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The California Community Redevelopment Act was implemented in 1945 to address urban decay. The post-war era of “urban renewal” was marked by the provisions of the Federal Housing Act of 1949. Subsequently, federal grants to local governments dominated redevelopment. Redevelopment was about slum-clearance.
In 1951, the Community Redevelopment Act was codified and became the Community Redevelopment Law. The concept of tax-increment financing (TIF) was introduced. With the passage of Prop. 13 in 1978, TIF became a major financing tool for most cities. The number of agencies and the size of project areas increased substantially, particularly since cities were now able to generate new revenue without raising taxes. TIF reallocates a portion of tax revenues normally flowing to other overlapping jurisdictions in favor of a city or a city-controlled redevelopment agency. Typically, a city targets a blighted area, “freezes” the baseline of its property taxes, issues a bond to pay for new infrastructure, and waits for tax-spend incentives to attract private developers. It is armed by both the carrot and the stick — with the carrot as the TIF money and the stick as eminent domain. Since TIF bonds do not have the same restrictions as general obligations bonds, many cities now favor TIF. As private investment builds the tax base, the additional money is used to pay off debt or buy new improvements.
TIF’s popularity soared during the prosperous 1980s, but in the 1990s, it ran into trouble. Cities located next to one another started bidding wars while subsidizing retail stores and car dealerships to attract sales tax. Concerns arose over the possibility that TIF didn’t really generate new development, but merely was able to shift facilities from one community to another. It was used not for redevelopment in urban areas, but in greenfields. School districts were angered by the diversion of property taxes into redevelopment.
Since they are a creation of state legislation, redevelopment agencies are governed by state law — local governments don’t have much leverage in their processes. This is why most city councils jealously guard the functioning of the agencies by doubling up as board members. Major legislative reform occurred in 1993 with the adoption of AB 1290, which modified the definition of “blight,” required that an annual report be submitted to the state auditor, imposed new time limits, and contained the rush for sales tax generators. More recent reforms have tightened the definition of blight and changed term limits on redevelopment plans.
In San Diego, the City Council first activated the Redevelopment Agency in 1958. It is administered by three entities: the city’s own redevelopment division, which administers 17 project areas across the city from Grantville to Barrio Logan, Centre City Development Corp., which administers downtown, and Southeastern Economic Development Corp., which administers four areas located southeast between Interstate 94 and Interstate 5.
CCDC and SEDC have powers that go far beyond performing redevelopment functions. They actually perform city planning and permit functions, and are land-use authorities. For example, to build anything downtown, you need a CCDC permit, which is granted by the president of CCDC (formerly Nancy Graham). You need that permit even if you don’t need to use redevelopment tools like TIF or eminent domain. This is unprecedented authority, and is quite a different process than if a project were to be proposed in an area outside of downtown or southeastern San Diego.
This is why they can act as if the rest of the city did not matter.