Redevelopment Agencies' Debt Overshadows Revenue
The paper reviewed documents from the 2009 fiscal year representing more than two dozen redevelopment agencies. The implication is that efforts to counteract blight and create jobs are straining city budgets beyond the point of sustainability.
"Cities and towns in the state created redevelopment agencies to attract tax-paying businesses to blighted areas. When new developments raise property values, the additional property-tax revenue goes to the agencies to pay off bondholders. But such plans go awry when property values tumble.
Hercules, Calif., a city of 25,000 people northeast of San Francisco, sold some $260 million in redevelopment bonds, mainly to acquire private land it sought to improve to attract new businesses. But the recession wrecked those plans as plunging property values dried up hoped-for revenue gains.
The old industrial city, once famous for dynamite manufacturing, faces some $15 million in annual interest payments on redevelopment bonds and related costs, exceeding the $10.5 million in higher yearly property tax collections generated by the redevelopment district."