Property Rights

A Victory for Property Rights in California

The California Supreme Court stands up against government abuse.

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I'm still giddy after the California Supreme Court ruled on Dec. 29 that the state had every right to shut down those noxious enemies of property rights and fiscal responsibility known as redevelopment agencies. Better yet, the state's high court ruled that another law that allowed those agencies to come back into existence was unconstitutional.

As of February, anyway, redevelopment is dead in California, the victim of an absurdly arrogant legal and political strategy pursued by redevelopment's chief defenders. This is wonderful news, made even better by the teeth-gnashing of public officials who have routinely abused their powers under redevelopment law. Cry me a river.

But before I gloat too much, we need to remember that this victory already resembles one of those cheap horror movies where the Evil Thing has been vanquished and all appears well, but then its hand pokes out from the grave just as the credits begin to roll down the movie screen. No one gives up riches and power without a fight, so redevelopment lobbyists already are crafting new legislation to replace the dead agencies with new, revised versions. (Meanwhile, successor agencies will pay off the old debt and old projects will go on to completion. Many of those projects and property transfers slapped together after the RDA-killing law was passed will be audited by the state controller, stopped or tied up in litigation. Many RDA officials will, thankfully, be out of work.) The fight goes on but I never would have expected such progress.

One of my earliest memories as a newly hired editorialist at the Orange County Register in the late 1990s was meeting with local property rights activists in a parking lot outside a subsidized shopping mall project and looking at their charts explaining why a process called "redevelopment" was such a problem. As we gawked at the fruits of redevelopment's corporate welfare, they explained how these urban-renewal agencies float debt without accountability and routinely misuse eminent domain.

As I plunged deeply into the issue, I never forgot that sense of near hopelessness I felt in that parking lot. I never forgot the despair I saw on the faces of homeowners in Garden Grove as they begged the city to scotch a quietly hatched plan that would have driven them out of their middle-class neighborhood so that the city could market the land to a yet-to-be-determined theme-park developer.

Over the years, I've interviewed victims of eminent domain, many of them immigrant small-business owners who couldn't believe what was happening to them in America. They were bullied, put out of business and forced to spend years battling City Hall rather than building a better life. The general public learned of the injustices after the 2005 U.S. Supreme Court's Kelo decision, which upheld the "right" of governments to use eminent domain for these redevelopment-type economic projects. The grand revitalization project that destroyed Susette Kelo's Connecticut neighborhood was abandoned and the site remains a spot to dump vegetation, a reminder that officials in the United States can't plan an economy any better than their equivalents in the old Soviet empire. Free markets work better than central planning.

I've seen how this redevelopment process has distorted the market and made it more difficult for people without political connections to pursue their businesses and their dreams. Redevelopment embodies crony capitalism, but there's so much money in it, so many consultants and politicians who benefit from it, that I never dreamed of the day when it could actually go away. Who would have thought that redevelopment agencies would be the ones on the outside looking in, scheming for new ways to regain some power and privilege?

Redevelopment officials are so used to getting their way with average citizens that they figured it would be no problem giving state elected officials the back of their hand. The seeds of their demise were sown after former Gov. Arnold Schwarzenegger attempted to divert some of their funds to fill the state budget hole. Redevelopment – which morphed years ago from a mechanism to fight urban blight into a scheme to divert county and state taxes to cities – is the creation of the state, so the governor argued that the state had the right to take some money. The League of California Cities and the California Redevelopment Association struck back with Proposition 22 in November 2010, which forbade state diversions of redevelopment funds. It was sold to the public as a means to stop Sacramento politicians' raids on local road funds.

Redevelopment officials were gloating after their big victory, but then Gov. Jerry Brown came up with a work-around. He signed a law that shut down RDAs. After all, Prop. 22 can't stop a raid from agencies that no longer exist. And then he also signed a law that allowed the agencies to come back to power after paying funds to the state. The redevelopment community challenged both laws and was pleased when the high court agreed to review them. But redevelopment advocates were stunned by the unanimous ruling that found that the Legislature was perfectly within its rights to abolish agencies that it had created and by the 6-1 ruling voiding the second law. The justices said that agencies cannot buy their way back into existence because that violates Prop. 22, the very initiative the RDAs had crafted. How sweet is that reasoning?

I celebrated Tuesday night at Philanthropist Moe Mohanna's downtown Sacramento Oddfellows building. Many in this odd group of activists of the Left and Right had been abused by redevelopment agencies, including Mohanna. We ate Persian food and savored the rare victory
for the good guys. But we realized that redevelopment is, as the Monty Python troupe once said, "not quite dead."

Let's hope coalitions emerge this year to keep this Evil Thing in its grave.

Steven Greenhut is editor of CalWatchDog.com.

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31 responses to “A Victory for Property Rights in California

  1. “No one gives up riches and power without a fight”

    Is this another article on Congress?

    1. I lol’d. I think it’s an article on government in general.

      1. Or how the California Supreme Court stood up against government abuse.
        Just a guess.

        1. Or how the California Supreme Court stood up against government abuse.

          It was a choice between state government scewing us or the local government doing it. The CSC sided with the state. Not surprising. It’s nice to see them beating up on each other, though.

  2. We need the video of the LA guy in the outrageous sport coat ragging on the RDA folks for an illegal meeting.
    I’ll bet there were a lot of those meetings and a lot of funds transfers.

  3. Getting rid of RDA’s is good. Congratulations to the California Supreme Court for making a ruling in favor of liberty. It’s a first step in normalizing California’s distorted real estate markets. Awesome.

  4. And then he also signed a law that allowed the agencies to come back to power after paying funds to the state….The justices said that agencies cannot buy their way back into existence.

    I’ve heard other people in the development industry refer to that as “pay to play”–in all innocence.

    As if the problem wasn’t the effect on the economy or the people getting screwed, the problem was that they weren’t sharing the booty.

    There are some situations where land can be worth less than zero, but that’s generally becasue of environmental regulation of some sort, which can be addressed in a better way.

    If I could use this to persuade my fellow Californians of anything, it’s that good things happen because of budget crises. It’s often unpredictable about what the good effect is going to be, but I don’t think there’s ever been a situation where the state legislature was so flush with cash–that it decided to kill off whole programs.

    This was brought about because of the budget crisis–and California’s ability to withstand the call for more taxes. Starving the beast works.

    We don’t always know precisely what’s going to get cut or how, but when they can’t get the money anymore, somethin’s gotta give.

    1. It’s too bad the beast has to be allowed to grow in the first place before we can starve it in a crisis and even then we can’t get it down to a manageable size.

      We’d have to cut off the funding early to keep the beast malnourished in order to avoid this drama in the future.

  5. The likely result is that RDAs will be created at the local level instead.

    1. Dunno. That amount of graft is hard to hide at the local level.

      1. It’s also tough to float that kind of cash at the local level.

        I think there might be some political issues with that too, in relatively small cities, where you’re seizing people’s property–and then asking their relatives and lifelong friends elsewhere in the city to sign off on the float?

        The difficulty score on that stunt goes up geometrically when you’re burning the candle at both ends, I’m sure.

        And a lot of these cities are already strapped for financing anyway.

        1. It’s true that it might be harder to get away with politically at the local level, since the voting power of the residents affected will be greater. Small organized groups of residents are more likely to change a city council race than a state election.

      2. That amount of graft is hard to hide at the local level.

        [snicker]

        1. Well, the *pros* can get away with it…

      3. Well, you can’t keep doing it forever, sure…

  6. Off with those corporate welfare queens’ heads.

  7. Over the years, I’ve interviewed victims of eminent domain, many of them immigrant small-business owners who couldn’t believe what was happening to them in America.

    Women and minorities hardest hit.

    FIFY

  8. “A Victory for Property Rights in California”

    Surely there is a typo in there. Or I am drunk.

    1. Why can’t it be both?

      1. Everyone: “OLE!”

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  10. CA got something right? OMG!

  11. y off the old debt and old projects will go on to comp

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