Clueless traitor to the schools of the year has to be Eva Lueck, chief business and financial officer for the Glendale Unified School District, who likened the redevelopment wind down to “smoke and mirrors” because it is taking longer than expected. Not far behind are the writers for local papers, like Brittany Levine and Kelly Corrigan, who clearly don't understand redevelopment, or are just too caught up, with the civic types who loved it, to be impartial.
Here's how redevelopment used to work: Walmart comes into a town and buys a vacant lot. As an enticement, Walmart pays the property tax level of the vacant lot, often pennies,, plus a little more, called an increment, which then goes to the city to entice the next big box monstrosity. (Yes, an ongoing pyramid scheme to the benefit of big box).
If the new Walmart (or cookie-cutter condo complex) was then assessed at $25 million, it doesn't matter. The schools get the farcical tax revenue as if it was an empty lot! Even if the schools are flooded with new students from said condos!
I don't know about you, but I'd like to pay the tax rate for an empty lot where my house used to be, but we mortals don't get to do this. Only the big corporations who line the pockets of local pols.
School officials who feign shock that they haven't received as much as was expected, or that it has taken longer than expected? May be they should pay attention to how the city officials fighting every step of the way to hold onto those funds. IE, maybe they should realize that the cities and developers are pushing to hold back funds from the students of their district. But that would take depth and courage, something that is difficult when cliches are readily available.
Monday, January 21, 2013
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Actually, you are a blogger who is clueless about redevelopment. Schools, community colleges, and affordable housing all got a percentage of the tax increment revenue from redevelopment projects. You are wrong when you wrote "If the new Walmart (or cookie-cutter condo complex) was then assessed at $25 million, it doesn't matter. The schools get the farcical tax revenue as if it was an empty lot!". You are factually completely wrong.
ReplyDeleteThis is why school boards across California supported redevelopment and fought against its abolition. Their share was a sure thing, which is a far cry from any crumbs they might get from Sacramento's shell game.
Looks like the Burbank Blog struck a chord. Perhaps one that embarrassed some people.
DeleteThe original post was dead-on accurate. Schools ALL HATED the redevelopment Developers Slush Fund, except some of the more clueless boards who were bastinadoed by powerful local developers. In those instances, the developers and local agencies would take 100% of the money that would otherwise go to education, and tithe back say 10% for schools. Some very dumb schools thought this was good.
Either way, now the schools and public safety get 100%.
I don't know about the rest of your blog. This is the first page I've seen. But I have to tell you this is maybe the most inept effort I've ever seen to explain how redevelopment worked, though I don't know if Leno's "Jay Walking" segments ever covered the topic. Maybe those tourists could do a worse job, but it would be tough.
ReplyDeleteI'll have to explain it to you in two parts
PART 1
Here's how redevelopment worked: First, a city's RDA would identify a section of the community as "blighted." In some instances, the neighborhoods were blighted, run down and decrepit. But in many other, more infamous instances, some developer, or group of developers, were anxious to gain access to the property, but didn't didn't want to do so as prices inflated when current owners learned a developer had a plan. In a great many other instances, the developer(s) maintained they would create a new project that would be of some benefit to the community, usually in terms of tax revenues, but sometimes also offering benefits like public "open spaces," man-made water features, parking lots, and so on. The only hitch was that the developer said they could not afford to pay for the whole project, and couldn't buy the land. So, would the city please give them the land for free?
So, the city/RDA would seize the property under eminent domain, or the current landowners would have to sell the property under the threat that, if they weren't "reasonable" in pricing the land/buildings, it WOULD be seized, and the owner could be assured of being paid only what the city/RDA (and perhaps the courts) determined was the fair market value for the land/building.
Locally, we've seen cities and RDA's take property. We've also seen them simply buy the property under the previously mentioned threat. Also locally, we've then seen the city/RDA then hand over that property to the developer for a price that was arguably "fair market value." We've also seen them sell multi-million dollar properties to the developer for $1. And sometimes that property is sold by the owner directly to the developer. Once again, this typically took place under the RDA's looming threat of seizure by eminent domain.
RDA's pushed and promoted projects using "studies" offered by economists for hire. These economic firms learned very quickly that, to win the next contract, they had to tell the RDA and staff what they wanted to hear for this contract. The files are full of reports from economic firms that offered in-depth analysis proving a project was going to be a huge financial windfall, and provide hundreds of new jobs. It was always interesting to notice that, even if the last project studied by a firm was a huge failure, that same firm had no trouble getting hired by the same RDA to analyze its next project. All they had to do is find that the new project was all but a guaranteed money machine.
SEE PART TWO
HOW REDEVELOPMENT WORKED
ReplyDeletePART TWO
Just for the sake of keeping the examples simple, let's say the property tax being paid on that land declared blighted is $1000 a year. As is the case with privately owned property all over the state, that $1000 is split up among state, county and local governments for all the things governments have to pay for, from roads and police, to schools and DMV buildings.
But now the new project is up and running, and a new assessment determines the fair property tax henceforth will be $1500 each year. In this example, that $500 dollar increase is the "tax increment."
The first $1000 goes to be split up among the state, counties and municipalities, just like always. But that added new tax, the increment, goes directly to the RDA. All of it. The idea is that these monies will accumulate and finance more projects in the future for that same formerly blighted area. The RDA can even borrow money for right now based on being able to pay off the loan with the increment it expects to receive over the coming years.
In theory, it's illegal for the RDA to use that increment for any expense outside the redevelopment district it created. After all it's blighted. So the city has to improve the roads and put in new street lights.
Many RDAs found ways around this, and the state did little to challenge most of these tactics. Burbank, for example, claimed that new businesses and residences in redevelopment districts put more pressure on schools all over the city, and so rationalized giving the BUSD $23 million in RDA funds. Many of the contortions and rationalizations were much less noble than this one.
RDA's were eventually killed off because the abuses became so infamous that even the state's legislature could no longer ignore them. Developers were being given land and rebated taxes left and right. RDAs were being sucked into bidding wars with one another, with developers laughing all the way to the bank. Schools and other recipients of a share of property taxes howled that they were being denied their share of taxes paid by valuable properties that would have increased in value and paid more taxes with or without redevelopment. Other infamous abuses included one city that declared a top-quality golf course to be "blighted" land so they could grab the land for a residential and commercial project. Inevitably, there were MANY examples of council members (aka RDA members) and staff making enormous deals with developers who just happened to be best friends, relatives, in-laws, business partners and so on.
Many RDA projects turned out to be unmitigated financial disasters, and it was finally realized that city staff were essentially playing at development, and pretending to be commercial and residential developers with absolutely no skin in the game. They never lost their own money, only the taxpayer's. And no one ever lost their job because the project they pushed and lobbied for was a failure. Instead, they'd just start all over again the next morning, rolling the dice with taxpayer funds.
I don't know if it will do you any good, but THAT is what redevelopment was in California, how it worked, and why it's gone.