Bill would revive California’s redevelopment agencies

 

SACRAMENTO – 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.

In 2015, the governor signed Assembly Bill 2, which created Enhanced Infrastructure Finance Districts (EIFD) that have many similarities to the old redevelopment project areas. Under the old law, redevelopment officials would simply declare an area blighted before gaining new powers of subsidy and debt funding within that area. Under what some called Redevelopment 2.0, those borrowing and spending powers were limited to infrastructure projects.

To prevent some of the old fiscal abuses, the new EIFD process bans the newly created agencies from unilaterally creating project areas that would steal tax revenue from counties, fire authorities or school districts. Instead, they would have to gain the approval of the other districts, thus providing incentive for a less controversial project. These projects also lacked the affordable-housing requirement that was found in the old redevelopment law.

This year, affordable housing is the Legislature’s pet issue in its final week of session. The governor and Democratic leaders have promised a legislative package to deal with the state’s housing crisis. Lawmakers also are considering Assembly Bill 1568 by Assemblyman Richard Bloom, D-Santa Monica, which would add a housing component to those infrastructure districts. Critics say it’s creeping redevelopment, combined with an expanded ability for local governments to raise taxes.

“Local governments have been without a reliable financing mechanism to invest in economically depressed, transit-rich areas since the demise of redevelopment agencies in 2011,” Bloom said in a Senate Rules Committee analysis. This proposal “provides local jurisdictions with the authority to finance infrastructure and affordable housing using new sales and use taxes in addition to property tax increment within qualifying districts.”

Lawmakers are expected to make technical amendments Friday and then send it to the Senate floor for a vote Monday. The bill requires that the Enhanced Infrastructure Financing Districts use the new taxes to fund affordable housing on infill sites. The measure has passed its committees on a largely party-line vote, with most Democrats favoring it and most Republicans opposing. It’s backed by several planning and local-government organizations, and has a high likelihood of making it to the governor’s desk by the Sept. 15 deadline.

If that’s so, then it will be interesting to see whether Gov. Brown, who fought so hard to eliminate redevelopment agencies, is willing to let them return incrementally, albeit with a different name and somewhat different rules.

Steven Greenhut is Western region director for the R Street Institute. Write to him at [email protected]

14 comments

Write a comment
  1. LIbi Uremovic
    LIbi Uremovic 8 September, 2017, 11:27

    i started auditing government agencies when i found rda on the books … from an accounting perspective; it’s a heart attack …

    it was rda that bankrupt stockton and san bernardino – both appeared to be good cities – but they were running up rda debt, which is like credit card debt … and the embezzlement and misuse of funds was way out of control ..

    this is the problem with government corruption – one door is closed and another dirty politician is willing to open up another …

    Reply this comment
  2. Queeg
    Queeg 8 September, 2017, 12:09

    Comrades

    Study the history of public housing or is it history of single mothers struggling on government EBT/welfare housing….you will see an explosion of single parent households in these new affordable housing infills-

    Thousands of new latchkey kiddos with crowbars and bags of fast foods coming to your communities.

    Reply this comment
  3. Standing Fast
    Standing Fast 8 September, 2017, 14:41

    Well, I suppose this had to happen sometime. Steve, what do you think–time for a little history lesson? I can tell your fans what they need to know to get started fighting this menace.

    My credentials are as follows: I have been fighting Redevelopment since 1985 and have had a few victories against the local CRA where I live–and without going to court. I have been calling for its nationwide abolition since 1989. I met Steven Greenhut at an anti-Redevelopment Conference in 2004 where he was plugging his book, “Abuse of Power” the year before Kelo.

    Folks, the last year these corporate welfare-eminent domain abuse machines were in full swing was 2011. They were soaking up billions of property taxes statewide to pay for economic development projects that had a habit of making headlines for the wrong reasons. Even worse, so much of this revenue was being diverted from our local schools that the State could not comply with its own laws regarding funding for education.

    Jerry Brown had just won the election the previous November and one of the first things he did when he took office was to announce the end of California’s 400-odd Community Redevelopment Agencies. He had been persuaded by his finance advisor this was the right thing to do. She had been talking to the leader of the Statewide movement to abolish redevelopment, Chris Norby R-Fullerton, who had just been elected to the Assembly.

    Now, as it happened, the statewide movement against Redevelopment was the nation’s most vocal and prolific. From the day the California Legislature adopted the State’s Community Redevelopment Law (Health & Safety Code Section 33000 et seq.) back in 1952, there was strenuous opposition. This law is based on the Housing Act of 1949 which was a bi-partisan betrayal of the American people.

    But, it had enough support that the following year California voters approved a Constitutional Amendment allowing CRAs to use Tax Increment Financing to fund their Redevelopment Projects (Article XVI, Section 16). It took years for so many cities to jump on the bandwagon and at first not too many people saw what was coming. Tax increment financing sneaks up on you.

    To create their tax revenue-generating Project Areas, the law requires local governments to declare they had found blight within their jurisdictions, blight within their proposed Project Areas, blight in the form of physical, social and economic decay. Everyone who lives, breathes, and pays taxes in a Project Area is presumed by this declaration to be a menace to society. If you think I am making a joke, look it up. This is the law that made Chavez Ravine and Kelo vs.New London famous.

    The purpose of this declaration was to strip people of their Constitutional rights by invoking martial law. From that time, Congress considered the existence of blight–technically any area where there are properties that don’t generate as much tax revenue as local officials think they should–as a dire and imminent threat to our country on the order of invasion by a foreign enemy, terrorist attack, or Hurricane Harvey.

    What interested local officials was the money and the power and the glory. They could issue debt for the purpose of receiving tax increment revenue before a Project had even been approved. They could propose a Project without consulting affected property owners whose taxes were being diverted from schools, city and county General Funds, and other essential services. They could exercise the power of eminent domain for private projects to eliminate the blight they had found. They could expand the boundaries, increase debt and revenue limits and extend the life of Project Areas.

    The Redevelopment Lobby–made up of local officials, local governments, developers, real-estate investors, architects, urban planners, consultants, lawyers and camp-followers who mostly belonged to the California Redevelopment Association and its parent organization, the League of Cities–is the real menace to society.

    And their members pay their dues out of the public treasury. The money is used to fight any effort of legislators to reform or eliminate Redevelopment in California.

    But, after the U.S. Supreme Court rendered their appalling verdict in the famous eminent domain abuse case of Kelo vs. New London in 2005, the California anti-redevelopment movement took a turn toward abolition.

    Interestingly, although the movement was a model of political diversity, members of this movement tended toward conservative and libertarian thinking. So, we had always thought that the Republicans would lead the charge. But, when Brown showed an interest, Norby could not miss the opportunity to gain ground.

    Well, the Democrats in Sacramento were pretty much on board with their leader. But Republicans, who had erupted with indignation over the Kelo Decision’s obvious violation of the Fifth Amendment to the U.S. Constitution, were now waxing eloquent about the virtues of Redevelopment.

    The Democrats passed the bill to shut down California’s CRAs (this was not abolition, but it was a great victory for our movement anyway), and immediately there was a legal challenge and it went to court.

    Well, to make a long story short, by the end of the year the deed was done and on New Year’s Eve 2011 word came down that the judge had ruled in favor of the bill.

    After we celebrated our victory over the menace of Redevelopment, our movement just broke up. Everyone was exhausted. Many of us had been fighting for more than ten, twenty, even thirty years. We had grown old in the trenches and were exhausted.

    The agencies were required to create Successor Agencies which would continue to receive the TIR for the purpose of paying off the billions of dollars of CRA indebtedness. They are still doing this.

    A few years later the legislature passed a bill that would allow local governments to establish local Investment Authorities whose powers are based on California’s Redevelopment laws. Not much has happened with them because they are not self-funding.

    You can find out more in the Annual Report on Community Redevelopment Agencies for the final fiscal year and the Annual Report on the Successor Agencies for the years since then at the State Controller’s Office website at http://www.sco.ca.gov — look for the big numbers on Total Tax Increment Revenue received, Total all sources of revenue, and Total Indebtedness (this will include principle and interest over the life of all the bonds & other debt).

    But, the thing that I learned from my years in the Anti-Redevelopment movement is that until the law is abolished nationwide, it will never go away.

    Redevelopment is a lot like slavery. And until it is abolished, no American is truly free. Do not settle for less, if it takes a hundred years.

    Reply this comment
  4. DC1
    DC1 9 September, 2017, 15:47

    You are supposed to learn from your mistakes. I guess not in CA, especially when it involves ways to increase taxes and waste money.

    Reply this comment
  5. Jack
    Jack 10 September, 2017, 08:11

    My old neighborhood in San Diego, Allied Gardens, was declared ‘blighted’ back in2005 on the basis of some graffiti found on a dumpster behind an Albertson’s. Really. The San Diego City Council then declared that there was a ‘NEXUS’ between Allied Gardens and Downtown San Diego, which was a narrow strip that ran along the route of the san diego trolley for several miles. Now that Allied Gardens and downtown were linked, residual tax increment could flow to the Downtown Redevelopment Authority from a suburban neighborhood miles away on the eastern edge of the city. This would line the pockets of the developers who were totally rebuilding downtown infrastructure, and more importantly it was a huge fat gift to the unions-all redevelopment projects operate under Project Labor Agreements. A big fat greasy mess of loose easy money extracted by force from the little white middle class taxpayers that are so hated. This vampire will never die..

    Reply this comment
    • LIbi Uremovic
      LIbi Uremovic 10 September, 2017, 08:48

      almost the entire island of coronado was declared ‘blight’ so the city could get rda bonds without voter approval ..

      the city of coronado has over $300 million in bond debt …. all those giant government buildings constructed in the last 20 years were built with bond money, which is like credit card money … .. which begs the question …

      what happened to the property and revenue taxes collected in coronado – which has the highest property and revenue taxes in the country … ??

      Reply this comment
  6. Queeg
    Queeg 10 September, 2017, 14:38

    Comrades

    Many Daca’s in future for “distant” relatives and greasee “qualified” contractors from Democrat corruption with RDA and related bond driven hybrids…

    This is shameful….many Plutocrats licking their chubby fingers.

    Reply this comment
    • LIbi Uremovic
      LIbi Uremovic 10 September, 2017, 16:24

      the rda scam was most widely abused by the gop … the gop in cali have the ability to be very corrupt because their constituents are so brainwashed to blame everything on the dems and protect their corrupt governments …

      it was the gop that screamed for the rda loophole – and of course the dems allowed it because they profit from corruption too …

      in a government of the people there’s no one to blame but yourself …

      this is me – libionline.net … and here’s the audits that took down the city of beaumont – beaumontgate.org ..

      who are you?

      let’s see the results of your actions …

      a grown adult hiding behind a phony name – are you a man born and raised in the u.s.a. or are you a coward that has forsaken their duties as a citizen in the government of the people…?

      let me see the results of your pandering …. but i have absolute results from controlling my government …

      Reply this comment
      • David Zenger
        David Zenger 12 September, 2017, 10:35

        “the rda scam was most widely abused by the gop…”

        Only when the two parties became indistinguishable at the local level did the GOP really become drumbeaters for RDAs. When they went down in 2011 it was the Republicans who opposed its demise. The Dems were going with the Governor – but only until they could bring it back.

        Now it’s a two party scam.

        Reply this comment
  7. David Zenger
    David Zenger 12 September, 2017, 07:48

    “They had some notable successes…”

    Steve, two observations about Redevelopment’s alleged “successes.” First, nobody can really prove that revitalization wasn’t possible, or even likely, by the availability of cheap rent incubators for economic development.

    And two (what RDA cheerleaders never told anyone) Redevelopment generated NO new disposable income. It diverted it from other places that necessarily suffered. For every Downtown Pasadena there were fifty small downtowns devastated by subsidies to mall developers and big box stores. Oh, yeah, and the piratical behavior of car dealers and their municipal camp followers is legendary.

    The only thing (besides bad, clownish, immediately outdated architecture) that Redevelopment created was invidious competition between cities to see who could throw away the most cash.

    Reply this comment
    • Standing Fast
      Standing Fast 12 September, 2017, 08:33

      Uremovic’s comment that Redevelopment was abused mostly by Republicans is not born out by the historical record. For one thing, Redevelopment is a bi-partisan federal government program that was turned over to the States to be administered by local governments. In the states where it was adopted, politicians from all political parties (including Libertarian) endorsed it as a good thing and dismissed complaints as ignorant.

      Bear in mind that Redevelopment is a Progressive government program, cooked up by 19th-century social reformers, big-city politicians, and urban planners as a solution to a number of “problems”: inner-city slums; “undesirable” populations of Roman Catholic immigrants from Southern Europe, Puerto Ricans from the Caribbean, and blacks from poor Southern States; inadequate tax revenue for local government treasuries; and “antiquated” commercial and residential buildings. In the early 20th Century it was a Veterans Housing program that was so corrupt even its proponents were appalled.

      Personally, I think the worst part about Redevelopment is what it does to the American people as a class and as individual citizens:

      When Congress adopted the Housing Act of 1949, their premise was that the People of the United States are no longer the nation’s greatest asset, but its greatest liability. Each State and city that adopted the program, in turn, made the same finding.

      When a city establishes a Redevelopment Project Area, it is for the purpose of receiving property tax increment revenue to finance debt on future Redevelopment projects. As part of this process, all the people who live and work and pay taxes within that territory are stripped of their Constitutional Rights. They are, until the Project Area is closed down, second-class citizens.

      Thus, Redevelopment has effectively created two new classes of citizens: those who have more rights than everyone else, those who have fewer rights than everyone else, and those whose rights are not directly affected. That is why Redevelopment developers are given so much latitude, and the victims of the projects are treated so badly, and everyone is helpless to do anything about it–or so people think.

      Zenger’s observations about Redevelopment are correct. Cities that adopted Redevelopment are still paying off agency debts, and most won’t have retired them until your grandchildren are all grown up. You can watch the numbers in the State Controller’s Reports that I cited in my earlier post. It is all part of the public record.

      If you are in Sacramento, stop by the California League of Cities and Redevelopment Association offices downtown. They are both in the same building, two separate but related organizations that bear close watching. Their lobbyists work very hard every day making sure the men and women who represent you are not moved by your opinions.

      The way to get rid of Redevelopment is this:

      Keep telling your local, state and national reps why you think Redevelopment should be abolished;

      Keep writing letters to newspapers, posting your comments online, calling in to radio & television talk shows;

      Keep telling your friends to do the same.

      Reply this comment
      • LIbi Uremovic
        LIbi Uremovic 12 September, 2017, 12:01

        i’m not talking about enacting rda – i’m talking about the actual abuse of the program in cali …

        riverside, orange, and san diego counties are the top three rda scam counties – they beat out l.a. county ..

        but looking nation wide – how about houston texas ….

        houston has so much bond debt that it can’t be pulled up all at one time on ’emma’ … all those housing developments around houston are built with rda bonds …

        on june 28th the city of houston took out a $200 million ‘payday loan’ to be paid in march, 2018 with their 2018 property taxes as collateral …

        now all those houses with the massive rda property taxes are under water and worth a fraction of their value … houston will not receive the property taxes they expected to pay the bond debt due in march, 2018 …

        houston could have mitigated their loses by requiring adequate drainage and not allowing chemical plants to operate next to residential neighborhoods …

        … a penny in the good o’ boys’ pocket has created many pounds of debt and expense …

        and now that houston really needs money – they’re maxed out – they ran up their credit card debt in the good times and now that bad times are here they have no money for the necessities ….

        almost every cali city is the same …

        Reply this comment

Write a Comment

Your e-mail address will not be published.
Required fields are marked*



Steven Greenhut

Steven Greenhut

Steven Greenhut is CalWatchdog’s contributing editor. Greenhut was deputy editor and columnist for The Orange County Register for 11 years. He is author of the new book, “Plunder! How Public Employee Unions are Raiding Treasuries, Controlling Our Lives and Bankrupting the Nation.”

Related Articles

Looking Back At Absurd State Budget

This article was first published in City Journal. OCT. 28, 2010 By STEVEN GREENHUT Smoke and Mirrors in Sacramento: California’s

CalPERS considers – then rejects – efforts to end tobacco divestment

SACRAMENTO – As the nation’s largest state-based pension fund, the California Public Employees’ Retirement System is known for using its

DOJ to state agencies: pay up

March 17, 2010 By KATY GRIMES The California Department of Justice wants to be compensated by California’s state agencies for legal services.