Here’s a Way to Ease the State Deficit

Hey, Gov. Wilson, I know where you can lay your hands on some money. Although the bucks may not cure the state’s $7-billion budget deficit, they’ll sure help in the future.

The revenue-producing scheme arose as I was talking with some government officials about the $1.54-million farewell settlement given to the Los Angeles Community Redevelopment District’s departing director, John Tuite. We all agreed that only a super-privileged--and rich--redevelopment agency could have afforded the generous gesture in this era of dreary tidings from deficit-ridden government offices.

Now, there is no question that redevelopment agencies have done a lot of good in this state over the last four decades.

As the Senate Local Government Committee reported in 1989, “redevelopment has literally changed the way California looks: Office towers in Los Angeles, San Francisco, Sacramento and San Jose exist because of redevelopment programs. Tens of thousands of low-income households live in better conditions. . . . For many California communities, redevelopment is the key tool for economic development.”

But now, some government officials are saying, it’s time to change this agent of change.

I’ve explained before the complicated way redevelopment agencies work, but here’s a refresher: Cities first used redevelopment to rehabilitate blighted old downtowns, just beginning to lose business to the shopping centers going up near the new post-World War II residential subdivisions. The redevelopment agency bought or condemned land and sold it at low prices to developers. The new buildings brought in additional property tax revenues. Rather than going for schools, hospitals and police, the new money was put into a special fund to buy more land, or to install streets, lights, sewers and other amenities for the new developments.

When Proposition 13, the property tax-limit measure, was approved by the voters in 1978, redevelopment financing took on a new dimension. Cities no longer had enough money to finance roads, street lighting, convention centers and other civic improvements. So they began using redevelopment as a bailout.

Small suburban cities created redevelopment agencies on undeveloped agricultural land that they declared “blighted,” and thus eligible for redevelopment. As the land went from agricultural to urban, property taxes increased, going into the redevelopment fund. With those increases, not subject to Proposition 13 limits, officials financed new streets and other public works with the excuse that the improvements were needed for future economic development.

As the ‘80s ended, the Senate Local Government Committee reported, California’s redevelopment agencies were taking in more than $3.5 billion a year in property taxes.

Objections to these money-raising practices have come from school districts and county governments, which must operate hospitals and clinics for the poor, jails and the courts. The state reimburses school districts for the loss. But for the counties, it’s an outright loss. Deprived of funds, counties press the state for more aid. Providing that aid, along with supporting the school districts, has helped cause the state deficit.

“We must re-examine redevelopment in light of the current fiscal crisis,” Los Angeles County Supervisor Ed Edelman told me. “This is a new day.”

So now we return to Mr. Tuite, and lessons that can be learned from his incredible buyout package. Suspecting the Tuite affair is an example of widespread redevelopment agency waste, county officials statewide are discussing some sort of a limit or phase-out of the redevelopment agencies’ great property taxing power.

In fact, Los Angeles County, joined by other counties, is expected to offer a change something along those lines to the Legislature, and this, Gov. Wilson, is where you can pick up some sorely needed cash.

How much money is at stake? County officials have said Los Angeles city redevelopment proposals could cost Los Angeles County about $2 billion over the next two decades.

Of course, the powerful lobby of cities and redevelopment officials will argue that redevelopment has made cities strong enough to survive the current recession. To this, Los Angeles and the other counties will counter that trickle-down redevelopment benefits take too long.

You may not agree with the concept, governor. In the world of municipal and legislative politics, it’s pretty controversial. But as John Tuite’s farewell gift from the Los Angeles Community Redevelopment Agency showed, this may be one level of government that has too much money.