Happy New Year Except for California Redevelopment Agencies

As far back as 1946 when the California Legislature first passed legislation enabling the establishment of redevelopment agencies, the concept of restoring aging urban neighborhoods has played a key role in the character and identity of California cities. This role, which was enhanced by government money during the era of “urban renewal” in the 1960s, has now been effectively obviated by a ruling of the California Supreme Court which, on Thursday, December 27, 2011, held in favor of a recent State law abolishing the State’s 400 local redevelopment agencies. The Court also ruled against a compromise measure which would have allowed the redevelopment agencies to continue in operation with the sharing of their revenues with the State General Fund. Localities are now faced with the quandary of how to make up the shortfall. Several new ideas have been advanced at both the State and local levels.

The Court’s action is a double-edged sword. On the one side is the more than $1 billion in revenue that will accrue to the State which would have gone to the local redevelopment agencies. Those who supported the legislation justify it by pointing to the use of redevelopment funds to support self-serving action by local government, including the purported catering to rich developers, and the alleged sponsoring of fancy field trips for redevelopment agency members. Those who opposed the legislation point to redevelopment agencies’ role in the resuscitation of depressed neighborhoods and their replacement with low income and elderly housing as well as job creating commercial areas.

Both positions have a point, and both have problems. While it is true that local redevelopment coffers (enhanced by “tax increment financing” which returns to the local jurisdiction the difference between the appraised value of the local neighborhood in its original condition and its appraised value after redevelopment) are often raided for purposes other than redevelopment, it is also true that redevelopment has demonstrated notable successes in the past such as San Diego’s Gas Lamp District, and the development of new low income housing where only hulks of burned tenements stood before.

Of course, even the newly refurbished housing stock had an additional cost which served to condemn redevelopment – the hidden relocation of low income households from their original dwellings. While Federal funds are available for relocation of those who cannot afford alternate housing, even low income, those funds have been misused and misallocated with as much frequency as the funds required for the underlying development, often leaving the poor and displaced to fend for themselves.

Finally, the court also rejected a proffered compromise that would have allowed the redevelopment agencies to continue in existence with a revenue sharing agreement with the State government. Ironically, it was the forces opposed to the underlying legislation that brought about the demise of the “compromise” legislation by opposing it and challenging it in court. At this juncture, however, the localities that opposed the demise of the redevelopment agencies say that they will settle for “anything they can get.” It remains to be seen if the Legislature will adhere to their request and enact new legislation allowing for the continued existence of the agencies on some, as yet unspecified, terms.
 

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