Opinion: Redevelopment programs shortchange California schools

By Doug McNea

Special to the Mercury News
Posted: 03/26/2009 08:00:00 PM PDT

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Funding education first should be the top priority of all Californians. But laws governing property tax allocation from redevelopment project areas place subsidized development before education. Here in San Jose, that means over 90 percent of the property taxes in areas designated for redevelopment go to the Redevelopment Agency (RDA). Until these laws are changed, all redevelopment plans designed to increase the money going to redevelopment should be rejected.

California redevelopment agencies have the power to seize all future property tax growth, known as the tax increment, in their project areas. This happens in a four-step process. First, find blight. Second, write a plan and get it approved. Third, acquire first claim to any and all property tax increases in the project area. Fourth, sell bonds secured by that property tax revenue and start spending. Then, by law, the agency cannot be terminated until all debt is repaid.
Unlike school bonds, RDA bonds are debt with no voter approval required and little accountability. California RDAs rarely go away because plans keep getting amended and debt keeps getting extended.

The state's redevelopment agencies currently are robbing education of more than $2 billion in property tax revenue a year. For our children and grandchildren, this is a double whammy. Their education suffers due to the loss of revenue. Then, when they grow up and become taxpayers, they inherit this never-ending legacy of debt.

Redevelopment is an ever-growing blight on education finance. In Santa Clara County in the 2008-09 fiscal year, education will lose over $158 million in revenue to redevelopment agencies. This is a 33 percent increase in the last five years. The current economic crisis demands a permanent policy change that will fix this problem.

This loss of this revenue to redevelopment results in more dependence on Sacramento to maintain school budgets. The level of school district funding from Sacramento is determined by a complex formula with many variables. This calculation offsets some of the property tax lost to redevelopment, but only for some districts, some of the time. This makes it difficult to hold redevelopment accountable for the loss of education revenue.
Although the original goals of RDA legislation were well-intended, a large portion of RDA dollars are wasted or misused on activities far outside the original intent. And unlike old soldiers, RDAs never fade away.

Here in San Jose, we have the mother of all California redevelopment agencies. Established in 1956, it is one of the largest in the state in terms of project area size, tax increment generated and debt. After more than a half-century fight to eliminate San Jose blight, now a preliminary Plan Amendment Report finds more blight than ever. This newfound blight is supposed to justify raising the current $7.6 billion tax increment cap to $15 billion. Redevelopment agencies don't solve the blight problem; they subsidize it with property taxes hijacked from education.

The policy changes required to give education first priority for property tax revenue will not be easy. Redevelopment is supported by a powerful Sacramento lobby of lawyers, consultants, bond brokers and publicly funded organizations such as the California Redevelopment Association and California League of Cities. It will require a coalition of parents, teachers, administrators, school boards and taxpayers to restore our control over property tax priorities.

Doug McNea is president of the Silicon Valley Taxpayers" Association. He wrote this article for the Mercury News.

Douglas A. McNea
President, Silicon Valley Taxpayers' Association
www.SVTaxpayers. org

Cell: (408) 472-3964