California Almost Eliminates TIF Agencies

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.

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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.

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About The Antiplanner

The Antiplanner is a forester and economist with more than fifty years of experience critiquing government land-use and transportation plans.

4 Responses to California Almost Eliminates TIF Agencies

  1. bennett says:

    “Although 48 other states also allow cities to use TIF, California cities collect more money from TIF than all other states combined.”

    I’m not well versed in CA politics, but I’m assuming that the state overuses TIF because it has tied it’s hands in increasing revenues in more traditional ways. Can anyone verify this?

  2. Scott says:

    It’s about time that RDAs are more critically examined. That’s one of the few good ideas that Jerry Brown has.

    There are so many negatives to the TIF & heavy-handed of an RDA:

    1. Property inflation – mostly due to induced demand, including infusion of taxpayer money; mandated affordable housing (aka rent control) does that too — by pushing costs to upper ~80% of units built, and lowering overall new supply, by making new development cost-prohibitive.

    2. Crony capitalism – favoritism, reduced competition, political campaign kickbacks, bribery, nepotism (ie municipal purchases of friends’ properties), PPPs being monopolistic & avoiding consumer wants, social engineering,

    3. Diverting tax revenue from basic gov services [as mentioned in the OP].

    4. Eminent domain violations – takings, lowering the “market” price, unjustly declaring hoods as “blighted.

    5. Altering natural market forces.
    6. Creates burdensome regs.
    7. Emphasizes non-residential.

    8. Creates other loss of tax income, such as “incentives” for businesses to locate.

    8. Creates excessive fake competition between cities in that they cannibalize themselves & hurt residents.

    9. Can perpetuate: NIMBY, BANANA, the open-space fallacies and the drawbridge principle.

    10. Creates undue & expensive objective for developers to meet.

    11. Puts too much politics (influence, pressure, cost over-runs, payouts) into the private sector industry of building. Look at the many problems of HUD [which was instrumental in the sub-prime crisis] in their public housing (the projects) — notably see the CHA (Chicago Housing Authority), and the razed Pruitt-Igoo (St.Louis).

    Without RDAs, the built environment would vary & be in different areas, but many advantages: prices & taxes would be lower; greater efficiency would be achieved; there would be better quality & more variety/choices.

    Big gov is neither the savior nor can solve many of the perceived imperfections. Good intentions & taxpayers’ money cannot do much. Please do not make a false, binary choice and confuse this with anarchy.

    Here’s a fairly recent article by Steven Greenhut:
    http://www.city-journal.org/2011/21_2_california-redevelopment-agencies.html

    Here’s a USC site about planing & markets:
    http://www-pam.usc.edu/index.html

    It’s a shame that most of those who disagree, probably have too much blind faith in government, and lack: the understanding of basic concepts (economics, business, human nature); the morality in taking money from some for others & forcing their ideals; and application to selves (hypocrisy).

  3. metrosucks says:

    The fact that even Governor Moonbeam is against TIF in California only speaks to the enormous size of the problem. We would be far better off without this fraudulent scheme. I urge everyone to read the piece by Steven Greenhut. I read all his articles, and they always shine forth with common-sense analysis and respect for consumer choice and freedom.

  4. Scott says:

    Hmmm? No comments? This has been typical — what the OP starts [for years] with & then I initially elaborate in more detail, is not countered.

    Name-isn: You lefties, big-govies, have difficulty.

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