Time to Eliminate the Blight of California’s Redevelopment Agencies

Examples in San Jose and other areas show how redevelopment agencies fail taxpayers

California Governor Jerry Brown’s proposal to eliminate state subsidies of local redevelopment agencies is now on life support because only one Republican, outspoken redevelopment and eminent domain abuse critic Chris Norby (R-Fullerton), voted to support the measure, SB 77. But given the notorious waste and abuse of redevelopment agencies, this is an issue that should unite Democrats and Republicans alike.

A recent report by the State Controller’s office provides more evidence of the wastefulness of redevelopment agencies, finding they illegally shortchanged schools by $40 million last year. According to the Controller’s office, redevelopment agencies also suffered from “widespread accounting and reporting deficiencies, questionable payroll practices, substandard audits, faulty loans, and inappropriate use of affordable housing funds.”

A January 2011 analysis by the Legislative Analyst’s Office also described the failure of redevelopment, affirming, “The state’s costs associated with redevelopment has grown markedly over the last couple decades, yet we find no reliable evidence that this program improves overall economic development in California.”

San Jose’s redevelopment agency is struggling with a debt of $2.5 billion, the largest in the state. While Santa Clara County is facing a $230 million deficit and has been forced to cut health and human services programs and lay off workers, the redevelopment agency has missed $63 million in payments and interest owed to the county over the past three years, prompting a county lawsuit that was recently settled.

The roughly 400 redevelopment agencies in the state siphon $5 billion a year in property tax revenue from cities, counties, school districts, and special districts. In addition, the state reimburses local agencies for property tax revenues diverted from K-14 schools to redevelopment, at a cost of over $2 billion a year.

Redevelopment agencies purport to remove blight and foster economic growth within a neighborhood or region by directing public funds to subsidize certain development projects that are supposed to bring in more tax revenue for the local government. But they often end up spending the public’s money on unnecessary and bizarre projects, such as building a “mermaid bar” blocks from the Capitol in Sacramento and renovating greens and bunkers at the 4.5 star Desert Willow Golf Resort in Palm Desert.

Furthermore, redevelopment agencies can define “blight” however they want to suit their purposes and plans. Blight definitions have been expanded, and now approximately one-sixth of San Jose is located in a redevelopment project area. The posh, San Diego-area town of Coronado even declared the entire city, with its numerous multi-million dollar beachfront homes and median home value of about $1 million, a redevelopment area.

In actuality, redevelopment fails to generate any net growth and is just a form of central economic planning and corporate welfare. While supporters of redevelopment agencies tout them as engines of economic growth in areas that otherwise would remain dilapidated and economically stagnant, redevelopment projects frequently end up being failures, as evidenced by the numerous vacant lots and urban deserts that were once identified as redevelopment projects.

A 2010 Los Angeles Times investigation found that at least 120 redevelopment agencies spent a total of $700 million in redevelopment funds dedicated to affordable housing between 2000 and 2008 without building a single unit. The investigation also described too-cozy relationships and sweetheart deals between developers and elected officials, and found “widespread instances of corruption, questionable spending and poor accountability” at redevelopment agencies. In some instances, the Times concluded, redevelopment projects “end up worsening blight and hurting the people they were supposed to help.”

Though the Republicans claim to support limiting the size and scope of government, protecting private property rights, and eliminating waste and abuse of taxpayers’ money, they punted when given the opportunity to prove it. For the sake of taxpayers and property owners across the state, let us hope they realize that it is not too late to do the right thing and put principle over politics by supporting the elimination of redevelopment agencies.

Adam B. Summers is a policy analyst at Reason Foundation.