State Assembly approves plan to bring back Kelo-style redevelopment

Redevelopment agencies would once again have the power to seize private property for big developers under a bill that passed the California State Assembly earlier this month.

Assembly Bill 2, authored by Assemblyman Luis Alejo, D-Salinas, would give local governments the power to create new entities that would have the same legal authority as redevelopment agencies. These new Community Revitalization Investment Authorities would have the power to issue bonds, award sweetheart deals to businesses and “acquire and transfer property subject to eminent domain,” according to the legislative analysis of the bill.

Property rights advocates warn that the bill’s language contains no restrictions on eminent domain and could resurrect the abuses made possible by the Supreme Court’s controversial Kelo decision.

“It brings back the right of governments to exercise eminent domain against some private parties in order to resell their property to other private parties,” cautioned Howard Ahmanson, Jr., a property rights advocate and founder of Fieldstead and Company. “Only new and wealthy suburbs would be potentially spared from ‘redevelopment,’ the lower middle class and poor would not.”

12 Assembly Republicans back redevelopment, unrestricted eminent domain

In 2005, the U.S. Supreme Court ruled in Kelo v. New London that government agencies have the power to seize property for economic development. The decision was widely criticized across the political spectrum and inspired states to pass tougher laws limiting governments’ eminent domain powers. Here in California, the momentum for property rights reached its zenith in 2011, when Gov. Jerry Brown pushed through a plan to end redevelopment as part of his plan to balance the state budget.

Now a decade since Kelo, the horror stories of small businesses being seized to make way for strip malls and condo complexes have faded from public memory. During the state Assembly’s floor debate on the bill, not a single member – Republican or Democrat – spoke in opposition to the bill, which passed by a 63-13 vote.

Surprisingly, a dozen Assembly Republican lawmakers, including Assembly GOP leader Kristin Olsen, joined the Democratic majority in backing the bill. Olsen’s office refused to comment on the bill or explain how the bill fit with the Republican Caucus’ position on property rights. One GOP lawmaker defended her vote by arguing that redevelopment agencies are an important tool for economic development.

“I ran for Assembly to help create jobs,” said Assemblywoman Young Kim, R-Fullerton. “RDAs give us another tool to do just that while turning around poor and disadvantaged areas.”

Redevelopment focused in areas with high unemployment, crime

Under the bill, a Community Revitalization Investment Authority could be created by a city, county or special district if certain conditions are met. The first requirement is that the area have an annual median household income that is less than 80 percent of the statewide median. Additionally, three of the following four conditions must be met:

• Unemployment that is at least 3 percent higher than the statewide median unemployment rate;
• A crime rate that is 5 percet higher than the statewide median crime rate;
• Deteriorated or inadequate infrastructure such as streets, sidewalks, water supply, sewer treatment or processing, and parks;
• Deteriorated commercial or residential structures.

“It’s redevelopment with a kinder, gentler twist,” explains Steven Greenhut, the state’s foremost expert on eminent domain and author of the book, Abuse of Power: How the Government Misuses Eminent Domain. “If AB2 passes, agencies will take property by eminent domain and use public dollars to fund private projects. Localities will run up debt without a vote of the public. As always, the plans of residents will give way to the edicts of the planners.”

There’s overwhelming evidence that redevelopment agencies harm small businesses, while failing in their mission to stimulate economies. That’s most evident in the landmark Kelo case, where a Connecticut town offered a corporate welfare package to the pharmaceutical giant Pfizer, Inc.

“While Ms. Kelo and her neighbors lost their homes, the city and the state spent some $78 million to bulldoze private property for high-end condos and other ‘desirable’ elements,” the Wall Street Journal observed in 2009. “Instead, the wrecked and condemned neighborhood still stands vacant, without any of the touted tax benefits or job creation.”

Those abuses extended to California’s application of redevelopment, property rights advocates say.

“California has rightly earned the reputation as one of the nation’s largest abusers of eminent domain, given that Redevelopment Agencies routinely abused their power of eminent domain to seize homes, small businesses and places of worship for private development,” wrote the California Alliance to Protect Private Property Rights, the state’s leading property rights group. “Time and time again, these obscure agencies diverted taxpayer dollars from core government programs to finance professional sports arenas, luxury hotels, golf courses and strip malls.”

Alejo: Bill needed to help disadvantaged communities

Nevertheless, supporters of AB2 say that blighted areas are a problem that demand government action.

“There are many areas in the state where the streets are broken and old water and sewer pipes lurk below,” Alejo said of his legislation. “In these areas, businesses do not open up shop. This leads to high unemployment, high crime rates and a hopeless community. This bill will work to tackle issues facing our state’s most disadvantaged communities.”

Several GOP lawmakers that opposed the bill dispute Alejo’s arguments.

“Private property rights are a foundational principle declared by our founding fathers,” said Asm. Scott Wilk, R-Santa Clarita, who opposed the bill. “Eminent domain is used by the government to trample on private property rights and as an individual property owner, there are legal protections in place to prevent government encroachment.”

Assemblywoman Melissa Melendez, R-Lake Elsinore, one of only 13 members to oppose the bill, said that she understands her colleagues interest in redevelopment, but can’t back legislation that undermines property rights.

“Stripping away property rights in the name of economic development isn’t the answer,” said Melendez, a former member of the Lake Elsinore City Council. “I think it has become more fashionable to allow the government to take over instead of allowing the free market to do so.”