Jerry Brown signals the return of abusive local agencies in a limited form.
23 May 2014
Sometimes the right things happen for the wrong reason, such as when
governor Jerry Brown signed
budget legislation in 2011 to shut down the state’s . Brown’s opposition
to redevelopment had nothing to do with fidelity to private-property rights or
disdain for eminent-domain abuse; it was a to find
money in a tight budget year. The agencies had siphoned 12 percent of the
state’s budget annually from traditional public services—public education,
firefighting, and the like—and directed it toward local economic-development
projects. They also distorted local economies, subsidized developers, and
abused California property owners.
Now that the state’s budget outlook has improved at least superficially, the
agencies could make a comeback.
Over the last three years, Brown that would have revived the redevelopment agencies in one form or another. Earlier this month, though, the governor unveiled his , which suggested a much brighter fiscal picture. Officials are now talking about how to squirrel away surpluses and pay down debt. And the are stepping up efforts to resurrect their favored program.
Formed by a 1940s-era law designed to channel money into urban slums, redevelopment agencies became a means for cities to subsidize tax-generating auto malls,
shopping centers—especially after 1978’s property-tax-limiting Proposition 13
curbed the locals’ ability to raise taxes on homeowners and businesses. Here’s
how it worked. The agencies would declare an area blighted and then float bonds
to pay for new infrastructure in the targeted neighborhood. The “tax
increment”—the growth in property-tax revenues following the creation of the
project area—would be used to pay off the debt.
Cities gained tax revenue from the new shopping centers and hotels.
The controversies surrounding redevelopment came to a head in 2005, after the U.S. Supreme Court ruled in that local governments could use eminent domain for “public benefit”—even if that benefit happened to enrich private developers. (In
redevelopment agencies often grabbed properties to help developers build
tax-generating projects that would fill their coffers.) After Kelo, more than 40 states
passed at least modest reforms to check eminent domain’s excesses. But the California ’s
idea of “reform”—shepherded by the League of California Cities and the
California Redevelopment Association—was a ballot initiative merely restricting
eminent domain in residential neighborhoods. Golden State
In 2010, redevelopment supporters passed another initiative, this one protecting the agencies’ funding from being raided by the legislature. Brown outsmarted them by simply shutting down the agencies over the objections of most Republican lawmakers, who, despite their property-rights rhetoric, argued that the move was an assault on
local control. But earlier this year, Brown
said he could support expanded use of Infrastructure Financing Districts
(IFDs)—projects that used the same tax-increment financing mechanism as the
defunct redevelopment agencies, but with tighter restrictions and for a limited
number of projects. IFDs can wield eminent domain, but they require the consent
of other affected bureaucracies. Under the old redevelopment arrangements,
cities could create an RDA and swipe tax dollars from other agencies at will.
So the IFDs offer protections for other government agencies—but nothing for
property owners. Brown has no objections to them, as long as revenues for
public schools and other traditional public services remain untouched.
attorney with the law firm of Rutan &
Tucker has filed a state initiative that would revive the old redevelopment
regime, with even fewer limits. The measure would repeal the agencies’
elimination, remove past caps on debt limits, broadly expand blight
definitions, and reduce affordable-housing requirements. Though some cities
support the measure, many political observers suspect it is really intended to
prod recalcitrant Democrats into restoring the redevelopment agencies in some
Redevelopment’s foes worry about these efforts to revive the program, but their voices are mostly absent from the public debate. When
have heard about RDAs lately, it’s usually from figures like Tim Donnelly, a
Republican assemblyman and gubernatorial candidate from the Southern California
mountain town of .
Donnelly had been sharply critical of Brown—not for trying to revive
redevelopment, but for shuttering the RDAs in the first place. (Donnelly backed
away from his RDA support after it became an issue in the campaign.) In all
likelihood, redevelopment will come back in the form of expanded Infrastructure
Finance Districts. Brown has been forthright about his intentions, and unless
the economy collapses again, Californians should have no reason to expect a
change of heart from the governor. The big question is what will happen after
Brown finishes his final term. That’s when Twin Peaks will need to have a real debate
about redevelopment California