The Foolishness Exposed by Carson’s Quest for an NFL Team

AZUSA — In the high-roller bidding for an NFL expansion team, only three cities remain in the game: Houston, Los Angeles--and Carson. How does a community of 90,000 residents find itself in the same league with two megacities? By offering to underwrite a new stadium and shopping mall with up to $180 million, a staggering sum that works out to $3,000 for every adult resident.

It’s not sports mania driving Carson’s breathtaking flyer with public funds. “It is clearly, principally, a financial deal,” says Carson City Manager Jerome G. Groomes. In California, property taxes used to pay the bills for basic services like police, fire and libraries. Twenty years after Proposition 13, local-government finance is so convoluted that cities and counties are routinely driven to high-risk deals with sports moguls, corporate giants and avaricious developers. Administrators and part-time elected officials in towns like Carson find themselves in league with “partners” like Michael Ovitz, a Hollywood legend for driving hard bargains. Ovitz has proposed to build a 157-acre sports and retail complex in Carson on what is now an abandoned landfill.

But don’t blame late L.A. activist Howard Jarvis for these inadvertent consequences of property-tax reform. For 20 years, state politicians, beginning with Gov. Edmund G. “Jerry” Brown Jr. in 1978, utterly have failed to devise a sensible alternative to fund the essential services that every Californian relies on and expects. Brown had threatened doomsday cuts if Proposition 13 passed. But, seeking reelection, he converted overnight into an ardent tax cutter after the measure passed. By tapping the state’s bloated surplus, Brown bought instant relief but no long-term funding for local services. Unfortunately, Brown’s opportunism set the pattern for resorting to ever-more-precarious schemes to maintain politically popular local services, even as voters approved ever-more-draconian restrictions on direct taxation.

The state could afford to bail out local governments after the passage of Proposition 13, but when recession hit state government in the early 1990s, Gov. Pete Wilson rerouted $3.6 billion in annual revenue from cities and counties to public schools to meet the mandate of Proposition 98. That imposed harsh cutbacks on communities already reeling from their own lowered revenues. Los Angeles County had its share of local property taxes cut in half. Struggling to stay afloat by asset sales and deficit finance, the county avoided bankruptcy only with an election-year bailout from the Clinton administration. The city of Los Angeles, meanwhile, scrimped on core services, postponed important infrastructure investment and slashed others, such as parks and recreation, by almost 40%.

Wilson’s “emergency” tax shift, which remains in effect, unleashed a reckless scramble for revenue to replace what was lost. Orange County supervisors were delighted to reap premium interest income until that morning in 1994 when they awoke to the news that $1.6 billion in speculative investments had evaporated. But even after the shocking revelation that the state’s most prosperous county had gone bust, cities and counties continued to chase get-rich-quick schemes like the Carson stadium deal.

To offset their property-tax losses, counties and cities feverishly compete for sales-tax revenue by subsidizing urban sprawl. The money to finance the subsidies comes from redevelopment agencies, originally established after World War II to rescue blighted inner-city neighborhoods. “Blighted” areas now encompass vast tracts of land, including raw desert surrounding affluent municipal oases like Indian Wells. Since state law allows redevelopment agencies to capture the appreciation of property-tax revenue in designated project areas, counties and cities routinely subvert the law to subsidize auto malls, outlet centers and big-box retailers, accumulating an astonishing $15 billion in public debt statewide. More than $100 million of this tax-increment financing provides the backbone of the Carson proposal.

The pattern is repeated across the state. To lure a Wal-Mart, San Gabriel recently offered to divert half of the store-generated sales tax to developers for the first 12 years of its operation, plus fork over another $3 million in street improvements. Since the city didn’t own the proposed site, it threatened to use eminent domain to evict a local nursery and demolish several homes and an apartment building. The flagrant spectacle of a city forcing local citizens to move so it could subsidize the world’s most profitable retailer is no aberration. A study released by the Public Policy Institute of California notes that in the most recent year on record, redevelopment agencies “displaced more than 500 households from their homes, received $1.5 billion in property taxes that would otherwise have gone to other public agencies and initiated several new project areas that consisted of thousands of acres of vacant land.”

What is even more grotesque is that cities have become addicted to diminishing returns. Home shopping and catalog sales have reduced per-capita retail sales by 40% since the passage of Proposition 13, while Internet commerce threatens to shred it even faster.

The absence of a fair, stable and understandable system to pay for local services has nourished the growth of an impenetrable thicket of special fees, special deals and special exemptions, all of which inevitably are exploited by special interests. The scandal of Hawaiian Gardens shows how far local authorities have strayed. The city partnered with high-flying Miami developer Irving I. Moskowitz, who owned a local bingo parlor and card club. But when he abruptly halted his $200,000 monthly payments in July 1997, the city was forced to slash its staff of 105 to 30, including abolishing the police department and turning over law enforcement to the L.A. County Sheriff’s Department.

This is a small part of the high price we pay unless local-government finance is fundamentally reformed. Proposition 11, on Tuesday’s ballot, would allow cities to voluntarily share sales-tax revenue, but that’s an arrangement as reliable as a Kosovo truce.

Unlike most of the issues that get debated in the sound-bite hothouse of television ads, the problem directly affects every community, every neighborhood and every family in California, now and into the future. “Under the current system, communities end up with the short end of the stick,” says Carson’s manager, Groomes. “What the state seems to forget is that the state is made up of all those communities.”

Yet, gubernatorial candidates Lt. Gov. Gray Davis and Atty. Gen. Dan Lungren have continued to avoid addressing a local-government financing contraption that undermines both our standard of living and our quality of life, destroys local control, distorts our economy, promotes ugly sprawl and fosters cynical wheeling and dealing. With the gap between our appetite for essential services and our willingness to pay for them growing, we will all lose if the new governor postpones tax reform for eight more years.