Public Finance, Prop 13, TFAs, and CRAs! OH MY!

May 15, 2012 1:17 AM

Out of Cash - The End of the Nation’s Largest Redevelopment Program (and a major source of California’s local funding sources).

Tax increment financing (TIF wiki) is often contested, but ubiquitous tool for areas to subsidize and leverage gains from future development into specific designated areas. Community Redevelopment Agencies (RDAs or CRAs) use TIFs to create a virtuous circle of local based growth and urban regeneration. However, since passage of Proposition 13, cities in California have come to rely on RDAs as a major source of local funding. To shore up state budget deficits Governor Brown attempted to abolish RDAs in order to appropriate their funding streams. After a surprise state Supreme Court ruling affirmed their abolishment via bills AB26 and AB27, California agencies and local areas now face the possible “death of redevelopment” and life without CRA.

posted by stratastar (13 comments total)

Interesting article. The whole read I really wanted more hard data on the types of projects done, but I guess there's just none to be had.

As a California resident I honestly don't feel like what happened to the RDAs was outrageous. I'm all for re-development of urban spaces and I think it's important, but at a time when Brown is being forced to gut education and just today announced more proposed cuts, renovating a derelict building downtown just isn't as high on my priority list as it would normally be.

In my ideal world this budget mess would get straightened out through some modest tax increases and cuts and California would figure out how to fix its taxing and budgeting dysfunction for the long-haul. I only have a vague understanding of what the main problems are as most of the reports I hear or read about the California legislature basically consist of reporters exclaiming, "shit's fucked up!" I'm sure I'm not alone in holding the California legislature in even lower regard than our current congress, which must put them somewhere in the negative.
posted by Defenestrator at 2:04 AM on May 15, 2012

Somewhat related, how obscure tax changes left California with more than a billion dollars less in revenu.
posted by MartinWisse at 2:06 AM on May 15, 2012

The sweetest news to be heard in the great state of California for many years, and I hope to get the chance to personally thank Governor Brown for this great service, which will be his legacy. As a native son, he sees the truth behind the hype: that these parasitic, unaccountable agencies have enabled municipalities to seize by eminent domain entire swaths of historic structures, raze them, and replace them with ugly, ill-planned, often unprofitable dreck, privatizing public space in the process. Developers and politicians got rich as neighborhoods were slaughtered, and when they smelled their own blood in the water they stopped even pretending that it was all to fight blight. It will be generations, if ever, before these places can be reclaimed as the living, breathing, genial communities that many of them were before the money men came through with their scythes.

RIP to Bunker Hill (the walkable, livable, architecturally interesting, multi-generational, mixed-income downtown Los Angeles neighborhood that boosters and developers can only dream about down in the flats of Adaptive Reuse), to the BLVD Cafe (seized and razed to leave a vacant corner in a supermarket parking lot) and The Trails (seized and razed for ugly stucco housing), Acres of Books (seized and shuttered for an arts center that will never be built) and to Councilman Ernani Bernardi, who helped the CRA destroy downtown L.A., recognized that he and the citizens had been hustled, and spent years suing to try to reverse the injustice. "RIP to the CRAs," a beautiful phrase I still can't quite believe is real. Here's to a new age of real development, not redevelopment, the sort of slow, natural growth by which cities are allowed to evolve to suit the human beings who live and work in them. California might surprise us yet.
posted by Scram at 2:19 AM on May 15, 2012 [9 favorites]

I know it's the symbol of California and all, but the image of a Bear walking in front of a Red Star is... hilariously suggestive.
posted by valkyryn at 3:41 AM on May 15, 2012 [1 favorite]

In California, as in the 48 other states that use versions of it...redevelopment agencies mint money for cities

Just wanted to highlight the part about the entire country's cities (not just Fed) also having their own paper machines.
posted by Reasonably Everything Happens at 4:37 AM on May 15, 2012

A priori, redevelopment sounds like fairly high velocity money, making it exactly the spending you want during a recession. And prisons and police are almost surely exceedingly low velocity spending once you as many as we have currently.
posted by jeffburdges at 5:50 AM on May 15, 2012

I fucking hate TIFs. They can easily (are easily) abused by those with a lot of money and power to throw their weight around. To me it's a way of bribing elected officials to get what they want. It's public investment in private infrastructure (yes, I get the argument that it brings in revenue to the public, not just the private)... But what burns my goat is that it's often used to gentrify the hell out of things.

(Bitter Madisonian who fucking hates our local shitweasel TIF abusers Frautschi and Downtown Madison Inc.)
posted by symbioid at 6:42 AM on May 15, 2012

Yeah, it's interesting to watch the end of the redevelopment agencies in my little burgh. On the one hand, money's going away. On the other hand, some of the "blight" here is pasture that became auto row, which may be good for sales tax revenue but is kind of a shady way to funnel public funds into private pockets.

Chuck Marohn, the Strongtowns.org guy, has a whole bunch of examples where TIFs have caused shiny new buildings which bring in less sales tax revenue than the "dilapidated" structures they replaced, in the process exchanging character and local dollars for franchises and emblandishment.

So I won't be shedding tears.
posted by straw at 7:42 AM on May 15, 2012 [2 favorites]

I never thought about the sales vs property tax issue. That's a good point. Especially when one massive thing (our arts center) displaces a ton of small local unique shops. I'm not sure what the sales tax difference is, though I'd always assumed the "benefit" was property tax revenue considerations, and then of course I believe in WI they have some stupid rule limiting how much property taxes can be raised (and thus limiting local authorities ability to raise revenue)...
posted by symbioid at 8:20 AM on May 15, 2012

The whole read I really wanted more hard data on the types of projects done, but I guess there's just none to be had.

San Diego had almost the exact opposite experience to what scram describes. The Center City Development Corporation, or CCDC, is a redevelopment org funded by all this stuff that started in the early 80s. At that time, downtown San Diego was full of x-rated theaters and bookstores catering to sailors in port at the 32nd St. Naval Station, NTC, or Coronado. The CCDC has basically resurrected downtown, with projects like Horton Plaza, the Convention Center, preservation of all the historic structures in the Gaslamp District, and fairly recently, the re-opening of the Balboa Theater, which is kind of in the same building as Horton Plaza but sat derelict for more than 20 years after the mall opened. Just about everything you do downtown when you come visit for the ComicCon was done through the CCDC. Their mandate was just about over anyway, so they were probably going to dissolve soon, but the redevelopment organizations are not all bad.
posted by LionIndex at 9:19 AM on May 15, 2012

My take is that TIFs are a tool that comes with a pre-ordained trade-off, and planners should be aware of those trade-offs. If that development absolutely was not going to happen without a TIF, and that's mostly in areas that are truly blighted; then its generally a net-gain if development occurs. If they are thrown around willy-nilly, which was surely the case in California, they drain money that would be going to the system straight into developers pockets.

I am not a Californian, so reading about it sparked my interest. The interesting thing is that the article implied that Prop 13 forced areas to use RDA's to get local funding for schools. In many areas TIFs are a major drain on local school funding.

Great links Scram!
posted by stratastar at 10:48 AM on May 15, 2012 [1 favorite]

I believe in WI they have some stupid rule limiting how much property taxes can be raised (and thus limiting local authorities ability to raise revenue)...

WYI, generally taxation differs when comparing increases to existing property with new construction.

I really wanted more hard data on the types of projects done

I think the only real source for this info is to find the development/master plans for various CDCs. It's a time intensive process.

San Diego

I work with someone who left that CDC, that was her take too. You need an engaged public though, and it looks like on average the right ingredients are rarely in place.
posted by Reasonably Everything Happens at 2:57 PM on May 15, 2012

Hey, Josh Stephens! He runs the California Planning and Development Report, which I've written for.

This was a pretty good article, and one that emphasizes what a fuck-up capping property taxes was. Property taxes are one of the best opportunities for progressive taxation, and the current budget shortfalls come in large part from a 30-year-old mistake.
posted by klangklangston at 12:05 PM on May 16, 2012