In the Wall Street Journal, Steven Greenhut writes about California’s redevelopment agencies, which are very similar to tax increment financing districts (TIF) in Kansas. California governor Jerry Brown has proposed ending these agencies. Local government officials, who are beneficiaries of the agencies, are pushing back. A controller’s report in California finds that the agencies are a “source of waste and governmental abuse — not a generator of jobs and economic growth.” This is consistent with other economic research on TIF districts.
Greenhut correctly diagnosis the problem with these agencies or districts: “Redevelopment has attracted the Brown administration’s attention for an obvious reason: The more aggressive cities have become in using this ‘tool,’ the more they divert tax dollars from traditional public services like schools, fire-fighting and police services.” The use of the term “tool” evokes the rhetoric of Wichita city council members, who are wishing for more “tools in the toolbox.”
As part of its approval of the Goody Clancy plan for the revitalization of downtown Wichita, Susan Estes asked the city council to formally disavow the use of eminent domain for the purposes of transferring property from one person to another. While the city says it does not intend to use the power of eminent domain for this purpose, the reluctance of the council to add this provision to the plan means that it is held in reserve. Mayor Carl Brewer believes it is “one of the tools that is available to the city.” And when perceived to be needed, the power of eminent domain is usually too powerful to resist.
TIF district money is expected to be a key component of the public financing contribution to downtown Wichita redevelopment.
Greenhut concludes: “While economic development and local control are crucial issues, it’s hard to understand why any Republican would believe that a regime of government planning and subsidy is the best way to achieve those goals. They should be standing up against the abuses of property rights and the fiscal irresponsibility inherent in the redevelopment process and championing market-based alternatives to urban improvement — even if it means defending a proposal from a Democratic governor they often disagree with.” Or here in Wichita, a liberal Democratic mayor who champions the centralized government planning of the Wichita Downtown Development Corporation.
Greenhut’s most recent book is Plunder: How Public Employee Unions are Raiding Treasuries, Controlling Our Lives and Bankrupting the Nation.
Jerry Brown’s Good Deed Gets Punished
California’s governor wants to close his state’s redevelopment agencies, which abuse property rights and breed dependency among city governments.
Forced to choose between funding public schools and subsidizing ritzy golf courses, many California officials prefer the latter. That’s become painfully clear in the past few weeks as Golden State politicians have fiercely opposed Gov. Jerry Brown’s plan to shave $1.7 billion from the state’s budget deficit by shuttering California’s 400 redevelopment agencies.
The roots of this story go back to 1945, when the California legislature allowed cities and counties to form these redevelopment agencies. Their purpose, at least in theory, was to fight urban blight. Once public officials deem an area blighted, redevelopment agencies can use eminent domain to clear old properties and sell bonds to pay for improvements.
To pay off the bonds, the agencies gobble up any subsequent increase in tax revenue — what the state calls the “tax increment.” In addition, a portion of the sales taxes generated by the new retail and commercial centers go into city, not state, coffers. That’s the main reason redevelopment agencies are popular among local politicians, Republican and Democratic alike. (Plus, they allow pols to reward favored corporations and developers.)