The San Francisco Bay Area is faced with the most acute homeless crisis in its history. A recent (April 10th 2019) report issued by the Bay Area Council Economic Institute estimated that it would cost $12.7 billion to end the homeless crisis in the Bay Area.
And the latest news is that the San Francisco and Bay Area homeless population has grown by “double-digits” and stands at 8,000 people. In Alameda County, the count is also 8,000 people. In the SF Bay Area, the estimate is 25,000 – although the homeless population numbers feel larger than that just by sight, or around 100,000.
The report stated “To provide a scale of the resources necessary to end homelessness under current methods of building and providing services, a simplified calculation shows that $12.7 billion would be required to create a new unit of permanent housing (at $450,000 per unit) for each of the 28,200 people experiencing homelessness identified in PIT counts. Providing services (at $25,000 per person per year) to half of that population over 10 years would require an additional $3.5 billion. ”
The Bay Area Council Economic Institute Report also said providing services at about $25,000 per person annually to half of the region’s homeless population over 10 years would require another $3.5 billion.
The trouble is, while the report put out that total fiscal weight of the homeless crisis in the SF-Oakland Bay Area, it failed to explain where the money would come from to lift it. This post does just that.
The idea for the way to pay for the $12.7 billion plus $3.5 billion, or $16.2 billion comes from tax increment financing. Tax increment financing, or “TIF”, is a formula designed to captures growth in property values over time and use that as the basis of a taxation formula that yields revenue which is used to pay for for bonds issued for various types of public and public / private partnership projects.
TIF is not new to California. Established in 1945, it was the main funding tool used to implement urban reformation plans allowed by “California Redevelopment Law” and formed by what were called “California Redevelopment Agencies” or “CRAs”. Since some of the CRAs actions allowed under California Redevelopment Law were controversial, lay people often confuse TIF with CRAs, even though the former was used by the later.
The advantage of TIF is that it allows the efficient and effective use of property tax dollars toward urban reformation without raising taxes. The formula is so powerful it became the main go-to approach after the passage of California Proposition 13 in 1978. That caused a dramatic reduction in available property tax revenue; cities used CRAs and TIF to capture that money, sometimes for use even in gap-financing shortfalls in municipal budgets. And that’s what makes TIF the perfect way toward full-funding of the cost to eliminate the homeless problem in the SF / Oakland Bay Area. Let’s have a look at why.
The idea I have is that each of the nine counties that make up the San Francisco Bay Area would designate TIF zones totalling $8.3 billion in assessed value each, or $74.7 billion in total asssessed value. That would form what’s called the “base year” that’s used for our TIF calculation. Let’s take it on a per-county basis.
(As an aside, I must explain that I’ve served as a redevelopment tax increment financing forecasting consultant to the Oakland Redevelopment Agency, The Emeryville Redevelopment Agency, and the San Francisco Redevelopment Agency. I was also an intern to the Oakland Redevelopment Agency in 1987-1988.)
Assuming a 40-year-bond issue, and the allowed increase in land value of just two percent per year, and a one-percent tax rate, we would come to $1,793,631,896.08 in total revenue from TIF, per county. Now, multiplied by nine, and to represent the nine-county SF Bay Area, we get $16,142,687,064. Now, we have just identified the revenue we need to pay the “end homelessness” price tag that the Bay Area Council Economic Institute came up with. Now, before your response is that money takes away from substantial revenues the counties use, let’s check that idea.
The total assessed value for all nine SF Bay Area counties is $1,732,301,430,136, or $1.732 trillion. Of that, the total assessed value of the TIF zones that is $74.7 billion comes to just 4.31 percent of the total value of all nine counties in the Bay Area. So, while the TIF zones read like a giant share of the SF Bay Area, in truth, they’re not.
Here’s the per-county break down of total assessed value:
The TIF Zones Should Not Be One-Per SF Bay Area County
In this idea, the $8.3 billion TIF zones don’t have to be one giant area. Remember, we’re forming and considering an idea that becomes state legislation. From that perspective, the best way to design the law is to allow counties to form commissions that then work with local elected officials to form “Sub-TIF Zones” that equal $8.3 billion in total value.
Since the proposed law would create revenue that would, in part, help the county and the cities deliver needed services, no pass-through legislation to those “taxing agencies” is needed. Now, that leads us to the new organizations who would be responsible for administering the law.
The law should call for a new, regional agency, a kind of “joint powers authority” (formed using California Government Code section 6500 called the Joint Exercise of Powers Act) to distribute and monitor the use of the generated funds. The way the system would work is such that each county would have its office representing the regional agency, and the one headquarters office would be located in Oakland.
The county decisions on TIF Zones and funding expenditure plans would be given to the new regional “joint powers authority” commission for final approval. Then, the new regional “joint powers authority” commission would float bonds to pay for the implementation of, let’s call it “The SF Bay Area Plan To End homelessness.”
As to what the plan would consist of in this conception of the idea, are specific monies green-lit to approve housing projects and services and programs, all with the objective of ending homelessness in the Bay Area. The regional commission’s function is not only to monitor the activity, but also to divert funds that may be needed more in another part of the SF Bay Area.
Housing Not Meant To Be Only In TIF Zones
It must be added that the idea of this proposed legislation is not to suggest that we segregate extremely-low-income housing to certain areas via the TIF Zones, but that the TIF Zones serve as funding generators for the regional program. Thus, in this concept, TIF revenue can be used outside the TIF Zones in the county, and in accordance with the regional plan.
That written, there are homeless specialists and affordable housing advocates and developers all over the SF Bay Area, and who have a better handle on that than this one vlogger does.
Also, the idea can be used in other regions in California. The documentary Sheltered Mercy, which focuses on the homeless problem in Sacramento, points the way toward a similar effort for that area.
Input is more than welcome.