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