Rebuilding America's Blighted Cities, but at What Cost? Local Redevelopment Agencies Can Help, but They Also Keep a Big Shareof the Tax Proceeds

By Daniel B. Wood, writer of The Christian Science Monitor | The Christian Science Monitor, March 1, 1999 | Go to article overview

Rebuilding America's Blighted Cities, but at What Cost? Local Redevelopment Agencies Can Help, but They Also Keep a Big Shareof the Tax Proceeds


Daniel B. Wood, writer of The Christian Science Monitor, The Christian Science Monitor


When the local redevelopment agency recently announced that it wanted to build a $750 million film studio here, city leaders were overjoyed.

Mildred Weller, however, went for her lawyer.

"They are using public funds to benefit a private studio," says Ms. Weller, who owns a building that may be bulldozed if the plans go through. "The city is using a law that was put there to build public highways, and schools, and courts, and parks - not to condemn my property to turn over to a developer." Like a growing number of California residents, Weller is fighting the rising influence of redevelopment agencies - controversial city agencies that use local property taxes to lure business to depressed areas. And with similar redevelopment efforts under way in 47 other states, California's debate over the agencies' benefits and drawbacks is attracting interest across America. Proponents say redevelopment agencies (RDAs) invigorate blighted cities by revamping downtowns and decaying warehouse districts. Critics counter that once these agencies are created, they take billions of tax dollars and spend them at will, displacing home and business owners without citizen oversight. "More and more states have been catching on to the attractiveness of redevelopment financing," says Richard Dye, a professor of economics at Lake Forest College in Illinois, who studies redevelopment law. "But I think it's fair to say the idea has winners and losers, and the losers - those who are paying the cost with reduced schools, parks, or development somewhere else - are beginning to catch on." California's model Following the California example, RDAs in other states fund themselves through tax-increment financing (TIF). Although written differently in different states, TIFs allow local governments to stimulate economic growth by giving tax and financial incentives to businesses that locate in rundown areas. However, once a project area has been declared, all subsequent increases in property taxes (above a 2 percent annual increase) flow directly to the city's RDA - not to the county or the city - to help it pay off any debts. California was first to use the funding technique in 1952, but it was not used widely elsewhere until the tax reforms of the 1970s. Now nearly every state in the country has similar laws. "TIF programs encourage cities, towns, and counties to initiate developments that might not have otherwise been undertaken," says Joyce Man, a researcher at Indiana University who tracks TIFs. Just five years ago, 35 states had such tax programs; today it's 48. "California has been the model, but unfortunately, there has been little testing of their effectiveness until now." Here in California, four groups have recently examined the state's redevelopment laws and activities in past years. All four call for changes and a need for better oversight. The Public Policy Institute of California, for instance, found that during the 1994-95 fiscal year, the state's 351 RDAs received 8 percent of total property taxes collected statewide - roughly $1.5 billion. Without RDAs, half of that sum would have gone to cities and counties. "That is a staggering amount of money that, without RDAs, would have gone to other public agencies," says Michael Dardia, author of the study. "Some of them have unquestionably done many good things, but what makes this a reason for concern is that what the local redevelopment agencies do may not line up with broader public goals. …

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