Complicated roots
At the time California’s redevelopment agencies were dissolved in 2012, they were recipients of $5.6 billion a year in property tax revenues. Enough for Next City to label them “America’s Biggest Redevelopment Program.”
The story of California’s redevelopment agencies begins in 1945, when state lawmakers passed the Community Redevelopment Act. The legislation gave cities and counties the authority to establish redevelopment agencies (or RDAs) as independent, publicly-affiliated entities with a mission to eliminate blight through development, reconstruction, and rehabilitation of residential, commercial, industrial, and retail districts.
Those agencies were supercharged after Congress passed the Housing Act of 1949. Title I of that legislation infamously created “Slum Clearance” powers that allowed cities across the country to declare entire neighborhoods as “slums” and offered federal loans and grants to bulldoze them and make way for private developers to rebuild. To access those federal loans and grants, local governments needed to come up with their own matching funds. In 1951, California passed new legislation that provided RDAs with matching dollars via the nation’s first “tax-increment financing” scheme.
With tax-increment financing, also known as TIF, cities or counties designate an area or sometimes a single property as “blighted” and in need of new investment. Upon designation, the existing amount of property taxes paid to the local government (as well as to the school district, parks district, transportation district or other local government bodies) is frozen from within that area. Over time, if property values within the designated area rise, any property taxes assessed above the frozen amount are set aside to subsidize redevelopment projects or fund other eligible activities within the designated area.
Fueled by Title I Slum Clearance and their new TIF dollars, California RDAs went right to work, using eminent domain to demolish cherished homes and neighborhoods wholesale in the name of “urban renewal.” The project that incited James Baldwin to re-dub urban renewal as “negro removal” was in fact a project involving the San Francisco RDA bulldozing most of the Fillmore District, a predominantly-Black enclave in San Francisco.
Oakland created its RDA in 1956. Its first large-scale project involved bulldozing the 34-acre Acorn neighborhood, home to around 500 primarily low-income families (78% African American, 20% Mexican American, and 2% white) living in some 600 dwellings.
But it wasn’t as simple as RDAs being wielded only to destroy Black neighborhoods and hand them over to white developers and contractors.
In the aftermath of Acorn’s 1962 destruction, John B. Williams became the head of Oakland’s RDA in 1964 — making him among the first Black people to head a city agency in the United States.
A baptist preacher born in Covington, Georgia, Williams also had a fine arts degree and helped found First Enterprise Bank, the first minority-owned bank in Northern California. According to Places Journal, with his fine arts background he supported art as a means to engage community members in the agency’s work. He was the first Oakland official to enforce minority training and hiring policies, and required that the agency employ laborers and award contracts proportionate to city demographics. Williams led Oakland’s RDA until he died of cancer in 1976.
Complicated demise
Since proliferating across the country, TIF schemes differ from state-to-state, and they go by many names. In Texas, it’s known as a Tax Increment Reinvestment Zone, or TIRZ. Florida calls it Community Redevelopment Area, or CRA. Back in 2018, Chicago infamously had around 150 TIF districts, as many as the next nine largest U.S. cities combined, according to a study of TIFs by the Lincoln Institute of Land Policy.
For local public officials, TIF can seem like a magical way for redevelopment to pay for itself. Cities can borrow dollars up front, based on projected future TIF area property tax payments, then use those dollars to do almost anything they want — like build the Oakland Ice Center. If all goes as planned, property tax revenues then collected within the TIF area repay the debt automatically as time goes by.
TIF schemes also vary greatly in how decisions get made about what projects to finance or which properties to acquire for redevelopment. Not all TIF schemes create an RDA-like entity that can acquire properties. In Chicago, TIF districts don’t have a separate governing entity, only separate bank accounts whose dollars are ultimately doled out by the city’s Department of Planning and Development, which is really controlled by the mayor. In Texas and Florida, each TIRZ or CRA has its own board of commissioners that oversees an entity that controls its dollars, acquires properties and sets up partnerships with private developers.
Back in California, each city or county established an RDA with the power to designate multiple TIF areas, acquire properties and spend TIF dollars on projects located in the designated areas where the dollars came from. City and county legislators had the flexibility to control RDAs directly themselves or create an appointed commission to wield RDA powers.
Since it derives revenue from local property taxes, TIF is often seen as pulling money away from schools, fire departments, parks, libraries and other local public services usually supported by local property taxes. TIF projects also don’t often require direct approval from mayors, city council or voters, so TIF dollars also often end up being used as a slush fund to support local politicians’ pet projects that happen to be developed by their biggest campaign donors. For these and other reasons, TIF continues to be a hot button issue in places like Chicago or St. Louis.
Ultimately, it was the TIF funding mechanism that led to the demise of California’s RDAs.
When former Oakland Mayor Jerry Brown came into office as California governor in 2011, he inherited a $26 billion state budget deficit from the Governator. Although Brown had been a huge beneficiary of Oakland’s RDA during his time as mayor, the RDAs suddenly became sacrificial lambs to help close that giant hole.
Under the state laws governing RDAs, the state was obligated to pay local school districts for any revenues lost to tax-increment financing. The state, he argued, could no longer afford those payments. At the time, RDAs accounted for 12% of all property taxes paid across California; in some places, they earned more property tax revenue than the local city or county government that created them.
Cities, counties and RDAs fought back vehemently. Gov. Brown first tried eliminating them by executive order. When that didn’t work, the state passed legislation which the RDAs and local governments later fought in court. The state emerged victorious, leading to the dissolution of RDAs in 2012.