Redevelopment the Unknown Government, 2004


This pro-retail/anti-industrial bias pervades redevelopment promoters. They value low wage retail jobs at the expense of high paying manufacturing jobs. They value people only as consumers, not as skilled workers. They value consumption at the expense of production.

Per-capita sales tax revenues vary widely

from city to city (Table 6.2). Generally, affluent suburban ring cities get more than older urban-core cities that need it the most. Largely minority cities are hit especially hard by sales tax inequality. Redevelopment has added to these distortions as cash-flush suburban cities lure retailers out of the poorer inner-city.

In California Cities and the Local Sales Tax (Public Policy Institute of California, San Francisco, 1999), researchers Paul Lewis and Elisa Barbour show how the sales tax bias has skewed local decision-making and how the billions in redevelopment subsidies have failed to expand sales tax revenues: "From the 1970's to the 1990's, sales taxes, measured in real dollars per-capita, were a fairly stagnant source of funds" (page xiii).

Even as personal incomes grew rapidly in the halcyon '90s, sales tax revenues remained flat. An aging California population is investing more of its money, and spending it on health care, travel and personal services, none of which is subject to sales tax.


Page 15 and 16



Sales Tax Reform: Some type of per-capita sales tax disbursement would end predatory redevelopment and return cities to an equal footing. Assured of a stable revenue flow based on population size, cities could concentrate on providing basic services, rather than subsidizing new businesses.

Debt Control: Make redevelopment debt subject to voter approval. This would limit debt issuance and make agencies more publicly accountable.

Mandatory Sunsets: The 40-year sunset law must be given teeth and enforced. If redevelopment agencies truly have eliminated blight, then there should be no further need for them.

Infrastructure: Redevelopment funds are public funds that should be spent on public infrastructure, not on private projects. Tighter state legislation should restrict expenditures to improving public streets, parks and other facilities.


Comprehensive Fiscal Reform: A rational and stable method of funding local government must be found, shifting cities back to greater reliance on property taxes and less on sales taxes.

A CRA-backed initiative (Prop 65, Nov. '04) threatens to constitutionally guarantee future tax increment revenue. Bad idea.

Another ballot proposal by the legislature offers protections for local revenues, while allowing for future reforms.

Many redevelopment bills are introduced into the legislature every year. The most significant recent law is AB 178, by Assemblyman Tom Torlakson (D-Martinez) and signed by Governor Davis in December, 1999. It requires any city that uses public money to lure away an existing business from a neighboring city to reimburse that city for half the sales taxes lost. Any cities victimized by predatory redevelopment may now sue to recover up to half the lost sales taxes


Numerous recent studies and legislative commissions have concluded that redevelopment abuse must be addressed within the need for comprehensive state and local fiscal reform:

SMART Report: State Controller Kathleen Connel's 21-member State Municipal Advisory Team (SMART) published its 1999 report, Generating Revenue for Municipal Services, recommending a 10-year phased-in per-capita sales tax formula, and a greater share of the property tax for cities.

Wilson/Hertzberg Commission: The 14-member bi-partisan Commission on Local Governance for the 21st Century released its 222-page report, Growth Within Bounds, in January, 2000. It noted with alarm the doubling of redevelopment area acreage (Table 3.2), and "recommends that the point-of-sale allocation of the sales tax be revised to mitigate its effect on the 'fiscalization of land use' and that the

allocation for property taxes be increased to more completely fund property-related services."

Grand Jury Reports: County grand juries are more actively investigating redevelopment activities and they don't like what they're finding. The 1994 L.A. County Grand Jury detailed the impact of agency revenue diversions on county operations. A 2004 Fresno County Grand Jury study found the City of Fresno's agency is sitting on $25 million in vacant land much of it for over 30 years. "RDA operations need to be more transparent to city officials and the general public," it concluded.

Speaker's Commission: Then-Speaker Antonio Villaraigosa's Commission on State and Local Government conducted regional hearings throughout the state. At its hearing at Cal State Fullerton, MORR representative and then-Fullerton Councilman Chris Norby gave the opening testimony. The commission ultimately called for reforms in the state-city fiscal relationship.

PPIC Studies: The San Francisco-based Public Policy Institute of California has produced two recent seminal reports: Subsidizing Redevelopment in California (Michael Dardia, 1998) and California and the Local Sales Tax (Paul Lewis & Elisa Barbour,

Page 34