Eminent Domain Report

In a report issued in advance of today’s Senate Subcommittee hearing on the issue, the Legislative Analyst's Office reiterated its support for the Governor’s call for an end to redevelopment in California.  While acknowledging that redevelopment does lead to economic development within redevelopment project areas, the report asserts that there is no reliable evidence that it attracts business to the state or increases overall regional economic development. 

This may all be well and good, but analyzing the issues this way creates a subtle - but important -shift in the argument.   Redevelopment agencies' statutory charge is to eliminate blight, a cause that seems lost in the LAO's report and its focus on whether redevelopment constitutes an effective engine for statewide economic development.

Indeed, the report suggests that a redevelopment agency might attract businesses to a redevelopment project area that were previously located elsewhere in California.  While this results in an increase in property tax revenue in the project area, the report suggests that this is a zero sum game, as the project area’s gain is some other region’s loss.  Once again, the statutory purpose of redevelopment, the elimination of blight, is given short shrift in the analysis.

Interestingly, the report suggests that the Governor’s proposal does not go far enough.  While the Governor proposes to use redevelopment funds to offset state General Fund and K-12 education costs for 2011-2012, thereafter, redevelopment funds would not be used to offset the state’s payments for K-12 and junior colleges.  The LAO assessment suggests that if future revenues are treated generally as property taxes, the state’s ongoing share of costs for K-12 costs could be gradually phased out.

The LAO report acknowledges that dissolving redevelopment will be complicated and disruptive.  Ordinarily, it would recommend that the state phase out this program over several years or longer to minimize the disruption and abrupt ending it would likely engender.  However, given the state’s extraordinary fiscal difficulties, the report suggests that such a gradual phase out may not be the best option.