CALIFORNIA
California had created its first TIF redevelopment agencies in 1953 but TIF itself had yet to diffuse nationally or become the major economic development tool it would shortly become. But after 1978, TIF and RDA formation exploded in California. This explosion occurred after the approval of Proposition 13 in 1978. Probably as many as two-thirds of California’s 400+ RDAs (as of 2011) were created post Prop 13. In California this RDA-TIF explosion allowed an aggressive use of TIF as a jurisdictional sales tax capture strategy and as a public development agency-planning agency alliance in which these local departments would partner with private development corporations in Greenfield construction of new office, housing, infrastructure and retail projects.
California is a nation in its own right. Its 2016 GNP is larger than India and roughly equivalent to France. It is sixth globally. Texas, by comparison, would be fourteenth largest GNP. The sheer size economically and population-wise of California, our most populous state, ensures that if it exists in American state and local economic development, it probably can be found somewhere in California. Its sheer size and its centrality to global economic growth has partially sheltered the state, and its jurisdictions, from negative impacts of our three competitive hierarchies. California exhibits, in my opinion, a certain “insularity”, a firewall that sets it apart from other states.
More importantly to this history, it means there is no way we can pretend in a comprehensive history to do justice to the state. Rather, it is necessary that I select some themes and topics that are either essential to understanding California state/local ED/CD or which offer special value to those in other states.
One such topic is environmentalism, which some might classify as regulation and an element of business climate, while others would argue is an essential element of post-industrial economic development. Environmentalism has fueled California-styled CD and the rise of neighborhoods in American state and local ED. Another topic, tax increment financing (TIF) and California redevelopment agencies arguably is a prominent element of the state’s and local jurisdiction’s ED strategy. A third theme is how California state and local ED has been noticeably, if indirectly, affected by policy system and budgetary requirements injected into policy-making through the state constitution by means of initiatives and referenda.
While the state government itself has not especially injected state dominance over local ED, indirect state constitutional factors have exerted a massive impact on local ED/CD. In any case, because of growth, the “California” that existed at the start of the Transition Era (1970), is not the “California” that that ended the Transition Era and entered into the Contemporary Era (2001). Metaphorically, California in the Transition Era can be divided into two “Ages”—a pre-Proposition 13 and a post-Proposition 13. The Contemporary Era (post-2001) witnessed the arrival of dramatically different local policy systems.
If these topics were not sufficient, it cannot be ignored that ED/CD in California reflects “growth” politics and ED policy systems mostly in growth mode. With inevitable exceptions, California in the Transition and Contemporary Ages have been growing both economically and population-wise. While some jurisdictions (Oakland, for example) share much of the problems found along the East Coast hegemonic cities, and other jurisdictions (Stockton, e.g. and even Orange County) have witnessed serious financial issues from various causes, they have done so in a state-environment of growth and prosperity. Home to Silicon Valley, and the tax receipts and job creation it generates, have provided a “floor”, albeit unlevel, to California ED.
Huge immigration (from Mexico, Central/South America and Asia) and internal generational cohort migration flows have transformed the demographic base of the state and radically reset the dominant political cultures of the state. To put it another way, long-standing political cultures have been replaced by new political cultures and new policy systems have resulted. Los Angeles is an obvious example—and so is Orange County. Overall, it can be argued that these population shifts have exerted a greater impact on local ED/CD than economic growth and innovative entrepreneurship. The jagged tensions between economic growth, substantial population change and sheer size have exposed California to the label of being “Paradise Lost”[i], a state whose impressively modern and superbly competent government and vibrant economic base is often overwhelmed by pressures engendered by population change. Economic development in the Contemporary Era has been seriously impacted by the adjustment of its jurisdictional policy systems to these tensions.
Pat Brown: California’s state “master-builder”
We have to start somewhere—and that has to be with the governor often called “the creator of modern California”: Pat Brown (for those history-challenged, yes, it is Jerry Brown’s dad). Pat Brown “ruled” between 1959 and 1967; while he beat Nixon in 1962, he lost his third term to Ronald Reagan (1966). Pat Brown is a resident of the Age of Urban Renewal, the last phase of our Classical Era of American State and Local ED.
Pat Brown is a creature of the past, much like Robert Moses with whom he overlapped and can be compared no matter how different in personality, career and background they may be. Moses built modern NYC; Pat Brown built modern California. They did so using many of the same ED tools. Both were pioneers of urban renewal. Pat Brown can be linked with Nelson Rockefeller, governor of New York, also elected in 1959; Rockefeller severed through 1973. Brown and Rockefeller were rivals– the two states competed intensely. In 1962 California became the nation’s most populous state, overtaking New York. That shift produced the first ringing of the rise of the Sunbelt bell.
According to Henton, Waldhorn et al.[ii] neither California nor Pat Brown followed “an explicit economic development strategy” during the fifties and sixties. During these decades, whatever they did was mostly driven by population growth, and the need to accommodate ever-increasing and never-ending large numbers of new residents—mostly at that time from internal migration and federal war (Cold or WWII) production/industrial decentralization. If so, there is no need to make a case that anyone at the state level consciously laid the ground and prepared the way for California’s leadership in knowledge-based economic growth and technological innovation. Not to make too fine a point, little done at the state-level had directly triggered the rise of Silicon Valley (state law did inadvertently favor patent and venture capital financing at least as compared to Route 128)—probably so did its business climate.
Speaking of business climate it was Pat Brown in the course of his first campaign that defeated a right-to-work referendum (Proposition 18) and for the first time allowed the Democratic Party to control the governorship and both houses of the state legislature simultaneously—ending a Republican dominated (badly apportioned) state policy system that began in 1918. That policy system shift was augmented by a Brown-led 1962 state constitutional reform and the 1964 federal Supreme Court decision, Reynolds v. Sims (377,US 533), effectively ended California’s electoral malapportionment (which augmented Los Angeles electoral power compared to San Francisco). It is at this juncture one can see a notable shift in state policy outputs from the past.
To the extent Brown followed a formal ED strategy, it was infrastructure (especially highways and water-related facilities) and “buildings”—mostly university campuses. His organization (the 1960 Masterplan for Higher Education) and dispersal of California’s university system remains essentially in place today. Working with the Kennedy administration he secured exemption from the federal New Lands Reclamation Act which limited private acreage ownership of federal land to 160 acres (limiting industrial and commercial use/as well as public). Brown’s California State Water Project (also advanced by his son decades later) corrected a chronic water undersupply and extended water into central California. The Water Project include a series of pipelines, electric generating plants, pump stations, aqueducts, and water reserves. His masterplan detailed a series of capital investments through 2015.
Interestingly, Pat Brown‘s establishment of a state Office of Economic Opportunity in 1964, intended to take advantage of the federal War on Poverty OEO programs, resulted in the formation of a number of Community Action Agencies throughout California (all fifty-eight counties as late as 2017). In 1996, a legislative initiative during the Pete Wilson administration, elevated the Office to a Department (Community Services and Development) within the super-agency “Health and Human Services”. These agencies are major players in a sizeable sub-state community development approach—dedicated to helping low-income families achieve self-sufficiency, evolving into home energy, state and federal earned income tax credits, lead-free programs and in recent years solar and drought assistance.. In 2017, the Health and Service Agency remains as one of the twelve departments of the super-agency California Health and Human Services.
On top of this, it was Brown’s use of a relatively new-fangled and untapped ED tool, TIF[iii], that launched his rebuilding (using local redevelopment agencies as well as state and local financing) of the government complex for the State capitol, Sacramento (the so-called Sacramento 1960 Capital Plan). That he did so to compete with Rockefeller’s famous Albany, “the Empire Plaza egg” complex was alleged an added feature. That the timing, if anything was reversed—Rockefeller did not start construction until 1965 after the Sacramento project was well on its way (and both extended for a decade after)—suggests a bit of an urban myth is in the making[iv]. TIF itself was used primarily by the Sacramento Redevelopment Agency for city-projects (neighborhood and housing) some of which were tied to the State project. Whatever its complexity, the Sacramento Plan and the use of TIF became linked and TIF, highly publicized at the time, enjoyed a prominent reference certifying its legitimacy and potential utility/effectiveness.
Brown did attempt to put some order to all this in 1963 when he formed a task force to compose a “California State Development Plan”. The plan[v], issued in 1966, reviewed how issues such as population and economic growth, urbanization, the environment interrelated. It called for “growth management” (which shall be discussed in a later section) and stressed the link between growth and environment. Never formally adopted by the legislature, Reagan upon assuming office simply let it die. Brown’s third term was probably stymied by his calling out the National Guard in response to the 1965 Watts Riot. Deeply unpopular, the aftermath of Watts weakened Brown and helped Reagan. In his eight years, Pat Brown doubled state expenditures and its workforce. Kotkin & Grabowicz asserted that those two administrations “California had its New Deal, Fair Deal, Square Deal, New Frontier and Great Society all rolled into one”[vi].
Ronald Reagan
It is tempting to assert that, when looking at Reagan’s ED record in both California and Washington, Reagan did not prioritize state and local ED. Believe it or not, he did not initially support even the Economic Development Zone strategy—a strategy that today is linked to him. My sense, by no means conclusive, is, however, the opposite. Reagan believed strongly in state and local ED, his devolution strategy while in Washington clearly empowered states and pulled back from cities. He also limited the federal government pursuit of community development strategies. He did not stress direct government assistance to business; he tried to defund SBA, limit IRB federal tax involvement, and EDA, and his record as governor does not link him to the traditional mainstream ED strategies. Rather, he stressed “macro” ED strategies such as tax cuts, fiscal austerity, balanced budgets—supply-side not Keynesian economics—and relied on a favorable “business climate” to encourage economic growth—which he prized highly. This is more “laissez-faire” economic development than most are used to in these modern eras. Indeed, his community development, people-focused initiatives—notably the earned income tax credit—are also macro tax-based rather than programmatic ED initiatives.
Henton et al (in Fosler) observe state ED strategy is strongly linked to the temperament and philosophy of the governor—and logically changes with each administration. I agree, with the strong qualification that one cannot discount the impact and influence of the state legislature which can be quite capable of carving out its own path to ED/CD. During his first administration, the California legislature, probably among the most “capable” in the nation, was mostly reactive concerning ED; that would change under his successor, Jerry Brown and in Reagan’s second administration when in 1971 the legislature created its own EDO, the Commission for Economic Development, that served primarily as a vehicle to project legislator’s perspective into the policy area. In later administrations, it would assert a larger presence.
Reagan did employ the private sector to devise and implement his state ED program. He appointed a 250 member business task force to review state agencies and the size of state government, improve the efficiency of government services where such are deemed appropriate, and remove unnecessary regulation. Reagan inherited (from Brown) a state EDO system organized into six “super agencies”. The only department related to economic development (leaving aside agriculture and natural resources which overlapped into infrastructure) was the Dept. of Industrial Relations which was lodged in the super-agency “Regulations and Licensing”. Reagan reduced Brown’s six to four super agencies and moved ED to “Business and Transportation”. Importantly, Reagan also created a new Dept. Commerce which reported directly to him, the governor. That Dept. managed business “contacts” and marketing. Still, “economic development [did not have] high organizational visibility in California state government”. From the 1950’s through the early 1970’s local jurisdictions and state government did not “focus explicitly on attracting and retaining business and jobs. Their underlying belief was that California’s basic attractiveness was sufficiently powerful as long as government took care of the basics: education, infrastructure high quality public services”[vii]. That would change in the later seventies when recession, a temporary decline in Silicon Valley, and a prevalent image its business climate had deteriorated made California vulnerable.
In 1972 the state legislature passed legislation (Chapter 1406) passed a bill that radically restructure the financing and role of sub-state economic development. During the Age of Urban Renewal—which was then coming to a close—local governments were not limited in the types of taxes and fees they could utilize without recourse to voters. Urban renewal projects in this atmosphere were conducted by city –EDOs, and redevelopment agencies—and California’s famous innovation, tax increment financing (approved by a 1952 Proposition 18 to find a way to raise the local share to garner federal subsidies) was only one of several ways to finance urban renewal and redevelopment. California, a rapidly growing state, however, had great need for “development”, i.e. greenfield projects as well as redevelopment of existing sites—which usually had to meet state/federal standards for “blight”. TIF-based redevelopment agencies grew slowly in these years as a result. Chapter 1406 changed all that.
Chapter 1406 created a system of K-12 financing that in effect set a floor for local school district revenue raising using a combination of local property tax and state funding. If growth in the level of local property taxes did not keep up with the floor, then the state stepped in with its funds. Local governments desirous of pursuing new development (and redevelopment) needed to better control growth in property tax receipts so that it could finance such projects rather than go to the school district. Redevelopment agencies at that time were not required to make payments derived from TIF bond payments and PILOTs to local school districts so redevelopment agencies employing TIF constituted a loophole in the Chapter 1406 structure. By 1976, the number of California RDA TIF districts skyrocketed to 229 and by 1977 redevelopment agencies captured 2% of the state’s total property taxes. In 1966, there were only 27 TIF districts[viii].
In any case through Pat Brown and Reagan administrations California did not prioritize ED—or CD—to the extent it was autonomous and directed by anything linked to a formal strategy, rather than to a set of gubernatorial principles and legislative serendipity. The locals were very much on their own—albeit empowered by state authorizing legislation and increasing subject to bureaucratic and regional planning and environmental “direction”. The next two administrations (Jerry Brown and George Deukmejian took the state to higher involvement in ED/CD and environmental-related goals.
Where Pat Brown had a New Deal belief in the efficiency of government to cure the problems of California, Reagan feared the power of big government to undermine social relations. Jerry Brown … was not convinced [in his first two terms] that government had the magnitude of power that his father expressed and Reagan disliked[ix].
The Oil Spill and the Rise of California-Style Environmentalism
BART –led by Bay Area Council opened 1957
State Motor Vehicle Pollution Control Act, 1960 and State Resource Board in 1967
Bay Area Conservation and Development Commission in 1965—state level and legislation
State Water Control Board 1967 and 1968 state Water Control Act, and 1972 Federal Clean Water Act
1969 Santa Barbara oil spill—1972 Coastal Community Commission—California Environmental Quality Review Act in 1970
State empowerment of Regional Planning legislation in Metro Growth Planning in California—Barbour. This may be the source to outline the role of planning, and environmental planning in California ED
Jerry Brown’s First Administration (1975-78)
Henton et al “take” on these first two administrations is expressed in their topic heading: “From No Growth to Pro Growth”. Mainstream ED just wasn’t his thing; environmentalism—and concern with growth’s impact on the broadly-defined environment (which included quality of life) was where he was at when he was first elected. As suggested in the above quote he reflected a thoroughly anti-authoritarian almost anti-government, frame of mind that drew focus and intensity from Watergate, Vietnam and the Sixties milieu. He probably had more sympathy with community development, but state government in 1975 had not yet figured out how to do that[x]. His California Conservation Corps was the closest he came in these years.
In any case, he was not especially keen about attracting firms so he abolished Reagan’s Dept. of Commerce. His interest in the environment led him to support wind and solar power and in 1977 he put in place what may have been the first ever tax abatement for rooftop solar systems. He also repealed the oil depletion allowance. He also pressed for a state space program. His environmental interest likely triggered his strong attachment to technology, California’s strong suit. He created the Office of Appropriate Technology to use technology to achieve environmental objectives. For Jerry Brown these were years of “small is beautiful” and an era of “limits”. Brown hoped to find a way to combine the two.
Brown cut funding for the university system as well as reduced highway spending. There was a streak of fiscal conservatism (he early on supported a balanced budget amendment to the state constitution) that, unlike his Massachusetts counterpart Michael Dukakis, would prove helpful when both states erupted into major tax revolts in the late 1970’s. Brown seemed also less concerned with California’s business climate, possibly reflecting a view that whatever its deficiencies, they had not hurt the economic performance of the state thus far. That would change early in his second administration (1977) when Dow Chemical canceled a half-billion dollar project in rural Solano County (near San Francisco). State permits were expensive and time-consuming. The Company attacked him as a “no-growther”. By that time, California unemployment reached 9%. The campaign behind the massive-tax-cutting 1978 Proposition 13 was rapidly sucking the air out of California politics.
Brown, on the threshold of his second election, almost made a U-turn in his ED perspective. Between Dow Chemical and the election Brown (1) instructed his Office of Planning and Research to develop a streamlined permitting system for industrial sites, (2) he met with high-tech industry leaders, (3) set off to a trade mission to Japan to convince Japanese auto-makers to make California investments, (4) abolished a tax on business inventory, and (5) printed thousands of “California Means Business” buttons, wearing one through the entire election process[xi]. Buttons aside, Brown launched in 1978 an innovative initiative in job training that constituted his most successful effort to develop a state-level community development platform.
The program, implemented in his second administration, put $25 million in state funds toward reforming state education and training workers for firms and plants that were expanding or opening new facilities. It set up a series of centers to train teachers in the use of computers, upgraded state engineering schools, stricter standards for high school curricula and university admissions. On-the-job-training Brown established an entity to retrain works that lost their jobs (or were in danger) because of economic and technological change. Brown set up a Harrison & Bluestone-like “adjustment team” to respond to plant closings—which may have been the first formalized state plant-closing SWAT-team initiative. The 1978 job training pivot from no-growth to progrowth, a two-year in the making evolution, proved to be path-breaking—and can be argued as the “coming out” of the entrepreneurial state[xii].
It served as inspiration for a series of ideas he touted in his future 1980 presidential campaign. As the initiative and its rationale evolved Brown formalized the links between deindustrialization, reindustrialization/sunrise economics, and technology manufacturing. Brown began speaking about “an American economy in transition from industrial technologies aimed largely at a domestic market to computerized information technologies produced for a global—and very competitive—market. He described the growing importance of research and development, of a skilled work force, and of energy efficiency… he advocated new forms of cooperation between government, business and labor to drive America into the new age”. Writing in 1988, David Osborne believed these themes which became commonplace in the entrepreneurial state and American politics were first articulated by a nationally prominent political leader, Jerry Brown[xiii].
Proposition 13
But before that could happen, the waters unleashed by California’s property tax rebellion, Proposition 13, had to flow over the dam—nearly taking Governor Brown in his slowly developing new “industrial-economic strategy for the 1980’s” with them. Proposition 13 injects discussion regarding initiatives and referenda, which during the Transition Era became an integral element of the State (and local) policy-making process.
The “why” behind Prop 13 is by nature subjective, but from my perspective it is a logical reaction to California’s steroidal growth—reactions that comprise a frequently-found nexus of growth, stress, and reactions that underlie the “politics of growth” in the Transition Era. In 180 degree this politics of growth is the virtual opposite of the politics associated with chronic decline introduced in other state case studies. In either case, jurisdictional policy systems cannot escape their dynamics and effects—neither can ED/CD policy-making.
Certainly, the principal advocate of Prop 13, Howard Jarvis could be consider not simply as a policy actor but as a cause in himself. His populist appeal foreshadows Donald Trump in personality and policy style. Jarvis pioneered mass media involvement in initiatives, new forms of initiative financing, and fostered an “industry-consultant” complex that has transformed politics and policy-making. California since Prop 13 has voted on, by my count, at least 471 initiatives through 2016. Accurate or not, the Jarvis Institute asserts that 364 citizen-based initiatives have amended the state constitution 52 times[xiv].
Prop 13’s focus was the skyrocketing property tax and logically, the important triggers that unleashed the populist reaction revolved around what pressured the tax rates. Many of those triggers were sui generis to California and the population flood that had incessantly flowed into the state for generations. Its home base was southern California, LA in particular where property taxes in the 1970’s doubled—and then doubled again-within a five year period. Southern California felt it more intensely but so did the rest of the state. In the same period (1974-1978—Brown’s first term) the value of an average California home leaped from $34,000 to $85,000[xv].
Property values do not translate into profits unless the property is sold. Taxes require immediate cash not only to buy a house but simply to stay in one. The erratic and scandal-prone hodge-podge of jurisdictional assessment practices, among jurisdictions but also within them, created a realistic sense of injustice, unfairness, and corruption. None of which, by the way, had any noticeable effect in slowing down population inflows—so much for economist theories and modeling. This was not new news to Californians and earlier in 1966 legislation (AB 80) took property reassessment away from local assessors by requiring every parcel to be reassessed every three years at 25% of market value. This produced a flood of revenues to school districts and local jurisdictions which, logically expanded services and personnel, which required even more taxes and fees.
The ever-increasing horror of serious annual tax increases fueled homeowner, common interest development (condos), renter, and commercial and industrial outrage, but also became interwoven with an important trend of serious consequence to American state and local ED: the formation of homeowner groups and the rise of neighborhoods. Organized neighborhoods with neighborhood-based EDOs injected themselves into local politics, and proved to be a force that often stymied business efforts to revitalize and redevelop the CBDs—a major reason why many western cities, certainly southern California cities like San Diego avoid or were unable to use federal urban renewal funds as well as find consensus to fund redevelopment/infrastructure.
In the East and hegemonic states, the neighborhood movement was closely associated with inner cities and race. Less so in California and the West where rapidly expanding areas created new neighborhoods in incorporated and unincorporated areas, cities and simultaneously growing suburbs. These neighborhoods filled up with younger, enter the baby boom, generational cohorts holding a new value system with priorities much different from their parents. Alongside property tax outrage were demands for ending sprawl, improving neighborhood quality of life, concern with effects of growth on the environment, a not too-well-hidden dislike of developers and business. Prop 13 piggy-backed off the neighborhood movement which gave it legs and an organizational ally
In this period, the first phases of our smush dynamic “environmentalism” infused itself with more practical concerns such as school quality, city services and property taxes. Managed, and then “slow” growth initiatives were advocated, along with demands to stop disruptive housing developments, suburban single family housing subdivisions, implement rent controls/anti-eviction ordinances, and restrictive zoning. Intended to satisfy other noble purposes, these demands, often successful in California, unintendedly monkeyed with the laws of supply and demand—fueling further increase in prices as developers shifted away from single family housing to commercial multi-family housing elevating home values of increasingly hard to find existing housing, and encouraging new housing in unsettled areas more free of neighborhood-based opposition—i.e., sprawl.
It was those homeowner associations and the perceived nexus between taxation and development … that became the backbone of the tax revolt ….. Meanwhile, pressure was also mounting to find ways to control growth and increase environmental protection at the state level …. One set of complaints fueled the other. In slowing growth, imposing moratoria on new construction, and most particularly blocking the development of low and middle income housing in many parts of Southern California altogether, the home owner groups reinforced the run-up in residential real estate prices ….[xvi]
After a year of gridlock in Sacramento, an orthodox establishment-supported, bipartisan alternative Proposition to Prop 13 was put on the ballot. That might have worked, if shortly before, Los Angeles prematurely had not sent out its proposed annual reassessments that confirmed Jarvis’s wildest ravings. In June 1978, nearly two-thirds of California voters approved a 57% commercial/residential property tax reduction with rates frozen at 1976 valuation. So long as property was not sold, future increases were capped at 2% and when sold the property was automatically reassessed at 1% of sales price. Renters bore the brunt as landlords pocketed the tax relief. Inherently this initiative was incorporated into the state constitution and could only be changed through constitutional amendment or referendum. Also included in the Proposition was a requirement that future increases in state taxes that generated revenues to the state be approved a two-thirds vote of the state legislature, and local “special purpose” taxes be approved by two-thirds of voters.
Once adopted, there was no Trump era “Resistance”. The problem was real and the voters had spoken—loudly. Jarvis ally Paul Gann doubled-down and a second amendment to Prop 4 which limited growth of state and local spending to the lower of population increase or cost of living, which when successfully passed in the following election hopelessly compounded reaching the necessary two-thirds budgetary approvals. Education funding fared badly in that crossfire. Even worse, each jurisdiction had to figure out its own increases/cost of living—and defend them from lawsuits and media scrutiny—thereby creating an internecine war among counties and local governments as well as a series of urban winners and losers. The traditional central cities/suburb war gave way to a war of all, between all.
Brown, a fiscal tightwad naturally, announced he would implement the Proposition and declared himself a “born-again tax cutter”. Tons of Democrats leaped on board, and Jarvis’s “caveman” followers were now legitimized. Although constantly amended to deal with dislocations and budgetary crises, Proposition 13 would be legitimated by the U.S. Supreme Court in 1992 (in part because “it increased local neighborhood preservation, continuity and stability”) and has hung around to the present day. Amazingly, between 1978 and 2004 up to eighteen additional Prop 13 tax limitation constitutional amendments were approved (including freezing at 1975 levels to inherited property), to which the state legislature added its own tax “loopholes” (because Prop 13 restrictions did not apply to tax reductions).
The ED/CD after-effects of Prop 13 have been huge, creating an environment and a political/ economic/ social and structural backdrop from which ED/CD (or any policy area) could escape. In some ways worse, over time the distortions became built into the mindset of new generations and the various policy actors. They created their own series of Stone-ish “stories” that served as shorthand for media and voters. Chicken and egg blaming who did what took precedence as later policy actors operating in the only atmosphere they ever knew failed to realize the deck had been stacked, the policy area restructured, before they were born.
Due to its implicit benefit to those who did not sell their property—“locking in”[xvii]—population mobility and growth which did not abate after 1978 created a unique California version of housing supply and demand which produced a number of distortions that simply became the accepted way to do business. Perhaps the most obvious and certainly impactful, was, however affluent and innovative California and Silicon Valley were, the state and its sub-state jurisdictions were locked in to a perpetual budgetary and fiscal crisis that quickly became an intergovernmental revolution.
Overnight, between $6 and $7 billion dollars (1978 dollars) were lost to California jurisdictions annually. That would increase over the following decades. That loss amount to more than one dollar in four of total city revenues, forty percent for county revenues and almost half of school district revenues, and ninety percent to fire districts[xviii]. Counties, with no constitutional support to chase new revenues, were devastated—and they were further hit by Reagan-era social service/health care/welfare budget cuts. The state bailed out the immediate crisis by redistribution nearly six billion in reserves and budgetary surpluses. That shift created the intergovernmental revolution as the state became the chief funder for counties and especially for school districts. This dependence only got worse over the following decades.
From ED’s perspective, the dependence of school districts on Sacramento set the state for a zero-sum atmosphere between urban ED’s property/infrastructure redevelopment and business assistance and school districts. In 2011 it would culminate in Brown’s termination of redevelopment agencies and pull back from TIF. Schrag, in any case, traces the subsequent notable decline in California K-12 education to Prop 13—the immigration explosion, of course, did not help.
If this were not bad enough, Prop 13 distorted the normal mechanics of residential/commercial supply and demand. Don’t sell your property and tax rates are frozen and capped forever—and for those who inherit the property—a phenomenon called “locking in”. Locking in spurred new home construction, known to many as “sprawl”, to accommodate new households unable to find starter/existing residential/ commercial investment. Property development/redevelopment, city-building/suburbanization, and infrastructure as well as housing availability and affordability—key ED/CD strategies—were impacted by the after-effects of Proposition 13. Since Proposition 13 hung around so long, it inevitably caused a reaction to this sprawl-inducing consequence—public action to limit new construction to plan-zoning approved locations–which in its turn resulted in skyrocketing housing prices, reduced affordability, and poor access to first-time home owners. The distorted housing inequalities, limited access and affordability, not to mention the impediments inflicted on private investment and business operations, sharpened already serious tensions between California Mainstream ED and Community Development.
The effect of Proposition 13 on tax revenues to state, and especially to local governments and school districts, was partially anticipated—it was, after all a tax reduction reform—but over decades “capped” tax increases, untied to actual costs and inflation, mean a chronic fiscal crisis which required two-thirds votes by legislatures or voters to overcome. Several adjustment legislations were enacted over the following decades to deal with these fiscal realities, but however, tempered the original thrust of Proposition 13 continued to exert the following ED-related effects in California[xix].
First local taxation became a creature of the state as key elements of it were transferred to state administration and legislation—local governments and school district revenues became tightly bound to state action, or its lack. Secondly, if the local desired to raise revenues locally they needed to turn to “off-budget” sources not affected by Proposition 13, and in remarkably short order that led to tax increment financing and doubling of TIF-issuing redevelopment agencies[xx] as a jurisdictional revenue-raiser, usually in the form of a sales, not property, tax. Redevelopment agencies exploded in number, financed ever-increasing amounts of property development/redevelopment through thousands of TIF taxing districts—creating an off-budget revenue flow to local communities—but less so to school districts.
Commercial businesses, can the reader say “malls and suburbanization” as well as ceaseless commercial strips to her/himself, or capturing economic growth became a major local revenue raiser which separated communities from each other, creating fiscal winners and losers. Shades of BAWI and buying payrolls. Chasing local revenues through TIF/redevelopment agency action became a way of life—and redevelopment agencies became the predominant EDO in California. That Proposition 13 would emerge as a major shaper of California ED for more than thirty years was not anticipated in 1978. That Proposition 13 bled into California-style community development was also not foreseen.
That over that time, school districts, unable to take advantage of sales tax revenues, would be especially hurt—requiring several state-imposed (and some local) modifications to the distribution of TIF repayments—meant that by 2010 redevelopment agency/TIF proceeds had turned into an almost zero-sum battle between EDOs, ED, local governments—and school districts. Since local and school district revenue-raising had flowed unnaturally to the state government, the solution to TIF-school tension fell to the Governor—with all the irony in the world—Jerry Brown who presided over Proposition 13 some thirty-three years earlier. In 2011 Brown started the process which terminated redevelopment agencies, and transferred their monies, in considerable part, to fund a K-12 budgetary deficits. We shall return to that discussion later in this presentation.
California is far from unique in including initiative and referendums into its policy process; to my best knowledge nearly all do. But all initiatives and referendums are not alike. Most states do not allow California’s direct citizen initiative (without having to be passed by state legislature) that, if approved, amends or writes into the STATE CONSTITUTION its provisions (I believe only eighteen do). Direct citizen initiated state constitutional amendment is the nuclear bomb of American state and local public policy. That it has been incorporated into the normal mechanics of California style-policy-making, however, is not typical even for the other states that allow it. That last reality is further proof of several of our Chapter One model’s underlying themes: (1) that political culture matters in ED policy-making; (2) that political structures contain value biases that reflect past generations now enjoying tax abatements in the local cemetery; and (3) such political structures, in this case electoral processes, can wreak enormous baggage and benefit on ED/CD policy-making—usually unnoticed and unseen by the policy actors themselves.
Suffice it to say, Proposition 13 was a game-changer—more succinctly a policy system changer. California’s Transition Era, be it at the state or the local level, can usefully be divided into a pre and post-Proposition 13 “Age”. Economic development-wise these Ages are related, but starkly different periods. These separate periods also capture the incredibly different population migration/immigration and generational realities that separated the 1970s from life after 1980—including the Big Sort. We shall commence California’s Age of Post-Proposition 13 in the next section.
What has Prop 13 Wrought?
Before plodding through the various gubernatorial/state legislative ED/CD strategies and initiatives that populated the Age of Post-Prop 13, we need to discuss the ED/CD-related intergovernmental turbulance that ensued—almost to the present day. Prop 13 and its successful set up a chronic fiscal and budgetary crisis, a seemingly permanent distortion of housing/commercial dynamics, and an intergovernmental sub-state war with Sacramento as its only arbiter. While traces of almost anything characteristic of this atmosphere can be found to some extent in other states—it was in the extreme in California. Perhaps, it can be argued that any alleged “insularity” exhibited by California ED/CD owed much of its existence to the reality that Prop 13 and its successors created a unique structural, policy and budgetary environment that the rest of America offered little in the way of solutions and good ideas.
A not too subtle consequence of this atmosphere and structural configuration was that state and local government was in a chronic budgetary crisis, ebbing in flowing thru good times and bad, but constantly in need of new revenues to find replacements for those lost—and these potential revenues, fees and backdoor off-budget sources, ought not require a vote from citizens. The easiest target was the citizen who had not yet came to California. Anything or anybody new was “welcomed” to pay a disproportionate share of whatever taxes were out there. Selling one’s property invited a reassessment that reset the purchase price and new revenues to the taxing district.
Paying the jurisdiction’s bills became dependent on growth, especially housing and business expansion. The costs of infrastructure (including new school construction) for new housing was passed on to the builder/developer and included in the purchase price. Subsequent annual debt payments were required of the new owner. Business expansion, especially in the service and retail sectors contained a built-in illogic described by Schrag:
If Penny’s builds a new store across the road from Gottschalks, it will be assessed at the full cost of the property, not counting the various fees new developments must pay in addition, while its competitor pays on its 1975 assessment, or whatever it paid when it bought or built its facility. (As of 1996, an estimated 50 percent or so of business property paid taxes on 1975 acquisition costs … at levels of .2%” of new taxes[xxi].
When Macy’s contested this illogical to the U.S. Supreme Court in 1986, arguing the Prop 13 violated both the commerce clause and equal protection guarantees, it generated tremendous local pressure, a returning of thousands of credit cards by disgruntled California residents irate that anyone would threaten Prop 13. Macy dropped the case and paid the taxes and fees.
In effect, the sum of all these Prop 13/4 market and fiscal distortions was that housing and business investment delinked from economic and demographic fundamentals (such as our profit life cycle). Probably this was sustainable for decades because of California’s sheer market size, home to Silicon Valley innovation, and future sustained population growth due mostly to immigration. Furthermore, size, market power, innovation and growth rendered the state almost unassailable by our various competitive hierarchies. To be sure, the metropolitan hierarchy characterized by increasing polarization between winners and losers was the most vulnerable and the one to watch in the Contemporary Era.
As the second California Age, the Post-Prop 13 Age, rolled out in the eighties and nineties, the impact on Mainstream ED[xxii] in particular was huge and continued into the post-2000 Contemporary Era. It is described at this point for two reasons: (1) it evolved incrementally over the next twenty years or so and served as a backdrop to the various goings on at the state level—remember the state became the de facto sugar daddy for much of sub-state policy areas; and (2) since our principal attention in this section is the state level, its role in local ED/CD sub-state goings on might distract the reader. Episodically, the state would become involved in the various aspects of what is described in the next paragraphs—frequently by tidying up the more gross disparities between schools and TIF/redevelopment agencies which shall be more fully discussed in Jerry Brown’s Third Administration below. In any case, Props 13 and 4 seriously reshuffled the strategy choices for sub-state jurisdictions and fundamentally altered Mainstream Ed’s behavior and priorities—through 2010 at least.
At root what happened has been given the elaborate titles of “fiscalization of land use or cash box zoning”, is that “planning and zoning choices” as well as ED strategies were “made not so much from the point of view of what would enhance the health of whole community [or its private sector economic base]—the attraction of clean, light manufacturing … that promised well-paying jobs, or … balanced residential development that provided housing for low- and middle-income families … — but … cash box zoning designed to attract development that would maximize local revenues”[xxiii] in a way that would not trigger the strictures of Props 13 and 4. That task fell on redevelopment agencies (RDA) whose number skyrocketed after Prop 13.
From the onset, Prop 13 fueled use of TIF and redevelopment agencies. RDAs could issue tax-exempt TIF bonds outside of Props 13 and 4 restrictions, i.e. without need of two-thirds vote by anybody, just a majority of their small board of directors—appointed by mayors, city managers and the city council. By 1990 RDA-owned property totaled 6% of California’s entire property tax base—and over $10 billion in TIF debt, a multiple of the total bonded debt of all California school districts combined (BTW, all of which complied with broad state-required “blight” designation)[xxiv]. Cities and some counties almost immediately redefined “project areas” so to enlarge their acreage (to thousands of acres from a few hundred), including vast tracts of farmland or undeveloped land. [This practice was somewhat curtailed by 1983 state legislation (AB 32] Still, by 1988 the number of project areas had expanded to 594 (nearly doubling over that decade since Prop 13) and RDAs garnered about 6% of the state’s total property taxes (from 2% in 1977)[xxv].
Fiscalization of land use meant development that generated lots of sales tax. This meant projects involving retail and service sectors—the most obvious being malls, tourist-based sites, and commercial strips, but less so manufacturing. Faced with a choice between a manufacturer and a large commercial project, the latter was much preferred. Housing projects, more costly to local government services, were also less favored. Grocery stores replaced small manufacturers as targets of ED. ED retail targeting is inherently controversial, but in light of Prop 13 tensions with school districts, redevelopment agency initiatives generated more than their fair share of negative attention and criticism.
To add salt to the wounds, sales tax generating projects also generated intense deal-making among potential competitive jurisdictions—unleashing what William Fulton called a “sordid and depressing war”. He describes Ventura which had assembled a “Maginot Line of retail establishment, a regional mall, a half-dozen significant shopping centers, and hundreds of small, locally-owned businesses”. But neighboring cities figured out that through tax abatements they could attract auto dealerships, outlet malls, movie theatres “and the most devastating, that nuclear bomb of retailers, a Wal-Mart. The Result? [Ventura] lost its once-impressive lead in sales tax revenues and our regional mall has been decimated. Now our city manager is devising a counterattack”[xxvi].
The outlet mall in Oxnard—that’s what most California cities now mean by economic development. What they’re trying to do is steal sales taxes from the next city. They have no stake in growing the local economy[xxvii].
Not surprisingly, the state reacted to these activities—in a of serious state fiscal deficits (1991-4) appropriated somewhere between $3 and $4 billion of city and county property taxes to meet is Prop 98 obligations to school districts—increasing the pressure on locals to find and use sales taxes for revenues.
Given that not all jurisdictions could engage or win this war of incentives and sales tax revenues each metropolitan area was populated by fiscally growing jurisdictions alongside those teetering on near-or actual-bankruptcy. City services and housing markets, of course school districts, bore the consequences.
Prop 13 meant over time fewer new housing units were built than demand required and commercial/ industrial property redevelopment inhibited. Undersupply meant rising housing prices, rapidly escalating school taxes, and limited access and affordability—unless a loophole could be found. Enterprising businesses and sub-division developers—not to forget residents trying to dodge taxes or enhance city, but especially county, services which languished as counties became the “sick man” of the California intergovernmental system—also needed a loophole. In the 1980’s they found one: incorporation of a new municipality. In the 1970’s seventeen cities were incorporated; in the 1980’s thirty-four, in 1991 alone there were forty-one—the largest number in California history[xxviii].
So Citrus Heights, a Sacramento suburb garnered a couple of much-desired sales tax paying properties, and set up a municipal government that offered its residents better services than the county could provide. Los Angeles, San Diego, Orange County, and the Inland Empire counties were particularly affected. Many cities and unincorporated areas tried to separate themselves from high-tax school districts, most failed, often blocked by the courts since such attempts often overlapped with racial change and demographic transition. The state passed restrictive legislation in the early 1990’s and city-building tapered off.
Economic development in its quest for new development and investment increasingly labored against the so-called “welcome neighbor” effect described earlier. Attraction and retention/business expansion faced very serious barriers. Anything new got assessed a the current high rate and had to compete with others at 1975 rates—plus pay for any infrastructure and a host of fees for each aspect of a new development project. Some argue (Schrag) that slow growth was always meant to be a part of Prop 13 (Jarvis would certainly disagree), but the business and tax climate for new physical investment—especially housing—did not encourage unrestricted growth. The accumulating subsequent propositions, notably the 1996 Prop 218. Sponsored by the Jarvis Association, gave citizens enhanced rights to repeal new assessments and local taxes through initiatives requiring fewer signatures. The constitutional amendment could be exercised to achieve environmental and slow growth ends, as well as tax, assessment and fee avoidance. Ironically, the welcome neighbor—slow growth atmosphere was seemingly at odds with the needs of local tax base to promote new development assessed at high rates. Growth, physical growth, sales tax growth were the only ways to escape the strictures of California’s fiscal and budgetary system. In that world, redevelopment agencies were the kingpins of local and sub-state economic development.
Brown’s Second Administration
Jerry Brown ran for reelection on the same ballot as Prop 13; he won handily and faced the storm unleashed by the Prop. With ample state surplus and reserves the initial sub-state fiscal deficits were papered over, in effect with paper money from Sacramento. Brown, as indicated earlier, ran with the Prop 13 ball and sponsored his own budget-cutting priorities. He also ran for President in 1979—a campaign which went nowhere, but did serve as the forum to forge his new directions in state level ED which we introduced in our First Administration discussion. He tried to practice what he preached, forming a shadow young blood cabinet, set up task forces on ideas (including new business development) and focused his second administration ED initiatives around two themes: “investment in economic strength” and “investment in people”—a hybrid ED/CD concoction.
The investment in people thrust focused on education reform and job training—again as we outlined earlier. This thrust was the most innovative, a very earliest efforts into Eisinger’s entrepreneurial “demand-side” ED—which in our model is community development applied to the state level. It took advantage of California’s self-starting, autonomous university-led ED (Stanford is only the most prominent example of several notable university-led ED programs), and moved into state-level deindustrialization responses centered around skills retraining, SWAT teams/case management—previous to 1981 release of Harrison and Bluestone’s “Deindustrialization”.
The second theme, “investment in economic strength” found fallow ground in the legislature—Osborne claiming the legislature never understood what Brown wanted. The most successful of this set of initiatives was the MICRO (Microeconomics Innovation and Computer Research Opportunities) program which bridged the gap between theoretical basic research and applied research suitable for use for commercialization, new products and startups. MICRO matched a business grant to a university for research for eligible purposes. It was accepted reasonably well. Another initiative authorized a EDO-type, today known as BIDCOs, which served as a public/private sector intermediary financial lender for venture capital and SBA loans and a secondary market to private investors.
Brown also set up a state-owned BIDCO to invest in alternative energy and conservation technologies. Brown’s state pension system reform encouraged CalPERS to diversify its investment into firms conducive to California economic growth (housing and small business loans). He also created the Corporation for Innovation Development and in 1981 Brown appointed a formal Commission on Industrial Innovation (composed of prominent business, labor, and technology CEOs (Steve Apple and David Packard, for example)) which dealt specifically with the threat from Japanese firms in key sectors; the report urged generic state involvement, i.e. no attempt by state to pick sector winners and losers, but funding for applied research, innovation and open-ended venture capital[xxix]. The Commission’s report, “Winning Technologies: a New Industrial Strategy for California and the Nation”, was issued in 1982, Brown’s last year in office (ha ha) expressed the approach to post-industrial state ED that Brown had pioneered. Brown took his idea to the National Governor’s Association, prompting them to move into initiatives to spur technological innovation, and his NGO co-chair Michigan governor Milliken to start his own state initiative.
It is worth note in 1980the California Association for Local Economic Development (CALED) (in 2017 more than 800 members) was formed.
Oh! Did I forget to mention that California’s now-famous high speed rail initiative began in 1982? Brown a long-standing advocate for high speed rail [perhaps a Freudian nod to his dad, the master-builder] and he secured passage of legislation to study the prospect and details of a California high speed rail system. In 1992, in his Presidential bid, he reiterated his support. In 1993, the legislature approved the creation of the Inter City High Speed Rail Commission to conduct studies and prepare plans for the project—“to determine feasibility to relieve automobile and rail traffic congestion by serving as a viable alternative to both”. The study that resulted confirmed the question provided that speed was essential. In 1998, Senate Bill 1420 created the California High Speed Rail Authority (governed by a nine member board: five appointed by governor, two appoint by Senate Rules Committee and two by the Assembly Speaker) to replace the Commission. In 1999 public hearings commenced[xxx]. In 1996, this High Speed Rail Commission/Authority was charged by the legislature with preparing an initiative to be submitted to the voters no later than 2004. This was later extended to 2006, and finally to 2008 when it was placed before the voters in the form of Initiative Proposition 1A. 52.7% of the voters approved the initiative that called for issuing $9 billion in bonds to begin design, environmental compliance, and land acquisition for the high speed rail project. Until Schwarzenegger no sitting California governor did anything other than sign the legislation that approved these commissions and authority. This was a legislative and “bureaucrat-planning” project in the twenty year period between 1982 and 2002. Discussion will be resumed in the Schwarzenegger section.
The Deukmejian Years (1983-91)
Overall, Republican George Deukmejian returned to the ED path followed by Reagan. Deukmejian certainly upheld the philosophic approach of limited government, focused on excellent infrastructure (education and highways), governance, and favorable business climate. He was more interested in sound management than innovating new approaches to anything. Governor Deukmejian embraced Reagan’s reform of CETA with JTPA and his administration stressed strong private input into local worker training programs. Needless to say, the Prop 13 and 4 goings on were going on and California sub-state ED during his administration was following a path of its own, reacting to Prop 13 and whatever shenanigans were unleashed by the state or voters to cope with it.
Early on (1983) appointed an Economic Advisory Task Force tasked with developing a plan and strategy for ED and job creation. Employing a SWAT methodology by enlisting input from over 360 site selectors, plus 600 business leaders and 50 firms that had recently consider or entered the State, the task force determined there was an urgent need to correct misinformation that California was a hard place to do business. It found that forty-one percent of site selectors thought the state’s business climate was poor—and business leaders stressed tax reductions. The bottom-line need was to fix the California brand by reducing regulation, more competitive tax structure, streamline permitting, reduce housing costs, and improve infrastructure across the board. A “new” California had to be marketed effectively, with a focus on assistance in site selection. A close relationship of the state to local recruitment efforts was regarded as vital. Export to the Pacific Basin was an obvious target[xxxi]. The report stirred everybody’s ED juices, and 1984 proved to be an exciting and transformative year in California ED.
The legislature was quite active in regards to ED. In 1982 a new Committee on ED and New Technologies (with subcommittees in international trade/investment, rural ED, and biotechnology) was established. During these years the legislature was active in trade promotion, tourism, defense spending, and technology sector-relevant ED. In 1983 the legislature created a State World Trade Commission (which set up a Export Financing Program that provided working capital loans to small business), .and the California Commission for Economic Development which published reports, studied other state’s ED initiatives and organization. In 1984 it studies EDZs, regional ED strategies, and infrastructure financing alternatives, and issued reports regarding Feminization of Poverty and toxic waste cleanup. The Assembly also created a committee on Small Business to stimulate and grow new firms, and also formed a Select Committee on Long Range Policy and Planning to examine industrial competitiveness. In 1986 a Joint Committee on Science and Technology was formed. Deukmejian vetoes, however, blocked many state legislative initiatives into new ED areas, and tried to prod local governments into a more pro-business atmosphere[xxxii].
Deukmejian radically reorganized California’s state-level EDO structures. Brown had restructure the Reagan super agencies to include one on “business, transportation, and housing”, but in his last years created a formal Department of Economic and Business Development—within the super agency. Initially Deukmejian renamed the Department to “Commerce”, but in 1984 completely revamped the state ED EDO system. The Department of Commerce was augmented with increased budgetary and staff resources—and visibility. Its mission to advertise/market the state, attract industry, and encourage Californians to stay home and become tourists in their own state. A basic business retention program was set up that include ombudsmen, case management and permit assistance, several financing programs, and site selector liaison.
Deukmejian stressed tourism as a job-creating industry (at that point it was a $28 billion industry with about a half million related jobs, but had stagnated in recent years. Even movie production had diffused from California to other states and countries. Overseas trade was also important as the governor set up offices in London and Tokyo. He also secured approval of a series of new initiatives to promote rural development—including a $30 rural infrastructure and business expansion fund. Most of these efforts followed more traditional Mainstream ED trends, less so Eisinger entrepreneurial demand-side ED. His capstone initiative, the formation of a private sector led (appointed by the governor) nonprofit California Economic Development Corporation (CEDC), cemented this Mainstream focus. CEDC was intended to supplement the Department of Commerce’s attraction and advertising initiatives, but also to sharpen the state’s business climate. Business leaders served as “ambassadors” and developed their own business contact program. It later worked cooperatively with the legislature’s World Trade Commission, forming its own Pacific Rim Task Force. Unlike Indiana’s private sector corporation, CEDC did not attempt to “lead” state initiatives or operate formal programs. It had a small staff and budget and relied mostly on volunteer effort. Accordingly, it stopped noticeably short of being a “privatization” of ED.
Wrapping up the Deukmejian years, I argue that he had not picked up the Brown second administration demand-side entrepreneurial role for the state. There were the trappings of trade and export and the constant reference to technology (how could the state ignore it?), but through the 1980’s California state emphasized the traditional MED programs and strategies. Eisinger concurs (obliquely), although he does believe the state exhibited incremental change in that direction—that change was prodded by the engagement of “northern” states in economic crisis and population outmigration that adopted the demand-side entrepreneurial strategies and programs—compelling growing Sunbelt states to copy and imitate these initiatives to remain competitive:
In (1984) California, whose ‘gross national product’ would make it the eighth most productive nation in the world … there is a concern about the prospects for continued growth and prosperity. According to the state’s Department of Economic Development [BTW, it had no Dept. of ED] ‘We assumed too long that California was always the obvious place to locate. Then other state’s got aggressive and took the momentum away from us”. The state offered only 14 of [Eisinger’s entrepreneurial programs] in 1966, and only 16 of 53 in 1976. But by 1985, it had 38 of the 55 …. The continual efforts of northern states to establish a competitive advantage and of Sun Belt states to meet competitive challenges drove the policy penetration steadily upward through the 1970’s and into the 1980’s.[xxxiii]
If so, despite California’s image and stereotypes attributed to it by outsiders, the state of California was not home base to the demand-side entrepreneurial state. That honor, if lodged anyplace, is best lodged in Massachusetts. California copied these strategies and programs, as arrows in its quiver, without budgetary or programmatic commitment because of pressures generated by its perception of our first national competitive hierarchy. The core of California’s state ED strategy lay within old-style MEP.
-universities SEE Fosler
Après Deukmejian …. Les Neo-Populism?
In recent years from immensely popular two-term San Diego mayor (first elected in 1973), U.S. Senator (beating Jerry Brown in 1982) and California Republican governor (defeating San Francisco mayor Dianne Feinstein) from 1991 to 1993, now an affiliate of Hoover Institution, talks much about Singapore, its growth model, and California revitalization. In this history, however, Wilson, an announced supporter of Prop 13, presides, much like the proverbial surfer, on the crest of a cascading California wave buffeted by immigration winds, and the Prop 13/4 sharks. He stayed around for two terms, so in that sense he was successful enough—he got back to the beach—and in 1999 when California crossed over into our Contemporary Era, it wasn’t very pretty, at least the first half decade for sure. Frankly, it wasn’t all that pretty during the Wilson years either. It may be that growth and prosperity ain’t what its cracked up to be.
Looked at from afar, California seems like heaven to most non-California economic developers. In the 1990’s, the Wilson years, the California economy was a roller coaster, starting with a recession and ending in a “tech” boom that would come crashing down in 2001. The high rolling innovators from Silicon Valley were still hard at work, a new generation, a third wind (semiconductor, than hardware, and now internet software—and biotech as well) had institutionalized the Silicon Valley as the global capital of technology innovation—a place where trees grow to the sky and innovation generates new innovation like a perpetual motion machine. Lost in the hyperbole in the late 1980’s was the debilitating effects of deindustrialization which hit California P52
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The Silicon Valley replaced Hollywood, as the place where dreams are made of (film-making had diffused globally and nationally in part because of high costs), foreign trade, entrepreneurism, and the entrepreneurial/venture capital culture was taking over as the new American icons. No one ever talked about Bloomberg’s “Two (Luxury) Cities” in San Jose where the creative classes, the docks, cranes and truck parking lots at Long Beach, and Starbucks presided, as a tourist my family and I visited California several times in the nineties, but maybe they should have?
The grape-picking, truck-crop harvesting, trash and construction, pools and landscaping still needed workers, however, and in California Mexicans did it—if they were lucky to get a job at all. The 1990’s were all about Mexican and Asian immigration. Southern California, the borderlands, was logically, the hardest hit and Los Angeles swallowed huge numbers of Mexicans, who thankfully for the Los Angeles power establishment did not vote, or become citizens for that matter. California politics and the dynamics of policy-making (ED no less than CD) cannot be understood unless one realizes the pressures created by significant low-income, often low-skill population migration did not exert equivalent pressure on the policy process—certainly through the 1980s and into the 1990’s. There was a noticeable lag between the arrival of immigrants and their effect on the then-contemporary policy system nexus and aggregate data-based policy analysis. The impact on social services, neighborhoods, and the K-12 educational system was profound.
It was only in the 1990’s, that , gradually thanks in some measure to Pete Wilson, that Mexicans and Central Americans turned to the ballot box and got themselves elected, interestingly more to the state Senate and Assembly than to City Councils. Through the 1990’s, California, effectively, aside from the Governor’s office, a one-party state, discovered that its one party was undergoing an infusion of Hispanic leadership. I never tire of reminding the reader that ED and CD are policy outputs, and during the Wilson administration, the state (and often local) policy system was in considerable flux. Big Sorts and change in local political culture injected a new vitality into California’s direct democracy plebiscite and a significant new power grouping within the conventional-institutional policy system decision-making.
Given the lag factor, the politics of assimilation and the velocity and volatility of economic growth, generated a hyper-plebiscite, initiative/referendum—and eventually recall—that, to me at least and to some others as well, exhibited no stable patterns over the decade. In the same election budget-cutting propositions passed alongside increased expenditure propositions—socially liberal (marijuana) alongside (restricting marriage to same-sex), prison reform alongside mandatory prison sentences—and a ton of other examples. The Prop 13/4 syndrome, the fiscalization of land use, ballot-box budgeting, planning and zoning, the chronic, sometimes huge budget deficits solvable only by the state government, which was usually semi or completely grid-locked by two-thirds voting requirements—and in 1996 mandatory term limits imposed by a new initiative.
Most of the 1990’s state-level propositions did not directly affect ED—most were social—but local initiatives were another matter. The major exception was the 1998 proposition pushed by Native American gaming interests (which spent $70 million) ) (p. xix) and were countered by Las Vegas casino interests (which spent $30 million) on Prop 5 which, after its approval by nearly a two-thirds majority, expanded massively slot machines and California Indian casino gambling. California had by the 1990’s evolved into an initiative-dominated hyper-democracy (Schrag claims that initiatives in the 1960’s totaled 9, 22 in the Seventies, 45 in the Eighties, and 62 in the Nineties (not counting the hundreds at the local level[xxxiv]). Moreover, California voters, on the whole, seemed quite comfortable with this style of politics—trusting an initiative to yield better policy than conventional governmental policy making (p. xx). The public sector bore the brunt
Even as the state’s high-tech economy was widely regarded as the world’s leader, and as the private wealth of California’s richest residents reached unprecedented levels, California’s government, its tax system, its run-down physical infrastructure—road, bridges, sewer and water systems, school buildings—and its public programs languished in another era.[xxxv]
Initiative-imposed term limits and one-party policy system translated into legislative gerrymandering transformed primaries into the key election which in turn stimulated a policy and ideological polarization, increasing low voter turnout, and a style of political rhetoric closely resembling the Resistance rhetoric following the Trump election. External institutions, money-raising, mass advertising, and movements to raise the necessary signatures to get initiatives on the ballot accumulated into what Schrag calls neo-populism. If you buy his argument and label (I do mostly), during the 1990’s one can see the emergence of the negative, media-saturated neo-populist tone that characterizes today’s Contemporary California policy system politics.
In this environment, state policy-making was reactive mostly, and gubernatorial platforms, economic development plans, and state legislative priorities were constantly yanked from one policy area to another. Structural reform was not likely, and Wilson in particular often played initiative politics himself. Generally, Wilson’s EDO apparatus followed along the policy lines set forth by Deukmejian, but the constant crisis and fluidity wreaked havoc with attraction in particular—but the sustained and spectacular growth of the Silicon Valley kept monies, taxes and job growth flowing.
Wilson was a fiscal conservative, yet upon entering office he confronted a serious recession and what by then was another episodic fiscal/state budget crisis that required him to raise taxes—sales taxes because property taxes were capped—car license fees, college tuitions and the income tax. So much for business climate. He also cut back on infrastructure (highways and deferred maintenance), another key Reagan strategy; there goes another traditional Republican ED strategy. He cut state expenses across the board and instituted a market-based, unsubsidized healthcare coverage to small business. Schrag asserts that between 1991 and 1994 California net domestic out-migration totaled 600,000—although the state itself increased its overall population[xxxvi].
In his second year, however (1993) his State of the State top-ranking priority was ED, job creation in particular. Emphasizing technology/defense, manufacturing (California’s usual suspects) and small business ($300 million loan guarantee program) and business tax reform to counter intense competition among states. Agreeing with a Council on California Competitiveness report, he called for serious deregulation. He urged the below-described California Trade and Commerce Agency to accelerate business promotion and recruitment, stressing environmental technology (pollution remediation) and enhanced export and trade promotion to take advantage of an anticipated NAFTA approval. Affordable housing was next on his list.
The rhetoric and prioritization was there, consistent with an image of an “entrepreneurial state”, but in fairness it was tinkering programs and “doing better with less”. There was little in Wilson that altered Eisinger’s skepticism regarding California’s commitment to high-tech and demand-side entrepreneurialism. Writing in 1987 he complained “conscious efforts to support growth industries had been rare in California …. people only cared about reducing regulations and taxes’”[xxxvii]. Some could argue that California state government was riding the wave of innovation and prosperity generated by its size, growth and Silicon Valley, using it as little more than a cash cow to combat the vicissitudes of Props 13 and 4.
In later years, he vetoed employment discrimination by sexual identity, identifying business climate as his principal concern. His controversial 1996 deregulation of California’s energy sector, advocated by companies such as Enron, whatever his business climate objectives, proved to be a long-term disaster that did his successor or California consumers little good. In his 1998 State of the State (his last), Wilson asserted that California was “back”, it had recovered. He claimed California job creation equaled that of New York, Illinois, Michigan and Pennsylvania combined—California was the “powerhouse of the Pacific”. He applauded his $1 billion dollar tax cut observing that taxes for businesses were the lowest in three decades but that “every state touching the California border passed a tax cut”. In the same State of the State Wilson boasts “When my Administration hears of a major California employer leaving our state we unleash what is known in the aerospace industry as “the Red Team”. This is by now the well-established core Republican Mainstream ED followed by Reagan, Deukmejian and Pete Wilson—twenty-four years sandwiching Brown, constituting the entire of the Transition Era.
EDO-wise Wilson in 1994 defunded (he and Gray Davis left it out of seven state budgets) Reagan’s California Commission for Economic Development. A year earlier he had established an unpaid volunteer Council of Economic Policy Advisors. Gray eventually included funding for the Commission for Economic Development in his 2002 budget. After a year to organize and fill board seats, it resumed activities, chaired as always by the Lieutenant Governor (December, 2003). Governor Brown’s Lieutenant Governor (Gavin Newsom) set an agenda for improving California competitiveness in his first 2011 session—by 2016 it claimed to have achieved, at least partially, seventy-five percent of its 2011 agenda recommendations. The Commission remains largely advisory, emphasizing programmatic efficiency; under Brown it stressed workforce development and education. Its wide purview, including most aspects of economic development, has been construed as the closest thing California has to state-wide ED plan.
Wilson continued to rely on California Business, Transportation and Housing (a super-conglomerate department) that in one form or another served as California’s lead agency from Governor Pat Brown’s days (it would do so until 2013 when Jerry Brown reorganized ED and the old super department became the State Transportation Agency-CalSTA), Using the Business, Transportation and Housing subdivision (California Trade and Commerce Agency) as his lead MED agency; it included trade, export, tourism, Business Development, Small Business, Film Commission,, Technology, Permitting, and corporate relocation projects.
On the other hand, Wilson pressed, as early as 1992, to approve a state-wide “infrastructure” bank. With a slightly misleading name, Wilson wanted a general purpose tax-exempt financing authority to include education, water and sewer, pollution control so to combine the separate authorities into one focused “bank” (a conduit lender as well as bond-issuer). His intent was at much efficiency and cost reduction as “infrastructure” capacity-building. The legislature sent him legislation to do so, but he vetoed it and fussing continued until the legislature reapproved the general purpose authority in 1994 (Executive Director appointed by the Governor, and a three member Board, Legislature and Governor). Incredibly it was unfunded, and remained unfunded until Wilson in 1997, with a “windfall” of new revenues from a resurgent state economy, proposed, and the legislature approved, $50 million capitalization intended for local construction of roads, sewers and water mains. In the next year, under the Davis administration, the legislature authorized $400 million. The “I-Bank” continues as of this book, issuing $38 billion in various infrastructure projects. It is regarded as California state government’s “only” general tax-exempt authority.
Predictably, K-12 education and immigration proved Wilson’s most intractable policy areas. Instituting several reforms, he also limited the funds available to schools led to a legislative budget impasse which shut down California state agencies for over two months. Reelected by 55% in 1994, he ran for President in 1996. Wilson played in “initiative politics” and got burned. He presided over an initiative that limited state legislative and gubernatorial terms and he supported an initiative on car license against illegal immigrants that is widely credited with accelerating the political mobilization of Hispanics and their meaningful entry into the policy process. During his administration the “ED of fiscalization of land use” and ballot-box zoning” was on steroids—and would continue to be so into the administration of his successor, Democrat Gray Davis.
Gray Davis: California formally enters the Contemporary Era
Gray, a Democrat (former chief of staff to Governor Jerry Brown) swept the 1998 election. Schrag believes the onus for this lies to a large extent on Wilson’s playing around in direct initiative (plebiscite) politics. Wilson supported Prop 226 which restricted union fundraising—which mobilized the labor unions. Prop 187 intended to deny school and public services to illegal immigrants and their children (it passed but was overturned by a federal court)—alienating and mobilizing the Hispanic community by becoming citizens and register as voters. In 1990 Hispanics were 9% of the electorate; by 1998 they were about 14%. Forty percent of Hispanics voted for Wilson in 1990, only 17% in 1994 after his support of Prop 187. “With nine members in the forty-member Senate, and fifteen in the eighty member Assembly, Latinos had better representation in the legislature than in the electorate at-large”[xxxviii].
The “times they were a ‘changing”. Immigration and demographic change was catching up with politics and in the Contemporary Era we see in California the increased prominence and impact of Hispanic and Asians in politics and policy-making at both local and state levels. In this transformed electorate, the Democrats captured every major state-wide office, elected Davis by more than twenty point margin, and saw a resurgent Hispanic voter vote Democrat overwhelmingly.
Davis’s first state of the state (1999) declared his “first priority—indeed second and third priority—was education”. A series of education initiatives, programs and reforms were introduced. [He would eventually spend $8 billion in excess of what was required under Prop 98]. Coastal access, wetlands reform and several environmental and water quality proposals were next. A State Housing Task Force to “look at permanent sources of income for affordable housing, growth management incentives” and ominously “consider whether state government should oversee the use of redevelopment funds”. Next on the list was his intention to regulate the healthcare industry, especially HMOs. Regarding the economy Davis observed “California’s economy is fundamentally healthy … We have emerged from recession. We are growing again. We are leading America into the 21st Century”. There were no mainstream ED initiatives, or any mention of what would be 21st Century ED innovation or knowledge-based economic development. Nor was there any mention of structural fiscal reforms. What we have involves a tailored set of California-style community development priorities.
In this most happy of Democrat times, however, life intruded. In what would become the outstanding dynamic of Gray’s administrations, over the next four years a series of crisis, none of which were of Davis’s making” hit the state—and took him down in the process.
The first was the 2000 and 2001 state energy crisis—with ever-popular rolling blackouts and eventually dramatically rising utility costs to consumer and industry—that culminated in the bankruptcy of Pacific Gas and Electric. As crises do, there were many background causes, but the chief trigger was an Enron-led energy supply manipulation that created shortages (wholesale prices increased by 800%), intensified by illegal pipeline shutdowns. Initially, consumer electric prices were capped and the burden fell of power producers, prompting Pacific’s bankruptcy and the near bankruptcy of Southern Cal Edison. Some of the blame for this lay in Pete Wilson’s lap as his 1996 energy deregulation legislation proved faulty and without intention set the stage for future manipulation. Many felt Davis “dithered”, that he was slow to take action (his state of emergency was nearly eight months into the crisis). His state of emergency allowed the state of California to purchase gas easing bankruptcy threat, and then instituting a streamline application and permitting process that eventually allowed for thirty-eight new power plants to be constructed.
In 2000 Davis secured passage of legislation that created four Institutes of Science and Innovation to address “large-scale societal problems through interdisciplinary research and new market applications”. Target areas included biomedicine, bioengineering, nanosystems, telecommunications, and information technology. Such targeting of growth sectors through university-based research and development was a hallmark of the post-Eisinger entreprepreneurial state approach. A derivative of the Transition Era Reindustrialization Debate, it embraced or at least was congruent with t innovation economics of Romer, Krugman, Lukas and Solow. Most critically, it tapped a California strength, the aggressive, autonomous faculty-driven activism of many of California’s major universities to do their part in ED. UC Los Angeles, Santa Barbara, Irvine, Berkeley, San Francisco and Santa Cruz all participated in the Davis initiative. These initiatives survived Davis and continue at the time of writing.
In 2001 Davis was hit by another of “things not of his making”: the busting of the internet “dot-com” stock market bubble” followed by the September (/11) terrorist attack on the World Trade Center; a national recession followed. Naturally, this hit at the heart of Silicon Valley, the only state revenue source that kept California in growth mode. Ironically, since internet firms typically employ few workers, relatively speaking, overall California job growth still exceeded the national average. The Bay Area (and to a lesser degree Southern California), however, did enter into a mild recession. The national recession badly impacted California tourism, a major industry in California. So not only did unemployment spike and California economy plummet, but state revenues were way down and yet another fiscal crisis was on hand. When the economy sneezes in California, the state and local budgets get pneumonia. Economic development strategies shift when that occurs.
In that atmosphere, Davis got a good measure of “mainstream ED” religion, if only because he had to—MED seemingly legitimized austerity (the now preferred word for budget-cutting, tax increases, deregulation, and cutbacks in social services). With new-found respect for private business, Davis refunded the old Reagan Commission for Economic Development. In 2002 he also reorganized workforce EDOs and established the Labor and Workforce Development Agency, a cabinet-level department to administer labor-related programs, “fair business and labor regulations, and workforce/training programs. His 2003 state of the state described a recessionary national economy and declines in various California industries, and detailed his plan to confront a $35 billion dollar state budgetary deficit. Cutting 11,000 state jobs, $10 billion in program cuts and the obligatory “state government will need to do more with less”. He did call attention to the reality that state budgeting was a “roller coaster ride”, “boom and bust”, “that we must rewrite the book on California budgets”—but no meaningful ideas were mentioned and he ended it with a call for a more active federal government.
His chief ED/CD-related proposal, other than austerity, was to “Build California” an infrastructure initiative (using tax-exempt bonds) stressing education, transportation and affordable housing. He also was sensitive new infrastructure projects (nearly everybody was) and the high-speed rail initiative would seem as good as any—but it was not mentioned. Small business initiatives were detailed in some number as small business “employs half of all Californians”. He embraced extension of a manufacturer’s tax credit. He then took considerable time detailing the success of his Science and Innovation Initiatives which he described in case studies of how they help children and those in need.
Davis was reelected in November, 2002 garnering only 47.2% of the vote, the most expensive election in California’s history to that point, and according to Wikipedia—“the lowest turnout in modern California history”. One year later, Schrag observed “a centrist Democratic governor, in what was supposed to be a safely Democratic state … [was replaced] by a Republican with an Austrian accent—a bodybuilder and actor acknowledging ‘bad behavior’ toward women’—who had never sought [or held] public office”[xxxix]. The reason: probably a mixture of austerity, disenchantment, a restoration of a fee on state car license, a car tar that tripled cost to vehicle owners from former levels. That combined to generate a recall—a rarity—that due to California statute also involved in the same ballot the election of the successor. Impossibly, and incredibly—name recognition and participatory democracy being what it is–Arnold Schwarzenegger (married into the Kennedy family, and with no special ties to the Republican Party) won the “election” part of the ballot, after the first recall question removed Davis. At one point 105 candidates contested the recall election. While not for the first time in American state history, a celebrity was elected Governor of California.
Schwarzenegger: Conan the [shallow-roots] Republican,
Announcing his candidacy on the Jay Leno show, Schwarzenegger blitzed through the 2003 recall election with everything from a “Gropegate” scandal, not appearing in debates (except one), and coming through with a minority but still solid victory (nearly 50%) in a multi-candidate recall/election. For those of us watching a 2017 Trump Presidency, in many ways the first two years of Schwarzenegger’s governorship was a sort John the Baptist precursor to the main act (don’t cha love mixed metaphors). Piling into office in January 2004, despite shallow roots with his party, Schwarzenegger was a pretty conservative, businessman-like conservative.
Inheriting yet another state fiscal and budgetary crisis that elicited budget-cutting and anti-Democrat rhetoric that was well-received by public opinion. From the start he also played plebiscite-initiative politics, winning a critical 2004 “Economic Recovery Bond” initiative that, combined with rolling back the infamous vehicle tax that had toppled Davis, closed the gap in the state budget deficit—but at a considerable cost. The 2004 Bond Initiative for all practical purposes bonded current expenses in a long-term financing. That and a succession of future infrastructure and education bonds created a horrible fiscal legacy (tripling the state debt during his administration) that was passed on to Governor Brown in 2011. To his credit, over the seven years of his administration, Schwarzenegger also renegotiated the various Indian tribe casino gaming compacts to increase state gaming receipts from $19 million in 2004-5 to $$391 million by the time he left office. Indian gaming revenues in the process became a major source of California revenues. ED was paying its fair share of California’s bills.
Arguably, his most successful 2004 initiative was workman compensation reform which, from a Mainstream ED perspective, provided a meaningful and positive jolt to the state’s business climate. During his administration, Schwarzenegger stressed California’s firm tax credit heavily—using his Hollywood contacts, to keep film-making in California. Over $200 million was expended in the course of his administration. His early, more conservative years, included a series of workforce and skills programs, which in 2006 “culminated” in his raising the California minimum wage to $8 by 2008. The latter, it must be admitted reflected his 2006 movement to the “center”—which to Republicans, and some Democrats—seemed more as a movement to the left—see below.
With the fiscal crisis somewhat resolved, Schwarzenegger in 2005 launched a series of controversial actions, packaging them into a series of Propositions, for which he called an ill-advised special election. Name-calling (he called the Hispanic leaders of the House and Senate “girlee men”) and partisan polarization. He took on California’s powerful education lobby, and then, for good measure proposed a “right-to-work-style” initiative that made paycheck withholding voluntary. That special election campaign allegedly attracted about $100 million in financing from organized opponents—including the unions that used pension funds for campaign expenses (losing a 200? Supreme Court decision, Knox…). A year of negative radio and TV ads cost Schwarzenegger his initial high levels of public opinion, so that by election time, he lost every single one of his initiatives solidly. Only one, an independent board to develop a redistricting map was later approved with Democratic legislative support. The year, in most respects was a disaster.
So early in 2006 Schwarzenegger hired a Democrat as his chief of staff and “moved to the center”. A flurry of legislation, executive orders, and another initiative, a Strategic Growth Plan to Rebuild California, which included a host of infrastructure projects financed through tax-exempt bonds, and which subsequently led to the creation of a new joint executive/legislative tax-exempt financing authority, the California Enterprise Development Authority, to issue private activity bonds “for the purpose of economic and community development” aimed at small and medium-sized firms. In November 2006, the various elements (roads, bridges, classrooms, housing, levees—and a certain high speed rail initiative described earlier) of the Plan were packaged into Proposition Initiatives 1A through 1E (allegedly their nominal value made them the largest such state bonding initiative in the nation up to that time). They were approved. In that year Schwarzenegger also signed an executive order “Twenty-First Century Government: Expanding Broadband Access and Usage that charged his chief EDO, the Business, Transportation and Housing (super-agency) with developing and implementing a state-wide broadband strategy.
The leftward movement culminated in the incredible, for a supposedly conservative Republican, in the passage of a series of climate change initiatives that included green manufacturing sales tax exemption (to create 100,000 jobs), an executive order to join Michael Bloomberg’s Regional Greenhous Gas initiative (developing emissions trading tax credits to power plants to encourage reduction in discharges, another executive order to reduce greenhouse gases by 50% by 2050, and culminating in two legislative acts, the Global Warming Solutions (s) Acts of 2006, that set emission discharge limits on California firms, power plants, refineries, and manufacturing firms—and with suppliers that do not meet state standards. The goal was to reduce California emissions by 25%, bringing them back to 1990’s levels by 2020. The governor himself equipped his much-loved Humvee to run on hydrogen and installed solar panels on his house. From right-to-work, to Global Warming Solutions, to a hydrogen Humvee, Schwarzenegger had pulled off a dizzying ideological transformation in the space of less than two years.
Did we mention that 2006 was an election year and Schwarzenegger was running?
In 2007, the increasingly leftward-leaning governor embraced prison reform and committed his administration to “reducing beds” in overcrowded prisons using “re-entry facilities” and parole reforms. He went so far as transferring and paying for facilities in other states. By 2009 he had eliminated over 11,000 prison beds.
And then things really got interesting! Housing finance and the housing industry collapses, the financial system largely followed and we entered into the Great Recession which for the next year or so consumed Schwarzenegger, California government, and just about everyone else. At that time, the California drought also began and that promoted a series of water-dam-conservation infrastructure and water-use regulation. Over the next year and a half a series of housing-related (mortgage, foreclosures and building), worker retraining), and a parade of costly, “the nation’s largest” type infrastructure projects (paid for with previously described bond financing and federal ARRA (American Recovery and Investment Act of 2009)—President Obama’s stimulus bill) intended to provide jobs and ease the state from its Great Recession unemployment and economic collapse.
One of these was yet another Proposition 1A, this time in 2008, the Safe, Reliable High Speed Train Bond Act for the Twenty-First Century which authorized issuance of nearly #10 billion of go bonds to partially fund a $40 billion, 800 mile, high speed train, designed, managed and implemented by the previously described California High Speed Rail Authority, By anyone’s standards, the issuance of so much debt for so many infrastructure projects in so little a time period constituted a kind of New Deal level infrastructure avalanche. Not everybody, predictably was on board with this fiscal extravaganza—Schwarzenegger’s public opinion support plummeted dramatically in the period that followed.
In 2010, his last year in office, Schwarzenegger established his “GoED” Governor’s Office of Economic Development. By executive order a “one stop shop … to cater to business needs, supposedly a derivative of an earlier 2004 and 2010 Little Hoover Commission report that painted a less than favorable picture of fragmented, disjointed, ill-coordinated mélange of state ED and community development programs that succeeded mostly in bewildering businesses. The new office was tasked to “promote the state as a place to do business, support businesses interested in starting, growing, expanding or relocating in California, and to help those businesses facing challenges to operating in California”. It was staffed by its Executive Director and a series of personnel “seconded” from the existing EDO array. In reality, the GoED Office concentrated on “green” projects and programs, worked with solar, bio, and renewable firms, clean-tech firms, green venture capital and activities congruent with his Global Warming Solutions Acts.
Thankfully perhaps, Schwarzenegger was termed out. He left office (with a 24% public opinion approval, one point higher than Davis at his lowest) and he and his Humvee moved onto other ventures such as “American Icon”—bringing once again onto the stage of California politics, Jerry Brown. It ain’t over yet!
Jerry Brown and the 2011 Fiscal Crisis: Policy Area Realignment and Devolution
After Jerry Brown left the governorship in 192, he was defeated by Pete Wilson in his senatorial bid. After a seven year hiatus when many thought his political career was over, Brown became head of the California Democratic Party in 1989-91. He challenged Clinton in the latter’s 1992 Presidential bid, obviously unsuccessfully. After another six year hiatus he ran successfully for Oakland’s mayor in 1998 and served two terms (1999-2007), then successfully running for California Attorney General and serving from 2007 to 2011—when he was elected as Governor once again, with 54% to Republican Meg Whitman’s 42%.
Once in office in January 3 2011, Brown faced a whopping $25 billion dollar deficit, nearly half of which was K-14 education-related. California‘s credit rating was the lowest of the fifty states (Brown’s State of the State. 2011). His state of the state conveyed his plant to close the deficit: cut backs in education, social and health services, raise taxes and certain economic development actions to be discussed in a separate section below. He also devolved state programs to local government. In an extraordinary session of the legislature it all came together and a “balanced budget” was approved. The crisis was patched over and solutions stitched together—in 2012 Brown would make it more effective and solidify California’s intermediate term fiscal stability.
The 2011 California budget process is a significant event in our assessment of Contemporary Era state involvement in state and local economic development. Budgetary cuts, increased taxes (some temporary and others sometimes reverse in later years), had been the usual tools used to solve what was an endemic capacity/structural weakness of the California IGR system. Using them California had jerry-built for thirty years an unsustainable, often illogical, intergovernmental fiscal system that robbed one policy area to pay off another. The state was the default revenue source for sub-state government—which worked only when the state had sufficient revenues, which increasingly was seldom.
In this jerry-built IGR system, ED and RDA had crossed hairs with K-14 education, but paying for social and health services, and recently administration of criminal justice and prisons—a condition that inevitably flowed from the plebiscite destruction of sub-state government’s capacity to raise revenues and administer those policy areas for which it was responsible. In his 2011 list of tools, Brown added policy area realignment or devolution. ED and the RDA redevelopment system, however, was included, not for renegotiation but sate unilateral action. To close the deficit “redevelopment agency reform” shut down and dissolved California’s RDAs and redistributed their net assets, mostly to the state to help cover the deficit. Guilt by association, California’s 42 EDZs were also closed down[xl].
The state had been a willing and unwilling partner in this transfer of power and fiscal responsibility to the state. It is my view, the secret to unlocking the importance of Brown’s 2011 fiscal and budgetary solutions is that he made intergovernmental reform, taking on the RDAs and also “realigning” social services, health care and criminal justice administration. That this IGR reform was considered necessary was in no small measure due to the after effects of the Great Recession, a slow growth economy, and a loss of tax receipts. Devolution or policy area realignment of intergovernmental responsibilities was not caused by the Great Recession, the concern and need for tending to the IGR garden has been a normal aspect of American federalism since its inception (consider Dillon’s Law), but the Great Recession created an urgency that compelled the attention of policy-makers.
At a very simple level devolution or policy realignment requires some answer to two related questions: (1) which level of government does what, and (2) who pays for it, and how. In his 2011 budget resolution Brown entered into serious negotiations with the state’s sub-state actors regarding prison, health and social services. There was no discussion with economic development policy actors. Prop 22 made it clear, redevelopment revenues constitutionally belonged to RDAs, cities and counties for ED use. This was unacceptable to Brown; the only way around it was to terminate outright RDAs. The background and detailed description/assessment of that termination is provided in the section below.
On final discussion is pertinent before doing so, however. Policy area realignment, devolution, or reform of the IGR state-sub-state policy system contains significant implications to each of the policy areas affected. To this point, this discussion has contented itself with describing the post-Prop 13 ED redevelopment strategy in terms like “fiscalization of land use” and “paying the bills”. Inherent in a “paying the bills” ED strategy, however—using ED direct and indirect proceeds to pay the expenses of other policy areas—threatens the autonomy of ED as a policy area, administered by its professional experts, and injects non-ED actors, institutions and processes into ED-relevant policy-making. What ED does, or does not do, affects other policy areas, and vice versa.
In this atmosphere, internal ED professional values, ethics, and strategy/program coherence and performance share common ground with non-ED needs, values and overall system coherence and performance. In this “process of sharing” different rules, processes, actors, agendas and goals become salient. Economic developers responding in what I call the “Blue Blood/Jesse Stone”[xli] mentality, “I am the expert and my decisions are made on professional values/goals and my perspective of the common good”, is not likely to be well-received by non-economic developers. Policy area realignment and devolution open up a new discussion of professionalization, administration by experts, and policy area autonomy. Nowhere is this discussion more vital than in ED’s unacknowledged use of casino gambling revenues as a variant of paying the bills ED strategy. Whether or not casino gambling—and the recent rise of the cannabis sector/ED strategy—is mainstream ED or CD, it is so regarded by many others.
The Dissolution of California RDAs
By way of background, we last left TIF and redevelopment agencies with our discussion on Props 13 and 4. RDAs had become the major player in California sub-state ED and through them the so-called fiscalization of land use through redevelopment and TIF had prospered greatly. Never popular, RDAs were insulated from both local policy processes and outside the strictures of Prop 13 and 4. The structure of California K-12 school district financing had transferred much of school financing to the state—as a funder of last resort—and created a sort of zero-sum between RDA/TIF redevelopment and school financing—increasing the cost burden of the state only complicated the situation.
Accordingly, from the 1980’s through 2011 the state had, through various legislation, placed limitations on local/county use of redevelopment agency proceeds and bond repayments. RDAs were required to finance a specified percentage of low-mod income housing, in 1993 (AB 1920) tightened the definition of blighted area to contain its use in vacant greenfields, auto dealerships, big-box retailers, and certain “pass-through payments” to other agencies as negotiated by the RDA—often the school district. AB 1290 imposed a formula by which such pass through payments were disbursed in accordance with proportion of local property tax share. AB’s language was sometimes imprecise and its definition of eligible projects limited so that many RDA projects escaped its strictures.
RDA’s fiscalization of land use continued and increased after AB 1290. This prompted nine legislative acts during the 1990’s to directly shift RDA proceeds to school districts (ERAF or SERAF accounts). RDA growth continued. By 2008 RDAs captured 12% of the total state property taxes, and despite strictures on large TIF project areas, there were six project areas in excess of 20,000 acres. To add illogic if not insanity to this picture, after nearly thirty years of serious effort to constrain RDAs and TIF districts, in the 2010 election that brought Jerry Brown into office, California voters approved a Prop 22 initiative “which limited the state’s authority over [sub-state] redevelopment and prohibited new state laws requiring RDAs to shift funds to schools and other agencies”[xlii]. Determined to put an end to the constant budgetary and policy intrusions by the state, by this time an almost annual affair, municipal, county and ED NGOs and business groups supported and financed the initiative. Prop 22 seems to have been the initiative that broke through the state’s unwillingness to deal more comprehensively with the plethora of policy areas and dysfunctionalities of the state’s intergovernmental fiscal system. Upon hearing of its passage, Jerry Brown allegedly uttered “Enough”!
Enter Jerry Brown and, surprise, yet another massive $25 billion state budget deficit (with a $12 billion deficit in state education funds alone) and limping California state tax proceeds—and a debt burden three times that inherited by Schwarzenegger. Brown, always a fiscal conservative, saw TIF and RDA reform, despite Prop 22, as part of his plan to solve the crisis. Twenty-eight days in office, in his January 2011 state of the state, Brown observed:
a lot has been made about [my] proposed elimination of redevelopment agencies. Mayors of cities both large and small have come to the capital …[ they assert] that redevelopment funds leverage other funds and create jobs … I certainly understand this because I saw redevelopment first hand as Mayor of Oakland But I also understand that redevelopment funds come directly from local property taxes that would otherwise pay for schools and core city and county services such as police and fire and care for the vulnerable …
His budget submitted to the legislature terminated RDAs and redistributed their property tax revenue to paying off previous redevelopment debts and $1.7 billion in stage general fund costs. The budget failed in the legislature. The legislature then approved bills that imposed an immediate freeze on RDAs, dissolved the RDAs effective 2011, and outlined a closedown process. RDAs could avoid dissolution if they made annual payments to school districts. The California Redevelopment Association sued attacking the constitutionality of the legislation. At the same time, many RDAs went on a debt-issuing binge, despite higher interest rates—they also transferred assets to other local agencies to prevent the state from taking them. In December, the California Supreme Court approved the legislation’s constitutionality, but declared unconstitutional annual RDA school district payment because of Prop 22[xliii].
As it played out the RDAs lost “authority to transact business or exercise power” on February1, 2012. The cities and counties were forced to assume responsibility for the complicated closedown of RDAs and service of their portfolio. Successor agencies were formed to handle portfolio and any property tax received was to be distributed to the taxing districts. Dismantling of the required low-mod affordable housing portfolio was especially controversial. In any case the net effect was to reduce state burden in funding K-14- deficits.—at the cost of severely restricting local redevelopment/ development and reducing the supply of affordable housing. BIDCOs and infrastructure financing districts (IFDs) were local options to fill the vacuum. RDAs and Cities fought back—stressing the approved Prop 22 as defense against Brown’s actions. The actual wind down left a decidedly-mixed legacy, evidenced a large disruption in what had been a critically dominant element of sub-state ED. Predictably, RDA shutdown intensified the chasm between California mainstream and community developers, mayors and county officials were left with gaps in their budgets and a vacuum in their ED strategies. In the immediate aftermath, the general community, and probably most media, were unsympathetic to their distress as summarized in a 2013 LA Times editorial:
The genius of the state’s late and not-very-much-lamented community redevelopment agencies was that they built projects that raised property values and then kept for themselves the higher tax receipts that resulted … any tax receipts beyond what the parcel already had been generating would stay with the agency to pay off bonds and invest in new projects. The self-financing of these agencies worked fine when the goal was to make over ‘blighted areas in postwar urban cores and to build affordable housing. But after voters adopted Proposition 13 … cities and their redevelopment agencies became increasingly aggressive in establishing project areas and discovering blight …. to cling to scarcer tax dollars … by setting up a mechanism that kept more of those dollars at home instead of Sacramento …. [RDAs] pumped public money into private development plans to build car dealerships, entertainment complexes, and other projects that demonstrated little public value beyond the increased property tax revenues—which didn’t even help pay for schools or police but stayed with the agencies for the next project … By the time Brown returned to the governor’s office, the state was itself so broke it finally needed its own share of the redevelopment property tax “increment” back[xliv]
And so off the RDAs rode into the California sunset! Well … not exactly. Four years later, in 2015, Brown changed his mind and signed into law Senate Bill 107 “which grants local governments (cities, counties and special districts) the power to create new entities (community revitalization agencies or CRA) to stimulate economically-depressed (less than 80% of state-wide median household income) and crime-ridden areas … which will have broad powers to issue bonds and conduct eminent domain for the purpose of investing tax funds in infrastructure, affordable housing, and economic revitalization projects. The bipartisan measure passed the Democratic-controlled Assembly 58-15, and Senate 29-10. BTW actions taken by these new agencies do not require any supporting public action and are outside of Prop 13 strictures[xlv]. Who said EDOs never die?
Third and Fourth Term: Putting aside 2011 Budget Deficits
In the midst of his 2011 fiscal difficulties, Brown found time to harken back to his older gubernatorial priorities: the environment. He signed a law requiring California’s energy sector to generate one-third of its power by 2020 through renewal energy, including a specific target of one million rooftop solar panel installations. Tax credits for solar and wind power were reapproved. With the largest auto sales market in the nation, he required that 15% of cars sold in the state be electric no later than 2025. He set up an advanced carbon cap-and-trade secondary market and committed the “world’s ninth largest economy to reduce climate pollution to 1990 levels by 2020”.
In 2012, the budget crisis and reform came to a head—alongside a major reorganization of California’s state EDO system—the first in fifty years. The 2011 fiscal crisis resolution was a temporary patchwork. The longer-term solution was wrapped into another initiative, Proposition 30 “Temporary Taxes to Fund Education, and send it for voter approval—which amazing enough was forthcoming by a solid ten point margin. Proposition 30 raised sales taxes, and income tax rates, on the state’s more affluent classes, raising about $6 billion. Combined with the 2012 state budget which contained meaningful cuts to social services, and a state Supreme Court decision permitting termination of RDAs and transfer of their funds to the state, meant that about $17 billion had been amassed to address the deficit. For the time being at least Brown had brought intermediate term stability to state finances. The 2016 Proposition 55 extended income tax rates for twelve years (2030). RDAs transferred assets to successor agencies and, for the most part, the old RDA system was over.
In 2012 Brown announced in the state of the state, the following as his priorities in priority order: stimulate jobs, build renewal energy, reduce pollution and greenhouse gases, , launch the nation’s only high speed rail system,, reach agreement on a Delta water and dam infrastructure project improve schools, reform pensions, and prison realignment. As part of a larger state bureaucratic reorganization initiative, a major reorganization of the State’s EDO system.
He terminated California’s long-standing “super departments” in which economic and community development were lodged as component departments in separate super-departments. These super department sub-agencies had served as the chief or leading state EDO since Pat Brown. Community Development and Mainstream ED resided in different super-departments. While the sub-agency (earlier referred to as Trade and Commerce Agency) had been the lead agency, other EDOs, in the Governor’s Office, separate commissions such as the High Speed Rail, and the autonomous Infrastructure Bank had supplemented, and fragmented the State’s EDO system. In their place was a separate Department of Housing and Community Development that housed most community development programs offered by the state, and most Mainstream ED programs were lodged in the Governor’s Office of Economic Development—nick-named “Go-Biz”.
In its own, California-way, Go-Biz was tasked to improve the state’s acknowledged poorly perceived business climate. Regulation simplification and a sort of one-stop shop, staffed with business knowledgeable people were key. Job creation, however, did not imply just any type of job. The hierarchy of job creation started with renewable energy and pollution control, green technology jobs,, climate change and reducing dependency of foreign oil and attraction of clean energy venture tech was intended to make California the world’s leader in that targeted “cluster”. High speed rail was also a major element in that initiative—its ultimate objective being to reduce reliance on fossil fuels, reduce congestion and its environmental costs, and save huge sums by not building highways/airport extensions.
The subject of business climate and California, it might be added, is fraught with some complexities. Defined in traditional mainstream ED criteria, it is horrible, among the nation’s worst. In terms of job creation, however, the state in defiance of its business climate creates jobs and still attracts firms—although in recent years ample evidence exists that increasing numbers of jobs, people, and firms are moving to the state’s neighbors. The 2016 loss of Tesla Motors to Nevada, following an incentive war reminiscent of 1976 Pennsylvania’s Volkswagen Plant (Chicago’s Boeing HQ), in which California dropped out, does suggest the climate has its limits.
The “I-Bank”, Film Commission, Trade and Tourism Commission, Small Business Loan Guarantee Program and Small Business Development Center were also relocated into the Governor’s Office for Economic Development. Go-Biz became the state’s lead agency for attraction, site selection, retention, job creation, infrastructure, tourism, business climate, small business, and international trade and export. With a 202-3 budget of $3,8 million, it was not overfunded compared to many other smaller states. Twelve overseas export/trade offices were shut down in 2003, and Brown’s reorganization did fund the opening of California’s only overseas office in China. By 2017 the I (Infrastructure) Bank was “modernized” by a Brown-created Task Force. It reassessed its lending procedures and priorities, and was specifically tasked with carrying out the Governor’s “Green Initiative”. In 2016, a $400 million Green Bond was issued, its proceeds went to water projects in the state—in drought at the time. A $1.5 Billion green revenue bond on behalf of Apple Corporation was applied to its alternative energy projects. Clean Energy is a major new redirection.
In 2013 California acquired about $3b stimulus money for high speed rail and approval to start construction of the first 65 mile stretch and the Delta Bay Infrastructure Plan with its Central Plateau Project (a major initiative of his Dad). His funding of public education, and substitution of formula-driven state grants as opposed to categorical, kept that policy area somewhat satisfied and a rainy-day reserve funding was set aside—an incredible achievement in California.
http://caselaw.findlaw.com/ca-court-of-appeal/1621398.html
Reelected (59%) Neel Kashkari (attacked business climate—is business climate real) in Nov 2014 California’s loss of Tesla Motors project to Nevada and Brown advocated high spped rail
Fourth admin new quotas on earlier 2011 energy and gas tax in April 2017
In 2015 approval of the redevelopment bill creating a new revitalization agencies was a controversial move for Brown. The reaction against his action was severe and across a number of groups. He also vetoed two bills that would have provided $1 billion to build affordable housing—too expensive and fiscal austerity still in order. The bills passed unanimously in the House and only two negative votes in the Senate. While the governor signed a bill extending firm tax credits, he vetoed seven other tax credit bills. On the other hand, the 2012 cap and trade program was generating profits which were used to subsidize affordable housing and transportation-density projects. And in true Tevye-style, on the other hand in 2015 California had $174 billion in unfunded pension liabilities—on top of its huge conventional public debt. In 2017 it accumulated an additional $72 billion in unfunded retiree health care benefits—total unfunded retire pension and health care benefits equaled $220.
In 2016 he continued to talk about fiscal discipline and was reluctant to stress new initiative” focus on how we pay for commitments we have already made”. Observing that the net amount of California state deficits and surpluses since 2000, deficits exceeded surpluses by seven times. He described California as “cut and spend” state. In 2016 the state’s fiscal system rested on 70% of income tax revenues. Except for raising minimum wage ($10) , California Works (workforce) and the need for lots more infrastructure (and maintenance) than California can afford, mainstream ED was not mentioned. After 2015 it dropped for the most part off his priority list. No mention was made about high speed rail. The sole major initiative was California becoming the 26th state to approve its own earned income tax credit—a major Reagan federal initiative. He also did not act to fund counter measures to a rapidly brewing fiscal crisis for newly incorporated cities—see above.
In 2017, in June Brown signed a balanced state budget that among other claimed successes provided money to pay for roads and bridges,, pay down debt, invest in schools, fund the earned income tax credit and provide Medi-Cal healthcare to millions. His state of the state declared California as the nation’s “Great Exception” to Trump incivility, further implying that “when California does well the nation does well”—a certain immodesty to be sure. Absent from the speech were any new initiatives—for all practical purposes it was a reaffirmation of the priorities of his administration and a contrast to Trump..
Schrag’s first generation immigrant thesis p. xxv and resident expatriots p xxvi
Smart growth thru Regional Planning
Lessons Learned
- California’s unique context, scale, and global tech leader—it’s economic base is not broken. It is ED at the top of the heap, the king of the mountain. Business Climate becomes the cost of doing business in a place you have to be. California ED does not need to chase business, more counter or justify the cost of business. California should not be directly compared to other states, possibly excluding Texas. The jerry-rigged intergovernmental fiscal system, hanging precariously in a boom and bust mode for more than half a century, is extreme when compared to most states. California lives off its Silicon Valley (and now its Los Angeles (Venice and Santa Monica) Silicon Beach) which has expanded to San Francisco, skipping over Oakland, its traditional defense manufacturing, tourism, and agriculture which in drought years either dries up or burns down. Some jealous economic developers could say it is living off these sectors and if any runs into serious trouble, California might seem some of the reality other states must confront. The national and global hierarchy just doesn’t impact California like it does other states. California is America’s most consistent example of the politics of growth. While increasingly hemorrhage jobs and population, California is still growing. From 2010 to 2016, California increased by an estimated 1.7+million or 4.6%; Texas number 2, added about 2.2 million over the same period, nearly 9.1%. Even at those rates it will take decades for Texas to catch up. In 2016, the federal BEA issued data that California was the sixth largest GNP in the world. Its 3.2% growth rate exceeded the nation’s.
- Programs are different even if they use the same name. TIF in California and Illinois, for example, serve mostly different purposes (greenfield development versus central city redevelopment) but the fiscalization of land use—and constant state redistribution to fund other policy areas, plus the destruction of local tax base capacity through plebiscite politics—really are two different realities. That RDAs were terminated—and then replaced over the dead bodies of many—is not found in any other TIF state. That the Brown administration has shifted ED targets to environmental and climate control rather than direct job creation or economic base diversification. California has relied on its autonomous higher education system to handle whatever is done concerning knowledge-based economics, fostering tech innovation. The very uneven K-14 public education system, always teetering fiscally and performance-wise, is probably not a plus. The state has operated low-key small business programs, however. Tourism is a critical industry for California, but it is more a municipal/county concern than state.
- ED can afford the luxury of confining its targets to environmentally and politically correct sectors—subsidies go in that atmosphere to the larger goal, i.e. clean energy, reduce fossil footprint, global leader in climate change—than to a capitalist pig firm. High speed rail is less transportation infrastructure than energy and cost reduction—and climate control.
- It is amazing how little state-level ED deals with Silicon Valley. The disconnect between municipal/ county mainstream and state-level ED is profound. They operate on two different planets with overlap but mostly two almost conflicting mindsets and strategies. Community development has the better of the two given its congruence with much of Brown’s environmental thrust—and the sharp preference to set up regional planning entities whose processes reinforce many CD priorities. Obviously the heritage of immigration has foster a powerful ethnic/racial/identify politics neighborhood-based municipal policy systems.
- One wonders if California’s plebiscite democracy, combined with is mix of a conservative older political culture, a north/south split that was erased from immigration of political culture change, a grid-locked prone state legislature, has created a set of municipal, county and state policy systems that are unable to produce coherent and sustained policy outputs. California is always an initiative away from policy system turbulence. Despite the intense use of government, California’s government is often weak, fiscally-impaired and surprisingly fragmented. Regional planning agencies have proliferated, but for the most part do their thing without being able to accomplish their goals. They too lack power, but produce wonderful plans and a few regulations. Outwardly, the private sector seems weak, but that is misleading. The power of the giant tech firms locally and nationally is noticed at the state level—and a fairly hands off state policy system. Chambers are stronger than one would think—and mainstream ED , without the knowledge-economy bells and whistles—is the default. It is not aggressive.
[i] I refer to, and will rely upon, the work of Peter Schrag, Paradise Lost: California’s Experience, America’s Future (Berkeley, University of California Press, 1998 and 2004 (Rev Ed).
[ii] Douglas Henton, Steven Waldhorn et al, “California” in R. Scott Fosler, the New Economic Role of American States, op. cit., pp. 203-47, reference on p. 228
[iii] Coan, As Two Ships, op. cit., pp.478-9
[iv] http://www.parenvironmental.com/…/The-Grand-Approach-Sacramentos-Capitol-Mall.pdf
[v] See Joel Kotkin and Paul Grabowicz, California INC (New York Rawson-Wade, 1982)
[vi] Joel Kotkin and Paul Grabowicz, California INC (New York Rawson-Wade, 1982), p. 80.
[vii] Douglas Henton, Steven Waldhorn et al, “California” in R. Scott Fosler, the New Economic Role of American States, op. cit., p. 235, and p. 242.
[viii] Casey Blount, Wendy IP, Ikuo Nakano and Elaine Ng, Redevelopment Agencies in California: History, Benefits, Excesses and Closure, Working Paper No. EMAD-2014-01, Office of Policy Development and Research, U.S. Dept. of Housing and Urban Development, January 2014, p1.
[ix] Gary Hamilton and Nicole Biggart, Governor Reagan, Governor Brown: Sociology of Executive Power (New York, Columbia University Press, , 1984), p. 184.
[x] Osborne acknowledged in the early/mid 1970’s few governors knew how to attack social inequality. “Development programs designed to combat poverty remain a poor stepchild of … [state-level] economic development”. Only “a few of the more liberal governors, such as Michael Dukakis and Mario Cuomo, … pioneer[eds] a development agenda in poor communities”., David Osborne, Laboratories of Democracy., p. 12
[xi] David Osborne, Laboratories of Democracy, op. cit., p. 36.
[xii] Eisinger seems to support this by asserting that on-side displaced worker services (our SWAT program) ‘strongly resemble the rapid response economic adjustment teams that more than 20 states established by mid-1980. Created first in California by order of Governor Jerry Brown in 1980 (and enacted into law there in 1982’ p, 313.
[xiii] David Osborne, Laboratories of Democracy, op. cit., p. 36.
[xiv] https://ballotpedia.org/History_of_Initiative_and_Referendum_in_California
[xv] Peter Schrag, Paradise Lost: California’s Experience, America’s Future (Rev Ed) (Berkeley, University of California Press, 2004), pp. 172-87, figure cited on p. 133.
[xvi] Peter Schrag, Paradise Lost: California’s Experience, America’s Future (Rev Ed) (Berkeley, University of California Press, 2004), pp. 137-8
[xvii] Nada Wasi and Michelle White “Property Tax Limitations and Mobility”: the Lock-In Effect of California’s Proposition 13 (NBER Working Paper 11108).
[xviii] Peter Schrag, Paradise Lost: California’s Experience, America’s Future (Rev Ed) (Berkeley, University of California Press, 2004), pp. 154-5
[xix] Peter Schrag presents an ironic reaction to after-effects of Proposition 13 by Howard Jarvis, the principal advocate for Proposition 13. Commenting on the inequities induced over time by Proposition 13, a crazy quilt pattern of low property taxes for those who stayed in their original locations and did not sell, and skyrocketing reassessments of new or sold property. By 1993, forth-three percent of homeowners were still assessed at 1975 levels and paying about 20% of the effective rate for new home owners; Peter Schrag, Paradise Lost: California’s Experience, America’s Future (Rev Ed) (Berkeley, University of California Press, 2004), pp. 172-87, figure cited on p. 174.
[xx] Eisinger, the Entrepreneurial State, op. cit., p. 187 asserts “the number of {California] municipalities and counties with TIF districts rose from 113 in 1975 to 221 in 1984; the number of individual districts rose from 229 to 467, and the revenue generated … by tax allocation bonds backed by tax increment increased from $50 million to $378 million … in the mid-1970’s less than 1 percent of the total assessed value in the California counties using TIF … had risen to 3.6% in 1984”. Eisinger does not link this explosion to Prop 13 or the fiscalization of land use.
[xxi] Peter Schrag, Paradise Lost: California’s Experience, America’s Future (Rev Ed) (Berkeley, University of California Press, 2004), pp. 180. Interestingly, he observes that only Wisconsin matched the intensity TIF use by California in this period.
[xxii][xxii] This is a simplification to attribute redevelopment agencies and TIF to Mainstream ED. It shall be argued later that TIF, originally tied to blight and public housing/slum clearance/urban renewal was always a mixed strategy with both CD and MED applications. In the case of California redevelopment agencies their close overlap with Planning Departments, and planners as economic developers who were less attuned to the private sector economic base and traditional MED strategies such as attraction and retention than to zoning and conformity to comprehensive plan. The stress on physical redevelopment—with the end user being mostly private developers and their client companies—further confuses the issue of whether a redevelopment agency’s action is more CD or MED. This is a gray area, deserving of more reflection, but at minimum, while the activities of California redevelopment agencies can be subsumed under MED, it also includes serious doses of CD as well.
[xxiii] Peter Schrag, Paradise Lost: California’s Experience, America’s Future (Rev Ed) (Berkeley, University of California Press, 2004), pp. 178.
[xxiv] Peter Schrag, Paradise Lost: California’s Experience, America’s Future (Rev Ed) (Berkeley, University of California Press, 2004), pp. 176-7.
[xxv] Casey Blount et al., Redevelopment Agencies in California: History, Benefits, Excesses and Closure, Working Paper No. EMAD-2014-01, Office of Policy Development and Research, U.S. Dept. of Housing and Urban Development, January 2014, pp. 1-2
[xxvi] William Fulton, “In their race for sales tax income, Cities often wind up as the losers” Sacramento Bee, September 4, 1995, p. B7.
[xxvii] William Fulton, “In their race for sales tax income, Cities often wind up as the losers” Sacramento Bee, September 4, 1995, p. B7.
[xxviii] Peter Schrag, Paradise Lost: California’s Experience, America’s Future (Rev Ed) (Berkeley, University of California Press, 2004), pp. 181.
[xxix] David Osborne, Laboratories of Democracy, op. cit., pp. 37-40.
[xxx] http://www.spur.org/publications/spur-report/1999-11-01/california-high-speed-rail-project
[xxxi] Douglas Henton, Steven Waldhorn et al, “California” in R. Scott Fosler, the New Economic Role of American States, op. cit., pp. 230-1.
[xxxii] Douglas Henton, Steven Waldhorn et al, “California” in R. Scott Fosler, the New Economic Role of American States, op. cit., pp. 235-8
[xxxiii] Peter Eisinger, the Entrepreneurial State, op. cit., pp. 63-4.
[xxxiv] Schrag, P. xx
[xxxv] Schrag p. xxii
[xxxvi] Schrag p. 53.
[xxxvii] Peter Eisinger, the Entrepreneurial State, op. cit., p. 233. Eisinger calls attention to the 1983 decision by Microelectronics and Computer Tech Corporation (an 18 company consortium) to locate in Texas and not in California. The legislature responded (unsuccessfully) by increasing university budget by 30% to offer more technology courses (see p. 233).
[xxxviii] Peter Schrag, Paradise Lost: California’s Experience, America’s Future (Rev Ed) (Berkeley, University of California Press, 2004), pp. 10-11.
[xxxix] Peter Schrag, Paradise Lost: California’s Experience, America’s Future (Rev Ed) (Berkeley, University of California Press, 2004), p. ix.
[xl] See Dean Misczynski, Rethinking the State-Local Relationship: An Overview, Public Policy Institute of California, April, 2011, especially pp. 11-2. That policy realignment is a feature of the post-Great Recession Contemporary Era see Alan Greenblatt, ”State’s Handing off More Responsibilities to Cities”, Governing, April 2011, http://www.governing.com/topics/mgmt/States-Handing-Off-More-to-Cities.html and Dan Carrigg, 2011 Legislative Year in Review, , Western City,http://www.westerncity.com/Western-City/January-2012/2011-Legislative-Year-in-Review/; and Noa Clark, Robert Herr, and Paul Levin, “California Post-Redevelopment Agency Landscape, Perspective on Real Estate Newsletter, Spring 2012, https://www.pillsburylaw.com/en/news-and-insights/californias-post-redevelopment-agency-landscape.html.
[xli] I refer to the TV series Blue Blood and Jesse Stone in which actor Tom Selleck, portrays the expert police chief whose decision-making is constantly interfered with by non-policy policy actors. Watch several of these shows and, I believe it will become apparent how the larger issues raised by policy area realignment strain in a cross-policy areas policy process.
[xlii] Casey Blount et al., Redevelopment Agencies in California: History, Benefits, Excesses and Closure, Working Paper No. EMAD-2014-01, Office of Policy Development and Research, U.S. Dept. of Housing and Urban; Development, January 2014, pp. 2; http://www.lao.ca.gov/ballot/2010/22_11_2010.aspx. Continuing the insanity, after all the brouhaha about California license fees, Prop 21 passed with nearly 60% of the vote—it imposed a surcharge for parks and wildlife. Another initiative allowed the legislature to increase taxes by a majority, not two-thirds vote.
[xliii] http://caselaw.findlaw.com/ca-court-of-appeal/1621398.html; https://www.pillsburylaw.com/en/news-and-insights/californias-post-redevelopment-agency-landscape.html
[xliv] Editorial Board, Los Angeles Times, September 22, 2013
[xlv] http://calwatchdog.com/2015/10/01/governor-jerry-brown-revives-redevelopment-agencies/; http://www.sacbee.com/news/politics-government/capitol-alert/article36193152.html.
Ron W. Coan 