Capitol Alert
The latest on California politics and government
February 1, 2011

Gov. Jerry Brown’s proposed 2011-12 budget has many controversial aspects, but one of the most contentious is his call for eliminating 425 local redevelopment agencies and redirecting about a third of their property tax revenues into other state and local services.

Last week, nine big city mayors called on Brown to abandon his proposal, claiming that redevelopment is central to economic development. But Brown insists that supporting schools and other public programs is a more important use of the funds.

Underlying the political exchanges is a phenomenal growth in redevelopment agency activity — especially their diversion of property tax money into their own activities. By law redevelopment agencies can retain property taxes on increased development within redevelopment projects, although they must share some of it with other local governments and schools under reform legislation enacted in the 1990s.

Each year, the state controller’s office publishes a thick report on the activities of redevelopment agencies, most of which are operated by city governments. And the latest report, covering the 2008-09 fiscal year, details the extent of their finances.

It reveals, for instance, that redevelopment agencies captured about 12 percent of all the property taxes collected in the state, $5.7 billion. It shared $1.2 billion of those revenues with schools and other local governments, but retained the other $4.5 billion.

That $5.7 billion is well over three times as much tax money as redevelopment agencies captured 10 years earlier, an examination of the 1998-99 controller’s report shows. And the debt incurred by redevelopment agencies also has grown sharply. In 1998-99 they had $42.7 billion in debt. By 2008-09, that had more than doubled to $87.5 billion, most of it in the form of bonds.

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