May 27, 2010

How Remedying Blight "Pays For Itself"

How Remedying Blight "Pays For Itself"

Posted: 26 May 2010 11:05 AM PDT

Here's a case, issued yesterday by a California Court of Appeal, that is not directly about the use of eminent domain for redevelopment purposes to remedy "blight," but is nonetheless worth reviewing since it shows how redevelopment supposedly "pays for itself" (in the words of a court) through tax increment financing:

Under the [California Redevelopment Law (Cal. Const. art. XVI § 16], redevelopment is financed through tax increment financing. In essence, a redevelopment agency, which is not empowered to tax, but which is empowered to acquire debt through loans or the sale of bonds (§ 33601), finances a redevelopment project through borrowing. When the redevelopment results in increased property values in the redevelopment area, the tax attributable to the increase in value -- the tax increment -- is distributed by the taxing authority to a special fund of the redevelopment agency, to pay the principal of and interest on its debt. (§ 33670, subd. (b).) "'This way, the redevelopment project in effect pays for itself.' [Citations.])" (City of Dinuba v. County of Tulare, supra, 41 Cal.4th at pp. 865-866; Community Development Com'n of City of Oxnard v. County of Ventura (2007) 152 Cal.App.4th 1470, 1475-1476.)

Glendale Redevelopment Agency v. County of Los Angeles, No. B212718 slip op. at 3-4 (May 25, 2010). Couple tax increment financing with California's notoriously loose standards for defining "blight," and you can see why there is little disincentive to designating property as blighted. For additional background and commentary, see A Tiff Over TIF In Northern California and In Pursuit of the Free Lunch on Professor Kanner's blog.

Update: some additional thoughts on counties vs redevelopment agencies in Grab redevelopment cash from Cal Watchdog.

The dispute in the Glendale case involved whether the redevelopment agency was permitted to submit a revised request to the County for its share of the tax increment. The court held the statute permitted the redevelopment agency to amend its request after the annual deadline in order to correct an error in the original request, even though the statute did not expressly permit the County to accept it after the deadline.

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