The Redevelopment Boondoggle

Redevelopment.

Sounds like something great that every town and city in America would want to be involved with, doesn’t it?

Who wouldn’t want their downtown area redeveloped – bringing in new businesses, shoppers and revitalizing a blighted area?

While that may be the way your local government presents redevelopment to you – that’s not the way it works.  And in Bloomfield we have a 10 year project that has bonded more than $20 million and not one single, solitary building has been built. 

So, what’s the real story behind redevelopment?

The real story is that redevelopment has become the “unknown government.” 

The truth is that town councils can create redevelopment agencies/authorities to administer redevelopment projects.  These projects, governed by the redevelopment authority, usually have their own staff and governing board appointed by the town council.

Legally, these redevelopment authorities are an entirely separate government authority, with its own revenue, budget, staff and powers to issue debt and condemn private property.

Redevelopment is an important “tool” created by state law to assist local governments in eliminating blight from a designated area to achieve the goals of development, reconstruction and rehabilitation of residential, commercial, industrial and retail districts within the city.

And the "tools" they use for redevelopment are the:

·         Ability to assemble land for development and rehabilitation

·         Ability to utilize tax increments and issue bonds

·         Ability to invest in infrastructure to make the area suitable for private investment

·         Ability to create affordable housing opportunities

Redevelopment should not be confused with the federal “urban renewal” programs.  Redevelopment is a state-authorized layer of government, without federal rules, funds or requirements.  It’s entirely within the power of the state legislature and voters to control, reform, amend or abolish. 

Urban Renewal is the process where an urban neighborhood or area is improved and rehabilitated. The renewal process can include demolishing old or run-down buildings, constructing new, up-to-date housing, or adding in features like a theater or stadium. Urban renewal is usually undergone for the purposes of persuading wealthier individuals to come live in that area. Urban renewal is often part of the gentrification process.

In order to use the first tool of redevelopment – the ability to assembly land for redevelopment or rehabilitation – the local government must hire consultants to go out there and declare an area blighted.

Most state law is so vague, that to meet the definition of blighted doesn’t take much.

The consultants are chosen with the approval of the town council. Hmm.  I wonder if they are also contributors to campaigns?  Anyway, consultants know their job isn’t to determine “if” there is blight, but to declare an area blighted.

So, privately owned structures in areas that have been deemed blighted not only fear loss of property value, but eminent domain.

Once an area is designated blighted, look out.  Your town will probably then try to expand the area.

Now we have upset private property owners who want to fight having their area being termed blighted or who now need to fight against eminent domain.

As part of the team, the town retains a law firm to write the paperwork and defend against legal challenges.  And the final part of their team is bond brokers.

The redevelopment agency has four extraordinary powers in place that no other government authority has:

1. Tax Increment – a redevelopment agency has the exclusive use of all increases in property tax revenues generated in its designated project area.  Any increases in property taxes go directly to the agency and impacts the town budget.  That part of the tax increase that would have gone to the town’s general fund is lost and can only be used by the redevelopment agency.  There’s money for the project, but not enough money for police, fire and libraries.
2. Bonded debt – the agency has the power to sell bonds secured against future tax increments and does so without voter approval.  For many states, in order to receive tax dollars it must first incur debt and property tax increments can only be used to pay off outstanding debt.  Of course, redevelopment staff is supportive of incurring bond debt because more debt means more job security and larger payrolls. Bonded debt is done without voter approval and they don’t have to be justified or approved by the taxpayers.  Bond brokers love to sell redevelopment debt.  Commissions are high and there are plenty of buyers.  The debt is secured against future property tax revenue.  And if a town overextends, the general fund will cover the debt.  This debt obligates property taxes for decades to come.  A nice gift from your local government to you, your kids, your grandkids and your great-grandkids.
3. Business Subsidies – the agency has the power to give public money directly to developers or other private entities in the form of cash, grants, tax rebates, free land or public improvements.
4. Eminent domain – the agency has expanded powers to condemn private property, not just for public use, but to transfer to other private owners.

This an enormous expansion of government into our system of private property and free enterprise.

Our free enterprise system becomes totally distorted and redevelopment deals are given to favored developers.

These public private partnerships are crony capitalism and only transfer wealth to developers and corporate retailers with small business owners and taxpayers footing the bill.

So, is it any wonder with all this nonsense going on that economic development and the abolishment of blight never happen?  There is no evidence that blight is ever eradicated or that local economies have been stimulated.

Redevelopment believes the free market system is not adequate.  It presumes government planners can allocate resources more efficiently than the free market.

What redevelopment agencies will not acknowledge is that if new development is justified by market demand, it will be built anyway.  If not, they will fail, regardless of the subsidies.

Those who are for redevelopment show nice pictures of stadiums, malls, shopping areas. 

As a country that respects property rights and free enterprise, and outperforms countries that do not, it’s amazing that we are allowing our local and state governments to institute economic policies that have repeatedly failed elsewhere.

A local case in point is Harrison, NJ.  The town is on the verge of bankruptcy due to the building of Red Bull Stadium.  The stadium that was supposed to alleviate blight and bring economic bliss is wrecking the city.

Bloomfield NJ pays $7 million off the top of its budget to pay debt service (interest on bonds).

But this tangled web is what your local officials want.  They want you to not understand what is going on.

Problem for them is – now you do.

*Information courtesy of "Redevelopment:  The Unknown Government", Published by Municipal Officials for Redevelopment Reform

Read the full report here:  http://www.missionviejoca.org/pdfs/rug_2004.pdf