Redevelopment

By Diane Underhill

Redevelopment misuse is bad public policy. When the majority of the property tax increment from a redevelopment area is dedicated back to that RDA for a period of 45 years it leaves the government agencies that should have recieved those funds unable to provide necessary public services.

When taxpayers wonder: Why can't the County pay parity wages to its unionized workers? Why can't the cities afford to keep their streets repaired? Why are schools cutting programs? Why are our libraries under-funded? The answer is: The misuse of redevelopment statewide. To quote California planning expert Bill Fulton from a recent analysis, redevelopment has "the power to take unilaterally some of the property tax that would otherwise have to be shared with counties, school districts, and other government agencies."

During the 1992 recession, the state, facing an $8 billion deficit, diverted local property tax revenues to its coffers under the guise of the Educational Relief Augmentation Fund (ERAF). The result: county and city governments were strapped to fund basic public services. Cities and counties cannot be held blameless; a contributing factor to the $8 billion deficit and, therefore, the 1992 State-budget-balancing-ERAF-tax-shift was the aggressive pursuit by cities and counties of "creative financing schemes" like the misuse of redevelopment in areas that were not "legally" blighted. (Some local cities went so far as to declare strawberry fields blighted -- imagine.)

Cities and Counties all jumped on the redevelopment band wagon because "everyone was doing it" and they mistakenly bought the argument (put forth by the powerful redevelopment [AKA developer] lobbyists in Sacramento) that with redevelopment the city or county gets to "keep" 72% of all incremental property tax to use in that area. The problem is redevelopment money cannot fund infrastructure maintenance and it cannot fund regular city or county government operations like police, fire, libraries, planning departments, healthcare, etc.

Redevelopment money is restricted by state law and can only be given as incentives to lure private business to invest in a blighted project area (in what amounts to a giveaway of public funds to private business and equates to corporate welfare) or to pay for the complete rebuilding of the area's public infrastructure at many times the cost of simple repair or maintenance (in what can only be called wasteful public spending.) When our schools are struggling for funding, our streets are deteriorating, and we cannot afford to pay our public servants a parity wage, then we as taxpayers should take a hard look at the public funds siphoned away from these public services through the misuse of redevelopment.

To understand how taxpayer money subsidizes private big business consider where tax money should go and compare it to how redevelopment money is spent. The following is the City of Ventura's (1998) property tax distribution and is an example of where a city's property taxes are suppose to go: Education 55%, County of Ventura 25%, City of Ventura 16%, Casitas Municipal Water 1%, Other 3%. If a redevelopment project area is established, 72% of all incremental property taxes within the area go to the Redevelopment Agency (usually for a term of 45 years +) and the other entities (minus the city) share the remaining 28% as a "pass-through". Again, the problem with this equation is that redevelopment money can only be given away as incentives for private business to invest in a project area or to wastefully rebuild (rather than repair) infrastructure.

Not only can redevelopment money not fund crucial public services, it siphons money away from them. For every redevelopment project area created within our county's cities, money is stripped from state education programs, county public services, and the city that creates the redevelopment project's own general fund. Where does the lion's share of this public money usually end up? It ends up lining the pockets of private big business.

Throughout this, remember that although there are three levels of government within California, there is only one funding source--the taxpayer. If the state has to backfill money to the schools or other public services, the taxpayer pays the bill. If cities create special assessment districts to pay for services that have traditionally been paid by government, the taxpayer pays for that service twice. The taxpayer is forced to pay these "extra" bills because redevelopment uses public funds to subsidize private business.

Although I do not agree with all of Tom McClintock's political views, I would like to quote from his May 1999 speech on redevelopment:

"It is wrong to give public money for private gain. It is inherently
corrupt. It impoverishes our communities; it robs us all of our
ability to provide our children with decent schools, our
neighborhoods with adequate safety, our towns with simple
services..."

State Senator Tom Torlakson has proposed a bill (SB211) that would permit redevelopment projects to keep operating past 2009 (when the state will require most older redevelopment projects to close down) while requiring the agencies to spend redevelopment money only in those portions of the project area that are still blighted, and having that blight determination made with the stricter 1993 reformed definition of blight. The 1993 definition states that the physical and economic blight must be "so prevalent and so substantial that it causes a reduction of proper utilization of an area to such an extent that it constitutes a serious physical and economic burden on the community which cannot be alleviated by private enterprise or governmental action, or both, without redevelopment." However since there is no real state oversight to redevelopment areas, historically, redevelopment consultants have found "blight" where ever the city or county agency that hired them, wanted them to find "blight." .

The only true oversight for redevelopment is citizens. Although counties (to protect their revenue flow) sometimes challenge cities in court over redevelopment misuse in non-blighted areas, more often citizen groups are forced to defeat redevelopment projects in referendum. Now that taxpayers are becoming more informed about redevelopment's dysfunctional property tax distribution we need to collectively insist that our elected state officials eliminate the public policy abomination of redevelopment. (Did I mention: That Redevelopment Agencies are the only government agencies allowed to issue bonds without voter approval? That of the 829 redevelopment project areas formed in California with the purpose of eradicating "blight" that only 25 projects have ever closed out? That statewide in 1999 we had an astounding $41 billion plus redevelopment debt with that figure predicted to double every five years? That if the kind of dire inner city decay that would legally entitle an area to redevelopment monies actually existed that there are other federal and state grants that would be available to the area without redevelopment?)

While SB211 is better than nothing, we need to do more than tighten the definition of "blight" for redevelopment areas, we need to abolish all new redevelopment projects and force older ones to close-out as soon as possible in order to get public funds flowing back to public services. Redevelopment as it has been used is bad public policy that has had a devastating effect on local government finance. Citizens pay taxes to fund public services, not to fund private enterprise. We need to use our collective voting power to force our state-level elected officials to eliminate redevelopment so that we as the taxpayers do not continue to foot the bill while not having our necessary public services met.