California Gov. Jerry Brown is proposing extraordinary revenue- raising plans to tackle the state’s $28 billion budget deficit. The Brown Administration has proposed that the state dissolve the state’s community redevelopment agencies (CRAs), regional quasi-public bodies charged with administering redevelopment dollars. Tax increment financing (TIF – the mechanism through which redevelopment is funded) is an enormous expense in California, representing
$5.8
billion
in diverted tax revenues a year. The current proposal would retire current redevelopment debts with agencies’ existing funds, allowing the $1.7 billion to be applied towards the state budget. Remaining funds would be returned to local governments and school districts.
Unlike the Enterprise Zone program, also
slated for elimination
by the Brown Administration, redevelopment in California actually does provide some clear benefits to the state. TIF plays a significant role in providing affordable housing in California: twenty percent of all TIF revenues must be set aside for affordable housing projects. When properly harnessed, redevelopment can spur equitable revitalization. Some of the most successful
community benefits agreements
in the country come from Los Angeles, where
LAANE
and other organizations have leveraged redevelopment funds to provide good jobs and affordable housing to underserved communities. Madeline Janis, executive director of LAANE, Vice Chair of the Los Angeles CRA Board, and board member of
Good Jobs First
has argued that
reform
– not elimination – of CRAs is the best way to advance economic recovery in the state.
Reform would help to address the overuse of redevelopment dollars in California. A February
report
by the Legislative Analyst’s Office found that CRAs in some counties have created so many projects that more than 25 percent of all property tax revenue is allocated to the agency. One needs to look no further for examples of
irresponsible use of TIF
funds than San Jose and Oakland. Both cities are scrambling to assemble and approve new
subsidized professional sports stadium plans
before the state can move to recapture redevelopment funds. Cities throughout California are moving decisively to
spend
or otherwise
encumber
their accumulated redevelopment funds.
California’s $28 billion budget gap is unparalleled, but budget pressures are bringing tough love to the economic development-industrial complex around the country. Getting back to basics is critical. Programs that pay companies to do what they would have done anyway – that fail to meet the definition of the word incentive, that don't correct market failures – are deservedly vulnerable. It's only fair, given deep cuts being proposed for aid to children, seniors, students and the unemployed.