LAO Calls Out CRA's Whoppers

Steven Greenhut:

The California Redevelopment Association and its “deer in the headlights” President Linda Barton have been making dishonest claims about the number of jobs that their corporate-welfare scam known as “redevelopment” provides to local communities. These agencies, which abuse property rights and lavish millions of dollars on politically well-connected developers, are resisting a plan by Gov. Jerry Brown to shut down the agencies and return the money (minus debt service) to the treasury.

The nonpartisan Legislative Analyst’s Office just released a report looking at Brown’s proposal and it tore apart CRA’s bogus jobs-creation claims:

CRA Report Inaccurately Calculates Employment Effects of Redevelopment

The California Redevelopment Association (CRA) recently circulated a document asserting that eliminating redevelopment agencies would result in the loss of 304,000 jobs in California. We find the methodology and conclusion of CRA’s report to be seriously flawed. In our view, it vastly overstates the economic effects of eliminating redevelopment and ignores the positive economic effects of shifting property taxes to schools and other local agencies.

The CRA’s job loss estimate is based on a consultant’s report using data from 2006–07. To estimate the number of jobs resulting from redevelopment agencies, the report calculated the total expenditures on construction projects completed within a sample of redevelopment areas for 2006–07, as well as for any projects completed outside the area with agency participation. Based upon that sample, the report then estimated the total construction expenditures for redevelopment agencies statewide in 2006–07 and used a computer model to calculate through various multipliers the total effect of those expenditures on the state’s economy and employment. The report concluded that redevelopment was responsible for the creation of about 304,000 full and part–time jobs in 2006–07. Therefore, the CRA asserts that the elimination of redevelopment would result in the loss of 304,000 jobs.

To our knowledge, the consultant’s study has never been subjected to any independent or academic scrutiny. Our review indicates that the report has three significant flaws that cause it to vastly overstate the net economic and employment effects of redevelopment agencies.

Assumes Redevelopment Agencies Participate in All Project Area Construction. The study’s calculation of construction expenditures includes all construction completed in a redevelopment project area in 2006–07, even if the redevelopment agency was not a participant. We find implausible the report’s implicit assumption that no construction with solely private financing would have occurred within a redevelopment area in the absence of the redevelopment agency. This is particularly true, given the large geographic scale of California redevelopment project areas. In our view, it is likely that much of the new business or residential construction (and the associated jobs) would have occurred independently of the redevelopment agency.

Assumes Private and Public Entities Participating in Redevelopment Agency Projects Would Not Invest in Other Projects. Most redevelopment agency projects include significant financing from private investors or other public agencies. By asserting that all of the jobs associated with redevelopment construction would be lost if redevelopment agencies were eliminated, the CRA implicitly assumes that these private and public partners would not invest in other economic activities in the state. The report provided no explanation for this assumption that the existing private capital and public agency grants would remain unused without redevelopment agency participation. In most cases, we would expect developers, investors, and public agencies to find alternative projects to pursue—either within the redevelopment area or elsewhere in the state.

Assumes Other Local Agencies’ Use of Property Tax Revenues Would Not Yield Economic Benefits. Under the Governor’s proposal, the property tax revenues that currently support redevelopment would flow over time to schools and other local agencies in the county. By asserting that all of the jobs associated with redevelopment construction would be lost if redevelopment agencies were eliminated, the CRA implicitly assumes that these other local agencies’ use of property tax revenues would not result in any economic activity. The report provided no explanation for this assumption. In our view, spending by school districts, counties, and other local agencies also would yield significant economic and employment benefits.

Of course, the eminent-domain-abusing corporate-welfare shills at CRA have no shame. I’m sure they will just go on pretending that their central-planning and subsidy mechanism is the cause of all economic growth in the state and that redevelopment has caused hundreds of thousands of jobs.

FEB. 11, 2010

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