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What is Redevelopment?

Answers to 12 Common Questions on Redevelopment

(Source: California Redevelopment Association)

1. What is redevelopment?

Redevelopment is a process created to assist city and county government in eliminating blight from a designated area, and to achieve desired development, reconstruction and rehabilitation including but not limited to: residential, commercial, industrial and retail.

2. What is a Redevelopment Agency?

In most cities, the City Councilmembers are also the governing board for the Redevelopment Agency, however, the Council and the Agency are two separate, distinct legal entities. The Agency members hire staff to carry out the day-to-day operations and its redevelopment plans. In most counties, the Board of Supervisors is the governing board.

3. What is the benefit of being in a redevelopment project area?

Redevelopment is one of the most effective ways to breathe new life into deteriorated areas plagued by social, physical, environmental or economic conditions which act as a barrier to new investment by private enterprise. Through redevelopment, a project area will receive focused attention and financial investment to reverse deteriorating trends, create jobs, revitalize the business climate, rehabilitate and add to the housing stock and gain active participation and investment by citizens which would not otherwise occur.

4. What is a redevelopment plan?

A redevelopment plan presents a process and a basic framework within which specific projects will be undertaken. The plan provides the Agency with powers to take certain actions such as to buy and sell land within the area covered by the plan (project area), improving dilapidated facilities and to use tax increment financing.

5. What is a project area?

The area within which actual redevelopment will take place. The project area must first go to public hearing (giving citizens who will be included in the project area a chance to express their views) after which the Redevelopment Agency acts on the adoption of the project area and becomes primarily responsible for future projects.

6. Why do we have redevelopment projects?

The basic reason for establishing redevelopment projects is to secure funds that can be used to attract commercial, industrial and residential development in order to eliminate blight and improve an area.

7. How do Redevelopment Agencies secure funds?

The State Law makes available to Redevelopment Agencies a method of obtaining funds called “tax increment financing.” On the date the City Council approves a redevelopment plan, the property within the boundaries of the plan has a certain total property tax value. If this total assessed valuation increases, most of the taxes that are derived from the increase go to the Redevelopment Agency. These funds are called “tax increments.” Usually, the flow of tax increment revenues to the Agency will not be sufficient in itself to finance the full scope of redevelopment activities and development projects. Therefore, agencies issue bonds. These bonds are not a debt of the City or County and are repaid solely from tax increment revenues. Tax increments can be used only in the same project which generates them, except for residential projects which benefit low and moderate income households.

8. Will property taxes be raised?

It is important to note that higher taxes from the sale, development or rehabilitation of property reflects a rise in property value and “not” an increase in tax rate. Until a property is improved or sold, assessed values and tax rates in redevelopment areas are restricted by Proposition 13 limitations.

9. Why does the Agency have the power of eminent domain (condemnation of property)?

Private developers seldom can assemble many separate parcels of land into a site large enough for their needs. One small “hold out” can refuse to sell at any price and block the entire development. The Agency can, if necessary, use its power of eminent domain to acquire the holdout parcel and permit the development to proceed.

10. What is relocation?

Relocation is the displacement of a business or family for the purpose of clearing land and preparing it for its designated use. When a person or business meets the legal qualifications, the Redevelopment Agency pays for: Assistance in finding a new location, payments to help cover moving costs and payments for certain other costs as provided by law.

11. If a citizen decides to sell property to the Agency, who determines the selling price?

The Agency would hire an independent appraiser to establish the fair market value of your property. If the owner is not satisfied with the appraised value of the property, he may hire his own appraiser to reevaluate the property after which both appraisals will be compared and a selling price negotiated. Fair market value is the value that the property would have if it were placed in today's market place and sold.

12. How will this affect city/county & other taxing agencies in regard to tax revenue loss?

Other taxing agencies will lose part of the new property taxes generated by redevelopment, but will continue receiving the base revenues. However, in blighted areas, the property values would not increase without redevelopment activities. Other taxing agencies will receive non-property tax revenues and revenues generated outside the project area as a direct result of redevelopment activities, i.e., sales taxes, hotel room taxes and property taxes.