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California League of Cities in a TIF Over Redevelopment Funds

In a recent City Advocate Weekly, the League of California Cities is expressing alarm and dismay over Sacramento’s proposal to appropriate $350 million each year for the current and the next two years from redevelopment agency subsidies for developers. Readers may remember that the California Redevelopment Association recently sued the State of California to take back $350 million in developer subsidies from State of California Schools.

Astute readers will remember that the California Redevelopment Association – a Sacramento lobby group funded by developers, builders and contractors, who benefit from redevelopment projects – sued the State of California over a plan for the Fiscal Year 2008-2009 to borrow $350 million from the 400+ redevelopment agencies across the state to pay for K-12 funding, via the Educational Revenue Augmentation Fund (ERAF.)

Recognizing that developer subsidies, through local redevelopment agencies, are garnering an ever increasing share of property taxes (as of last year, over $4 trillion worth of property in California had their ‘tax increment’ diverted to local redevelopment agencies for developer subsidies), California state legislators are expected over the next several days to consider a redevelopment budget trailer that would divert over $1 billion from subsides to the state budget. The California Redevelopment Association – Alameda Redevelopment Services Director Leslie Little is on the Board of Directors – is joining forces with the League of California Cities to fight back. The League issued this statement in their weekly update:

Redevelopment Funds at Risk for Three-Year Hit

Even though the Sacramento Superior Court declared unconstitutional the seizure of $350 million in redevelopment funds for the FY 2008-09 budget, the Conference Committee adopted trailer bill language from DOF that attempts to work around the decision. The committee also approved taking an additional $350 million in both FY 2009-10 and FY 2010-11 from redevelopment agencies.

This massive hit on local redevelopment agencies totals $1.050 billion and would mothball many planned local redevelopment projects that provide economic development and jobs that are desperately needed in this economy. Given that the courts have already deemed this action unconstitutional, if approved, it will trigger additional litigation.

The “redevelopment” finance mechanism is commonly known as “tax increment financing” or “TIF.” Proponents – beneficiaries of redevelopment projects, assert it creates jobs and economic development. Detractors – and several State of California-commissioned studies – say that redevelopment projects don’t provide the promised benefits, and divert tax revenue that would otherwise go to the state and municipal general funds to developer subsides. We say there’s only one pot of taxpayer money for the federal, state, county, municipal governments, and redevelopment agencies, to dip their hands into.

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