California Lawmakers Might Resurrect Failed ‘Urban Renewal’ Program
There’s yet another attempt to revive California’s shuttered redevelopment agencies—those crony-capitalist abominations that abused eminent domain, ran up debt without a public vote, and distorted development decisions at the local level. This year’s redevelopment effort is renamed the Reconnecting Communities Redevelopment Act, but a cute new name doesn’t hide redevelopment’s sordid history.
It’s oddly delusional even by Capitol standards to revive these tax-draining agencies when the state lacks sufficient revenues to meet its current spending. Last year, Assemblymember David Alvarez (D–Chula Vista) proposed recreating the agencies largely as they existed before Gov. Jerry Brown and the Legislature eliminated them in 2011 to help plug a gaping budget hole. It died in committee, the victim of a budget deficit estimated at around $32 billion.
Alvarez is back this year with Assembly Bill 2945 even though the current deficit is estimated at around $45 billion or higher. The state dissolved the agencies 12 years ago. Since then, lawmakers have passed measures that bring back modest portions of redevelopment—such as Infrastructure Finance Districts that use tax-increment financing to pay for limited infrastructure-related developments.
However, broader redevelopment revivals have failed—and likely will do so again. AB 2945 passed through committee but is headed toward rocky terrain. In 2019, former Gov. Brown threw shade on that year’s revival effort: “A lot of people wanted to see it go, and it did free up almost $2 billion a year for schools. And if people want to bring it back they’re going to take billions from the schools, and I would assume those people who care about the California public schools will fight that very hard.”
Brown was spot on. As much as I’d like to think that free market arguments against redevelopment swayed lawmakers, the real bill killer came from the powerful California Teachers Association. The teachers’ union clearly wouldn’t ignore efforts to tap their funding sources. Sure the state backfilled those lost education dollars, but California doesn’t have the spare cash to do that in the face of its remarkably large deficit.
As a refresher, California created redevelopment agencies in the 1940s to help rebuild inner-city slums. The basic redevelopment financial structure allows city governments to float bonds to pay for infrastructure related to urban-renewal projects. Cities gained the resulting increase in property taxes—called the tax increment—under the thinking that the projects spur gains in property values. That money then paid off the bonds.
By declaring an area blighted, agencies could unilaterally divert property tax revenues from traditional public services toward these privately built projects. Cities could declare virtually anything blighted (too little urbanization or
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