In 1945 the California Community Redevelopment act was enacted to help cities fight urban blight and in 1951 Tax Increment Funding was enacted to help cities raise funds to match the federal funds. Its purpose was to make the Redevelopment Agencies (RDA) self-funding. In 1975, another law the “set aside” law required RDAs to set aside 20% of the gross tax increment for a housing fund to meet very low, low, and moderate housing needs for California residents. Even before Prop 13, cities were spending more money on the economic development side of the agency, than they were on providing affordable housing. Prop 13 was passed in 1978, limiting property tax increases and raising the assessed values of property by more than 2% a year. Following Prop 13, the number of RDAs dramatically increased. The RDA became a valuable resource to cities to fund economic growth. 1993 brought yet another law requiring RDAs to share their tax increment with schools, law enforcement agencies, and special districts. AB 1290 required RDAs to pay a percentage of the tax increment to school districts, colleges, and county special education. Basically the RDAs had to share about 1/3 of the tax increment with the schools, colleges and special districts.
Those not in favor of RDAs say that cities use it to fund pet projects and favor the few as opposed to helping every citizen. Studies have shown that many RDAs are using broad definitions of blight, but according to Goldfarb and Lipman LLP ” A Legal Guide to Redevelopment” dated January 2006, the definition of a “blighted area” has evolved over the years. The current CRL definition was enacted as part of the redevelopment reform legislation contained in AB 1290. Under the current blight definition, a blighted area is one that is predominantly urbanized and in which the following four components are met:
1 The combination of statutorily enumerated conditions (which contribute to blight) are prevalent and substantial.
2. The above conditions are the cause of a reduction or lack of proper utilization of an area
3. The area constitutes a serious physical and economic burden on the community.
4. That burden cannot reasonably be expected to be reversed by private and/or governmental action, without redevelopment.
Blight must be prevalent and substantial in the project area, not merely characteristic of the project area. The passage also states…
Another fundamental purpose of redevelopment is to expand the supply of low- and moderate-income housing. California Health and Safety Code Section 33334.6 states that the “provision of housing is itself a fundamental purpose of the Community Redevelopment Law and that a general inadequate statewide supply of decent, safe, and sanitary housing affordable to persons and families of low or moderate income threatens the accomplishment of the primary purposes of the Community Redevelopment Law, including job creation, attracting new private investments, and creating physical, economic, social and environmental conditions to remove and prevent the recurrence of blight.”
The Redevelopment Agency must annually deposit at least 20% of the gross tax increment received into a Low- and Moderate-Income Housing Fund (LMIHF) and at least 15% of all housing created within a redevelopment project area must be affordable to low- and moderate-income households, with 40% of those units available at affordable housing costs to very low-income households.
As with most government agencies, the RDA has been susceptible to fraud, abuse, and mismanagement. This seems to be especially true in cities where the city council also acts as the redevelopment agency. There is a long standing dilemma between the greed for economic development and the need for affordable, decent, safe, and sanitary housing.
All agencies must report tax increment, indebtedness, and housing set aside funds to the State Controller’s Office and the Department of Housing and Community Development. Serious penalties can occur if cities fail to file an excess of funds in the low-moderate housing fund. Excess is defined as a million dollars in one fiscal year or the sum total of the past 4 years equal 1 million or more. Agencies may be barred from further development for two years if this abuse exists.
The question to be answered is how does 29 Palms RDA stack up under scrutiny?
Coming soon, Post #2: “The Devil is in the Details.”