Last week, RDA director Harry Mavrogenes and the San Jose City Council said they would work to keep the Redevelopment Agency going despite Gov. Jerry Brown’s intention to shut down agencies statewide.
An article in the Mercury News closed with the following paragraph: “The governor’s finance office said Brown has not wavered on his position and cited a study released Tuesday by the state’s Legislative Analyst’s Office. The report offers support for Brown’s plan to eliminate the agencies and replace them with other ‘tools to finance economic development.’”
The Legislative Analyst’s Office (LAO) is a non-partisan office that provides fiscal and policy information and advice to the state legislature. Here are some highlights (and “lowlights”) from the LAO’s report, “Should California End Redevelopment Agencies?”
“Redevelopment’s share of total statewide property taxes has grown six-fold (from 2 percent to 12 percent of total statewide property taxes). In some counties, local agencies have created so many project areas that more than 25 percent of all property tax revenue collected in the county are allocated to a redevelopment agency, not the schools, community colleges, or other local governments.”
“Redevelopment: Findings from research and studies:
Positive: Flexible tool that can improve target areas. Helps build affordable housing.
Negative: No evidence that redevelopment increases overall regional or statewide economic development.
Diverts revenues from other local governments and increases state
Has limited transparency and accountability.”
“While redevelopment leads to economic development within project areas, there is no reliable evidence that it attracts business to the state or increases overall regional economic development. Instead, the limited academic literature on this topic finds that—viewed from the perspective of an entire city or region—the effect of this program on property values is minimal. That is, redevelopment may cause some geographic shifts in economic development, but does not increase the overall economic activity in a region.”
“To the extent that a redevelopment agency receives property tax revenues without generating an overall increase in taxes paid in the state, the agency reduces revenues that otherwise would be available for local agencies to spend on non-redevelopment programs, including law enforcement, fire protection, road maintenance, libraries, and parks.”
“Redevelopment agencies lack some of the key accountability and transparency elements common to other local agencies. Specifically, unlike other agencies, redevelopment agencies can incur debt without voter approval. Redevelopment agencies can also redirect property tax revenues from schools and other local agencies without voter approval or the consent of the local agencies.”
“While the Governor’s plan would phase out the existing redevelopment system, it also proposes a constitutional amendment to allow local voters to approve tax increases and general obligation bonds for economic development purposes by a 55 percent majority. At this time, details on this portion of the proposal are not available. As we understand it, cities and counties would retain the powers granted to them under redevelopment law except for the use of property tax increment revenue. In the place of tax increment revenue, the proposal would lower the voter threshold for other financing mechanisms that local governments could use to pursue economic development activities that are currently carried out by redevelopment agencies.”
“Given the significant policy shortcomings of California’s redevelopment program, we agree with the Governor’s proposal to end it and to offer local governments alternative tools to finance development. Under this approach, cities and counties would have incentives to consider the full range of costs and benefits of economic development proposals.”
Read the Legislative Analyst’s Office (LAO) report here.