Over the past month, a powerful special-interest lobby has carried out an organized public relations campaign designed to reframe the reduction of its billion-dollar public subsidy at a time of unprecedented budgetary stress as an illegitimate “state money grab.” Usually, enterprising journalists would expose such efforts as an attempt by a small group of powerful actors to subvert California’s public interest. This time, however, the media have been a willing accomplice.
In the past week, both The San Diego Union-Tribune and voiceofsandiego.org have published stories about the potential consequences of the recently adopted state budget for local redevelopment agencies. These stories, along with other press coverage across the state, have further fueled false myths about California’s redevelopment regime, undermining an important and necessary public policy debate and doing a serious disservice to the voters and taxpayers of the state.
First, it is important to understand the relationship between local governments — cities and counties — and redevelopment agencies. San Diego’s Redevelopment Agency is not, in fact, a part of the city of San Diego. Instead, it is a separate government entity, governed by its own set of laws and with its own set of interests and responsibilities. In some instances, for example with efforts to alleviate blight in local neighborhoods, the interests of the city and of the Redevelopment Agency coincide. Other times, however, the interests of the two governments are in direct conflict: A dollar more for the Redevelopment Agency often means a dollar less going into the city’s general fund.
(Some of the confusion is certainly due to the fact that the City Council plays a role in governing both entities, in its capacity as the legislative body for the city and as the board of directors for the Redevelopment Agency.)
Redevelopment agencies have worked hard to create a perception that they are the rightful custodians of money taken by the state. The truth, however, is more complicated and must be considered in the context of both the theory and actual practice of redevelopment.
In theory, redevelopment works like this: A redevelopment agency sells public bonds to fund improvements in downtrodden neighborhoods. These improvements turn around the local economy, driving up property prices. Higher property prices lead to higher property tax revenues. These new property tax dollars go to the redevelopment agency to pay off the bonds.
In practice, however, redevelopment activities are not the only thing that has historically increased property tax revenues in redevelopment areas. A significant portion of this increase — as much as 50 percent, according to an influential analysis by the Public Policy Institute of California — has been the result of natural appreciation in the housing market.
If redevelopment agencies did not exist, a significant portion of the money that currently funds their work would instead go back to cities, counties, and local school districts. Instead, all of these governments end up subsidizing redevelopment. For the state, the effect is even larger, because it must reimburse local school districts for much of the money that gets diverted to redevelopment agencies, a subsidy that totals billions of dollars every year.
It may surely be the case that the citizens of California prefer to subsidize redevelopment. Indeed, some redevelopment activities result in the improvement of local quality of life and in the creation of affordable housing, which most people would agree are important public goals. However, redevelopment dollars also often go toward more questionable projects, like the construction of convention centers and publicly financed sports stadiums and subsidies to well-heeled developers.
The problem is that Californians have never had an honest debate about whether public dollars should be diverted from other government programs to subsidize redevelopment. Instead, the subsidy has emerged unintentionally, the result of the assumption that all new property tax dollars in redevelopment areas are the product of redevelopment activities. It’s an assumption that we now know is wrong.
Finally, redevelopment proponents have worked hard to suggest that this year’s revenue diversions are the result of broken politics-as-usual in Sacramento. Brian Trotier, Southeastern Economic Development Corp’s head, told the voiceofsandiego.org: “It’s a sad day when Sacramento decides to shift their problems to the poor.”
Yet Sacramento’s problems are the same problems that are being faced by governments across the country, including San Diego. They are the product of falling revenues brought about by one of the largest economic collapses in our country’s history. To deal with this historic calamity, state legislators have cut the most basic and essential public services, such as health care for our neediest and most vulnerable citizens, state support for AIDS and breast cancer treatment, and funding for our schools. To avoid even deeper cuts, they have ordered redevelopment agencies to help pay for the cost of education for students living in their redevelopment areas.
All of these cuts are lamentable, but they are also unavoidable. By perpetuating the popular belief that the state can deal with its budget crisis without making cuts to public programs, including redevelopment, or taking equally unpopular actions such as raising taxes, redevelopment officials make finding a permanent solution to the state’s problems even harder.
Restoring funding for redevelopment, as various lawsuits hope to do, may postpone the state’s final day of reckoning, but they will make that final reckoning all the more painful.
Vladimir Kogan is a doctoral student at UCSD’s Department of Political Science and a former voiceofsandiego.org reporter. He is a co-author of a forthcoming book about San Diego politics and its pension crisis. His e-mail address is vkogan@ucsd.edu.