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SPRING 2011

California Budget Battle Provides Opportunity

Redevelopment Agencies (RDA) have used eminent domain to forcibly seize private property for years. RDA’s have come under fire in the recent California budget debate when Governor Jerry Brown’s budget proposal was unveiled and revealed his plan to eliminate RDA’s.

First, let’s take a look at how RDA’s are funded. Typically, a city must first determine a redevelopment zone. Local officials determine what area is “blighted” and that is what the redevelopment area becomes.

Once the area is established an RDA, the tax revenue generated by the new property uses that would otherwise go to fund police and schools, would presumably be reinvested in the redevelopment district.

However, a recent State Controller audit found that many RDA’s were using these funds to pad their general funds, like salaries and pension benefits. Originally, RDA’s were developed to help get rid of “urban blight” in California cities, however they also fund luxury golf courses and sports arenas too – another form of corporate welfare. Now with over 400 active RDA’s, they have morphed into one of the largest abusers of eminent domain in the nation.

Here is how the scenario goes, a developer eyes some land to
build a new strip mall; the RDA assists in condemning the resident businesses to make way for the strip mall; and the local jurisdiction is lured by the potential boost in sales tax revenue that the strip mall would produce. The central issue is the definition of the word “blight”. The definition of blight is so loosely defined that most any property would be considered blighted by an RDA, not just abandoned boarded up buildings that we all envision.

As property rights advocates, Family Water Alliance has seen the eminent domain abuse of RDA’s across the state, but now comes a rare opportunity to eliminate the problem. RDA’s are a very powerful lobbying group in Sacramento and many legislators support them on the basis of economic development. While economic development is a laudable goal, RDA’s do nothing more than subsidize businesses creating unfair advantages for one politically connected business over another.

Let’s take a look at another scenario. There are two competing businesses in a city, one that is with the redevelopment area and one that is 2 blocks outside the redevelopment area. Why should the business inside the redevelopment area get more of an advantage than the other? RDA’s give government a role in picking the winners and losers in business instead of capitalism and market demand.

The second part of the equation is the massive amount of debt being accrued by RDA’s in California. The only way to pay for these redevelopment projects is to issue bonds. Then when the property taxes start rolling in, RDA’s can then make the payments.

Studies have shown that these types of economic development, along with enterprise zones, are not effective. Governor Brown wants to use the revenue to put towards basic services like schools, police and fire.

This is the opening we have been waiting for to score a win for private property rights by eliminating one of the largest abusers of eminent domain. While many can find flaws with Governor Brown’s budget, this is a chance to overhaul a program that has outlived its usefulness. ■

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