Jerry Brown’s proposal to take property tax revenues from the redevelopment agencies and give it to schools and local governments is generating a lot of controversy – and a lot of discussion. One of the more enlightening articles about it is Monday’s column by Dan Walters, giving a quick history of redevelopment agencies and their use of property tax funds:
Redevelopment dates back to the 1950s, empowering local governments to attack urban blight by acquiring land and repackaging it for development with subsidies. A key part of the program allows redevelopment agencies to retain all of the increased property taxes in project areas.
That provision began to bite after Proposition 13 passed in 1978, imposing a cap on property taxes.
City redevelopment agencies could skim their take off the top of the property tax pool, and eventually that reached 12 percent of all property taxes, leaving less for counties, schools and other local governments.
A decade later, voters passed Proposition 98, which requires the state to make up property tax losses to schools. State taxpayers thus are paying nearly $2 billion a year to underwrite local projects.
In short, Brown recognizes that we have to choose where these property taxes go, and that schools have the stronger case for those funds than redevelopment agencies. It’s difficult to argue with that logic, especially given the cuts K-12 schools have faced since 2009.
And yet the loss of funds to redevelopment agencies is a much bigger blow than Walters is willing to admit. While building a new Chargers stadium in San Diego is surely not the best use of redevelopment funds, the overall concept of using tax revenue to reshape urban space to help enable cities to meet new desires for using that land is still sound.
That’s especially true during a severe recession like this. Redevelopment funds could be used to spur more sustainable developments, particularly urban density and transit-oriented developments. California is moving away from low-density sprawl and toward mixed-use urban developments. Redevelopment can help accelerate this process, providing the basic infrastructure needed to spur the greater density that the market is starting to demand.
California shouldn’t have to choose between schools and redevelopment, just as we shouldn’t have to choose between schools and parks, health care and buses, and so on. The wealthy and the big corporations are sitting on a huge pile of cash that would be better used to fund these public services.
In this case, there might be additional options. Walters believes Brown is pushing local governments to fund redevelopment projects themselves. Well, let’s make it easier to do so. In addition to the badly-needed majority rule for approving tax increases, Brown could also champion methods to assess higher property taxes – or assess other kinds of fees – on the projects built with redevelopment funds. One model could be the Mello-Roos fees levied mostly on new suburban developments to pay for schools, a fee enacted in the early 1980s partly in response to the passage of Prop 13. Mello-Roos fees can be assessed in urban areas as well, although this is rarer, but they typically pay for public services and not redevelopment directly. Still, the concept could be extended to redevelopment projects as well.
Whatever the solution, Governor Brown should not be content to simply take the redevelopment money, give it to schools, and hope that localities find a way to fund their own redevelopment projects. The underlying structure of paying for government is broken. Brown had once before avoided that deeper question, 30 years ago when he centralized funding of schools and local government in Sacramento. That “solution” never really worked, as three successive asset bubbles made state revenues look like they’d recovered, but the busts revealed the basic weakness.
I can understand Governor Brown wanting to assure schools are funded this year, and I can justify taking redevelopment money to do it. But there needs to be a long-term fix as well – not just for redevelopment, but for our broken system of funding our public services. Otherwise this won’t be any more desirable than the post-1978 system Brown helped build, the same system he is now pledging to undo.
The redevelopment money, when compared to all the things the state does, is less critical than many of the other budget priorities, including schools. Redevelopment projects can wait, and some that I’ve seen are more ‘nice to haves’ and “gee, we have this money, so we should do something” than critical to day to day life. I think they’re valuable overall, but less so than say 3rd grade for a whole cohort of kids.
Perhaps a system where local governments float or match redevelopment projects, and send each over a certain size to the voters, would be more productive.
I heard all the people crying about the loss of redevelopment money, and I agree that it’s a shame, but not compared to the alternative cuts.
Without redevelopment as a tool to remove blight and increase the value of the property, there is no tax increment for anyone to take. It also provides the primary funding cities use for affordable housing.
It is an investment in the future. Once the bonds are repaid, all agencies get a step function in revenue. Without redevelopment, they never get an increase.
Redevelopment has had many, many successes. Many inner-city projects would never have gotten off the ground without redevelopment agency leadership. I like the idea of local control of these agencies because the locals have a lot more knowledge about what would blossom than state or federal agencies.
However, there have been some real busts too. Development is risky. Sometimes it hits big, sometimes it falls on its face.
If we eliminate redevelopment agencies completely, we will still get inner-city redevelopment projects, but much more slowly. If the only choice I get is between funding redevelopment agencies and say, third grade, I’ll fund third grade. But are there truly no better choices than that?
A good post with I concur…and I have so many thoughts, this may ramble…so sorry, but…
I am a municipal employee who’s position is substantially funded with RDA housing funds, as are the most of my colleagues…so my bias is up front. But I’ve been here a long time and know that we do good work in our city with RDA. Those funds have been a huge reason we’ve been able to better protect our community by seismically upgrading or rebuilding our oldest fire stations, build a new police station, support the construction of many affordable housing developments, provide grants to service providers who focus on providing affordable housing and other housing specific assistance, eliminate a blighted parking structure in the heart of downtown and replace it with a new structure and a cinema that helped strengthen our downtown, help support building a diverse retail mix that provides a mixed tax revenue to help sustain economic vitality…and many, many more things.
It is true, there have been RDA abuses and questionable uses around the country, but there have been a LOT of successes as well…and I believe those far outweigh the abuses. I think there’s a lot to be said for the efficiency of use from some of the smaller agencies.
In our city, the amount of taxes returned to the us upon RDA elimination would be approximately 14% of what is currently collected…woefully inadequate to support any of these efforts in the future, in essence halting all efforts to provide any substantial economic development efforts or affordable housing in one of the most expensive housing markets in the country.
I’m conflicted because I also have seen the devastation of our general fund over the years too, and any increase in those would be desired. I have seen the closures of libraries and parks, the elimination of park & rec programs, the elimination of the very effective community policing program and other safety related services. Both of my siblings – a brother and sister – are firefighters, and I know the physical and emotional stresses of their jobs and support their ability to retire a bit younger than most of us (With a nod to the whole other discussion of public employee retirements…Knowing how the job has already beat them up pretty good, I wouldn’t want lives depending upon my 60 year old brother or sister having to haul hose up flights of stairs!) I’ve also seen what the lack of funds do to any community programs or even purchase or financial support for equipment upgrades or other materials that could better help them protect their lives – or yours.
And I haven’t EVEN yet mentioned funding schools and education…a most obvious need.
Yes…as Steinburg said, this entire budget is awful, there’s not one “good” thing in it. And yes, our entire budgetary system is broken, but I just don’t think entire RDA elimination is the right move.