Public Comment

New: REDEVELOPMENT FORUM: The Facts behind the Hype

By Jim Mellander
Thursday January 12, 2012 - 10:16:00 AM

Redevelopment has been sold to the public nationwide as a virtual panacea for numerous urban ills. The California Redevelopment Association website features pictures of happy children frolicking in a presumably redeveloped urban area. Although this idyllic image is charming, adults need to address quality of life issues in a mature way. There are many desirable societal goals for which redevelopment is touted as the road to achieving these goals. This brief letter will discuss some of the hard facts behind the hype surrounding redevelopment. 

Blighted areas in urban settings are one of the ills redevelopment is expected to correct. In order to qualify for redevelopment an area must be declared “blighted”. State law is sufficiently vague and elastic to allow such areas as parkland, new residential areas, professional baseball stadiums, oil fields, shopping centers, orange groves, open desert and dry riverbeds to be declared as blighted. 

A city park in Lancaster was determined to be blighted and paved over to make space for Costco. In order to build a test track for a major automobile manufacturer, California City declared open desert land to be blighted. In Orange County, a public health facility was declared blighted and the property turned over to a BMW dealership. The extremely wealthy southern California gated-community of Indian Wells has several redevelopment areas despite an average six-figure income of its residents. 

Redevelopment agencies received enormous revenue from the increased property tax in the redevelopment area as a result of the property improvements financed by public bonds issued by the redevelopment agency. Over 10% of total property tax revenues in the state have been diverted to these redevelopment agencies – this is big business cloaked with the power of government, used for the benefit of the few, at the expense of the many. In the meantime, schools and other public services have suffered from the diversion of these funds away from general funding streams. In order to offset this loss, school districts have won their own property tax diversions from cities, in the form of the Educational Revenue Augmentation Fund (ERAF) further pressuring municipal budgets. 

From a purely financial standpoint, such increase in property values could be justified if it had resulted in increased prosperity for the citizenry – a rising tide floats all boats. The report “Subsidizing Redevelopment in California” found that redevelopment activities did not result in any net economic growth or increase in property taxes, and, in fact, that redevelopment was being subsidized by funds diverted from schools, the state, and special districts. The California Redevelopment Agency (CRA) initially fully cooperated with this study. However, when the conclusion was reached the CRA blasted the report and tried to have it buried. Per capita income growth in California cities with redevelopment agencies generally has slightly lagged behind comparable cities without redevelopment, exactly the opposite of what would be expected if redevelopment was a successful tool for economic growth. 

Politicians and other special interest groups will tout the relatively few successes of redevelopment as indicators of its value to the community. Certainly, those who directly benefit from this largess are understandably perturbed by the pending demise of the California redevelopment establishment. Aside from the workers in redevelopment agencies and those who have received subsidies, politically connected developers enjoy favorable loans in sweetheart deals. 

Statewide, 37% of all redevelopment funds are spent for debt service on bonds, 25% for actual development, 6% for land acquisition, and 12% for administration (i.e. redevelopment staff salaries). By law, 20% of all redevelopment funds must be spent on "low cost" housing, but only 3% is actually being spent directly on housing. 

More troubling to many people than the financial issues are the property rights violations inherent in the power of eminent domain, often aggressively used by redevelopment agencies to clear out uncooperative property owners in the way of the agency’s vision of “progress”. 

The Bill of Rights specifies that the purpose of eminent domain is for public use: "Nor shall private property be taken for public use without just compensation." Redevelopment has redefined “public use” to include privately owned shopping centers, auto malls, movie theaters and big banks. The CRA bragged in an article in its monthly Redevelopment Journal titled "Eminent Domain Helps Citizens" that "Wells Fargo Bank was one of the existing tenants of the Los Altos Shopping Center (Long Beach) helped by eminent domain." 

In a letter of this length, it is only possible to skim the surface of the financial and ethical problems surrounding the redevelopment establishment. Interested readers are invited to search the web for the document: “Redevelopment – The Unknown Government”, from which many of the facts and figures cited above have been used.