Blighted Areas Now A Calif. Budget Battleground

California officials are locked in a bitter stalemate over how to close the $15.4 billion budget deficit. One idea pushed by Gov. Jerry Brown is to do away with an economic development program that's been around since the 1950s and has helped transform blighted cities across California.

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California officials are locked in a bitter stalemate over how to close the $15.4 billion budget deficit. One idea pushed by Governor Jerry Brown is to do away with an economic development program that's been around since the 1950s. Proponents say redevelopment agencies helped transform blighted cities across California, but Brown says they've become a bloated bureaucracy the state can no longer afford.

NPR's Jim Zarroli reports.

JIM ZARROLI: When Nora Davis moved to the San Francisco bay area city of Emeryville 30 years ago, it was a place the economy left behind.

Ms. NORA DAVIS: The steel plants moved out, the truckers, the paint companies moved out, left behind this toxic wasteland of empty buildings. They were in very serious economic condition because their tax base had essentially abandoned them.

ZARROLI: Today, Davis is Emeryville's mayor and the city is transformed. The abandoned factories have been replaced by big box stores, offices and hotels. The animation company Pixar moved its headquarters into a renovated cannery. There's a retail and housing complex called Bay Street Emeryville.

Ms. DAVIS: It's a thriving, exciting shopping center that people like to come to.

ZARROLI: City official Helen Bean says the commercial developers who built these projects never would have come to Emeryville without California's redevelopment program, which provided money to clean up old industrial sites and build access roads.

Ms. HELEN BEAN: Well, the cost would have been too great. The time and the cost and the risk all would have been more than what a developer could take on.

ZARROLI: Redevelopment began in 1952 and has been copied by other states. Under the program, cities designate certain areas as blighted, then they set up agencies to promote development inside them - agencies that can borrow to fund new projects.

As time goes on and property values rise, most of the additional tax revenue gets funneled back into the agencies, which allows them to promote even more projects.

Redevelopment officials say there are more than 400 redevelopment agencies in California and few, if any, ever shut down. Terry Christensen teaches political science at San Jose State University.

Professor TERRY CHRISTENSEN (Political Science, San Jose State University): Do they ever end? Well, that's a really good question and I am sure there are places where that's happened, but in most places they seem to find a way to go on almost indefinitely.

ZARROLI: City officials in California love redevelopment. Here was Governor Brown addressing an audience in January.

Governor JERRY BROWN (Democrat, California): When I was mayor of Oakland, I built a lot of good things. I liked redevelopment. Didn't quite understand it; seemed kind of magical. It was the money that you could spend on stuff that they wouldn't otherwise let you spend.

ZARROLI: But today, Brown is fighting to eliminate the program. Spokesman Evan Westrup says redevelopment agencies siphon tax revenue away from local communities - money that would be better spent on schools and police, which means more of a burden on the state.

Mr. EVAN WESTRUP (Spokesman for Governor Jerry Brown): At this point, you have billions of dollars going to what have become bloated redevelopment agencies. And given the times we're in right now, the governor believes we need to rethink how those scarce taxpayer dollars are being spent.

ZARROLI: Recently, the state comptroller issued a report criticizing redevelopment agencies. He said some agencies use money for purposes that have little to do with combating blight, like renovating golf courses and building stadiums. Local officials say the report cherry-picked abuses to make a political point.

Chris McKenzie of the California League of Cities argues that redevelopment has been an economic boon for the state.

Mr. CHRIS MCKENZIE (California League of Cities): We believe the governor's proposal in all respects is dead on arrival, but more importantly sacrificing over $2 billion in tax revenues that's generated by redevelopment agency investments is very unwise for this state.

ZARROLI: McKenzie argues that Brown lacks the constitutional authority to eliminate redevelopment. Local officials have mounted a huge campaign to save the program, but Terry Christensen of San Jose State isn't sure how much public support it has.

Mr. CHRISTENSEN: There's support amongst the elected officials and redevelopment agency operatives but there's not a lot of public support for it, partly because the public doesn't always understand how it works.

ZARROLI: What Californians do understand is that the state remains deep in the red. Many programs have already been cut. Whatever good they have done, redevelopment agencies may have to share the pain.

Jim Zarroli, NPR News.

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