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I am not an expert about the Orange County bankruptcy or the more recent failures of health-care providers, but I have first-hand experience in another horror story; the scheme of diverting property taxes from schools, cities and counties into the pockets of wealthy investors for developments supposedly to replace loosely-defined "blight."
In the aftermath of Proposition 13, cities have used redevelopment law to subsidize retail construction in the hope that sales tax receipts would offset declines in property-tax revenue. Voter approval is not required. More than $41 billion in redevelopment debt and interest have quietly accumulated in California over the past 40 years, roughly doubling every 15 years.
At the present rate, city-formed redevelopment agencies would consume 64 percent of all statewide property taxes by the year 2040. The state and most of the 359 cities which employ redevelopment will go bankrupt first. The debt balloons because most development projects do not generate enough revenue to offset the bonds, as proved in a recent study by the Public Policy Institute of California.
But in the past two years the combined effort of dedicated legislators, citizens and journalists has raised awareness and concern about redevelopment abuse. Leading the way are Assemblyman Tom McClintock of Simi Valley, syndicated columnist Dan Walters from Sacramento, City Councilman Chris Norby of Fullerton, Brad Morton of Mission Viejo Committee for Integrity in Government and Jean Heinl, Director of Californians United for Redevelopment Education (C.U.R.E.)
As testimony to our effectiveness, redevelopment supporters have formed a new lobbying group, the Institute for a Better California (IBC). The California Redevelopment Assn. (CRA), composed of city officials and attorneys, consultants and financial advisers who reap millions of profits from bond issues, launched the new group March 17 at a Palm Springs conference. The CRA's February Redevelopment Journal suggests the new group will downplay the term "redevelopment" and conduct a high-powered, publicly-financed campaign to sell the public on "the benefits of public-private partnerships."
The Journal also reveals how redevelopment is being partially replaced by an even more fearsome monster, the joint-powers authority which enables two or more government bodies to issue bonds without voter approval for private projects, financed through complex leasing arrangements in schemes often publicized as "public-private partnerships."
The Journal cited questions raised in the press and in public about "corporate welfare," a term we redevelopment opponents have used successfully to the point it is now acknowledged publicly by the other side. It claims that redevelopment opponents have focused on "rare instances of misuse of public funds, or of public powers." (Remember folks, that's $41 billion worth of rare instances of abuse.)
While redevelopment focuses on property-tax diversion for commercial projects, a 1998 California Supreme Court decision upheld the broader financial power and scope of joint-powers authorities, dismissing three Libertarians' challenge to the sale of bonds to finance the $205 million expansion of the San Diego Convention Center.
Joint powers authorities are cropping up more frequently. A proposed Triple A baseball stadium in West Sacramento, for example, would be created through a city-county financing authority. An $85 million bonded indebtedness to subsidize the Mission Viejo Mall renovation is being financed through a scheme in which the same five people are members of the city council, redevelopment agency and joint powers financing authority.
The time is now to seek a state law or initiative prohibiting government from accumulating redevelopment debt without 2/3 voter approval.
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