News Release

New Report Shows Potential Problems with Redevelopment Areas

Recommends reforms for redevelopment agencies in California
For Immediate Release

Sacramento, CA– A new research report released today outlines problems with the growing trend among cities to borrow against future growth and divert tax revenues as a way to attract economic development.

“Localities too often look to redevelopment funds as an all-purpose subsidy for developers rather than its original purpose as a targeted tool to revitalize neighborhoods,” said Pedro Morillas, CALPIRG Policy Director. “You don’t have to look much further than the $5.8 billion price tag in California to see things have gotten out of hand.”

Forty nine states have some form of redevelopment system, more generally know as tax-increment financing deals or “TIFs” . Arizona eliminated its TIF law in 2006, according to the report.

These deals divert future growth in the tax base from a prescribed area toward special development projects over many years, sometimes hurting school departments and other public structures that must then be financed from a narrower tax base.

“It’s pretty obvious why developers like these subsidies, and a quick infusion of short term cash is usually very tempting to municipal leaders, but localities need to ensure that use of these tools is closely targeted to advance clear long-term needs otherwise they can turn from community improvements to developer giveaways,” said Morillas.

“If done badly, redevelopment money can steer development away from the places that most need it,” added Morillas. “It can also leave municipalities with unexpected shortfalls or create slush funds with little public oversight.”

The report recommends stronger guidelines to ensure redevelopment funds become more targeted, transparent, accountable, and democratically governed. For instance, redevelopment deals should be:

•    Used only as part of advancing part of a specific development strategy in limited areas.
•    As temporary as possible, with unspent funds promptly returned to the general budget if left unspent after a certain number of years.
•    Capped by the state as a percent of a municipality’s land that can be placed under redevelopment agreements.
•    Conducted through a fully open and democratic process, with information about redevelopment projects placed online like other best practices for spending transparency.
•    Accompanied by clear, measure benchmarks for the responsibility of developers.
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