California Dials Back ED Errors

According to an LA Times article, last weeks California Supreme Court decision ruled unanimously in favor of a state law passed last summer that abolished redevelopment agencies. They also voted 6 to 1 to strike down a companion measure that would have allowed the agencies to continue if they shared their revenues.

“More than 400 redevelopment agencies will cease to exist after Feb. 1. Authorized by law since 1945, the agencies have been responsible for such success stories as Old Pasadena and San Diego’s Gaslamp Quarter but also plagued by projects that some argued had little public benefit.

Redevelopment agencies, which use a portion of property tax money to partner with developers to encourage development in blighted areas, control about $5 billion a year in tax revenue. After agencies repay their existing bonds, those revenues will go instead to schools and special districts.

Gov. Jerry Brown, who first proposed eliminating redevelopment agencies to help solve the state’s fiscal crisis, expressed satisfaction with the court’s decision, noting that it “validates a key component of the state budget and guarantees more than a billion dollars of ongoing funding for schools and public safety.”

TIF – few short-term successes, much long-term debt and increased unfairness to taxpayers that also hammers the budget. California’s redevelopment problem grew too big to ignore.

The court upheld the constitutionality of AB 1X26, which dissolves the state’s redevelopment agencies and redirects their property tax revenues. Opposition even tried to bargain with proposing AB 1X27, which would have allowed the agencies to operate if they agreed to a plan that included annual payments (revenue sharing). That sounds something like kickbacks. Does it not sound like, let us continue to take too much as long as we give you some?

I suppose the recaptured, captured revenues would go instead to schools and special districts from the Economic Development scheme because once the government gets their hands on revenue, the last thing they think about is giving it back to the taxpayer. If any government agency finds they have a surplus, they immediately devise a way to spend said surplus to guarantee the same or larger amount the following year. They use lots of tricks to keep that revenue flowing steady and strong. Bloating the budget is another fine trick to keep coffers full.

I’m waiting for the day we can put a number on corruption, waste, fraud and abuse from every government program and agency. Currently we can only view the tip of the iceberg on that one. It wouldn’t surprise me if that number consumed 40% – 50% of your government contributions.

With every reform or regulation, we inherit bureaucracies and bureaucrats that run them, with all their golden compensation packages. To add insult to injury, we also get taxed more, charged more fees and acquire more red tape grief. Your labor is what you trade for money to pay your bills, government essentially steals your labor. Two years studying this mess has lead me to conclude getting rid of these economic development programs entirely is the best option. They’re full of cronyism and corruption and they just don’t work, nor are they financially feasible. They’re not even constitutional, if they were held to constitutional standards, they wouldn’t be able to steal your labor to fund them.

A non-partisan analysis group from Iowa, the Iowa Fiscal Partnership is crying out for TIF reform, they write…

“Without serious reform, we can look forward to a future in which increasing numbers of cities TIF all or most of their city for the primary purpose of shifting taxes to nonresidents,” Fisher said. “More cities will join the incentive wars in retaliation for the piracy of retail and other businesses by their neighbors.

“The result will be a local property tax system that is increasingly unfair, and a serious erosion of revenues. That will threaten the ability of cities and counties to finance important public services, many of which are part of the foundation for future economic growth. It is ironic to think this will all have been done in the name of ‘economic development.’ In most instances it is just ‘economic displacement’ that, among other things, distorts the free market.”

Iowa’s not the only state that should follow California’s lead and dial back on economic development errors. They all should.

States and local governments should be keeping more of the revenue they collect instead of sending it off to filter through federal agencies. It was the intention of the constitution to give the most power to local governments and less power to the Federal. We’ve progressively turned – or, allowed progressives to turn things upside down.

Solution: Why don’t we demand getting ourselves righted again?

Image: dan / FreeDigitalPhotos.net

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6 Responses to California Dials Back ED Errors

  1. JUST WATCHING GOVERNMENT says:

    Reading the Blissfield Advance this week on the store that just got approved for a government grant to build apartments over their store. Makes me think why our state (which all would agree is in trouble financially) would give out grants to private business owners to build apartments over their stores. The apartment build costs $110,000 and our tax payer money pays $70,000 of it! If I want to put an addition on my home, I don’t run to our government and ask just how much will they pay?? Heck, I’d build an addition too that I will make money renting out if I could get that deal!! Only $40,000 gets me apartments that I can rent out for maybe $700 a month, and 2 – 3 apartments at that would be a nice income. And our local government is so proud of that!! Just how many other grants has this business owner received on the same property?

    • Robin says:

      Exactly Just Watching…they are socializing the risks and privatizing the gains. That property has had at least 2 other grants. It’s called legal plunder, Allow me, if you will, an excerpt from Frederic Bastiat in 1850, he writes…

      “Now, labor being in itself a pain, and man being naturally
      inclined to avoid pain, it follows, and history
      proves it, that wherever plunder is less burdensome than
      labor, it prevails; and neither religion nor morality can, in
      this case, prevent it from prevailing.
      When does plunder cease, then? When it becomes
      more burdensome and more dangerous than labor.”

      Bastiat continues with this as he eerily defines what our dilemma today is…

      “No doubt the party benefited will exclaim loudly;
      he will assert his acquired rights. He will say that the State
      is bound to protect and encourage his industry; he will
      plead that it is a good thing for the State to be enriched,
      that it may spend the more, and thus shower down
      salaries upon the poor workmen. Take care not to listen
      to this sophistry, for it is just by the systematizing of these
      arguments that legal plunder becomes systematized.
      And this is what has taken place. The delusion of the
      day is to enrich all classes at the expense of each other; it
      is to generalize plunder under pretense of organizing it.
      Now, legal plunder may be exercised in an infinite multitude
      of ways. Hence come an infinite multitude of plans
      for organization; tariffs, protection, perquisites, gratuities,
      encouragements, progressive taxation, free public
      education, right to work, right to profit, right to wages,
      right to assistance, right to instruments of labor, gratuity
      of credit, etc., etc. And it is all these plans, taken as a
      whole, with what they have in common, legal plunder,
      that takes the name of socialism.”

      And the solution is merely a selection of which to choose our course instead of staying the course with number 1., which has been chosen for us by the few…

      “It is absolutely necessary that this question of legal
      plunder should be determined, and there are only three
      solutions of it:
      1. When the few plunder the many.
      2. When everybody plunders everybody else.
      3. When nobody plunders anybody.”

      So, instead of the few plundering the many, we should consider either nobody plunders anybody, or the wildly entertaining alternative of everyone plundering everyone else. Imagine the mayhem! Get ready to sharpen your mayhem and plundering skills!

    • Tom says:

      Just Watching,
      It’s called the Rental Rehabilitation Program and Robin has wrote an excellent article by that name on the concept that is about midway up on the right side. It is a total crock and a waste of public resources, and it’s going on all over the State, as Community Development Directors go after this money to get the extra administrative fees in helping the more well-off people in the community fix up their places– usually for no benefit.

      A case in point is my neighboring town of Scottville with about 1200 residents. In the ’90s a highway bypass of the town as well as development outside of the town, made the survival of the downtown problematic. They have bought into a DDA and the Main Street Program to try and save the downtown, with the effect of the town having the biggest tax rates by far in the area, and a lot of that cash going into a big downtown money pit and director’s/manager’s pockets. Yet, all the potted plants, facade projects, and new events have just make it look less vacant as more established businesses close shop. This last summer they hired Ludington’s CDD to help out, so now they have already had two new different Rental Rehab projects just under $200,000 total creat 5 rehabbed apartments in downtown Scottville that have a set rent to appeal to lower-income renters.

      Problem is, the rental rate is above what you pay for rentals in rather nice areas with yards, little street noise, and no need to climb some rickety stairs to get to your small domicile. The town has plenty of places to live as it is quickly becoming a ghost town largely due to the onerous tax rate and lack of clear direction, while the taxpayers of my state, county and city are throwing a fifth of a million dollars to make more vacant living spaces to benefit downtown property owners.

      • Robin says:

        Thanks for adding more credibility to the situation Tom by detailing how it’s affected someone else. If we give the electorate the taxpayer version instead of everybody relying on the pie in the sky “let’s just spend your money” version, the taxpayer will stand up against the absurdities going on in government. I have faith in “we the people”.

        The rental rehab program, the same as every other grant program proves to be beneficial to the recipient only by subsidizing improvements to their own property. This creates further competition disadvantage for business competitors. It also forces taxpayers to invest into a business we have no idea how good their business model is. If the business is slated to fail, propping up and subsidizing these businesses would just prolong the inevitable. Venture capitalists at least receive gains if in fact the business succeeds, they at least get to make an educated decision of whether to invest or not because they demand a look at the business’s books and the way it’s managed, they also look at other markers associated with business metrics. Not the case with the taxpayer, we’re just supposed to take some bureaucrats word for it. Not only that but, the programs with government involvement, totally just mess up the markets. How can any of that be good?

  2. Tom says:

    Robin,
    Thanks for the most excellent update on the California situation. I don’t usually recommend using California as a bellwether, but if Michigan’s Governor Snyder directed his attention, intelligence, and resources to the fixing of our Economic Re-Development situation, we might finally get out of our own economic malaise. Unfortunately, it will be politically unpopular until our Econ. Development reaches the ridiculous amount, unless enough people get the message before then.

    Also liked the “Economic Displacement” reference in the Iowa report. So true. Keep good news like this coming.

    • Robin says:

      Lol, I usually use Cali as a “what not to do”. I’m totally surprised by their backtracking… still, I have to laud their reform efforts. You’re absolutely right about this being a huge step for getting us out of our economic malaise and Governor Snyder would do well to address this money hole. I’m sure he’ll get a whiff of this economic carcinogen before too long!

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