Cities go on wild spending sprees

SACRAMENTO – Gov. Jerry Brown has been caught flat-footed in his plan to shutter the state’s redevelopment agencies as cities across California continue to squander their redevelopment cash, tying up hundreds of millions of dollars in long-term spending on half-baked projects simply to keep the money away from the state.

A recent Pasadena Star-News article captured the absurdity of what’s going on: “Rosemead officials may or may not want a skate park, but one thing is certain – they don’t want the state to get any of the money the city would use to build it. So last week City Council members put the skate park, along with a public parking structure, park improvements projects and a job to replace city signs, on a list of projects slated to be funded with city redevelopment funds.”

Cities are spending money on projects they don’t even need or want – simply to keep the cash away from the state. I last wrote about the governor’s plan in January, and, while Brown has stuck by his efforts to shave $1.7 billion from the budget with this idea, he and his allies have not been able to stop cities from doing the equivalent of heading to the mall with someone else’s credit card. So much for cities being bastions of good government and fiscal restraint.

State Treasurer Bill Lockyer rightly complained – after the Los Angeles Community Redevelopment Agency took the first step in diverting $930 million in redevelopment funds to the city of L.A. – that cities should engage in discussion rather than engage in “provocative acts of gamesmanship.” He compared the agencies to “vampires sucking the blood of everybody around them.”

It’s heartening that the governor remains committed to his proposal, but if the redevelopment lobby gets its way there soon will be nothing left to save. I do expect many of these hasty approvals to face court challenges on whether these emergency expenditures really are emergencies. I also expect that these agencies didn’t dot all the I’s and cross all the T’s, which is paramount in the redevelopment approval process.

Where’s the new state attorney general, Kamala Harris, when you need her?

This is an outrage, a misuse of public funds that deserves additional state scrutiny from a state auditor who already is looking at how 18 agencies have spent previous dollars. Still, state officials need to freeze those funds now given how unrepentant cities are about doing this.

City officials I’ve talked to insist that because the governor’s plan is unfair to them, they are doing what’s best for their communities. Others say they are finishing up already-started projects – but it all depends on what one means by “started” given that the paperwork on these plans goes on for years. I’m guessing that some of these are as much “started” as some of those projects funded by federal stimulus funds were “shovel-ready.”

Redevelopment agencies boast about the high-profile projects that have a redevelopment angle, but supporters don’t talk about the huge debt, the diversion of 12 percent of the state’s property taxes to corporate welfare rather than core government services or the many people who have been driven off their property so that big-box stores that promise a sales-tax bonanza can benefit. Many of these projects are bad enough when they go through the normal vetting process, but I fear that many of the worst projects will move forward as the agencies hurry their approvals.

It’s appalling that these redevelopment agencies are so unconcerned about the state budget mess and so fiscally irresponsible, but the whole process of redevelopment is based on fiscal irresponsibility. Their claims of economic gain are tenuous. For instance, the California Redevelopment Association, the interest group representing these officials, claims that redevelopment creates more than 300,000 jobs in California.

The nonpartisan Legislative Analyst’s Office recently rebutted this claim: “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.” Basically, CRA assumed that anything that ever happens within a redevelopment project area was the result of its agencies’ central-planning efforts, which is like assuming every job created in the country was the result of the Obama administration’s jobs program rather than due to the enterprises that created them.

About 60 years ago, California legislators allowed localities to start redevelopment agencies to eliminate blight in rundown urban areas. The agencies target an area within their cities, determine that it is “blighted,” and then float bonds to pay for the upgrades. The redevelopment agencies gain the tax increment – the increase in property tax dollars after the area is formed. Those dollars pay off the debt. Over the years, cities have turned to redevelopment to fill their general fund budgets with sales taxes and bed taxes. They use their enhanced land-grabbing (eminent domain) powers to provide cheap properties to developers, who then build projects that bring in tax revenue.

This is costly to the state government, which backfills the property taxes diverted from schools and public safety. But this process also has distorted land use in California. I have nothing against shopping centers, but they should pay their own way and buy land from willing sellers. Redevelopment mandates construction of “affordable housing,” yet the real way to provide affordable housing is to let the market work. Redevelopment causes cities to favor commercial uses for land over residential uses, which suppresses housing supply and drives up home prices. Then it subsidizes developers, who provide a few below-market units to select poor people.

Redevelopment shifts decision-making from free individuals to government planners, which is reason enough to shut down these agencies. The dollar savings are just an added benefit. And many agencies’ recent fiscal irresponsibility should remind us that they should not be trusted with public funds.

Steven Greenhut is editor of; write to him at [email protected]

Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.

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