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Redevelopment reality

The agencies will probably fall victim to budget cuts. But reform, not extinction, is an option.

March 11, 2011

Redevelopment in California is about to undergo a radical change.

For decades, community redevelopment agencies have targeted blighted areas and encouraged investment in them by allowing developers to keep the increased tax revenue generated by their projects. The successes have been notable: One need look no farther than the south end of Los Angeles' downtown, where Staples Center and the surrounding commercial area sit atop what once were parking lots and crack houses.

But abuse of the system has been a problem. Some cities have used redevelopment to pad their budgets, siphoning the tax increment from projects to pay for police or other expenses. Some redevelopment agencies have lent cities money or engaged in property swaps that defy the original intent of the law. Critics complain that developers with connections to the agencies are the ones who reap redevelopment deals.

The real trouble facing the redevelopment system, however, is that it denies the state significant tax revenue at a time when government cannot afford to leave a penny on the table. That's why negotiations are underway in Sacramento to amend or abolish redevelopment agencies statewide. The agencies are facing extinction so that the state can then use the money to balance a budget that is badly out of whack.

Given that the redevelopment system is likely to meet the ax in these negotiations, those who value its work should shift their tactics from trying to save it to rebuilding it in the aftermath of this showdown; the objective should be, as Assembly Speaker John A. PĂ©rez recently put it, "to end it so that we can mend it."

In that effort, a few principles should guide legislators. First, redevelopment has been abused, yes, but it also has been a powerful engine of job creation and a badly needed source of revenue for affordable housing. Those are laudable accomplishments, and any successor to the current system should preserve the ability of cities to allow such projects to be financed with tax increment. Second, the state needs to decide who would oversee successors to the redevelopment agencies. As it stands, the legislation to abolish the agencies envisions appointees from various entities but cuts out elected officials, those most readily accountable to the public. That's a recipe for further obscurity and corruption. Finally, the state needs to address the uncertainty that these discussions have cast over the future of redevelopment. With the work of the agencies in doubt, investors already are flinching at putting money into blighted areas. As the state fixes its budget, it should make clear that it is not abandoning this system but rather committing itself to sound investment that creates jobs, builds commercial centers and funds affordable housing.

Whatever comes next, we hope that it will continue to offer incentives for the redevelopment of blighted areas while limiting the ways redevelopment money can be spent, imposing clear rules about how that spending should be monitored and taking special pains to protect the role of redevelopment in funding affordable housing.

The mayors of California's biggest cities have fought to protect redevelopment agencies from being abolished. That's understandable, if misguided. They should now pivot toward rebuilding them in ways that are economically defensible and that preserve their core mission.

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