How Many Jobs Do Redevelopment Agencies Actually Create?

According to a report issued December 31, 2010 by the state Controller, California’s 425 redevelopment agencies created 14,723 jobs during the fiscal year running from July 1, 2008 to June 30, 2009.

The information is contained in an annual audit of the agencies conducted by Controller John Chiang. The agencies provide him with the information.

Gov. Jerry Brown’s budget proposes elimination of redevelopment agencies with debt owed on any existing projects paid off.

Local property tax revenue that previously went to the agencies would be given to schools, cities, counties and special districts – the biggest beneficiary being schools.

While not fully embracing the Democratic governor’s proposal, the Legislative Analyst noted in a February 9 report that there’s no reliable evidence redevelopment agencies improve the state’s economy.

The agencies counter that they are a vibrant economic engine that creates jobs and improves blighted communities.

“Eliminating redevelopment would cost jobs and harm local communities and the state as a whole,” said John Shirey, executive director of the California Redevelopment Association at a February 9 hearing of the Senate Committee on Governance and Finance.

“Elimination would be short-sighted, more complicated than the proposers may understand and produce less money to balance the state budget than estimated,” Shirey said. “Moreover, the proposal is very likely unconstitutional.”

Elsewhere in his testimony, Shirey said that “in good years when redevelopment funds are not taken away” redevelopment supports “over 300,000 jobs mostly in construction and construction-related industries where unemployment is currently running over 35 percent.”

In the Controller’s instruction to redevelopment agencies on compiling information for the audit they are to list the “number of jobs created as a direct result of redevelopment activities.”

Redevelopment agencies, which are charged with improving blighted – usually urban – areas, say their projects have a ripple effect.

An improved neighborhood or commercial area attracts more businesses and jobs. Simply cataloguing the number of jobs created by a project understates the impact.

On January 24, Chiang announced he would review the activities of 18 redevelopment agencies, including those of Los Angeles, Sacramento and Riverside.

“We’re going to ask for the number of jobs they say they create in their development areas,” said Garin Casaleggio, a Chiang spokesman. “We’re going to try to dig a little deeper behind the numbers.”

Figures for the 2008-2009 fiscal year are the last figures available and it was a period close to the bottom of the recession’s trough. Also Chiang notes that often projects span mroe than a year adding some complexity to reporting on an annual basis.

Even so, according to Chiang’s audit, over a 10 year – rather than a one year — period, beginning in 1999, redevelopment projects generated a total of 313,000.

The highest annual job figure was 42,000 in 2005 followed by 38,000 in 1999.

From the state’s perspective, $3.2 billion was spent to create 14,723 jobs costing $217,347 each.

Chiang’s more than 660-page audit also reveals that 26 of the state’s  425 redevelopment agencies reported no financial transactions. Cloverdale Community Development Agency failed to turn in its financial reports.

Six agencies reporting financial transactions didn’t turn in their paperwork including those in Coachella, Gridley, Vallejo and Hughson.

In 2008, redevelopment projects totaled 20 million square feet of new construction or rehabilitation of existing buildings.

The prior year, 46 million square feet was created along with 24,000 jobs.

Some redevelopment activites have included creating flood control projects, helping build sports arenas, financing housing for low-income families and operating amusement parks, Chiang reported.

Redevelopment agencies finance projects by selling bonds and repay them with what’s called property tax increment.

When a redevelopment plan is put into place, the property tax revenues for that area received by cities, counties and schools are frozen.

As the value of the property climbs through the redevelopment agency’s efforts, the increase in property tax – the increment – goes to the agency.

A portion is “passed through” to schools, cities and counties for services they provide within the redevelopment area.

Chiang says in his audit that redevelopment agencies received approximately $5.7 billion in property tax increment.

According to the Senate, the most reliable estimates are that 57 percent of property taxes go to schools, 21 percent to counties, 12 percent to cities and 10 percent to special districts.

Using Chiang’s numbers, that means of the $5.7 billion redevelopment agencies received, $3.2 billion would have gone to schools, $1.2 billion to counties, $671 million to cities and $519 million to special districts.

The less local property tax schools receive, the more money the state must send them under the formulas governing public school financing.

So the $3.2 billion in property taxes schools don’t get because of redevelopment agencies becomes the state’s responsibility.

From the state’s perspective, $3.2 billion was spent to create 14,723 jobs – at a cost of $217,347 each.

Dividing the full $5.7 billion in tax increment revenue by the 14,723 jobs redevelopment agencies said they created during the same fiscal year is $387,149.

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