SILICON VALLEY/SAN JOSE BUSINESS JOURNAL

"Redevelopment agency asked to close projects"

- Timothy Roberts

The Santa Clara County Civil Grand Jury has called on the San Jose Redevelopment Agency to close its older projects to free up property tax revenue that is being diverted from schools and social services.

The grand jurors also called on Santa Clara County to reconsider an agreement with the city of San Jose in which it committed to lobbying the state Legislature to extend the city’s older redevelopment projects.

The report was adopted by the grand jury May 29, just a week after the county and city signed their agreement.

The grand jurors concluded that the agency's success should put its original successful projects out of business.

But the report was among a dozen the 2000-2001 Civil Grand Jury released July 24 at the conclusion of its term. Such delays are not uncommon among grand juries.
The reports cover topics ranging from use-of-force training at the San Jose Police Department – to which the grand jury gave its OK – and the relationship of San Jose Mayor Ron Gonzalez with a city staffer. In the latter case, it found no laws had been broken, but called on the city to adopt a “no fraternization” policy.

Each year the Civil Grand Jury looks at the operation of cities, the county and other government entities in the county. It can issue reports but cannot indict anyone.

By taking up the redevelopment issue, the grand jury stepped into a highly contentious arena. San Jose and Santa Clara County have been arguing over redevelopment for a decade. The reason is control of tax money.

Redevelopment areas siphon off any increase in tax revenue once a redevelopment project begins. That takes money away from the county’s social services and from schools. The state, recognizing the potential for trouble, makes up a portion of the school funds, but leaves counties to otherwise fend for themselves.

San Jose and Santa Clara County settled their argument in a deal approved by the City Council and the county Board of Supervisors on May 22. The city agreed to pay the county $208 million between 2004 and 2014 to compensate it for the money its redevelopment projects siphon off. In return, the county agreed to help the city lobby for an extension of its redevelopment projects, which, under state law, would be phased out starting in 2004.

The grand jury findings included the observation that the redevelopment agency “is allowing its older project areas to continue to generate (tax revenue) after the original project has been completed.” It also noted that the city’s plan to revitalize neighborhoods would require money from these old projects for some time to come.

The agency derives 65 percent of its income of $140 million a year from its North San Jose development project that includes glistening office buildings along First Street. Part of the Cisco Systems campus is included in the project. The redevelopment agency, however, says that money is needed to fund much-needed work elsewhere. To make that money available, it has merged all of its projects into one super project area, allowing it to earn money in one sector and spend it in another.

Agency director Susan Schick says funding from areas such as North First Street is necessary for neighborhood projects. But the grand jurors concluded the agency’s success should put its original successful projects out of business. “Redevelopment has resulted in changing so-called ‘blighted’ areas into revenue-producing commercial and industrial developments,” the report says. “There is no obvious need for the continual merging of redevelopment project areas.”