Friday, January 21, 2011

The Foggy Gloom of Redevelopment in California

A brief prelude: Almost seven years ago to the day, I started working on a major redevelopment proposal for the south side of Stockton, California for a client. This potential project included almost 100 city blocks. The goal was to transform these properties into a rich and vibrant area of the city. The concepts and studies were paid for by private development interests. It was also a project within properties controlled by the City of Stockton’s Redevelopment Agency. There were hundreds of parcels, hundreds of property owners, many owners were known - many unknown.

One early foggy winter morning I was taking a drive-by survey of the area, more of a snapshot view than a parcel by parcel study. Lot after lot and house after house of vacant properties, derelict yards, abandoned cars, and (from police reports) crack houses and worse lined many of the streets; all were within five blocks of the downtown business district of Stockton. What really struck the heart, and still does today, was the sight of a young boy, crisply dressed, huge backpack, and baseball cap climbing down a set of broken steps fronting a decrepit shell of a house and beginning his walk to school about five blocks away. Disconnected youths stood on the corners, even at 7:45 and pit bulls stood behind chain-link watching the boy, marking him. No future was living in these buildings, no-way-out barred the door, and depression sat on the curb taking a tote.

The current debate (really a very serious battle) is now beginning over the existence and future of Redevelopment Agencies in the state. The cynics say it’s really a bone-toss to the teacher and employee unions to find more money for their coffers (It’s the schools and firemen – please help!). And from the other side come the constitutional arguments about the sanctity of property rights and the heavy hand of big brother (Ma’am were here to take your house - for a WalMart!).

The redevelopment agencies, with great aplomb, point to their successes such as the Disney Theater complex area (Bunker Hill) in LA, Hunter’s Point and Yerba Buena Center in San Francisco, most military base closures, and hundreds of other local projects, many successful, some not. Without some form of governmental assistance most, if not all, of these developments would not have happened.

California’s 425 redevelopment agencies were born during the post-WWII years through legislative actions at the state level to assist in the revitalization of run-down urban districts. Acquisition and construction bonds are repaid through the growth of the revitalized area’s property tax revenues. This increase in property tax values, the “tax increment,” is then captured by the agencies to pay off the bond debt. These agencies are not “local government” but extensions of the state, though local and operated locally. In effect a parallel “government” within a city or county. When they dance together things are great, a prom if you will, but when they don’t – bitterness and spurned lovers result – a body tossing rave.

Our urban areas face incredible difficulties during the next twenty years: increasing populations, aging infrastructures, aging populations, growing families (especially in urban areas), and burdensome costs and taxes. The life expectancy of most Western structures is forty to fifty years (this is not old world Europe – it’s just a fact), and our mid-century Twentieth Century California growth now requires substantial redevelopment and reconstruction. Towns that were hundreds of small parcels need to be agglomerated into substantially larger parcels for new retail, offices, and residential complexes. Few private interests have the resources and political skills to accomplish this – they know how to build that’s why their called builders – not agglomerators. This is where redevelopment agencies have stepped in to help present, to the development community, lands that are a sum of parts – not just pieces to be dealt with one-on-one.

I go either way with respect to these redevelopment agencies, sometimes they seem professional and have focus, other times they seem like just another governmental agency going through the motions of looking important and as a result never accomplish much. Should their funds be shifted to state coffers? Think about how those “revenues” from the state’s institutionalized gambling racket has “helped” the schools. Should more tax funds return directly to the state (remember that these redevelopments have created tens of thousands of jobs and billions in retail sales), should they cease to exist, should city’s become the redevelopment agency itself (imagine the graft and political corruption that would bring)? I am a social and financial libertarian of the Austrian School but like the atheist in a foxhole, I do have a broader less dogmatic view of this debate.

Again I go back to the boy walking the mean streets of Stockton in the foggy gloom: Who is his champion, who is his mentor, where is his future?

Stay tuned . . .


  1. Why we think pouring billions into a broken system is a good solution is beyond me. This is akin to parents taking all of the money from a savings account they'd established for their children's education and putting it into their checking account to cover bills for running the household. Unless the parents align their spending habits with the money they receive from their regular wages, this one-time injection of money will only help in the short term. They will run into this problem again once they've burned through the kids' education funds. And next time it happens, they won't have any savings to deliver them from their bad spending habits.

    I would be as disappointed in these parents as I am with my State.

  2. Thanks Kris, in many ways it is like an alcoholic who can't stay dry. Makes promises and yet continues to justify a sip or two, but never really reforms. I have no idea how to get around all this, fed and state governments seem to only respond to chaos and collapse, never plan for their kids "college" education and save. I am tending to strongly believe that a state constitutional rewrite is in order.