Redevelopment Agency Brouhaha

The recent arguments by local officials on behalf of redevelopment agencies (RDAs) probably made some people conclude the Legislature and Governor were breaking the rules when they proposed changing the way RDAs work. The reality is the situation is more complicated than some of the proponents let on.

RDAs were authorized by the Legislature in the 1940s to address urban blight. The idea was simple: let a public entity – the redevelopment agency – borrow money to subsidize private development in blighted areas, and then use the increased property taxes resulting from the improvements to repay the debt. In this way communities could help stricken areas “break out” of the urban poverty cycle, to the benefit of all.

Of course, like most good ideas, this one was quickly seized on by local governments and developers and pushed far beyond what the Legislature intended. Blight, it turns out, is pretty much in the eye of the beholder. For example, I live in San Carlos and our City Council recently used redevelopment money to buy property to combat blight in our downtown area. See if you can spot the blight in the following photo (click to enlarge):

Looking south on Laurel Street from San Carlos Avenue, San Carlos, CA

Don’t see it? Me neither. Granted, a property in the middle right of the photo has been vacant for a couple of years. But that hasn’t affected the vitality of the surrounding area, which saw substantial private investment during the same period.

Stretching the definition of blight may not cause you concern since RDAs don’t raise taxes, they just redirect them. But is that the whole story? The answer is no, it’s not. RDA investments do cause taxes to go up, but in a way that’s hard to spot.

It comes back to how California’s public schools are funded. About a third of public school funding does not come from local property taxes, and instead comes from money collected by the state as income taxes, sales taxes, etc. By law, the state is required to maintain minimum funding levels for our schools. When an RDA pledges an anticipated property tax increase to repay debt it is taking funds away from local schools. That causes the state to have to pay more out of its general fund to keep the schools whole. In the end, either taxpayers throughout the state must make up the difference, or programs must be cut, or both.

So are the Legislature and the Governor raiding RDAs to help solve the state fiscal crisis, as RDA proponents charge? Or is Sacramento just trying to compensate for an earlier raid on the state purse by RDAs? These are important questions to which the public deserves real answers, rather than rhetorical diatribes.

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