Redevelopment in California: Back from the Dead?

Two new bills could bring back California’s redevelopment agencies (RDAs), which were notorious for abusing eminent domain.  Over the past decade alone, the Institute for Justice catalogued more than 200 cases of eminent domain for private gain.

Not only that, redevelopment in California wasted other people’s money by funding boondoggles. For example, a pizzeria, a nightclub, and a “mermaid bar” in Sacramento benefited from $5.4 million from Sacramento’s RDA.  Redevelopment agencies have also crowded out private investment.  In Hemet, the city is refusing to sell vacant, boarded-up properties once owned by Hemet’s redevelopment agency.  Private developers have repeatedly offered to build “a nice gated community” that could generate some much needed tax revenue for Hemet.  But instead, thanks to the city’s stonewalling, that neighborhood is plagued with crime, while “taxpayer-funded property is being left to rot.”

Little wonder California redevelopment agencies have run up $30 billion in debt.  To bring some measure of fiscal sanity to the Golden State, under the leadership of Gov. Jerry Brown, the California legislature abolished more than 400 RDAs in 2011.  A few months later, the California Supreme Court upheld their dissolution as constitutional.
Introduced by Assemblyman Luis Alejo, AB 1080 would allow municipalities to create “Community Revitalization Investment Authorities” (CRIAs) to revitalize blighted areas.  If this bill passes, these CRIAs would have the authority to “acquire and transfer real property” with the power of eminent domain.

In an interview with The Salinas Californian, Alejo described his bill as a way to revive redevelopment: “Since the dissolution of redevelopment agencies, communities across California are seeking an economic development tool to use.  This proposal provides a viable option targeting the state’s disadvantaged poorer areas and neighborhoods.”
AB 1080 currently has 8 cosponsors (all Democrats) and recently passed the second reading on the Assembly floor.

According to legislative analysis prepared by that committee, AB 1080 is backed by the California Building Industry Association, a trade association for the housing and construction industry, and the California Rural Legal Assistance Foundation.  In addition, the League of California Cities supports the bill, as does the California Special Districts Association, an organization of local governments, since it “empowers local agencies.”

Accordingly, CRIAs would be imbued with a wide variety of powers, including the ability to issue bonds, fund affordable housing, remove hazardous substances, and build and repair infrastructure.  In addition, these authorities could receive financial assistance from the state of California and/or the federal government, as well as transfer funding for affordable housing projects to a “private nonprofit corporation.”

As its name suggests, CRIAs would be authorized to use eminent domain and its array of financing powers to redevelop places that have been designated a “community revitalization investment area.”  Such an area must have an annual median income less than 80 percent of the statewide annual median income, as well as have three of the four following criteria: unemployment that’s 3 percent higher than state levels; a crime rate 5 percent above the state crime rate; the presence of “deteriorated or inadequate infrastructure” and/or “deteriorated commercial and residential structures.”
These community revitalization investment areas could also be established on former military bases.  But unlike the old redevelopment authorities, school districts cannot participate in these Community Revitalization Investment Authorities.

In a similar vein, state Senate President pro tempore Darrell Steinberg has introduced another bill that would partially revive redevelopment agencies.  SB 1 would create “sustainable community investment authorities”  focused on building transit-oriented development, “small walkable communities,” and bolstering “clean energy manufacturing.”  Like the old RDAs and the proposed CRIAs, these sustainable authorities could utilize eminent domain and fund projects by re-directing property taxes.

So far, SB 1 has passed two committees and garnered support from municipal groups and labor unions, including the California Association of Realtors, the California Labor Federation, the California Special Districts Association, the California State Association of Counties and the California Transit Association.

It’s also identical to a bill Steinberg introduced last year (SB 1156), which sailed through the California legislature, passing the state senate 21-14 and assembly 50-27.  Fortunately, Gov. Brown vetoed SB 1156 in late September 2012.  The state legislature was unable to override Brown’s veto.  In California, a governor’s veto hasn’t been overridden since 1979, which was, coincidentally, during Gov. Brown’s first term as governor.

However, in the 2012 elections, the Democrats picked up more seats and have a potential supermajority.  So both SB 1 and AB 1080 could both become law, even if Gov. Brown vetoes them.
Indeed, the governor vetoed SB 1156 not because he was ideologically opposed to redevelopment, but because the Golden State’s finances are tarnished:

“I prefer to take a constructive look at implementing this type of program once the winding down of redevelopment is complete and General Fund savings are achieved.  At that time, we will be in a much better position to consider new investment authority.  I am committed to working with the Legislature and interested parties on the important task of revitalizing our communities.” (Emphasis added.)

As Steven Greenhut warns in City Journal, “What happens if the economy rebounds and the state gets its finances at least partially in order? Expect the redevelopment industry and its legislative allies to come back with a vengeance. Redevelopment may be dead for now, but opponents cannot rest on their laurels.”

— Nick Sibilla
Nick Sibilla is a writer at the Institute for Justice

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