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Cities Playing a Blight Game
By Dan Walters

The recent history of redevelopment, a process originally designed to assist cities in cleaning up blighted inner-city neighborhoods, has been something of a cat-and-mouse game.

City governments lost much of their property tax revenue in 1978, when voters enacted Proposition 13, and took another big hit in the early 1990s, when the state grabbed billions of dollars in property taxes from local governments to balance its own recession-stricken budget.

Increasingly, cities turned to the local share of the sales tax as a source of income and began using redevelopment aggressively to attract and subsidize tax-producing projects, such as "big box" retailers, auto malls and shopping centers.

It meant that cities were devising ever more creative definitions of "blight," a legal precondition for a redevelopment project. At the same time, however, cities have been very reluctant to fulfill state redevelopment laws' requirement that funds generated from projects be plowed back into low- and moderate-income housing, which is in critically short supply these days. Cities are sitting on hundreds of millions of dollars of funds that should be used for such housing.

As examples of redevelopment's misuse became more obvious, the Legislature responded with a series of reform measures aimed at forcing redevelopment back into its original purpose: providing more jobs, better housing and public services to distressed urban neighborhoods. The latest of the reforms was adopted just last year, making it more difficult for cities to use redevelopment subsidies to lure sales tax-generating commercial development away from neighboring cities.

Although the reform laws went into the books, many cities continued to use redevelopment creatively, in effect forcing their critics to sue to enforce the new rules on a case-by-case basis.

One of the more egregious examples of redevelopment's misuse has been in the remote community of Mammoth Lakes on the eastern slope of the Sierra. The tiny city declared virtually all of itself, more than 1,000 acres, as a redevelopment zone in 1997 to underwrite a massive reworking of Mammoth Lakes as a world-class ski resort. Opponents sued, saying the scheme violated the redevelopment reform laws adopted by the Legislature in the early 1990s, and the 3rd District Court of Appeal recently struck down the project, saying it encompassed a "municipal wish list" rather than a cleanup of blight.

It was the third recent appellate court ruling striking down overly ambitious redevelopment schemes and should send a message to municipal entrepreneurs that they cannot use the process wherever they please to underwrite commercial development, and that they should concentrate on the original target of true urban blight.

But will they get the message? Cities are continuing to devise new and questionable redevelopment schemes. Santa Clara County says the city of San Jose's plans to sharply expand redevelopment zones distort the definition of "blight." And just days after the Mammoth Lakes decision was made final, the city of Sacramento proposed a new redevelopment zone linking a marginally blighted residential and commercial area along Northgate Boulevard to some vacant fields along Interstate 80 - land the city wants to develop into a tax-producing auto mall. The proposed mall would attract dealers ensconced along Fulton Avenue, an unincorporated area whose taxes now flow into county coffers.

The tougher redevelopment laws, now being enforced by the courts, are welcome. At the same time, however, we should recognize that the underlying causes of redevelopment abuse are a series of political decisions that distort local government finances. And we should do something about that, as well.

Dan Walters is a Sacramento Bee columnist. This column appeared in September 7 editions of The Bee. It is reprinted with permission.