California Kills Redevelopment

Gov. Jerry Brown's winning campaign against blight hustlers


It's been a few years since California was considered a national leader in anything except decline. But with a law signed last year by Democratic Gov. Jerry Brown and upheld by the state's Supreme Court in December, California has set an example the rest of the country should follow: abolishing redevelopment agencies. 

The state has 425 redevelopment agencies (RDAs), urban renewal fiefdoms empowered by eminent domain and catering to political hacks, connected land barons, community organizers, and Chamber of Commerce flunkies. All 425 must now unwind themselves and liquidate their land holdings.

California authorized the creation of local redevelopment agencies in 1948, allowing them to receive a large cut of property taxes and seize land for "planning, development, replanning, redesign, clearance, reconstruction, or rehabilitation…as may be appropriate or necessary in the interest of the general welfare." The biggest, richest RDA, the Community Redevelopment Agency of Los Angeles (CRA/LA), sits atop vast tracts of land downtown and south of Interstate 10. This is real estate assembled by force, seized from its rightful owners (subject to "fair market" compensation under the Fifth Amendment) and delivered to the city's coterie of daytime dreamers. 

Redevelopment has taken a shameful toll in lives and livelihoods. The upscale Bunker Hill project of modern skyscrapers, generally considered the city's most successful redevelopment effort, required the destruction of more than 20,000 downtown Los Angeles residences in the 1960s.

The more lasting legacy, however, is not the millions of dollars in value the CRA took away but the vistas of urban prairie the agency left behind. The 22-acre Marlton Square development, on an area that once housed 230 businesses, was converted into a permanent ruin over the course of 20 years while a shady developer with friends in City Hall burned through $31 million in public funds without building anything. 

On another site, at the corner of Slauson and Central Avenues, the owners of a local scrap metal yard, responding to neighborhood demands for high-end retail complexes, tried to build a shopping center more than a decade ago. The CRA, working with a group called Concerned Citizens of South Los Angeles, blocked that enterprise and seized the property. Douglas Kramer, owner of the metal company, explains what the agency produced in place of this functioning business. "It's a vacant, filthy lot," Kramer says. "It has been used as a dumpsite. If the CRA had allowed me to pursue this shopping center, they would have an up-and-running shopping center, hundreds of new jobs, a fortune in tax revenues. And it would have been done 10 years ago at no cost to the taxpayer. Instead you have an empty lot, with a 24-hour guard to make sure nobody uses it as a continuing dumpsite, at a cost of tens of millions of dollars from the taxpayers of Los Angeles." 

The CRA follows this pattern throughout Los Angeles. When an owner in one of the agency's designated zones shows an interest in improving his or her property, the CRA comes in to help, then runs the owner through a conveyor belt of subsidy temptations, building restrictions, revolving master plans, and impact statements. The property languishes as the proceedings and uncertainty drag on. Personnel at the CRA turn over as local politicians play term-limit musical chairs, dragging their cronies along. In the end, the CRA tires of the game and seizes the property. 

Now the music has stopped. Last year Brown signed two laws—one terminating the RDAs and another offering to let the agencies remain in place if they handed their property tax increments over to Sacramento. The RDAs sued the Brown administration, citing a recent California law (promoted by the RDAs) that prohibits state seizure of property tax revenues designated for specific purposes, including redevelopment. 

The state's high court agreed with that argument, but not in the way the RDAs hoped. The California legislature does have the authority to revoke RDA charters, the court ruled unanimously. But a majority also ruled that, thanks to the law cited by the RDAs, the legislature did not have the authority to offer them the proposed lifeline. 

Even better, the timing of the decision left the RDAs with only a brief window to fire their employees and sell their property. The city and county of Los Angeles both declined to act as the CRA/LA's successor, and the dead agency's real estate may be sold at fire-sale prices in a declining market—creating a wealth of buying opportunities in an overpriced county. On February 1, most statewide redevelopment assets passed into the hands of a three-person dissolution board to which Brown appointed a connected developer, a former L.A. mayor's chief of staff and a former CRA "city council liaison."

The downfall of these agencies is in some ways a California-specific story. Other states' redevelopment organs are not afforded such broad eminent domain powers. Many lack California's briar patch of laws, rulings, and constitutional amendments—so thick that even powerful local institutions can become entangled. A history of despotic behavior, culminating in the 2011 lawsuit which infuriated Brown and alienated Democratic allies in the legislature, made California's RDAs an especially popular target. 

More important than any of these factors, the Golden State's fiscal crisis and recession have created a moment of clarity, with the result that school districts and police associations, eager to get their paws on tax money that had been going to redevelopment, gave the Democrats cover to terminate the RDAs. While Brown deserves credit for making a strong ethical case against the agencies, he was motivated primarily by the need for revenues to plug the state's gaping budget hole. 

But there is indeed a lesson here for other states. Our national half-decade of economic stagnation is creating opportunities for reform in unexpected places. As public finances shrink, voters continue to reject new taxes, and self-interested public corporations turn against each other, a reasonably bold politician can terminate even an old and resilient bureaucracy. 

Tim Cavanaugh is managing editor of reason online.