Gov. Arnold Schwarzenegger proposes taking $1.3 billion in property tax revenues from local governments to balance the state budget. These funds would be transferred to the Educational Revenue Augmentation Fund (ERAF) for use by California's public schools. This would assure education its minimum funding as required by Proposition 98.
City and county officials have attacked this proposed shift as a raid on revenues for essential public services. We all support schools, but we must not fund them on the
backs of cities and counties. If this current tax shift follows the past ERAF formula, counties will lose $915 million, with Orange County being cut by $62 million. California cities will lose $189 million.
Instead of complaining, however, county and city leaders should find the governor the money he needs without cutting vital local services. And the money is there, right in front of us: It's in the $2.5 billion in annual
property tax revenue given to California's redevelopment agencies. This huge outlay is not funding any vital public services.
Redevelopment agencies were originally created to alleviate "blight" but have become cash cows subsidizing private development. Stadiums, auto dealers, hotels,
movie theaters, big-box retailers and even casinos have all received massive public grants.
Costco alone has received $30 million in redevelopment subsidies just in Orange County. Statewide estimates range up to $300 million in total agency handouts for the giant retailer. In San Diego, $36 million has been paid to the Chargers for a ticketsales guarantee. In Los Angeles, the failing Hollywood/Highland Mall took $98 million, while Staples Center got $50 million—all from public funds.
By law, redevelopment money cannot be used to pay police officers, firefighters, code enforcers, librarians, public health workers, or for any local operations or maintenance. Redevelopment funds can only be used for development projects and to pay off the bonds that finance them.
Far from alleviating blight, redevelopment is merely subsidizing development that would ordinarily be privately financed—or shouldn't be built in the first place. City officials may defend redevelopment as a tool to attract salestax-generating businesses, but retail giants and team owners are pitting city against city for more public handouts. Cities often give away future tax revenues in the form of rebates and land write-downs.The resulting fiscalization of land use has subsidized a vast
overbuilding of commercial development.
We can and must restore these public funds for public use.
The math is simple: Redevelopment agencies annually consume $2.5 billion in local property taxes. Their current annual bond payment obligation is $1.2 billion
(principal plus interest). That leaves $1.3 billion in discretionary spending.
This is the $1.3 billion the governor can use to fully fund education, without touching city or county budgets. Some may claim that diverting this money will jeopardize redevelopment projects. But where is public money better
spent? For Costcos or classrooms? For Wal-Marts or fire stations? For new malls or to fix our streets? To raise pro football salaries or pay police officers?
Redevelopment agencies were never intended to be permanent. When an agency is created, by law it is supposed to exist for 30 years; this is so when the blight is alleviated, the agency would shut down. But few agencies actually do shut down. Instead,they continue to be extended indefinitely, and continue to divert property taxes into private development schemes.
Even without subsidies, malls, auto dealers, and hotels still will be built by private investors—if there is a market for them. That is a private, not a public, responsibility.
If redevelopment is to relieve blight, we can use it now to end California's budgetary blight. By using this $1.3 billion in available redevelopment revenue, the governor can fully fund the schools—and do so without
adding to the fiscal problems facing cities and counties.
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Chris Norby is Orange County Supervisor of the 4th District.
Reprinted with permission from Orange
County Register, Copyrighted 2004
Return to the Spring, 2004 edition of Local Liberty