By Steven Greenhut | California’s redevelopment agencies were a fixture on the local political landscape for six decades, as they guided development policies and grabbed “tax increment financing” that localities used to pay for infrastructure improvements, downtown renovations and affordable-housing projects. They had some notable successes but generated enormous controversy before Gov. Jerry Brown shuttered them in 2011.
They were designed in the 1940s to fight urban blight. But the agencies were criticized for their use of eminent domain on behalf of private companies; for running up debt without a vote; for the subsidies they ladled out to developers; and for financing big-box stores and auto malls rather than helping inner cities spruce up. The governor ultimately killed them because these agencies had become a drain on the state’s general-fund budget, consuming 12 percent of the budget.
It was a shock to see such a powerful sector dry up, as local agencies morphed into “successor agencies” that had nothing left to do other than pay off existing debt. But the redevelopment industry – the developers, lobbyists, city officials and low-income housing advocates – never really went away. Each year since 2011, lawmakers have proposed and sometimes passed measures that incrementally bring back the redevelopment process.
The way that complex process worked in the past involved city councils essentially creating agencies that target “project areas” for subsidy. The agencies would float debt to fund infrastructure and pay subsidies to developers who build things within those areas. Cities often would subsidize retail projects because of the sales taxes they provided. The gain in the property taxes from the new development was designed to pay off the debt.
But those taxes often come out of the hide of other public services, such as schools and public safety. The state budget had to backfill the losses and the result was the budgetary drain that the governor plugged. But with the state’s fiscal situation having improved markedly since 2011, legislators have been less concerned about any financial impact of revived agencies.
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