Development After Development After RedevelopmentRedevelopment

2013 Riverside/San Bernardino Economic Forecast ConferenceOctober 29, 2013

Professor Rob WassmerChairperson

Department of Public Policy and Administration

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Posted at City of La Mirada Website

Cartoon Illustrating End of California RDA from theCalifornia Political Review

Posted at Citizens Fighting Eminent Domain Abuse Website

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Gone As We Knew It in California Tax Increment Financing (TIF) Used to

Finance Redevelopment Authorities (RDA)

http://www.lao.ca.gov/analysis/2011/realignment/redevelopment_020911.aspx

My Purpose Today

• Robert Swayze (next)– short-term alternatives

• The “Professor”– Academic and long-term perspective

• How?– Simple framework

• Four policy concerns in need of new/better solutions

• Suggest solutions based upon observation and research

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Ben Stein, Economics Ph.D., from Ferris Bueller’s Day Off

Policy Analysis Framework

• Step one in Bardach’s eight step guide– Properly identify the policy problem– Do not state a “solution” as a “problem”

• Policy problem the State faces is not the need to reinstate California TIF/RDA

• California TIF/RDA circa last decade– Cobbled together solution to multiple policy problems

(four) still faced– Let’s unbundle each of these problems

• Consider possible different/better policy solutions• May or may not contain elements of RDA

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Policy Concern One“Blight” Discourages Economic Activity From

Where Most “Socially” Desirable• “Blight” broadly defined: structural, fiscal, demographic• Drives down property (land) value, but still not profitable• “Central” neighborhoods where social benefits generated if developed

– High unemployment, high poverty, affordable housing lacking, gentrification to reduce commutes, some existing public infrastructure viable, etc.

• Intra-metropolitan onlyevidence that this case– Location theory– Statistical evidence– Retail/Housing different than

manufacturing

6http://archpaper.com/news/articles.asp?id=6190

• 1945 CA Community Redev Act / 1952 Tax Increment Financing– “Blight” eradication the goal, $s to match Federal redevelopment

grants• Very limited use till Serrano v. Priest (1972) / Proposition 13 (1978)

– 2% statewide property tax revenues in 1977

• AB 1290 (1993) defined “blight”, limit time, non-negotiated local agency payment

• SB 1206 (2006) further definition of blight– 12% statewide property tax revenues in 2008

• ABX1 26 and 27 (2011) dissolved CA RDAs

72004 blight declarations in Two CA Counties: http://nextcity.org/forefront/view/out-of-cash

Policy Solution OneTool to Encourage Economic Activity Where

Most “Socially” Desirable• Lost an important tool to accomplish this• Furthermore

– AB32 requires CA green house gas emission in 2020 at 1990 level• Transportation GHG emissions about 30% of all GHG emissions• Only reduced if attack all legs of ‘three legged stool’ — vehicles, fuels and vehicle miles traveled (VMT)• More dense and mixed land use than market is delivering

• Suggest– Re-imagined, more limited, TIF program bundled with CEQA reform to achieve SB 375 goals

• Either strict specifications on density/mixed use/affordability requirements• Or applications approved by statewide comm (because GF loss)

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Policy Concern TwoProp 13 / AB 8 Unintended Consequences

• Prop 13 (1978) freezes CA’s ad valorem property tax rate at 1%

• AB 8 (1978) archaic distribution of countywide prop taxes

• Redevelopment becomes a municipal revenue generator– Chapman (PPIC, 1997)

• TIF used to alleviate fiscal stress• Easy to define as blighted• Capture full pie• RDA spending without voter

approval

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http://www.lao.ca.gov/reports/2012/tax/property-tax-primer-112912.aspx

Policy Solution TwoTouch the 3rd Rail of Prop13 / AB 8?

• Reconsidering AB 8: Exploring Alternative Ways to Allocate Property Taxes (LAO, 2000)

• Alternative I: Set Uniform Rates– Each jurisdiction allocated property tax share based on services provided

• Alternative II: Local Control Over ERAF– City/county authority over rate and allocation of a share of the property tax

• Alternative III: Property Taxes for Municipal Services and Schools– Allocation of every property's tax bill identical (e.g., half to local municipal services and

half to schools)

• Alternative IV: Re-Balance Tax Burden– Local revenue sources changed to provide a sales tax reduction and create local control

over property tax rates

• Alternative V: Making Government Make Sense– Realign the responsibilities of the state and local governments to create more efficient

program coordination

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Policy Concern ThreeHousing Affordability

• Why a public policy concern?– Equity– Efficiency

• AB 32 goals

• Original goal of 1945 CA Community Redev Act– But increasingly moved toward “blight” fight– 1976 Legislation directed redevelopment agencies to

set aside 20% of the tax increment to Low/Moderate Income Housing Fund

• $2 B annually generated in late 2000s• Mixed reviews on overall success, but specific success stories

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Policy Solution ThreeMetropolitan Wide Solution for Metropolitan

Wide Problem• California’s housing element law requires cities and counties to

make “adequate provision for the existing and projected housing needs of all economic segments of the community” (Government Code Section 65583, 1969)– Plan for, but not necessarily build

• Suggest– Housing affordability solution divorced entirely from redevelopment– Metropolitan-wide (statewide?) funding source

• Real estate transfer fee (progressive?), Linkage fee on new construction

– Expanded inclusionary zoning • Perhaps as a requirement for use of re-imagined TIF program use

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Policy Concern FourCalifornia High Tax / High Regulation

• Many view as a concern– Though magnitude of impact on statewide economic

activity anecdotal and not statistically proven• Patterns and Trends in the Location Decisions of

California Businesses (PPIC, Neumark, 2007)– RDA/TIF use became extensive in CA, took the edge off of

business/developers call for statewide tax reductions

• Getting more than their “fair share” of property tax increment

– Poor substitute for tackling “real” problem

13http://flazatron.blogspot.com/2009_05_01_archive.html

• Overall ranking based upon ranking of corporate, individual income, sales tax, unemp insurance, and property tax rates

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http://taxfoundation.org/tax-topics/state-business-tax-climate-index

Policy Solution FourCut/Reallocate Burden of Business Tax

• Let reformulated TIF Program serve its designated duty• Suggest

– Revenue neutral tax/expenditure proposals• Oil severance tax• High fee/high aid in CSU and Community Colleges

– Regulatory reform• CEQA

– Other suggestions?

15http://intorightfield.com/california-bad-for-business

Thanks for your attention!

Turn the floor over toRobert Swayze who will discuss

available redevelopment finance options that still exist

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