June 18, 2008 > Redevelopment - boom or bust?
Redevelopment - boom or bust?
This is the tenth 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 X: Eminent Domain for Private Gain
"Nor shall private property be taken for public use without just compensation." Thus the Bill of Rights specifies the only purpose for eminent domain: "public use."
Since then, government has used eminent domain to acquire land for public use. Roads, schools, parks, military bases, and police stations were essential public facilities that took priority over individual property rights. Private real estate transactions, on the other hand, were always voluntary agreements between individuals.
Redevelopment has changed all that.
Under redevelopment, "public use" now includes privately owned shopping centers, auto malls and movie theaters. "Public use" is now anything a favored developer wants to do with another individual's land. Eminent domain is used to effect what once were purely private transactions.
In a typical redevelopment project, a developer is given an "exclusive negotiating agreement," or the sole right to develop property still owned by others. Once such an agreement is made, small property owners are pressured to sell to the redevelopment agency, which acquires the land on behalf of the developer. If refused, the agency holds a public hearing to determine "public need and necessity" to impose eminent domain. By law, this must be an impartial hearing. In reality, the agency has already committed itself to acquire the property for the developer, so the outcome is certain.
Whole areas of cities have been acquired, demolished and handed over to developers to recreate in their own image. Historic buildings, local businesses and unique neighborhoods are replaced by generic developments devoid of the special flavor that once gave communities their identities.
Typical is the experience of Anaheim. Having demolished its historic central business district in the mid-1970s, the redevelopment agency recently hired consultants to help restore the identity of a downtown that no longer exists. "The complete eradication of the traditional business district has left nothing for the community to relate to as their downtown," admits an internal city memo.
"Redevelopment means the bulldozers are coming," said Jack Kyser, chief economist for the Los Angeles County Economic Development Corp., (January 30, 2000, L.A. Times). "A lot of time you displace business. Once you do that it's tough to replace them."
Small property owners have little chance to participate in redevelopment projects. Consultants and redevelopment planners prefer to work with one huge parcel under a single ownership. Entrepreneurs and homeowners just get in the way.
Historically black communities are particularly hard hit by displacement. In her pioneering book Root Shock (2004) Dr. Mindy Fullilove traces the cumulatively devastating impact on African-Americans of urban redevelopment schemes from the 1940's to the present. She writes:
Sometimes I just stand here and the tears come down, thinking about what used to be. What used to be: houses not buildings, neon not vacant lots, neighborhood not emptiness. In every city, where I was studying the effects of urban renewal, I asked people, "What was it like before urban renewal."
Typically, it is small family-owned businesses that are targeted for eminent domain. The Veltri family ran a popular Italian restaurant for years in downtown Brea. Forcibly acquired and demolished by the agency, a Yoshinoya Beef Bowl now stands in its place. Across the street, the Vega family saw its service station condemned and demolished to make way for a brew-pub.
For 40 years, family-owned Belisle's stood at the corner of Harbor and Chapman, famed for generous portions of homestyle cooking and 24-hour service. The Garden Grove Redevelopment Agency then seized the property for a developer who built an Outback Steakhouse. Belisle's was demolished and never found another location.
Ralph Cato saw his Fresno home condemned to provide land for a Roxford Foods turkey processing plant, which went bankrupt a few years later. Cato never got his house back.
Churches, too, are targets of eminent domain. The Cypress Redevelopment Agency condemned Cottonwood Christian Center's property for a new Costco.
Even public health facilities are declared blighted for private party eminent domain seizures. In 2003, the Santa Ana Redevelopment Agency condemned an Orange County Health Facility housing over 200 restaurant inspectors. The property was turned over to a BMW dealership. The agency's logic: public health is blight; selling more German cars is economic development.
The CRA touts the aggressive use of eminent domain in its monthly Redevelopment Journal. A September 1999 article, with the ironic headline "Eminent Domain Helps Citizens," boasts "Wells Fargo Bank was one of the existing tenants of the Los Altos Shopping Center (Long Beach) helped by eminent domain." Just how using eminent domain to benefit a multi-billion-dollar bank "helps citizens" is not explained.
The same article details how eminent domain was used in North Hollywood to forcibly acquire a "brake shop, a gas station and small apartment building" to make way for a Carl's Jr. and an El Pollo Loco. Why is fast food more of a "public use" than housing or brake safety?
Redevelopment staff attend professional seminars promoting the ever-expanding use of eminent domain. Costco's Vice President for Legal Affairs Joel Benoliel writes "without the power of eminent domain, there would be little urban renewal in our cities." That so-called "urban renewal" schemes have proven such failures only shows how destructive property seizures have been.
Apparently, Costco's legal spokesman sees respect for property rights as an impediment to economic progress. Of course, it is never giant corporate retailers who are subject to eminent domain.
That the success of a big city's renewal depends on the number of big-box retail outlets is, indeed, a frightening standard.
The looming threat of eminent domain was made even more immediate by the 2005 Kelo vs. New London decision, in which the U.S. Supreme Court ruled any government can seize any property for any reason it sees fit at the time. In its narrow 5-4 edict, the court removed all federal property protections.
Public outrage has been swift and overwhelming. Congress passed a resolution opposing the decision. Legislatures in 38 have hurried to enact their own protections, even as cities see the ruling as a blank check for massive land seizures. The City of Riviera Beach, Florida, is proceeding to condemn over 2,000 homes to make way for a private boat marina development, displacing 6,000 largely low income/minority residents. Both liberal and conservative commentators on Fox's Hannity & Colmes Show are in rare agreement that such land seizures must end.
The BB&T Corporation, the nation's ninth largest financial institution headquartered in Winston-Salem, announced it would not loan money to developers on property seized by eminent domain.
Here in California, newspapers as politically diverse as the Orange County Register and San Francisco Chronicle reported reader sentiment running 9 - 1 against Kelo. Strong bipartisan outrage includes both State Senator Tom McClintock and Congresswoman Maxine Waters.
Anaheim is the largest of many cities to pass a charter amendment banning third-party eminent domain in the city. Both the state Republican and Democratic parties took positions against eminent domain abuse.
Packed hearings have been held throughout the state gathering huge crowds calling for statewide protections against property seizures.
Many legislative proposals emerged, some strong, others weak. AB590 by Mimi Walters, Assemblywoman (R-Laguna Niguel) sought to limit eminent domain to public use, while AB1162 by Assemblyman Gene Mullin (D-South San Francisco) sought a moratorium on the takings of owner-occupied homes, but would leave renters and business owners unprotected. Neither passed. Voters failed to pass propositions on the February and June 2008 ballots to ban Kelo type eminent domain abuse in California.
The power to take property from one private owner and give it to another private owner lies at the heart of the coercion that makes redevelopment so dangerous.