Trend in Redevelopment Is More Taxing

One of Murphy’s lesser-known laws warns that “The light at the end of the tunnel is really the headlamp of an oncoming freight train.” California may be entering a new era of land use, with cities meddling in redevelopment of both commercial and private property. If a budding trend in Orange County spreads widely, cities would exercise control over most property in the state.

Your city could demand that you rehabilitate your home to its specifications, or seize your property through eminent domain if you don’t. Cities already exercise wide latitude in taking on debt without voter approval to foster retail development. They could begin issuing bonds for homeowner loans or to subsidize multifamily projects to boost their property tax receipts.

Behind all this is redevelopment, through which cities divert property taxes from public use to private use. Once a redevelopment zone is established, all incremental increases in assessment, through individual property improvement or mere sale, go to the city’s redevelopment agency instead of the state.

The agency keeps most of the new tax money. In our flush economy, Orange County and most other taxing bodies seem satisfied with only a portion of that money, but this new tax revenue really should go to the state for dispersal to all municipalities.

Three of four California cities and even some counties have redevelopment agencies, but until now they mostly focused on retail to compete with each other for sales taxes. Cities issue bonds to buy and bulldoze land for developers or finance private infrastructure such as mall parking garages.

The accumulated statewide debt from such bonds is $41 billion and growing, not unlike someone making minimum monthly payments on five or so credit cards and applying for more. Overhead consumed 71% of redevelopment expenditures in 1997-98, the state controller reports.

Westminster and Stanton are in the final stages of plans to include all residential property in redevelopment zones, reportedly to divert property taxes to finance public infrastructure work, such as street repaving, and home upgrades. Wednesday, for example, the Westminster City Council approved its plan to designate the entire city a redevelopment zone.

Last year, Riverside County approved a similar plan for unincorporated communities south of Lake Elsinore. Westminster and Stanton diluted dictatorial language and eminent domain provisions that sparked belated lawsuits in the Elsinore plan, but redevelopment’s 50-year California history is marked by loopholes big enough to drive bulldozers through.

There is little real oversight from outside authority. City councils, acting as redevelopment agencies, can discuss certain things in closed session. With loose definitions of “blight” to justify redevelopment, all but the newer California cities are vulnerable. Debt service could skyrocket. The losers would be counties and schools. The winners would be high-density residential developers benefiting from corporate welfare.

Current tax allocation makes cities too dependent on sales taxes. As an extreme example, three-fourths of Stanton’s budget goes for police and fire services. A better solution, though, is a fairer distribution of all property tax revenue.

A legislative commission, the state controller and others are proposing more equitable local tax distribution. Cities are copycats, and many likely would follow Stanton and Westminster. Orange County is more immediately vulnerable and should take a leadership role in urging a statewide consensus.