03/28/2024

Dan Walters: Should California revive redevelopment?

California’s version of redevelopment hinged on the novel notion of “tax increment financing.” Local governments, cities mostly, could deem neighborhoods as “blighted,” borrow money through bonds to improve housing and other services, and repay the loans from the property tax “increments” that those improvements generated.

For decades, those powers were gingerly used, although there were complaints that redevelopment projects disrupted ethnic neighborhoods and were architecturally and culturally sterile.

Everything changed when voters passed Proposition 13 in 1978, imposing tight limits on property taxes collected by schools and local governments and thus making the distribution of revenues a zero-sum game.
Redevelopment morphed into a way for cities to keep more of the property tax pot, so they expanded designated improvement zones, often stretching the meaning of “blight” to the breaking point, used bonds to subsidize hotels, auto malls and other commercial projects that would generate sales tax revenues, and siphoned off some revenue for general city services.

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