The fate of California’s redevelopment agencies (RDA’s) is frequently discussed in the news these days. However, resolution is close—on November 10th, oral arguments will be heard by the State’s Supreme Court in the case California Redevelopment Agencies v. Matosantos.
The issue at hand in this important case is the constitutionality of Governor Jerry Brown’s proposed elimination of all 400 of the state’s redevelopment agencies. A critical facet of his budget proposal, Brown claims the move will save the state $1.7 billion this year. Characterizing the state’s redevelopment agencies as a “piggy bank” from which the state must now draw, he plans to redistribute the money back to counties, schools, cities and other special districts.
However, he’s also proposed that RDA’s can avoid elimination if certain steps are taken by their local jurisdictions, including an agreement that the RDA’s will pay $1.7 billion this fiscal year and $400 million in subsequent budget years in statutorily mandated revenues to school entities and other special districts.
Panicked redevelopment agencies are contending that the proposed cuts violate Proposition 22, passed by voters in November 2010, which prohibits the state from borrowing or taking funds used for transportation, redevelopment or local government projects.
Opponents to Governor Brown’s proposal feel that RDA’s are needed more now than ever as the state struggles to recover from the recession. The wholesale elimination of RDA’s, they maintain, eliminates important tools to spur job creation, increase tax revenues, and induce economic growth.
However, proponents of Governor Brown’s proposal, including State Controller John Chiang, claim that RDA’s are mismanaged and waste funds that would be better used to pay for schools and other critical services. Chiang, who recently reviewed 18 RDA’s statewide, cited numerous reporting flaws, questionable payment practices and inappropriate uses of affordable housing money.
This issue –like so many the justice system and voters encounter– begs the question: which decision will positively impact the most people? If political radical and philosopher Jeremy Bentham, an early advocate of utilitarianism, were to ponder the situation, would he lend support to Jerry Brown, attempting to balance a budget and mindfully funnel funds into what he believes are our most critical areas of need; or would he cast his vote with the RDA’s, who enable and encourage local government autonomy and revitalization?
There’s no denying that the ruling by California’s top court – whether in favor, or a rejection of Governor Brown’s controversial move – will impact taxpayers and jurisdictions across the state.
The court has promised a decision by January 15, 2012, which is when the first RDA payments would be due.
Proceedings will be broadcast on The California Channel from 9:00 - 10:00 a.m. To view the oral arguments at a later date, please visit The California Channel’s archived video library
2 comments:
Your description of this issue as one of some kind of noble value question is off-base, perhaps even absurd. It's more a question of who ought to have use of these property taxes and under what rationale. Tax increment funding was begun at a time of relatively stable property values. Because of that the increase in property tax valuations in a redevelopment district could reasonably be construed as occurring because of the added value created by redevelopment agencies due to the projects within its jurisdictions, providing some logical nexus to allow the increase in taxes due to redevelopment agency's activity to fund those activities.
But since then property values have risen in general and Prop 13 kept property values from translating into tax valuations except when they were sold or when new construction was done. This meant that tax increments going to redevelopment often had little or nothing to do with the agencies activities and were in essence simply siphoning those funds from other government activities that would have otherwise received those property taxes paid just as occurs with properties not within a redevelopment area. The largest loss comes from schools and with the property tax being an element of the state's primary formula funding, the property taxes that were siphoned from going to schools into redevelopment usually lead to a dollar for dollar increase in what the state contributed to meet the formula funding requirements. Furthermore the occurrence and degree of those transfers to redevelopment is also a function of when properties were first put into a redevelopment zone, setting the valuation basis from which the tax increment is calculated.
This illogical and capricious redevelopment tax increment funding scheme created windfall slush funds that local government officials could spend that were not subject to the kind of opportunity cost analysis where limited taxpayers dollars are spent in their highest and best use. It lead to gross exploitation of the system and the perversion of the definition of blight, which is a requirement for the formation of districts.
I first looked into redevelopment funding after watching my local city council put on its redevelopment board hat to do much spending. Those dual roles are the norm. I was kind of incredulous and even arranged a meeting with the head of a local redevelopment agency just to make sure I was understanding it correctly. Later this was laid out quite well by the PPIC publication "Subsidizing Redevelopment in California" by Michael Dardia. I understand it was used by Governor Brown in the formation of his policy plan.
Anyways, to couch this is some kind of a noble struggle of values is to really distort what it is really about, applying sound principles to who pays for what in government and using sound accounting to measure that.
I remember listening to the debates and discussion on this. Still seems to be a hot topic.
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