March 07, 2010
Dear Council Member:
I am writing you about my concerns regarding the staff recommendation to increase the Redevelopment Agency (RDA) debt ceiling to $225 Million by continuing to divert tax increment dollars to fund the debt of mostly private commercial development.
The premise by RDA staff that the tax increment does not raise taxes, is clever language.
RDA’s do increase taxes because the revenue they divert from the general funded local governments is no longer available to help pay for schools, fire protection, nor the City itself that created the RDA Agency. The City of Grand Terrace, is in a parasitic relationship with the RDA Agency. The City is under-funded, in a budget deficit and forced to borrow from the RDA Agency.
The assertion by the RDA Agency that they generate new revenues and jobs is not supported by recent studies. RDA’s cannot quantify their results.
Redevelopment boosters claim the agency is entitled to keep the tax increment, because it was created by agency activity itself. The exhaustively researched Subsidizing Redevelopment in California by Michael Dardia (Public Policy Institute, San Francisco, 1998) disproved this. Thorough analysis showed property tax diversions to be a net loss, and do not "pay for themselves" with increased development.[1]
Increases to the tax increment were attributable to the increased net value of housing. Building new retail centers to generate new sales taxes do not justify the debt load incurred by the city.
Without an RDA Agency in place, any tax increment revenues-generated by the expiration of the existing RDA Agency- would go to the City general fund.
Normal market demand for more retail centers would bring new retail to cities without any incentives. Profit alone is a good incentive for private development. Current market conditions in housing/commercial values negate RDA goals and functions.
The RDA takes the property base for the entire City (as the entire City is in the boundaries of the RDA) and plays “commercial developer.” A role best left for the private entrepreneur. The current plan calls for diverting tax revenues to incur debt, enormous debt. For example RSG Report page 15, Table A-4, clearly demonstrates the costs and burden of debt. All the projects incur a debt equal to proposed project costs.
The City Council needs to meet in a workshop setting including the Auditor-Controller to define the tax base and what the City of Grand Terrace would capture without incurring new RDA debt and by dissolving the agency.
I did a list of projects the voters may want to fund using RDA powers. These costs are only $10Million. RDA proposes $30 Million of new projects. A proposition that will divert $225 Million of tax revenues to projects for costly real estate speculation in the worst housing market in the last century and worst economic decline since the Great Depression.
We are three years out from the RDA Agency losing their ability to divert tax increment dollars to private commercial speculation. I urge you to investigate your options with patience and due diligence. You are the elected stewards of our tax dollars.
Respectfully submitted,
Sylvia A. Robles, MPA
[1] “Redevelopment: The Unknown Government.” Published by the Municipal Officers for Redevelopment Reform (MORR).
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