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California

Steven Greenhut
Jerry Brown’s Accidental Legacy
Redevelopment in California remains dead—at least for now.
20 November 2012

California governor Jerry Brown staked his governorship on the passage of Proposition 30, a statewide income- and sales-tax increase that won by a solid 8.6 percentage points on election night. The measure epitomized Brown’s approach to “fixing” the state: increasing taxes while jealously protecting the power and privileges of the state’s highly compensated government employees. But the governor’s signal accomplishment may lie elsewhere. With little fanfare in late September, Brown vetoed a slate of six bills that would have revived, in one form or another, California’s redevelopment agencies (RDAs), which the governor eliminated last year.

Redevelopment is a convoluted process that allows local governments to target supposedly blighted areas and then convert them into redevelopment “project areas.” Cities float debt to pay for major construction and infrastructure projects, which in practice means using the revenue to subsidize auto malls, movie theaters, and hotels. Redevelopment agencies then receive the “tax increment”—the increase in property tax revenues flowing from the project areas—to pay down the debt.

California established the redevelopment mechanism in the 1940s to provide investment help in decrepit inner cities and rural areas, but most local governments—especially after 1978’s property-tax-limiting Proposition 13—embraced redevelopment to capture tax revenues that would otherwise go into their states’ coffers. City and county officials came to depend on redevelopment as a way to micromanage development decisions in their cities and boost their budgets. But seeking cash to close the state’s multibillion-dollar budget gap, Brown shut down the redevelopment agencies in 2011. Oddly, Republicans opposed Brown’s efforts—even though RDAs routinely abused private-property rights, using eminent domain on behalf of favor-seeking big developers.

Given the loss of money and power, it’s no surprise that redevelopment proponents tried to revive the practice this year. Senate president pro tem Darrell Steinberg’s SB 1156—one of the bills Brown vetoed—would have created a “Sustainable Communities Investment Authority” vested with many of the same powers as the defunct RDAs, including tax-increment financing, eminent domain to benefit private developers, and heavy-handed urban planning with the goal of bolstering mass-transit-oriented development. That’s a fancy way of describing those highly subsidized housing complexes, offices, and shopping centers built near rail stations. In theory, such developments reduce dependence on the automobile. In reality, they help young urban professionals buy hip condos at below-market prices while developers boast of being “green friendly” as they pocket government subsidies.

Steinberg’s bill sought to eliminate some of redevelopment’s abuses, namely the ability to declare virtually any area “blighted”: “This new program shall use tax increment revenue to fight blight as it is understood in the contemporary setting without including those aspects of the former redevelopment program that created so much controversy, including the manipulation of the definition of blight and the use of the school share of tax increment revenue, such that it became a drain on the General Fund.” The old redevelopment agencies justified blight declarations on myriad grounds, many absurd on their face—for example, “excessive urbanization” in the wealthy rural enclave of Mammoth Lakes; too little density in some communities and too much density in others; chipping paint on buildings; and basically whatever suited the redevelopment officials in charge. But the new Sustainable Communities Investment Authority would have been able to use the blight designation for the suburban-style development patterns that leftists such as Steinberg find offensive. In short, “blight” would have remained a dangerously open-ended concept.

The five other bills that Brown vetoed would have created different kinds of “infrastructure-finance districts” (IFDs) to let localities recreate some form of redevelopment. According to the Steinberg legislation, the goal of the new infrastructure districts was to “contribute to greater economic growth by creating good jobs, reducing commuter times for employees, reducing the costs of public infrastructure, and reducing energy consumption. Better development patterns may also result in increased options in the type of housing available, more affordable housing, and a reduction in a household’s combined housing and transportation costs.” Longtime redevelopment opponent Chris Norby, a Fullerton Republican assemblyman, didn’t think the IFDs were a good idea. But Norby said he was optimistic that, if signed into law, the new districts wouldn’t be as abusive as the RDAs. Still, redevelopment foes were relieved by Brown’s vetoes.

They have good reason to be, because any new agencies that spring up will retain the power to take residential and commercial properties and hand them over, via eminent domain, to rent-seeking developers—a powerful incentive for new abuse. In my view, they would keep the redevelopment industry alive long enough to figure out some lucrative new scheme to divert money to their favored projects.

In his veto message for SB 1156, Brown wrote: “This measure would likely cause cities to focus their efforts on using new tools provided by the measure instead of winding down redevelopment.” But the governor remains philosophically disposed toward redevelopment. If he hadn’t faced a cash crunch, he probably wouldn’t have done away with the RDAs. The six bills that Brown vetoed are a reminder of how quickly Californians could find themselves saddled again with this authoritarian land-use and corporate-welfare system.

It’s troubling that Jerry Brown is now the last line of defense against reviving California’s redevelopment agencies. (Unfortunately, Norby lost his reelection bid and has shut down his anti-redevelopment organization.) What happens if the economy rebounds and the state gets its finances at least partially in order? Expect the redevelopment industry and its legislative allies to come back with a vengeance. Redevelopment may be dead for now, but opponents cannot rest on their laurels.

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