Redevelopment

The California Community Redevelopment Act was enacted in 1945 to give local governments the tools necessary to address problems such as blight, degraded buildings, and a lack of housing. While the Act is now known as Community Redevelopment Law (CRL), the goals of redevelopment remain the same: to focus on problems in developed areas. The CRL was revised in 1993 to further restrict and focus redevelopment activities, ensuring that they can occur only in predominately urbanized areas on previously or currently developed properties.

There are 397 active redevelopment agencies throughout California, all of which are overseen by the local city council, county board of supervisors or a separate appointed board. Because they are locally governed and their boards are comprised of local elected or appointed officials, redevelopment agencies are in the best position to work with local citizens and businesses to identify community needs and to work with private investors on local projects to meet those needs. Redevelopment agencies support jobs, replace and upgrade infrastructure such as streets, water lines, and sewers, fund affordable housing, provide community facilities, clean-up contaminated properties, and encourage sustainable communities.

Redevelopment is a process authorized under California law that enables local government entities to revitalize deteriorated and blighted areas in their jurisdictions. Redevelopment agencies develop a plan and provide the initial funding to launch revitalization of identified areas. In doing so, redevelopment encourages and attracts private sector investment that otherwise wouldn’t occur. Redevelopment activities create jobs and expand business opportunities, provide housing for families most in need, help reduce crime, improve infrastructure and public works, and cleanup of environmentally-threatened and rundown areas.

Revitalization of blighted areas does not happen on its own. Often, the private sector is reluctant to invest in such areas because the risk and costs associated with doing so outweigh the benefits. Redevelopment serves as a catalyst for private investment by providing the initial plan and seed money that ultimately breathes new life into areas in need of economic development and new opportunity.  The initial community improvements made by redevelopment agencies, coupled with their commitment of funds and low-cost financing, reduce the cost and risk factors associated with these projects. In essence, redevelopment agencies make these projects more attractive and economically feasible for the private sector to undertake.

Specifically, redevelopment agencies encourage private investment by:

• Assembly/acquisition of project sites and making those sites ready for private redevelopment;
• Building or rehabilitating area infrastructure such as streets, sewers and water lines in order to make revitalization projects attractive and feasible;
• Issuing low-cost loans or grants to small businesses that pay for physical improvements to their properties;
• Clearing an area of existing blight or environmental hazards that make projects too costly or unattractive to the private sector;
• Making quality of life improvements by building libraries, parks and community centers.
• Improving public safety and reducing crime by building police and fire stations; and
• Building affordable housing, helping low- and moderate-income individuals become new homeowners, or funding rehabilitation of existing housing for working families.

Redevelopment agencies do not levy taxes and do not have the ability to raise taxes. They simply receive a portion of the property tax revenues generated when property values rise as a result of new investment. When redevelopment agencies improve deteriorated areas, property values within those areas rise, thus, increasing property tax revenues. The increased property taxes resulting from redevelopment activity are referred to as “tax increment.” State law allows redevelopment agencies to pledge tax increment so that they can repay bonds and other types of debt incurred to make investments in project areas. In essence, redevelopment agencies fund themselves when they make improvements to their communities. They stimulate increases in property values that otherwise would not have occurred.

Redevelopment plays a critical role in providing housing affordable for working families, low-income seniors, and disabled individuals. Agencies are required to deposit at least 20 percent of the property tax revenues generated from their activities into a special fund called a “Low- and Moderate-Income Housing Fund.” These funds can only be used for the purpose of increasing, improving, and preserving the community’s supply of affordable housing for very low-, low-, or moderate-income households.