Redevelopment is Redistribution

Redevelopment is Redistribution

Nine of California’s big-city mayors met recently with Gov. Jerry Brown in an attempt to talk him out of eliminating redevelopment agencies (RDAs) as part of his budget-balancing proposal.

The mayors support keeping RDAs intact because they believe it is through redevelopment that cities create jobs. “Without redevelopment agencies,” several of the mayors said, “private investment would not get involved in community improvement activities.” That claim calls for a closer look at RDA issues.

Of the $45 billion in property taxes collected annually in the state, California redevelopment agencies collected $5.7 billion in taxes (12 percent), but only funneled $1.2 billion to schools and local agencies. RDAs are funded by increases in property tax revenues from the blighted areas they supposedly improve.

Redevelopment has come under increasing scrutiny from legislators as the state’s budget problems worsen. In 2010 one Senate committee found that some affordable-housing programs within the redevelopment agencies spent more on employee salaries than the cost to build affordable and low-income housing.

Mayors and local city officials attacked Brown’s budget idea, insisting that the elimination of the 425 redevelopment agencies in the state would end their efforts to create jobs, as well as opportunities to revitalize blighted neighborhoods and downtowns in this difficult economy.

State Treasurer Bill Lockyer has said he is in support of Brown’s proposal and even called redevelopment agencies “vampire agencies sucking blood from everyone around them.” Lockyer recently asked one Senate committee how it serves the state to use local property taxes to prompt inter-regional shifting of economic activity.

The Treasurer seems well aware that such redistribution is not the same as creating economic activity. He recommended blowing up redevelopment agencies and starting all over again. “It would be the prudent, smart, and efficient way to do it. . . It is better to reinvent,” he said.

Prior to the hearing, the state’s Legislative Analyst (LAO) released a report to the Legislature charging that redevelopment agencies should be eliminated “because they do not significantly enhance the California economy.” The LAO expressed concern with the lack of detail available surrounding the proposed elimination of the agencies, and noted an even greater problem — redevelopment debt costs are not widely known.

The California Redevelopment Association, a nonprofit group that advocates for statewide redevelopment, is opposed to Brown’s proposal, and claims that more than 304,000 jobs will be lost if the redevelopment agencies are eliminated. The LAO report refutes this claim.

“We find the methodology and conclusion of CRA’s report to be seriously flawed,” reported the LAO. “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.”

Governor Brown said recently that redevelopment-funded improvements are not as “life-necessary” as schools, firefighters and other government services. “An economist would be hard-pressed to show me that continuing redevelopment and laying off the equivalent of $1.7 billion worth of employees is not an equal job loss,” said the governor.

The governor has strong arguments on his side but he should not imagine that cutting the RDAs, by itself, will revive the state. If the governor and the legislature want to create real jobs and boost the economy, they should cut even more wasteful bureaucracy and give Californians the tax and regulatory reform the state so desperately needs.

Subscribe to our newsletter:

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.