is not a new revenue source. So what you're doing is taking what is basically the only increasing portion of the county's general fund, property taxes, and dedicating it to a very specific purpose for 45 years, taking it out of the realm of any kind of discretionary expenditure."

Ziemer says he has attended a number of the dozens of public meetings held by community development staff touting the redevelopment plan. He complains that discussion of the potential negative effects of the plan has been left out in favor of what he calls "what-toys-do-you-want-for-Christmas" sessions where attendees are asked what projects they'd like to see in their communities.

"The devil is in the details," says Ziemer, who has spent months poring over the county's spreadsheets, questioning projected outcomes and disputing bottom lines.

Debets, stung by persistent criticism of budget figures by Ziemer and the Elsebusches, stated adamantly that "the numbers are good."

One of Ziemer's contentions is that the agency's projections for the growth in tax increments depend on a near-constant turnover of every piece of real property in the redevelopment zones. (Since Proposition 13 limits property tax increases, there is no substantial tax increase without land sales.)

"That is an error," said Girard, flatly.

Debets fear is that "misinformation" about redevelopment financing often goes unquestioned. "If you say that the numbers don't work, most people won't look at them because it's uncomfortable for them. We're talking about big, complicated spreadsheets with tiny numbers."

When it comes down to conflicting analysis of data arrays, "that's the horribly complex side," said Girard. "If you are a redevelopment detractor, you can work with the complexity of the financing, and, based on the assumptions you make, have your philosophy reflected in the conclusions that you draw. And because it's so complex, it's hard to get to the bottom of it."

Girard said he and his staff have met with Ziemer repeatedly to explain and/or refine the agency's number crunching. "I have committed to his [district] board that there will be no economic mysteries."

Ultimately, it's the bond merchants who determine whether the numbers pan out or not. Girard emphasizes that "they won't allow you to do pie in the sky growth assessments. You make very conservative assumptions. Typically it will be something like the growth you would see without redevelopment."

Big government

Conservative pundit Jerry Partain serves as vice-president for the Humboldt Taxpayers' League, a group that has been a thorn in the side of the Eureka Redevelopment Agency. Earlier this year the league filed a lawsuit challenging the selection process for a couple of redevelopment projects slated for Eureka's waterfront.

While the taxpayers group has not weighed in on the county redevelopment plan, Partain was quite wiling to offer his personal opinion.

"My concern is that the redevelopment laws give too much authority to too few people," he began. "That's exactly what we're fighting right now in Eureka. I'm opposed to the authority it gives the [Board of Supervisors], who will be able to impose a $26 million bond issue on the taxpayers without even a vote.

"Why should five people -- and I don't care if they are elected city or county officials -- why should they decide what development should occur in their jurisdiction rather than letting the private sector decide? It's a socialistic, communistic type of arrangement that I don't approve of at all.

"That's my basic objection to redevelopment: Government agencies will decide what development will occur. The bureaucracy on the redevelopment end just grows and grows, and more power is concentrated in these five people."

While he makes no specific accusations, Partain's fear of concentrated power lies in the potential for cronyism.

For David Elsebusch, the whole redevelopment plan boils down to one thing. "It's all about Danco and the plans for the town of Samoa," he said.

In 2000, Dan Johnson, of Danco Builders, and Lane DeVries, CEO of Sun Valley Floral Farms (and their wives) joined forces to purchase the former mill town, forming the Samoa Pacific Corp. In 2002, they laid out an $80 million master plan that includes, among other things, a hotel/convention center complex with a spa, a performing arts center with artist lofts, an RV park, senior and affordable housing units, a wastewater treatment facility and a 35-acre industrial park.

Community development staff have identified what Girard terms projects that have "risen to the top" as candidates for funding, based at least in part on their potential contribution to the fund. Girard would not confirm it, but it's highly likely that Samoa is on that list. A preliminary report on the county plan used Samoa as a "case study" on the potential benefits of redevelopment, stating that, the Samoa Town Master Plan "would greatly benefit from, if not depend upon, establishment of a Samoa redevelopment area."

According to Girard the redevelopment agency's initial interest in Samoa is as a potential location for an industrial park, probably through a direct purchase. "In that way we could have a relationship with [them] as one of many potential purchasers of the property. We have to pay fair market value like anyone else."

Johnson said he would be happy to sell the agency some land, but he does not seem interested in seeking other redevelopment money. "It's so expensive and there's so much bureaucratic red tape, it doesn't make any sense to use it. For [the project in] Samoa, we're not counting on the redevelopment monies doing anything."

As to the Elsebusches' accusation that the whole redevelopment project was conceived to provide funding for Samoa Pacific's grand plan, Girard says complaints of that sort are common among those who "either object to redevelopment or don't understand it."

"We hear people say `It's all going to Willow Creek for a sewer project.' And people in Orick say, `It's all going down to Redway for a downtown street.' If you look at the entire program from a holistic view, you'd see it's impossible to tease out a single project and say, `That's the driver.'

"The driver is the county saying it's our mission to provide infrastructure and housing for the community and to help businesses grow because our economy has gone through a major structural shift that has hurt us in many ways -- left decrepit communities, brownfield sites, a high social-service load. And because this is happening in unincorporated areas, we have to assume a rightful role in stewardship. That is the issue."

As he continued, a rare note of anger crept into the voice of the otherwise mild-mannered Girard. "To say that overall county purpose would be subsumed by some little sweetheart deal for a particular developer is a very unenlightened view of what we're trying to accomplish. And that's all I have to say."

But it wouldn't take a scandalous sweetheart deal for redevelopment to have a profound effect on business in the county. On the one hand, redevelopment would presumably usher in a wave of construction in targeted areas, putting people to work and potentially creating lasting improvements to various communities across the county. On the other, there is little doubt that for many cash-strapped community services districts and fire departments, any bite out of their future budgets could have serious consequences on their ability to provide services.

Redevelopment Agency staff plans to present a revised version of the redevelopment plan at the regular meeting of the Board of Supervisors on Oct. 18.


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