May 28, 2008 > Redevelopment - boom or bust?
Redevelopment - boom or bust?
This is the seventh chapter reprinted with permission from Redevelopment: The Unknown Government, A Report to the People of California published by Municipal Officials for Redevelopment Reform (MORR). Ninth Edition, September 2007.
Redevelopment agencies are debt machines that have amassed nearly $81 billion in statewide bonded indebtedness.
By law, a redevelopment agency can receive property taxes only after it has first incurred debt. Property tax increment revenues may only be used to pay off outstanding debt. Debts may be in the form of bonds, accounts payable to developers or reimbursements to cities for operating expenses.
Part VII: Follow the Money
Redevelopment backers claim they are eliminating blight and cleaning up urban California, but the money trail tells a very different tale.
Just under $6 billion in public money was spent by all California redevelopment agencies (Fiscal Year 2005-06), according to the most recent State Controller's Report. This includes both funds from property taxes and bond sale proceeds.
By far the largest expenditure (34.6%) by redevelopment agencies is the repayment of bonds. Just over $2 billion was paid to bondholders in Fiscal Year 2005-06. Of that, more than half (56%) went to pay interest. This is a very high price to pay for very marginal results. It is a powerful incentive for bond brokers to keep selling debt to redevelopment agencies.
While redevelopment apologists claim to be "rebuilding" our cities, barely 22% went for actual real estate development and another 7% for land acquisition, much of it still vacant.
Significantly, $721 million - 12% - was spent on administration, most of it for redevelopment staff salaries. This provides a lucrative bureaucratic base that redevelopment staffers seek to preserve and expand.
By law, 20% of all redevelopment funds must be spent on low cost housing, but just over 2% is actually spent on housing subsidies. Redevelopment agencies would much rather attract new retailers than residents.
The California Redevelopment Association has tried to disavow these figures and has attacked this publication (Redevelopment: The Unknown Government) by name for providing them. But the numbers in the 2005-06 Controller's Report were all submitted by the agencies themselves.
They are testimony to the waste and ineffectiveness of redevelopment. They are grim evidence of who really profits from it.
Definitely not the people of California.