A Legal Rip-Off at the Heart of Glendale
Those Enron tape recordings in which energy traders giggled about gouging California’s electricity ratepayers were the height of audacity, but what’s about to happen in Glendale, and has already happened in other cities throughout California, runs a close second. The Glendale City Council is betting that voters, in a special election in September, will swallow the Ponzi scheme known as redevelopment and approve a fleecing that parallels the energy rip-off.
Although redevelopment fiascoes exist throughout the state, Southern California has had more than its share. In the 1980s, Irwindale lost $10 million to the Raiders when the redevelopment deal to relocate the team there went sour. Orange County Supervisor Chris Norby recalled how auto dealers pitted Buena Park, Fullerton and La Mirada against one another in bids to locate in one of those cities, pocketing money from each.
At stake in Glendale is developer Rick Caruso’s proposed shopping center, Americana at Brand. Touted as a man who knows his way around city halls, Caruso has been appointed to powerful commissions -- water and police -- by successive L.A. mayors. Now he is muscling in on Glendale, and the council is ready to give him what he wants.
What Caruso, who build the Grove in Los Angeles, wants is a massive subsidy -- primarily in land -- to build his project. Even his supporters concede that the city’s gift would exceed $70 million. Redevelopment advocates claim the project would pay for itself through increased land value, resulting in more property taxes, and from sales taxes.
Not really. The 1993-94 Los Angeles County Grand Jury examined the abuse of redevelopment that was rampant even then and concluded that such benefits were a mirage. As in other cities, the increase in property tax revenue created by Americana at Brand would go, for decades to come, to pay off the bonds required to buy the land in the first place. Money that should go to schools, police and other city services would wind up in Caruso’s company coffers instead.
As for sales taxes, redevelopment may help the local municipality, but it doesn’t do anything for the revenues of Southern California. It merely moves the sales from one town to another, along with the taxes collected. The net result is a zero increase statewide in sales taxes from a redevelopment project.
But developers game the system, hinting that without subsidies they will take their projects elsewhere. In a sense, they legally extort huge grants from cities that fear that a neighboring community will take away their share of tax revenue. All a developer has to do is suggest that if Glendale won’t fork over the subsidy, Burbank probably will. A big-box retailer or an auto dealer can play one city off against another.
To make up for revenue lost to redevelopment, cities now enact parcel taxes -- a tax on property owners for a specific purpose, such as a library -- which fall more heavily on homeowners than on large corporations. Where user fees for certain services were once largely unknown, they have multiplied and continue to grow to make up for budget shortfalls.
Much of the state’s financial problems, and ultimately those of local governments, resulted from the inability of schools to get their share of increased property taxes because that increase was in a redevelopment zone and earmarked for paying off the cost of the project. Schools have lost about $1.4 billion per year to redevelopment, according to a June report from the California Taxpayers Assn. To keep them funded, the state diverted local property taxes to Sacramento, which in turn doled it back to the schools. That meant other city services lost funds.
Those supporting Americana at Brand are counting on the usual low special election turnout to give them a victory. In a sense, like the snickering Enron power manipulators, they view the public as rubes. They’re wrong. Just look at Inglewood, where voters in April turned down a bid by Wal-Mart to build a store there.