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Answers to 10 Common Questions about Redevelopment |
Q. Who governs a redevelopment agency? How do citizens control it?
A. Elected officials, directly responsible to their voters, oversee the redevelopment activities within their jurisdiction. The elected city council governs the redevelopment agency in all but three redevelopment agencies that are located within cities. The three exceptions (Long Beach, Santa Rosa and San Francisco) are governed by commissions whose members are appointed by the mayor and/or city council. In all counties, the board of supervisors governs the agency. Five closed military bases are governed by elected officials from affected cities and counties on a joint commission basis. When citizens support or disapprove of a project or program of the redevelopment agency, they have the right to voice their opinions at the regular public meetings of these responsible elected officials and the right to cast their ballot for the person they believe will best represent their interests. The voters are the ultimate "boss" of the redevelopment agency.
Q. Redevelopment agencies are created to eliminate blight - have they?
A. In West Sacramento some outstanding examples of blight removal are the Margaret McDowell Senior Housing development, which replaced a dilapidated and crime-ridden hotel, and Raley Field, which put a state-of-the-art stadium where blighted, underutilized warehouses had stood for years.
State-wide there are also numerous examples of redevelopment agencies successfully carrying out their responsibility to revitalize run-down neighborhoods and business districts suffering from such blighting conditions as decaying streets and sidewalks, crumbling buildings, derelicts, prostitution, high crime and suffering property values. A few well-known examples of revitalization are:
- Old Pasadena - This area has been changed from a marginal business district into a thriving downtown with wonderful shops, restaurants and entertainment due to the joint efforts of the redevelopment agency and private property owners and investors.
- Downtown San Diego - Horton Plaza, the Gas Lamp District and major high-rise office buildings attest to the effectiveness of redevelopment. Downtown San Diego was mostly a dangerous slum - pockmarked with tattoo parlors, cheap wine bars, adult bookstores and deteriorating buildings. San Diego represents an intelligent redevelopment effort that combined the efforts of the city with the investments by private individuals and property owners to completely change the economic and social climate to a world-famous place enjoyed by residents and visitors alike.
- Santa Monica 3rd Street Promenade - Once an area with stagnant property values and high number of vacant buildings, the redevelopment agency assisted private developers and property owners in building a downtown shopping center connected to adjoining streets where fine shops and restaurants host thousands of visitors each week.
- Downtown Monterey and Cannery Row - Many people do not remember the red light district that was once downtown Monterey. Cannery Row was once a street full of ugly, decaying industrial buildings. A redevelopment agency was created to address these serious problems. The agency's efforts to attract private investment bore fruit in the form of new hotels, renovated buildings that now house restaurants and stores - as well as the famous Monterey Bay Aquarium. Millions of people enjoy the beauty and ambiance of this historic seaside community because of the redevelopment efforts guided by the city.
- Downtown San Jose - A once vibrant downtown suffered from declining property values, increased crime and social problems as businesses and residents fled the blighted downtown area. The redevelopment agency was formed to reverse this trend. The agency worked closely with the private sector to rebuild the infrastructure and make the downtown attractive to private investors, businesses and residents. This turnaround effort has been highly successful and very popular with San Jose citizens. Projects include the Children's Museum, the Fairmont Hotel, the downtown San Jose Sharks Arena, the headquarters of Adobe and many other notable projects. These projects would not have located in the downtown were it not for the active involvement of the redevelopment agency.
Q. Doesn't the redevelopment agency take money away from the schools and county?
A. No. The formation of a redevelopment agency does not reduce the property tax revenues of either the schools or the county. The areas where a redevelopment project is formed usually have stagnant or declining property values because of blighted conditions. When the redevelopment project area is formed, a portion of the property tax revenue created by an increase in property values goes to the redevelopment agency to pay for the cost of improving the area. In fact, because of the method used by the state government to balance the revenue of various school districts, it is common for school districts to actually increase their revenue when they are included within a redevelopment area - particularly school construction and renovation funds.
Q. Does a redevelopment agency increase the amount of property taxes paid by property owners in the new project area?
A. No. A redevelopment agency has no power to levy a property tax or any other tax. All property within the redevelopment project area is subject to the protections of Proposition 13. The same rules apply to property located inside or outside a redevelopment area. Only if the property owner sells the property or constructs improvements that increase the value of the property, will the amount of property taxes go up.
Q. Why do redevelopment agencies have so much debt?
A. When the voters of the state of California approved a constitutional amendment in the early 1950s, it added a requirement that a redevelopment agency must have debt in order to justify receipt of property tax revenue. This is an unusual and rather arcane requirement. In addition, debt is broadly defined in state law to mean all of the obligations that are incurred by a redevelopment agency - whether short term or long term. Annually, each redevelopment agency prepares a statement listing all of its current and future obligations, including not only long term bonds, but also contracts to pay rent, pay employees or to buy land. These are all considered "debt" of the agency. No other form of government is required to operate under mandatory debt.
Q. It has been stated that by 2025, redevelopment agencies will "consume 68 percent of all statewide property taxes…"
A. Not true. The facts are:
- Beginning in 1976, redevelopment agencies have been required to pass-through an ever-increasing amount of property tax revenue to other taxing entities such as schools, community colleges, counties and special districts.
- Many redevelopment project areas will reach their time limits and phase out of existence in the next 10 to 20 years.
- The vast majority of redevelopment project areas will reach the cap on the maximum amount of property tax revenue that can be received. This recently occurred in the largest project area in the state.
- Since the reforms enacted into law in 1993, the number of redevelopment project areas formed has slowed dramatically. The majority of new project areas have been in areas damaged by earthquakes or because of closing military bases that contain serious infrastructure deterioration.
Q. Aren't redevelopment agencies just used to chase big businesses that generate large sales tax revenues for cities?
A. It is common for redevelopment agencies to work hard to rebuild retail areas that are suffering decline because of fierce competition from outlying shopping centers, changes in how goods are sold and consolidation of stores through acquisitions or mergers. Attracting new stores into blighted areas is often difficult and expensive.
- Because of severe limitations on raising taxes have been imposed upon local city council, cities often try to increase their budget for police, fire and other city services by attracting retail businesses that generate large amounts of sales tax. This generates more money without raising the tax rate for local voters. At times this has led officials to use redevelopment powers to assist "new" development rather than "re" development. Restrictions on the ability of redevelopment agencies were enacted by the state legislature in 1993 to curtail this practice.
- Sometimes there is competition between two cities and their respective redevelopment agencies when a retail business is planning to enter their market area, but has not yet determined the specific location. Each agency will put its best foot forward to attract the retailer to locate in their redevelopment area in order to both revitalize the area and produce added sales tax for the city. Although this is an unpleasant reality, it is not likely to end until there are significant changes in how cities are able to finance their services. There are frequent discussions about changing the current tax system. When the tax system changes, the use of the redevelopment process in competing for tax dollars will also change.
Q. Don't redevelopment agencies just take private property from "the little guy" and sell to big developers?
A. Well over 95 percent of the time redevelopment agencies buy property from willing sellers. The use of condemnation powers is always controversial and difficult - even when the property being condemned is in poor condition. It is expensive to buy property and even more so when eminent domain procedures are used. Numerous redevelopment agencies have restricted their ability to take private property. Perhaps 25 percent of redevelopment agencies have no powers of condemnation. These agencies will buy land, but will never take it from an unwilling seller. The actual amount of property purchased through eminent domain is quite small. There are times when it is essential to selectively use this power - with full compensation to the property owner - in order to benefit the entire community. There are more legal restrictions on how and when eminent domain powers are used by redevelopment agencies than are placed upon the state, county, city or school district.
Q. Upon what do redevelopment agencies spend their money?
A. The West Sacramento Redevelopment Agency has spent its redevelopment funds on new projects such as the Ziggurat, Raley Field and the Riverwalk Park and to finance the operations of the Redevelopment Agency itself. Statewide, approximately 2/3 of redevelopment funds are spent on improving streets, streetlights, landscaping, sidewalks, parking lots, sewer and water systems and other public infrastructure. The balance of the funds are used for housing rehabilitation or construction, land acquisition, development assistance, administration and operational expenses. Every expenditure by the agency must benefit the redevelopment project area that generates the funding. Redevelopment funds cannot be used to subsidize normal city services such as police services, fire protection or maintenance services. Because it is common for redevelopment agencies to sell bonds in order to generate sufficient funds to pay for large construction projects, a large portion of the tax revenues are spent to repay the principal and interest on the bonds.
Q. A portion of the redevelopment funds must be spent on affordable housing - does this mean that massive public housing will be built in local neighborhoods?
A. Redevelopment agencies are not public housing authorities. The redevelopment agency cannot own and operate a "housing project". Rather, redevelopment agencies work with private property owners, housing developers (both for-profit and not-for-profit) and financial institutions in a wide variety of programs to assist in making a certain number of homes affordable for families with modest incomes. In West Sacramento, this function is now handled by the Grants and Community Investment Department.
State-wide, redevelopment agencies use many different approaches to facilitating the development of affordable housing. One agency may assist those who have never owned a home buy one by providing a low interest rate loan. Another agency will work with a developer to buy and renovate an apartment building that has been poorly managed. Through physical improvements and good management a neighborhood eyesore becomes an attractive asset. In return, the new owner will set aside an agreed upon number of units that will be rented below the market level to people with lower incomes. A third agency will work with the owner of an abandoned or underutilized commercial building to change the use by constructing new single-family dwelling units. There are many approaches taken by redevelopment agency officials to assist housing affordability without government ownership. Sitting as the Redevelopment Agency Board the City Council determines which approach is most appropriate in West Sacramento.
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