Urban Revitalization

What Are Redevelopment Agencies?

In many states and cities, redevelopment agencies are created to encourage development in urban areas that are in dire need of revitalization.  I am sure that in many universities across the country, multitudes of studies and papers have been written trying to assess the solutions to a common problem in our society.

Until around 7 years ago, we had redevelopment agencies (RDA) in California that provided the impetus for cities and developers to provide the resources and effort to revitalize areas of blight.  The simple version is that a city would designate an area of blight and therefore provide for a property tax increment that would help in the financing of the redevelopment zone and provide funds to the city for other affordable programs.

As example, let’s say that a designated redevelopment zone currently generates $1.0 million in annual property tax revenue.  Of that total property tax, the city probably retains 10 – 15% while the state and other agencies take the balance.  Once the redevelopment zone is revitalized with new development, let’s say the new property tax is $10.0 million, or an annual tax increment of $9.0 million.  I have heard differing opinions, but the city would then keep 80 – 100% of this significant tax increase, which would provide for the RDA infrastructure needs and affordable programs.  The city, flush with this future tax cash flow, will then have the ability to sell municipal bonds to generate the cash needed today for programs.

The term “tax increment financing” (TIF) is also a related subject.  A debate seems to vary as to the effectiveness of TIF and redevelopment agencies.  The California state government ended the RDA’s approximately seven years ago, but recent talk is that some politicians are pushing again for these redevelopment agencies.

Please share with us below any of your comments, experience, and questions.