Rescuing redevelopment

As California lawmakers struggle to respond to the dire economy, one way they have tried to raise revenue is by eliminating an economic tool that helps spur development — but withholds some taxes from the state and is susceptible to abuse. Last week, the California Supreme Court upheld legislation that ended redevelopment agencies; now, lawmakers should find ways to build a better method of encouraging development without the problems that undermined the former system.

Redevelopment came to California in 1945, and it proved a useful device for eliminating blight. It did so by creating agencies that could identify troubled areas and then allow taxes generated by development in those areas to be cycled back into repaying the debt used to finance those projects. That lowered the cost of construction and encouraged developers to invest in communities that otherwise would have seemed unpromising. The result was jobs, growth and transformation of downtrodden areas into vibrant centers — Old Pasadena, for instance, or L.A. Live.

But redevelopment had its downsides. By allowing so-called tax increment money to finance projects, it blocked that money from going to the state government or schools. And the lure of redevelopment was such that private developers sometimes got deals that smacked of favoritism rather than sound government policy. As Los Angeles County Supervisor Zev Yaroslavsky said, redevelopment “evolved into a honey pot that was tapped to underwrite billions of dollars’ worth of commercial and other for-profit projects.”

That’s all over, but the combination of the need for the tax revenue and the impatience with redevelopment excess has resulted in the proverbial baby being tossed out with the bath water. Rather than simply walk away, the Legislature should take a moment to salvage what worked in redevelopment while letting the rest disappear. The trouble is that the clock is running fast, as the legislation called for redevelopment agencies to close by Feb. 1.

State Sen. Alex Padilla (D-Pacoima) is introducing a bill that would extend the life of redevelopment by a month or two; the exact language is still being drafted, but he says the extension would not go beyond early May, when the money is scheduled to begin flowing to the state. Lawmakers should approve Padilla’s bill and then use that time to re-imagine redevelopment with suitable controls to curb its excesses while allowing the agencies to bring jobs to troubled neighborhoods, affordable housing to areas that otherwise could not sustain it and environmental improvement to land now burdened by blight. That would restore redevelopment to its constructive history.