REDEVELOPMENT PART TWO: THE REDEVELOPMENT ESTABLISHMENT

The Myth Of Economic Development


Chapter 7

"Economic Development" is a common cliché among city governments and redevelopment agencies.

It refers to a belief that tax subsidies to selected private businesses can stimulate the local economy. It assumes that the free enterprise system alone is inadequate. It presumes that government planners can allocate resources more efficiently than can the free market.

The legal purpose for redevelopment remains the elimination of blight. All economic development activities must pay lip service toward that goal. Behind this façade, redevelopment has subsidized giant retailers, luxury hotels, golf courses, stadiums and even gambling casinos.

Has redevelopment succeeded in reducing true blight? By what objective standard can this be measured?

Any definition of blight must include depressed local economies and pockets of poverty. If redevelopment is working, then surely poverty is being reduced and the general standard of living improving.

Is there any evidence this is happening? Are residents of cities with redevelopment better off compared to residents of cities without redevelopment?

They aren't.

Are the 359 cities that have created redevelopment agencies any better off than those 102 cities that have not? If redevelopment is eliminating blight, then certainly comparisons between such cities could prove it.

They can't.

If redevelopment was improving local economies, then such a comparison would show greater personal income growth in cities that do have redevelopment relative to those cities that do not.

It doesn't.

Table V is a comparison of combined average income growth among all cities with redevelopment and those without it, between the years 1979-89. As can be seen, there is no correlation between redevelopment activity and personal income growth.

Table VI directly compares five pairs of cities of similar size, region and economic level. Again, there is no correlation between growth rates and redevelopment activity.

Both Tables V and VI demonstrate that cities without redevelopment either match or actually exceed those cities that do, in terms of personal income-growth.

There is no evidence to show that all the billions spent on redevelopment has done anything to improve the lives of people in those cities. There is no evidence that redevelopment is a positive factor in the elimination of blight.

Eminent Domain For Private Gain

Chapter 8

"Nor shall private property be taken for public use without just compensation." Thus the Bill of Rights specifies the only purpose for eminent domain: "public use".

Since then, government has used eminent domain to acquire land for public use. Roads, schools, parks, military bases, and police stations were essential public facilities that took priority over individual property rights. Private real estate transactions, on the other hand, were always voluntary agreements between individuals.

Redevelopment has changed all that.

Under redevelopment, "public use" now includes privately owned shopping centers, auto malls and movie theaters. "Public use" is now anything a favored developer wants to do with another individual's land. Eminent domain is used to effect what once were purely private transactions.

Its use nearly always favors large developers at the expense of small property owners. In a typical redevelopment project, a developer is given an "exclusive negotiating agreement," or the sole right to develop property still owned by others.

Once such an agreement is made, small property owners are pressured to sell to the redevelopment agency, which acquires the land on behalf of the developer. If refused, the agency holds a public hearing to determine "public need and necessity" to impose eminent domain. By law, this must be an impartial hearing. In reality, the agency has already committed itself to acquire the property for the developer, so there is little doubt of the outcome.

Whole areas of cities have been acquired, demolished and handed over to developers to recreate in their own image. Historic buildings, local businesses and unique neighborhoods are replaced by generic developments devoid of the special flavor that once gave communities their identity.

Typical is the experience of Anaheim. Having demolished its historic central business district in the mid-1970s, the redevelopment agency recently hired consultants to help restore the identity of a downtown that no longer exists. "The complete eradication of the traditional business district has left nothing for the community to relate to as their downtown," admits an internal city memo.

Small business owners are compensated and relocated, but often in distant areas far from their established customer base. Cut off from the community that nurtured them, they often cannot survive.

Small property owners have little chance to participate in redevelopment projects. Consultants and redevelopment planners prefer to work with one huge parcel under a single ownership. Entrepreneurs and homeowners just get in the way.

Indeed, one of the definitions of blight is that of "irregularly shaped lots with multiple ownerships," to be solved by "consolidating parcels" for an outside developer to control. The variety of land owners and uses that gives cities their individuality becomes an excuse for expropriation.

Legislative attempts to protect small property owners have all been derailed by pro- redevelopment forces in Sacramento. Eminent domain is defended as a tool of "last resort." Yet eminent domain lies at the heart of the coercion that makes redevelopment possible-and destructive.

The Redevelopment Establishment


Chapter 9

Redevelopment is an entrenched special interest. It thrives on contributions from its beneficiaries and from lack of awareness of the general public. Its advocate is the California Redevelopment Association, a Sacramento-based lobby that seeks to protect and expand redevelopment power.

The CRA claims to represent the interests of cities. It is, in fact, a self-perpetuating money machine that reacts against any reforms that would diminish its power. The CRA's annual budget now tops $1.6 million. Its Executive Director draws $156,200 annually in total compensation. Its contract lobbyist will be paid $122,800 this year, though the CRA is only one of his several clients.

The public has no voice in CRA operations or policies. The CRA is governed by its seven officers and a 12-member board. All are redevelopment agency administrators. None are elected officials. The CRA is operated by redevelopment insiders to serve their interests. Good public policy is the last of its concerns.

The real beneficiaries of redevelopment are not local communities, which must bid against each other for corporate retailers. They are not individual citizens, who have seen their property rights eroded as public debts mount.

The real beneficiaries are those employed by redevelopment agencies. Redevelopment staff controls agency agendas and recommends agency actions. Agency members-usually elected city councils-often rely more on their staff than on their own judgement. Though simple to understand, redevelopment is often presented as too complex for ordinary elected officials-and citizens-to comprehend.

The real beneficiaries, too, are the consultants, lawyers, bond brokers and developers who create, finance, advise, build and otherwise make vast sums from redevelopment projects.

They are easy to find. The California Redevelopment Association's 1996 Directory lists as members 25 commercial development companies, 26 bond brokers, 37 law offices and 101 separate consulting firms. Together, they form redevelopment's core constituency and its only profit-center.

Among these companies are California's biggest developers, priciest law firms and some of Wall Street's most powerful brokerage houses. They are relied on by public officials for "expertise" which is always geared to expanding redevelopment power. They are the donors to the CRA's political action committee, which supports compliant state and local lawmakers. Thus, the tax increment is recycled into political contributions.

What also allows redevelopment to thrive is the lack of public understanding of what it is and how it operates. By law, redevelopment agencies are an arm of state government, and thus are not subject to the same public overview as are those of the counties, school districts and cities. This isolation has spawned activities that would never be tolerated by any other government agency.