Does Research Back So-Called “Benefits” of Redevelopment?

The debate over Governor Brown’s proposal to eliminate redevelopment agencies (RDAs) in California is heating up. Since Governor Brown announced his plan to close the state’s nearly 400 municipal redevelopment agencies and shift control over much of the roughly $5 billion they handle each year, local leaders, who now direct the money, have angrily denounced the idea.

To help inform the debate, the California Budget Project pulled together a “quick and dirty” review of independent research on redevelopment – often referred to as “tax-increment financing” (TIF). This preliminary overview of the research points to two general conclusions:

o First, it’s unclear whether TIF boosts property values and results in increased property tax revenues. While the research finds mixed results, the most comprehensive independent study of California’s RDAs, conducted by the Public Policy Institute of California (PPIC), found that redevelopment activities in most RDAs studied failed to generate enough growth in property values to account for the tax increment revenues diverted to redevelopment. The PPIC study concluded that “the existing tax increment system is not an effective way to finance redevelopment. Few projects generate enough increase in assessed value to account for their share of these revenues.”

o Second, some academic research finds evidence that TIF projects simply shift economic activity within municipalities rather than creating additional economic activity. For example, one study suggests that when employment increases in TIF project areas, it decreases in other parts of the city, which could mean that TIF projects draw jobs from elsewhere in the city, rather than generating new jobs.

The findings of this body of research are echoed in the Legislative Analyst’s Office’s recent review of the economic literature, which concludes, “there is no reliable evidence that redevelopment projects attract businesses to the state or increase overall economic development in California. The presence of a redevelopment area might shift development from one location to another, but does not significantly increase economic activity statewide.”

You can read California Budget Project’s full summary here.


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