The Redevelopment Debate
Jerry Brown’s proposal to take property tax revenues from the redevelopment agencies and give it to schools and local governments is generating a lot of controversy – and a lot of discussion. One of the more enlightening articles about it was Monday’s column by Dan Walters (published at California Progressive Report, www.californiaprogressreport.com/site/?q=node/8577), giving a quick history of redevelopment agencies and their use of property tax funds:
Redevelopment dates back to the 1950s, empowering local governments to attack urban blight by acquiring land and repackaging it for development with subsidies. A key part of the program allows redevelopment agencies to retain all of the increased property taxes in project areas.
That provision began to bite after Proposition 13 passed in 1978, imposing a cap on property taxes.
City redevelopment agencies could skim their take off the top of the property tax pool, and eventually that reached 12 percent of all property taxes, leaving less for counties, schools and other local governments.
A decade later, voters passed Proposition 98, which requires the state to make up property tax losses to schools. State taxpayers thus are paying nearly $2 billion a year to underwrite local projects.
In short, Brown recognizes that we have to choose where these property taxes go, and that schools have the stronger case for those funds than redevelopment agencies. It’s difficult to argue with that logic, especially given the cuts K-12 schools have faced since 2009.
And yet the loss of funds to redevelopment agencies is a much bigger blow than Walters is willing to admit. While building a new Chargers stadium in San Diego is surely not the best use of redevelopment funds, the overall concept of using tax revenue to reshape urban space to help enable cities to meet new desires for using that land is still sound.
That’s especially true during a severe recession like this. Redevelopment funds could be used to spur more sustainable developments, particularly urban density and transit-oriented developments. California is moving away from low-density sprawl and toward mixed-use urban developments. Redevelopment can help accelerate this process, providing the basic infrastructure needed to spur the greater density that the market is starting to demand.
California shouldn’t have to choose between schools and redevelopment, just as we shouldn’t have to choose between schools and parks, health care and buses, and so on. The wealthy and the big corporations are sitting on a huge pile of cash that would be better used to fund these public services.
In this case, there might be additional options. Walters believes Brown is pushing local governments to fund redevelopment projects themselves. Well, let’s make it easier to do so. In addition to the badly-needed majority rule for approving tax increases, Brown could also champion methods to assess higher property taxes – or assess other kinds of fees – on the projects built with redevelopment funds. One model could be the Mello-Roos fees levied mostly on new suburban developments to pay for schools, a fee enacted in the early 1980s partly in response to the passage of Prop 13. Mello-Roos fees can be assessed in urban areas as well, although this is rarer, but they typically pay for public services and not redevelopment directly. Still, the concept could be extended to redevelopment projects as well.
Whatever the solution, Governor Brown should not be content to simply take the redevelopment money, give it to schools, and hope that localities find a way to fund their own redevelopment projects. The underlying structure of paying for government is broken. Brown had once before avoided that deeper question, 30 years ago when he centralized funding of schools and local government in Sacramento. That “solution” never really worked, as three successive asset bubbles made state revenues look like they’d recovered, but the busts revealed the basic weakness.
I can understand Governor Brown wanting to assure schools are funded this year, and I can justify taking redevelopment money to do it. But there needs to be a long-term fix as well – not just for redevelopment, but for our broken system of funding our public services. Otherwise this won’t be any more desirable than the post-1978 system Brown helped build, the same system he is now pledging to undo.