Placentia’s financing partnership with the County to overhaul its Old Town streets, sidewalks, sewers and other infrastructure shouldn’t be as risky as redevelopment agency projects in the past, according to a land use expert.
“They can only do infrastructure upgrades,” said Kenneth Stahl, a Chapman University political science professor who specializes in land use policy. “… one of the things that was controversial about tax increment financing was redevelopment (when redevelopment agencies were still around). So they would demolish a bunch of homes for an auto mall.”
“So I don’t think it’s going to be as controversial,” he said.
The financing district took its first steps April 23 when the Board of Supervisors approved the partnership with Placentia. According to agenda documents for that meeting, the financing district will create roughly 1,600 affordable housing units and could attract 125,000 square feet of commercial and retail space and a hotel. Placentia has a population of just over 50,000, according to the 2010 census.
Roughly 3,900 construction jobs will be made and 1,150 permanent jobs are projected to be added to the Old Town area near Melrose Street and Chapman Avenue.
The financing district can’t directly pay for private development like shopping centers and malls, but instead relies on the upgraded sidewalks, roads, sewers and other infrastructure to attract new development to the project area — unlike the redevelopment agencies the financing districts replaced.
The Placentia/County partnership is the first city and county partnership in the state.
Before former Gov. Jerry Brown disbanded redevelopment agencies across the state in 2011, agencies faced a series of issues, including taking money from school districts to help pay private development without paying the funds back or designating public golf courses as “blight areas” to begin redevelopment projects — according to a 2011 study conducted by former State Controller John Chiang.
The Controller looked at 18 redevelopment agencies across the state, including Placentia. While Chiang found no specific issue with Placentia’s redevelopment agency at the time, he did write all 18 had issues following state financial reporting guidelines.
Placentia City Manager Damien Arrula said the financing plan, known as an Enhanced Infrastructure Financing District (EIFD), won’t use general funds or the city’s reserve money.
“We will be establishing a restricted fund based on the Infrastructure Financing Plan. No general fund or reserve dollars will be used to fund the Infrastructure Financing Plan,” Arrula said in an email.
Tax increment financing is basically jurisdictions funding redevelopment and banking on higher property taxes after the projects are finished to recover development costs and generate new tax revenue because the area should be able to attract new property owners and businesses.
Unlike redevelopment agencies, the financing districts can’t issue bonds without voter 55 percent approval and can’t use eminent domain to secure property.
Stahl said because of the restrictions, the financing districts haven’t been too popular in the state, compared to redevelopment agencies.
“They have to get voter approval (on bonds), which is what they didn’t have to do with redevelopment,” Stahl said. “They can’t steal money from other jurisdictions in the area and they can’t do redevelopment (like malls and shopping centers) … those are the three things that made redevelopment popular.”
He also said the state law governing the finance districts doesn’t make them as powerful as the old redevelopment agencies.
“We’ve only seen a few of them, so I suppose it’s possible that cities can manipulate it. But the way it’s set up right now, it’s not that powerful of a tool, so I don’t think it’s really controversial,” Stahl said.
The city of La Verne created a finance district last year for much the same reasons as Placentia, but didn’t partner with Los Angeles County.
But a state Senate Bill removing the voter approval requirement is working its way through the state legislature and is currently in the Assembly Committee on Local Government. The bill would require financing districts to hold three public hearings on the possibility of issuing bonds and gives residents a way to reject the bonds.
“The public financing authority shall terminate the proceedings if there is a majority protest. A majority protest exists if protests have been filed representing over 50 percent of the combined number of landowners and residents in the area who are at least 18 years of age. An election shall be called if between 25 percent and 50 percent of the combined number of landowners and residents in the area who are at least 18 years of age file a protest,” reads the bill as of May 14.
The financing districts are geared more for core infrastructure upgrades like roads and sewers in an effort to revitalize a project area and attract new developments, businesses and property owners, like what Placentia is attempting to do.
According to the 2014 state law establishing the financing districts, the districts can use the money for “the acquisition, construction, or rehabilitation of housing for persons of low and moderate income for rent or purchase.”
According to the state Housing and Community Development department, people who make 50 to 80 percent of the area’s median income (AMI) are considered low income, people who make 30 to 50 percent are very low income and people who make up to 30 percent are extremely low income.
For Orange County, low income means a single person makes between $38,300 and $61,328; if a person makes between $22,980 and $38,300, then they’re considered very low income. Anything less than $22,980 is considered extremely low income, according to 2018 affordable housing income guidelines from the state housing department. The threshold numbers increase alongside the number of people in the family.
Instead of paying for affordable housing directly, Placentia is looking to attract affordable housing builders through the Old Town overhaul, Arrula said.
“EIFD will not pay for any affordable housing development and per EIFD law, eminent domain is prohibited. EIFD will generate interest by private developers in creating affordable housing and other mixed use developments in the City,” Arrula said.
Spencer Custodio is a Voice of OC staff reporter. You can reach him at firstname.lastname@example.org. Follow him on Twitter @SpencerCustodio