On top of the news that state revenue is falling short of what was anticipated by $3 billion, comes the decision from Superior Court Judge (and former state legislator) Lloyd Connelly that the state can shift $2 billion in local redevelopment funds to schools.
Redevelopment agencies will appeal the decision. But, if nothing else, Judge Connelly’s decision will force a hard look at the effectiveness and oversight of the redevelopment process and that is a good thing.
By declaring “blight” in communities, redevelopment agencies can use the power of eminent domain to seize property and develop the blighted areas while attaching the “tax increment” revenue to the redevelopment agency. The “tax increment” is the new property tax revenue that is the amount of taxes above what the property was paying when it was “blighted.” The new revenue stays with the redevelopment agency and is not available for schools and other county government services.
As Assemblyman Chris Norby argued on this site last year, “Rather than a temporary fix to alleviate blight, RDAs (Redevelopment Agencies) have become a permanent drain on California public resources that must be stopped. And this current fiscal free fall has become the perfect time to do just that.”
Not all redevelopment is bad. There is a good purpose behind many redevelopment projects. But, redevelopment has also been used for empire building. Many redevelopment agencies are city councils wearing a different hat so the council can control a new pot of money.
Redevelopment agency diversions consume about 10% of all statewide property taxes. Given the recent report by the Senate Office of Oversight and Outcomes casting doubt that redevelopment agencies are using the tax increment money adequately for approved housing purposes, the value of redevelopment agencies is justly questioned.
Moving redevelopment funds to schools is a temporary fix. However, the two-year revenue shift, if upheld on appeal, presents an opportunity to review redevelopment agencies while trying to keep the state’s head above fiscal waters.
Redevelopment agencies can use a good going over to test for effectiveness and to determine if they are carrying out their original goals. In the meantime, a hole in school funding will be filled as the state continues to maneuver through these difficult times.