San Lorenzo Express News

How Does Redevelopment Work?

MARCH 17, 2006

Part Three of a Series

California Redevelopment Law is intended to overcome physical and economic "blight" that exists because of lack of private investment. But what is "blight"? The answer very much depends on who is answering.

Government-managed redevelopment in California is legally, politically, and financially complex. The following provides only the broadest introduction to the subject, focusing on the background of California redevelopment law, sources of funds, and how funds are spent.

Whose Money Is Being Used?

Government-managed redevelopment began in California in 1945 with the Community Redevelopment Act, which was patterned after federal laws adopted in the 1930s Depression to build housing. Funds for redevelopment in the early years were largely from federal programs to promote construction of housing.

In 1952 California voters approved a state constitutional amendment that allows public financing of new construction based on "tax increment". Tax increment is the difference in the amount of property taxes owed when property value increases. (See Review of Property Taxes.)

The Community Redevelopment Act was rewritten as the California Redevelopment Law (Health and Safety Code beginning with section 33000) to take advantage of tax increment financing to jump start investment in older areas that had deteriorated.

When a redevelopment district is formed, tax increment in the district flows to the redevelopment agency rather than the city or county that has jurisdiction. The property tax values on the tax roll just prior to the formation of the redevelopment district become the "base year". As property values in the project area grow, the values in excess of the base year are the incremental assessed value. The tax revenues derived from this incremental assessed value is tax increment revenue.

For example, the base year for the local Eden Area Redevelopment District is 2000. Since then, any increases in property taxes within the district flow to the Alameda County Redevelopment Agency for spending within the district. In its first five years the Eden RD collected more than $20 million.

Why Redevelopment?

The county board of supervisors has the power to create a specific district for redevelopment, as it did in 2000 when it created the Eden Area Redevelopment District. To do so, the board must first establish certain "findings."

Most important, a redevelopment district can be formed only where "adverse physical and economic conditions", or "blight", are present. Examples of physical conditions are unsafe buildings; aging or poorly maintained buildings; incompatible uses in neighboring areas or parcels; flooding problems; or small lots that do not attract new development.

Examples of economic conditions include high vacancy or turnover rate in business buildings; high crime rate; lack of neighborhood-serving business; overcrowding; or "underutilized" land or buildings.

Before a redevelopment district can be formed, there must be a preliminary plan to address the blight documented in the findings. Once a district is formed, that plan must be reviewed and revised every five years.

A redevelopment agency has the power of "eminent domain" -- the power to forceably purchase land for redevelopment -- only if the power is expressly given to the governing body when a district is formed.

Critics of government-managed redevelopment in California have focused on the interpretation of "blight" throughout the state. Several redevelopment districts have been formed in prosperous areas, where it is claimed that less desirable development in surrounding areas has created "blight". Thus conditions in surrounding areas become the legal justification for use of redevelopment law to redevelop an area that itself is doing quite well (but not in the fashion that redevelopers prefer).

The concept of "blight" is so flexible that virtually any set of conditions qualify. Blight, critics say, is in the eye of the beholder. And if the beholders are a majority of a county board of supervisors or city council, they have the power to remove the "blight" and start rebuilding.

Who Decides How to Spend Redevelopment Dollars?

The short answer is, whoever created the redevelopment district. Locally, that means the Alameda County Board of Supervisors.

The redevelopment agency and district are legally separate units of county government. In Alameda County the board of supervisors has chosen to govern redevelopment districts directly, rather than appoint a governing board. Thus, whenever the board of supervisors makes decisions about spending redevelopment district funds, it must follow a legal fiction and "convene" as the redevelopment agency board.

Thus, the individuals who have the last say on how to spend redevelopment dollars are the same individuals subject to all the political influences that affect them as county supervisors.

The redevelopment agency formulates specific projects for a redevelopment district based on the broad objectives of the district's preliminary plan and, in Alameda County, the advice of local "citizens advisory committees". An agency is usually but not always a separate staff. The Alameda County Redevelopment Agency has its own staff but operates under the county's Community Development Agency. The county's redevelopment agency is not the same as the county planning department.

The redevelopment agency, unlike the county planning department, is actively engaged in promoting development and recruiting developers to accomplish redevelopment goals. The agency has several powers:

A major criticism of redevelopment agencies is that they have the power to act independently of the public planning processes that otherwise must be followed in developing public land use policy. Redevelopment agencies have a separate legal authority, unique powers to become active partners in property development, and control over large amounts of investment funds. Since agency projects and spending are decided by politicians -- locally, the Alameda County Board of Supervisors -- critics say that redevelopment power gives politicians a seductive opportunity to build personal "monuments" or to direct major projects to favored developers.

Other articles in the series:

Eden Area Redevelopment District Money is Growing (First in the series)
Local Communities Spend Redevelopment Money in Different Ways (Second in the series)

For more information see:

Alameda County Redevelopment Agency
California Redevelopment Association
Municipal Officials for Redevelopment Reform