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