THIS IS RIGHT ON THE SAME LINE OF OPINION

Sunday, July 26, 2009
Editorial: Getting it half right on redevelopment
Mutated blight-removal agencies should lose funds, shouldn't have unjust existences extended.
An Orange County Register editorial

The overall state budget deal is, indeed, a mixed bag, but we're glad the plan includes no new taxes and at least temporarily closes the gaping budget hole. The deal doesn't make long-needed structural reforms, but as Jon Coupal, president of the Howard Jarvis Taxpayers Association, told us, it's a huge improvement from the tax-raising plan that was shot down by voters in May.

This episode should serve as a lesson to Republicans on the value of holding firm against tax hikes. Still, expect continued wrangling as Democrats come back to push their one-size-fits-all permanent solution of tax increases, and expect continuing lawsuits and fights over two aspects of the budget plan that deal with the state's notoriously wasteful and ham-fisted redevelopment agencies.

Details of the plan had yet to be released, but the budget takes somewhere between $1.35 billion and $1.7 billion from redevelopment agencies and uses the money to backfill state education dollars. The second redevelopment-related provision is described by the Sacramento Bee: "In a separate proposal, the state has asked redevelopment agencies to volunteer 10 percent of their coffers upfront. In exchange, the agencies would be permitted to extend the life spans of their redevelopment zones by up to 40 years." Cities would not even need to find blight in order to dramatically extend the life of these areas.

We like part one. As the Register has long argued, redevelopment agencies – which are state agencies even though they are run by cities – should be shut down and their debt service paid off. Redevelopment is a central-planning mechanism by which local agencies undermine property rights and capture tax revenue that would otherwise be headed to schools, public safety and other traditional county governmental services.

The way it works: Cities want to increase tax revenue, so they declare areas "blighted" and start redevelopment zones. Once the zones are created, officials have vast powers – including eminent domain – to transfer properties to favored developers. Redevelopment law also forces cities to use a large portion of the taxes to build low-income housing. Cities run up enormous debts to subsidize developers and developments and then the new tax increment – the increase in property taxes after the new developments are put in place – is used to pay off the debt. Cities pocket the sales taxes and bed taxes from the new projects.

Initially conceived to replace slum areas, redevelopment law has become a scam used by cities to ladle out corporate welfare and to divert tax revenue headed to other agencies. So there's nothing at all wrong with taking away this money. As Orange County Supervisor Chris Norby, a longtime foe of redevelopment abuse, said in a recent published report, redevelopment agencies "have been draining money from the state for decades. It's long overdue that the state takes back the money that RDAs have been taking from the state's public schools."

But the second redevelopment-related element in the budget plan is a bad idea. Even though current blight designations are overly broad, it's dangerous to allow redevelopment agencies to expand without going through that process. This also would make it more difficult for community groups to fight these projects. Community groups have been winning some legal battles, for instance, when cities use phony criteria to determine blight. This plan makes a mockery of the stated purpose of redevelopment zones, which are supposed to be temporary mechanisms to clean up downtrodden areas, not to serve as permanent tax-enhancement regions.

This bid to extend the lives of redevelopment zones is pushed by the city of Industry, a tiny-population city in the San Gabriel Valley that functions as a giant redevelopment agency. The apparent goal is to make it easier for a developer to build a stadium for a future NFL franchise. The land is outside the redevelopment area, but published reports suggest the plan would enable the city to fund infrastructure projects needed to service the proposed facility.

Like the rest of the budget deal, this, too, is a mixed bag, but maybe it signals that the Legislature is beginning to look closely at redevelopment agencies and the path of financial and property-rights destruction they have left in their wakes.