Ventura Considers Ban on Business Subsidies

With governments all over California using tax breaks to attract major league stadiums, shopping malls and auto dealers, the voters of Ventura are considering banning all such public subsidies in their city.

If a local ballot initiative passes Tuesday, it would be the first time in California that a city’s electorate has issued a blanket ban on subsidies to developers, local government experts say.

Such a shift in policy would knock this city of 104,000 people out of the high-stakes game with neighboring cities to woo retail businesses that generate sales-tax dollars.

But to the proponents, it would call a halt to unnecessary government giveaways, often extracted by savvy developers.

Even if they detest doing it, most cities have long felt compelled to deploy tax breaks and other incentives to boost economic development and to avoid falling into a competitive disadvantage with their neighbors.

And government analysts say the idea of shackling a competitor could quickly spread to other areas as a new weapon in what one calls the domestic equivalent of the Cold War arms race.

“I know of no other city in California where the voters have been asked to vote on banning subsidies to developers,” said Bill Fulton, an urban planning expert writing a book about the fight in Ventura.

“This is an idea that could catch on for a variety of reasons,” he said. “It is a good political sell: ‘Don’t give our money to greedy developers.’ And there is heightened scrutiny over tax money.”

Starved for property tax revenue in the post-Proposition 13 era, cities have become more dependent on revenues from sales taxes for their municipal budgets.

Under California law, the state distributes sales-tax dollars to the site of the purchase, thus enriching cities that are fat with big retailers. The rules have fostered cutthroat intercity competition for retail commerce, from discount warehouse stores such as the Price Club to major department stores and auto dealerships.

Ventura and its fast-growing neighbor of Oxnard (pop. 154,600) have battled over sales taxes more than a decade, each with a competing auto mall perched just inside the city limits along the Ventura Freeway.

And each city has a major shopping mall, in an area that many experts believe has the clientele to support only one regional mall.

The Ventura City Council and owners of the Buenaventura Mall agreed on a $50-million expansion project that threatens to strip the Esplanade mall in Oxnard of its two anchor department stores.

As part of the expansion agreement, Sears and Robinsons-May have agreed to make the 3 1/2-mile move across city lines from the Esplanade to the Buenaventura Mall.

Oxnard officials have responded by suing Ventura to derail the deal. Oxnard officials say it would deplete their city’s treasury by $500,000 a year and leave the Esplanade largely vacant.

The owners of the Esplanade responded too, quietly bankrolling and directing the efforts of a group called Citizens Against the Sales Tax Giveaway to put Measure S on the March ballot.

The initiative targets the city’s promised tax rebate to the Buenaventura Mall’s developer. Under the agreement, the developer will pay $12.6 million upfront to improve parking, roads and mass transit, and then be reimbursed by the city’s share of increased sales-tax revenue over the next 20 years.

While city leaders defend it as a good deal, opponents criticize it as a taxpayer rip-off. Nearly lost in the debate are the initiative’s long-term consequences, which would prohibit Ventura from ever again providing rebates or subsidies to developers.

“It has very broad and very bad ramifications,” said Ventura City Atty. Peter Bulens. “If it passes, it will significantly impact the city’s ability to compete with other cities.”

Dwight Stenbakken, longtime legislative director of the California League of Cities in Sacramento, said Ventura’s case appears unique. Given the state’s history of taxpayer revolts, he said, “It wouldn’t surprise me to see the idea catching on.”

Joel Fox, president of the Howard Jarvis Taxpayers Assn., is intrigued by the concept. He is advising a group of San Diego residents who want a citywide referendum on the City Council’s decision to spend $66.6 million to refurbish Jack Murphy Stadium and hang onto the Chargers football team.

Public subsidies to attract private investment is a time-honored American tradition that predates the formation of the United States.

“Even in colonial times, governments spent money to build wharves, roads and canals to attract commerce,” said Peter Detwiler, staff consultant to the state Senate Housing and Land Use Committee.

“It’s predatory redevelopment,” said Fullerton Mayor Chris Norby, an outspoken critic of such practices. “Fullerton has lost of a number of auto dealers because other cities have given them subsidies and donated land.”

Norby has formed a group, Municipal Officials for Redevelopment Reform, to nudge cities away from pirating each other’s retailers. So far, it has had limited success, in part, he says, because business owners have gotten so good at playing one city off another.

Fullerton agreed to share revenue from a Price Club with Anaheim so the neighboring city would not try to poach its store, he said. Similar nonaggression pacts have sprung up among cities in Riverside and Alameda counties.

But most cities cannot imagine being forced to wean themselves from lending a helping hand.

“To tie our hands in that manner would prevent us from maintaining the economic health of the city of Anaheim,” said spokesman Bret Colson.