Lessons from the California Redevelopment Crisis

17 Mar

Guest author Brad Segal, Progressive Urban Management Associates, blogs about the recent issues facing California’s redevelopment agencies and how to prevent a similar situation here in Colorado.

In a bold stroke this past January, California Governor Jerry Brown announced his intention to help reduce the state’s enormous $25 billion budget deficit by eliminating redevelopment agencies and tax increment financing (TIF) by July. An important tool for downtown revitalization for more than 50 years, TIF has been used in virtually every state throughout the nation. TIF allows for the incremental increase in property tax (and sometimes sales tax) from new investment and value to be reinvested within the geographic boundaries of a designated redevelopment area. The rationale for TIF is that projects and community facilities wouldn’t happen without the upfront investment that TIF allows, therefore the community overall is better off.

California is arguably the most aggressive state to use TIF through its 400 redevelopment agencies. Governor Brown’s analysts found that 12% of the state’s total property tax base is now being consumed by redevelopment and TIF. In a deft political move, the Governor offered a trade‐off: Eliminate TIF and reallocate the property tax proceeds to local schools, police and other services. While a significant amount of TIF is encumbered to pay long term debt, the Governor’s office estimated that more than $2 billion would initially become available and grow over time. Predictably, the proposal has created political turmoil with local governments and redevelopment agencies pitted against powerful public employee unions. And while the drama could take years to fully play out, including anticipated litigation on the legality of the Governor’s plan, early polling found that two‐thirds of California voters backed the Governor.

Regardless of the outcome in California, the redevelopment crisis offers many lessons for downtown advocates, including the following:

  • Measure Results: While a large consortium of local governments, redevelopment agencies, downtown organizations and other civic groups have mobilized to fight the California budget proposal, it appeared that they initially scrambled to make their case. Redevelopment proponents spent much of the first quarter of the year compiling data on projects and tangible impacts. Much like how the National Main Street program keeps track of its program results, statewide redevelopment networks need to make sure they have a current tally of the new jobs, investment and other measures that result from their work.
  • Communicate Results: Redevelopment is a hard concept to explain in a sound bite, and Jerry Brown, a former mayor who understands the nuances of TIF and redevelopment, knew of this vulnerability early in the game. Forget about explaining how this all works–redevelopment proponents need to simplify their message. Something like “jobs, community facilities and local control,” period.
  • Refocus Redevelopment Tools: In California and elsewhere, redevelopment has strayed from its original intent to revitalize blighted areas. For example, the tool has been used to subsidize Wal‐Marts in suburban greenfields, and other communities have designated the majority of their commercial land to capture local tax increment. To preempt the California scenario, downtown advocates can work with state governments to tighten up their redevelopment laws to make sure this powerful tool is focused solely on downtown revitalization and blighted areas.
  • Create Different Tools: In California, the controversy over redevelopment has created an opportunity to create different and perhaps better tools. For example, many states have Downtown Development Authorities (DDA) that combine the advantages of TIF for investment with a business improvement district‐type assessment for operations and marketing. DDA’s should endure better than redevelopment since they are tightly focused on downtowns, leverage investment from both public and private sector partners and generally do not include eminent domain powers that have contributed to redevelopment’s “urban removal” stigma.
  • Diversify Downtown Development Resources: Like any business venture, downtowns would be wise to diversify the funding and array of tools used to promote development. In addition to TIF and redevelopment, options include business improvement districts, community development corporations, parking management districts, events production companies and more. These tools can be combined into one tool box – a holding company model that has emerged in many mature downtown management organizations such as Denver, Seattle and Houston.
  • Importance of Statewide Networks: Statewide advocacy networks for downtowns should be strengthened to maximize the effectiveness of lobbying efforts in increasingly tense state budget battles. Urban areas are often at a disadvantage in state capitals, outnumbered by suburban and rural interests. Through statewide downtown networks, large cities can join with suburban town centers and rural Main Street partners to advocate with a unified sense of purpose.

Brad Segal is president of Progressive Urban Management Associates, a Denver‐based downtown and community development consulting firm. Follow Brad’s blog entries at www.pumaworldhq.com or contact the author directly at brad@pumaworldhq.com.

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