As a part of the annual budget package, the California legislature approved a bill that would have required city and county redevelopment agencies to either shut down or start making large payments to local school districts. However, Governor Jerry Brown vetoed the budget package, saying it doesn’t go far enough in closing the state’s budget gap.
Brown called for completely eliminating redevelopment agencies as soon as he took office in January. The agencies are primarily funded by tax-increment financing (TIF), which uses property taxes on new development to subsidize that development. California redevelopment agencies currently collect $5.5 billion in property taxes a year. Because some of that money is dedicated to repaying bonds, eliminating the agencies would immediately save the state $2.5 billion, later increasing to $5.5 billion as the bonds are paid off.
Although 48 other states also allow cities to use TIF, California cities collect more money from TIF than all other states combined. As the Antiplanner recently found, state redevelopment agencies collect some $160 each year for every person in the state. The amount continues to grow, so in the long run eliminating TIF will save taxpayers far more than $5.5 billion a year.
Naturally, redevelopment agencies oppose their elimination, claiming they perform a necessary function in helping to revitalize blighted areas. However, TIF in California is completely out of control, with redevelopment agencies declaring everything from undeveloped deserts to wealthy neighborhoods “blighted” just so they can collect property taxes from those areas. TIF is also the primary funding source for eminent domain, which makes it even more controversial.
The future of the agencies remains up in the air as Brown is likely to continue to push for their elimination while members of the legislature will hold out for some compromise such as the bill they approved that allows agencies to survive if they make large pay offs to state schools. Since TIF takes money from a wide variety of other urban services, including fire departments, libraries, and anything else funded out of property taxes, simply paying off the schools will not really solve the problem.