City redevelopment agencies by the slimmest of margins — one vote — survived an initial legislative effort to kill them earlier this spring, but it’s now clear their practices will most likely never be the same again.
For until this year redevelopment agencies had rarely gotten much scrutiny, locally or statewide. Their most controversial actions come when they declare some areas blighted and buy them up, later selling the same land to developers at prices often discounted considerably from what they’d bring on an open market.
Going to the Well
Redevelopment money comes from the difference in property taxes paid after new developments go in — everything from shopping malls to affordable housing to football stadiums — and taxes paid on the same properties in their “before” state. This is called “tax increment financing.” It now amounts to about 12 percent of all property taxes paid in the state, more than $5 billion per year.
Eliminating the agencies is primarily the idea of Gov. Brown, but he’s been joined by liberal Democrats objecting to the way areas populated by the poor are almost always the first to be called blighted, with residents moved out to make way for glitzy development. Example A of this may be downtown Los Angeles, where there would be no Staples Center (home of the basketball Lakers and Clippers and hockey’s Kings) or LA Live entertainment complex had the poor and homeless who long occupied the area not been evicted.
Many conservative Republicans and Libertarians also want redevelopment agencies gone, seeing them as a far-too-powerful government intrusion into private property rights.
Meanwhile, many of Brown’s labor union allies — especially those in building trades like plumbers and carpenters — want agencies to stay, feeling they create many union jobs. The redevelopment agencies claim they account for a steady 300,000 jobs per year in construction and ongoing uses of redeveloped properties.
Other estimates from state officials have come in as low as 14,000 jobs, indicating the agencies’ claims are at least somewhat inflated.
Then came a report from state Controller John Chiang, who examined 18 medium- to large-sized agencies out of the state’s total of 398. He found there is no consensus definition of a blighted area, noting that even palatial ocean-front homes and plush hotels in ritzy Coronado are in a potential redevelopment area. In Palm Desert, he found redevelopment money renovating “greens and bunkers at a 4.5-star golf resort.” Palm Desert’s redevelopment agency – in a wealthy city with virtually no poor residents – gets the 10th highest tax revenues in California, with cash on hand “amounting to $4,666 for each of the city’s 52,000 residents.”
Other cities used tax increment money for lobbying expenses and code enforcement, as Chiang’s report bore out many negative perceptions of agencies.
Still, most Republicans in the Legislature oppose eliminating them and transferring $1.7 billion of their annual revenue (what’s left after making required payments on existing bonds) to the state, earmarked for schools, universities, parks and other functions threatened by the ongoing budget crunch.
Two Offers
The Chiang report and the ongoing pressure from Brown moved the agencies to offer a “compromise” that would let them keep operating, but still hand over a significant chunk of their cash.
The state redevelopment agency association offered to have its members voluntarily contribute 20 percent of tax increment dollars this year to local schools, relieving some pressure on the state budget. That would amount to more than $700 million. Over the next nine years, the agencies would contribute another $1.7 billion, or just under $200 million per year.
Neither figure approaches what Brown wants to take from agencies for help with the ongoing state budget crunch, so he has not bitten, even though the agencies also offered to toughen their audits and focus “even more” on job creation by assisting local businesses with “financing for new technologies, machinery and equipment.” Critics who accuse agencies of making sweetheart deals with business owners they like saw this as an expansion of a distasteful phenomenon.
“They say politics is the art of compromise,” wrote redevelopment agency association director John Shirey in a published essay. “This package is a reasonable solution to deliver on that promise.”
Not good enough, apparently, because a month or so later, the agency group sweetened its offer by backing a state Senate bill tightening the definition of blight and banning use of tax increment money for golf courses and racetracks.
It’s still not much of a compromise, since agencies have committed more than $5 billion toward indefinite, unplanned future projects or giveaways like stadiums for pro football teams – just to keep the cash away from the state. They don’t mention rescinding those moves.
It’s also unlikely Brown or a majority of state lawmakers will accept the compromise, because it lets agencies stay in business with the same people in charge.
But even if they do survive, the entire discourse will surely mean that life has changed permanently for redevelopment agencies and the projects they so often promote.
Mr. Elias may be contacted at tdelias@aol.com. His book, “The Burzynski Breakthrough: The Most Promising Cancer Treatment and the Government’s Campaign to Squelch It,” is available in a soft cover fourth edition. For more Elias columns, see www.californiafocus.net
