March 25, 2008
n s Pursuant to Elections Code Section
9005, we have reviewed the proposed initiative pertaining to
redevelopment (A.G. File No. 08‑0010).
California property owners pay over $45 billion
in property taxes annually. County auditors distribute these revenues to
local governments within the county where the tax is paid. Schools,
community colleges, cities, special districts, and counties use property
tax revenues to provide services.
State law authorizes cities and counties to
create redevelopment agencies to mitigate blight in urban sections of
their communities that they call “redevelopment project
areas.” After an agency creates a redevelopment project area, the county
auditor allocates to the agency all growth in property taxes (called
“property tax increment”) generated from increases in property values in
the redevelopment project area. State law limits the amount of tax
increment revenues that a redevelopment agency receives, however, to the
amount needed to pay its outstanding obligations (such as bonded
indebtedness, contracts, and intergovernmental loans), an amount shown
in each agency’s annual “Statement of Indebtedness.”
Growth in Redevelopment Agency
Indebtedness. In 2005‑06, redevelopment agencies reported that
they had over $80 billion in outstanding indebtedness. Redevelopment
indebtedness has grown considerably over the years, doubling between
1995‑96 and 2005‑06. Under current law, redevelopment agencies do not
need voter approval to pledge property tax increment to repay debt.
Property Tax Allocation Absent
Redevelopment Debt. In 2006‑07, county auditors allocated
redevelopment agencies $4.5 billion of property tax increment revenues.
Absent redevelopment indebtedness, the county auditor would have
allocated these revenues to other local governments in the county. Under
current law, schools and community colleges would have received somewhat
more than one-half of the $4.5 billion and cities, counties, and special
districts would have received the rest.
This measure requires redevelopment agencies to
obtain approval by two-thirds of their county’s voters before pledging
property tax increment revenues to pay a new bond, loan, advance, or
In addition, the measure requires the legislative
body of the redevelopment agency (the city or county) to (1) adopt an
ordinance proposing the pledge of funds; (2) identify the “exact
purpose” for which the indebtedness is to be incurred, the amount of
funds, and term of the debt; and (3) reimburse the county for the cost
of the election.
If voters do not approve new proposals to incur
new redevelopment debt (or redevelopment agencies abandon some plans to
incur new debt), the total amount of redevelopment indebtedness would
decline over time, or be lower than otherwise would be the case. To the
extent that redevelopment indebtedness decreased, county auditors would
allocate fewer property taxes to redevelopment agencies and more
revenues to other local governments. The amount of this potential tax
revenue shift is not known, but could be hundreds of millions of dollars
within a decade and greater sums annually thereafter.
State Fiscal Effect. Under state
school financing laws, increased property taxes to schools and community
colleges typically offset required state education spending on a
The measure would have the following major fiscal impacts:
Over time, potential
major shift in property tax revenues from redevelopment agencies to
cities, counties, special districts, and schools. Increased property
tax revenues to schools would result in a comparable
decrease in required state spending for education.
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