Corporate Welfare and the California GOP

How Golden State Republicans undermine property rights and support eminent domain abuse

We all know that California's Democratic Party is running the state into the fiscal ground, given how beholden its members are to public sector unions and how devoted they are to expanding government and raising taxes. The state needs some political competition, but a major court case reminds us why the state Republican Party is a useless vessel that's incapable of broadening its base and changing the state's political trajectory.

Last Thursday, the California Supreme Court began oral arguments in a lawsuit brought by defenders of the state's redevelopment agencies (RDAs) who are seeking to overturn recent laws that essentially shut down those agencies. Gov. Jerry Brown isn't often right, but he was on target when he proposed shutting down these central planning agencies that primarily dispense corporate welfare to big businesses and drive small property owners off their land so that big-box stores can prosper.

Brown's plan wasn't perfect. It allowed the agencies to buy their way back into existence as many of them have since done. The law wasn't passed entirely for the right reasons. Brown and legislative Democrats had typically supported RDAs, but were looking for quick ways to close the state's gaping budget hole. As Bloomberg reported, "The governor and supporters of the law said the redevelopment agencies have become little more than slush funds for private developers, and they want the tax money generated by new developments to be diverted from the agencies to local schools, law enforcement agencies and other services."

When your political enemies give you a gift, you ought to take it. Instead of taking it, California Republicans actively opposed the governor's plan and shamelessly sided with the people who run roughshod over everything the GOP is supposed to stand for. Forget all the talk about property rights, limited government, free markets, and family values.

"Almost like in Alice in Wonderland where up is down, and down is up, this past year Democratic Legislators voted to abolish redevelopment and most Republicans fought tooth and nail to protect 425 redevelopment agencies from being abolished!" explained Jon Fleischman, California GOP vice chairman and publisher of the GOP-oriented Flashreport. Fleischman noted that over two crucial votes, only six Assembly Republicans voted to abolish RDAs and only one Senate Republican voted to do so. This indeed is shameful.

In fact, one of the GOP's leaders, Sen. Bob Huff of Diamond Bar, received the League of California Cities' Legislator of the Year award for his efforts to save redevelopment agencies. His wife, by the way, works for a developer who is one of the state's biggest redevelopment beneficiaries. This is the type of thing that makes me want to join the unbathed wretches occupying city parks. In the thick of the debate, I recall talking to multiple Republican legislators and most of them were defiant defenders of redevelopment. They said that it worked in their city. They championed the economic benefits of redevelopment. It became clear that with the exception of Chris Norby of Fullerton, Beth and Ted Gaines of Roseville, and a couple others, Republicans don't even understand the nature of free markets.

Started in the 1950s to combat urban blight, redevelopment has become a tool by which localities maximize tax revenue within their boundaries. In the redevelopment process, local bureaucrats identify areas that they want to see improved. The agency declares these areas blighted based on a wide-ranging set of criteria. Basically, if officials want to redevelop an area, the well-paid consultants will always find blight.

Then within that area, property rights magically disappear. City officials call the shots. They can and often use eminent domain to clear away properties and hand them over to politically well-connected developers who promise to build tax-generating projects. Even when cities don't use eminent domain, the threat of its use is enough to cause small business owners and even homeowners to flee. Then the agencies run up debt to fund the projects. In Sacramento recently, a restaurant developer received millions of dollars in subsidies to build a mermaid bar—mermaid-costumed women swim around in a giant fish tank—that caters to lobbyists. How's that for a core government service?

Of course, most of the claims by redevelopment's advocates and beneficiaries of new jobs are bogus. The nonpartisan and highly respected state Legislative Analyst's Office found, "While redevelopment leads to economic development within project areas, there is no reliable evidence that it attracts businesses to the state or increases overall regional economic development." LAO debunked the absurd job-creation claims made by the California Redevelopment Association.

Mostly, redevelopment shifts jobs around a region as localities fight with one another to lure the businesses in a mad rush for tax revenue. They have to find some way to fund those lush city manager salaries and police pensions. This may be pro-business in a way, but it's the sort of anti-market, bailout, subsidy-driven philosophy that is angering Tea Partiers and Occupiers alike.

The state Supreme Court case centers on Prop. 22, the November 2010 statewide ballot initiative that banned fiscal raids on redevelopment funds. That's why the governor's approach was to shut down the agencies in their entirety and then allow some of them to come back into existence. As the state argued, "RDAs are creatures of statutes—and their existence is not guaranteed in the state Constitution—so the Legislature was free to dissolve them."

Republicans should be standing with the small property owners and business people—often working-class people and minorities—who want to pursue their dreams and not be bullied by these urban-renewal agencies. They should be standing up for fiscal responsibility and against debt and subsidies. Instead, they have stood up for the Armani-suit-wearing developers and bean-counting bureaucrats who treat private property like pieces on a monopoly board. It's shameful and a reminder of why the GOP is dying in California.

Steven Greenhut is editor of www.calwatchdog.com.