Although there is a lot of controversy regarding redevelopment, the actual fact of the matter is that redevelopment is a tool that is used by cities to give back to the community to improve the quality of life of the people of the community both business and residents alike.

It is crucial that each individual research the facts about redevelopment - separate the truth from fiction and make an educated decision on its merits. The following questions will help to provide a stepping stone to some of the questions that frequently arise regarding the tool of redevelopment; they also provide a starting point for one to research the facts about redevelopment.

Most Frequently Asked Questions About Redevelopment (FAQ's)

1. What is Redevelopment?
Redevelopment, by its most basic definition, is a tool primarily used to assist city and county governments to eliminate blight. It is one of the most effective means to revitalize deteriorating and blighted neighborhoods and business district areas. It infuses needed capital into these communities, empowering them to assume control of distressed areas to orchestrate their re-growth.

2. What benefits will Redevelopment bring to the City of Gardena?

Quality of life and City's visual environment improved
Jobs created
Private investment in the community promoted
Communication between public and private entities
increased; and contaminated and abandoned land
reused
Increased opportunities for use of vacant land in the City
Increased annual tax revenues

3. What is Eminent Domain?
Eminent domain is the authority for public agency to acquire property for a purpose that is in the public interest. It is not used lightly. Even if eminent domain is exercised, the public agency is required by law to hold public hearings on the action, to pay the owner fair market value, and to give the occupant relocation benefits and allowances to which one is entitled. If the fair market value cannot be agreed upon, all of the evidence, including appraisals, is submitted to the court and the judge or jury makes the final determination regarding value. If a household or business is displaced due to acquisition of the property by an agency, occupants are entitled by law to certain relocation benefits, including compensation for loss of business and good will.

4. What is Blight?

Under redevelopment Law, the legal term, blight, may encompass any number of conditions including, but not limited to:
Buildings which are unhealthy or unsafe for occupancy
as a result of code violations
Properties, including those containing hazardous
wastes, whose values have depreciated or stagnated,
possibly due to impaired investments
Business properties experiencing low occupancy, low
lease rates, as well as high turnover rates; even
abandonment
Factors that prevent or substantially hinder the
economically viable use of building or lots, such as
substandard design, inadequate size, lack of parking,
etc.
Residential overcrowding and high crime in the area

5. What is Tax Increment?
Tax increment is the increase in property taxes within a redevelopment project area that result from increases in the project area assessed value that exceeds the base year assessed value. When a redevelopment project area is adopted, the current assessed values within the project area are only designated as the "base year". This includes the assessed value of all land and improvements within the boundaries of the project area.

After plan adoption, all of the taxes paid on this "base year" assessment go, as they always have, to the city, county, school districts and other taxing agencies. Any increase in assessed value over this base value within a project area and the taxes resulting from this increased assessed valuation per the standard tax rate becomes a source of revenue for the agency. As a redevelopment plan is implemented, the improvements will result in an increase in property values within the project area. Taxes will only increase to individual property owner if there is a change in ownership or if there is new construction. These types of increases in value will increase the tax revenues generated by the property. This increase in tax value is known as tax increment.

For example, if property was assessed at $100,000 this year, the taxes paid by the property owner at the standard tax rate of 1 percent would be $1,000 pursuant to Proposition 13. If, as a result of new construction on the property, the property increases in assessed valuation to $500,000; the taxes paid by the property owner at the same standard tax rate would be $5,000. The $4,000 increase is called "tax increment' and it is these funds that can become the revenue of the agency.

6. What does Redevelopment Indebtedness Mean?
The term "indebtedness" in regard to redevelopment is highly misleading because the definition of debt for redevelopment agencies is unlike any other definition used by private business or government. The most effective way to illustrate this indebtedness is to use an example.

If you borrow $200,000 to buy a house, you would consider yourself $200,000 in debt. In addition, you know that you will be required to pay interest on the amount you borrowed. Over the next 30 years, you will pay over $300,000 in interest in addition to the principal on the loan. Principal plus interest on the mortgage totals over $500,000. In everyday terminology, you would describe your debt as $200,000, not $500,000.

If you were a redevelopment agency, you would be required to file a Statement of Indebtedness (SOI) in order to receive your paycheck so you have sufficient funds to repay your mortgage loan. On the SOI you would list your indebtedness as the full $500,000. In addition to basic principal and interest, as maintenance, repairs, improvements, landscaping costs, utilities, water sewage, etc.

Redevelopment bonded debt (the traditional definition of debt) is only 45 percent of the total debt claimed on the SOI.

Redevelopment debt is the obligation solely of the Redevelopment Agency. There is no legal requirement or non-legal precedent that makes the State, a city or County responsible for the debts of the Redevelopment Agency.

Source: Policy Making and Politics in Redevelopment, California Redevelopment Association

Redevelopment as a Tool
Click here to download the .pdf of the Redevelopment Tri-fold Informational Brochure.