|1) Do Redevelopment Agencies Have
too Much Debt?
- Voter approval - California voters approved a constitutional amendment in 1952 that
added a requirement that a redevelopment agency must have debt in order to receive
property tax revenue. No other form of government has this unusual and arcane
- No defaults - Buyers of redevelopment bonds have never lost $1 of their investment.
Despite the loss of property dollars due to Proposition 13, earthquakes and the
most secure recession since the 1930's redevelopment agencies have continued to pay their
debts. During the recession, the state had more problems paying its debt obligations
than did redevelopment agencies. According to Mr. Ken Kurtz of the rating agency
Moody's Investor's Services, "Redevelopment bonds pose no risk or financial liability
to the fiscal health of city, country or state government."
- Issuance of redevelopment bonds is quite modest. Over the past four years, only
2.2 percent of all new state and local bond issues can be attributable to redevelopment
- The principal amount of all outstanding redevelopment property tax supported bonds is
$7.9 billion. This is less than half of the State's outstanding principal of $18.2
billion of general obligation debt and lease-revenue bonds as of June 30, 1996.
2) Is Redevelopment Just Corporate Welfare?
- No. The purpose of redevelopment agencies is to eliminate blight and create jobs.
- Excluding debt service payments, redevelopment agencies spend money for:
- Public infrastructure (sidewalks, streets, parks, etc.) - 40% of expenditures.
- Affordable housing rehabilitation or construction - 20% of expenditures.
- Administrative costs - 14% of expenditures
- Design, architecture and engineering costs - 6% of expenditures.
- Real estate and state-mandated relocation costs - 6% of expenditures and
- A variety of programs, such as graffiti removal, commercial rehabilitation loans: and
public facilities like police stations, fire stations, and community centers - 14% of
- Between 1986 and 1996, redevelopment agencies assisted the private sector to:
- Create 301,000 jobs for California residents located in the most distressed areas of the
- Construct 65,221,000 sf of industrial buildings.
- Rehabilitate 6,568,000 sf of industrial building.
- Construct 100,783,000 sf of commercial buildings.
- Rehabilitate 22,905,000 sf of commercial buildings.
3) Does redevelopment assist only new development in cow pastures?
- NO! This is an old problem that the Legislature has already solved. There
are examples of such development in the past, but this practice was stopped by two major
redevelopment reform laws:
- IN 1984, the legislature added §33320.1 to the Health & Safety Code to require that
80 percent of the land within a project area be previously developed for some urban use.
No more that 20 percent of a project area could be vacant land; and
- In 1993, AB 1290 (Isenberg) prohibited redevelopment agencies from assisting retail
developers on vacant land that is greater than 5 acres. Further, agencies cannot
assist auto dealerships on vacant land of any size.
4) Should there be a vote on redevelopment bonds similar to general
- Unlike general obligation bonds, redevelopment tax allocation bonds do not require an
increase in the property tax rate to repay principal and interest.
- Unlike general obligation bonds, neither the redevelopment agency or the city is
required to pledge their "full faith and credit" to repay the bond debt.
- Requiring a citywide or countywide election for bonds that are supported solely by
property taxes generated within a smaller project area is unfair - those without a direct
interest in the project area will control its funding and its future. This is
especially egregious in large cities and counties where voters will be asked to approve
bonds for an area far removed from their residence. Voters will often have little
knowledge about the project area or interest in solving its problems.
- No agency has ever defaulted in the more that 45 year history of tax increment
- Unlike general obligation bonds for school or parks where specific projects can be
identified, only very general uses of redevelopment bonds are known at the time of the
issuance because prospective developers, businesses, tenants, employers, etc., will not
enter into serious negotiations until they know that financing is secure. It's a
real-life "Catch 22" situation. Voters may not approve the bonds until the
details of the final project are known, and the parties to the final project will not
commit until they know that the agency bonds will be approved and bond proceeds for
project funding will be available