Mike Madriaga 12:40 p.m., May 25
- Community Blog
- I've Got Issues
Redevelopment Being Paid For With Corporate Tax Breaks
Its no secret that I have been very critical of Redevelopment Agencies and how the money actually creates blight and destroys the most valuable assets neighborhoods possess. They typically target "blight" by demolishing a neighborhood's most historic buildings and replacing them with lackluster mixed-use development projects creating a dull wasteland of poorly executed new urbanist architectural gestures that lack any real identity or aesthetic value.
I knew that these agencies received enormous tax dollars from the government but I did not know that they ALSO were benefitting from money from other corporations that were given tax breaks for "investing" money in these for-profit investment projects.
This project is a great example of what these tax subsidized projects are like. The project destroyed a very rare and valuable art deco building and replaced it with this. Most of the commercial real estate offices in this building have been empty for 6 years including this corner anchor store.
Governor Brown's ferocious crusade to eliminate these agencies is very well-justified. There is absolutely no evidence to suggest they actually help neighborhoods at all while they syphon 5 billion dollars a year in tax revenues to private developers. And it seemed that these agencies were at last at least somewhat defeated by the recent budget deal that would cut some of their funding.
But Redevelopment has become that monster in a horror movie that you can't seem to exterminate. Just when you thought you were safe and all the doors and windows had been locked and boarded up you are horrified to discover the killer has slipped in through a ceiling vent.
But alas, the monster has found a new way in...or I guess an old way that they are exploiting even further....that is the public-private partnership. Essentially what they did to eliminate the ability of government to reduce their funding is they cut out the middle-man and passed legislation that would allow the private corporation to invest DIRECTLY into these redevelopment funds, thus directly giving money to developers in exchange for big tax breaks.
What's wrong with that you ask? Well for one thing in a state where tax increases are looming and cuts to critical services are imminent because of our desperate budget crisis we are cutting millions in revenues and diverting the money from one corporate interest to another with little to no benefit to the state and NO accountability whatsoever.
"Insurance Commissioner Dave Jones and Speaker John A. Pérez (D-Los Angeles) today announced $11 million in new insurance company investments to benefit underserved communities across California. Commissioner Jones sent a letter in February to insurance company CEOs encouraging them to make these types of investments and noting the availability of tax credits for such investments through the California Organized Investment Network (COIN), administered by the California Department of Insurance (CDI)."
"The investments – $7 million from Farmers Insurance Exchange, $2 million from Pacific Life Insurance Company, and $2 million from State Farm Mutual Automobile Insurance Company – were made to community development financial institutions of Impact Community Capital LLC of San Francisco. In exchange for an $11 million, zero interest, five-year loan to benefit underserved communities, the insurance companies will receive a 20% tax credit of $2.2 million."
So what's the problem? Well to start Impact Community Capital LLC is a FOR-PROFIT company receiving tax free investment money. Its receiving all the benefits of a non-profit and all the profits of a for-profit.
"Impact Community Capital LLC (www.impactcapital.net) is a for-profit corporation founded by leading insurers to promote socially responsible investments in underserved communities, particularly in California. Impact focuses on financing affordable housing and community facilities to benefit lower income individuals, families and communities while also meeting insurer requirements for the prudent management of policyholder funds"
So they used the word "underserved communities" so that must be good, right? What does that term even mean? All communities are entitled to the same percentage of tax revenues and many of these "blighted" areas are some of the states most expensive so the revenues will by no means be "underserving" anyone more than anyone else. Communities like Hayes Valley in San Francisco, Hillcrest, North Park, Little Italy even Coronado in San Diego made the list of "blighted" communities in need of redevelopment dollars. Thus giving these communities more money by giving the money to for-profit developers to solve social problems is a bit suspect to say the least.
And to do it in such a devious and duplicitous way should outrage Californians that have been embezzled for the last 50 years by these redevelopment agencies.
Chris Norby in "Redevelopment the Unknown Government" says this:
There is an unknown government in California.
This unknown government currently consumes 10% of all property taxes statewide - $2.1 billion in 2001. It has a total indebtedness of over $51 billion. It is supported by a powerful Sacramento lobby, backed by an army of lawyers, consultants, bond brokers and land developers. Unlike new counties, cities and school districts, it can be created without the vote of the citizens affected. Unlike other governments, it can incur bonded indebtedness without voter approval. Unlike other governments, it may use the power of eminent domain to benefit private interests. This unknown government provides no public services. It does not educate our children, maintain our streets, protect us from crime, nor stock our libraries. It claims to eliminate blight and promote economic development, yet there is no evidence it has done so in the half century since it was created. Indeed, it has become a rapidly growing drain on California's public resources, amassing enormous power with little public awareness or oversight.
So why in the world are we allowing private companies to "invest" in these for-profit projects when there is no evidence the projects benefit communities? The redevelopment projects are most often structured as Delaware LLcs which hide the names of investors thus it would be easy for the insurance companies to simply be giving money to public officials in this manner. Special interests have figured out how to bribe city officials with little consequence and it is through redevelopment LLcs which enable special interests and politicians to take tax money and give it to each other with no accountability to the public. Thus many of these LLcs even operate overseas.
This GIANT giveaway was quietly slipped through the Assembly. The only way I even discovered it was because I was looking at information on State Farm. This is a BIG story with really big consequences. Please write to Speaker Perez and tell him to stop subsidizing developers with tax dollars.
contact the State Auditor and tell him this is an inappropriate and possibly illegal use of tax dollars.
California State Auditor 555 Capitol Mall Suite 300 Sacramento, California 95814
Phone Number: (916) 445-0255 General Fax: (916) 327-0019 Executive Office Fax: (916) 323-0913 TTY: (916) 445-0033
More like this:
- Before you vote for tax hikes California consider this..... — Sept. 16, 2012
- State Committee approves bill with sweeping new eminent domain powers and no blight requirements — July 6, 2012
- 4 Egregious Examples of Redevelopment Fraud and Abuse in San Diego — July 5, 2011
- CA State Assembly Leader Atkins Heads Select Committee on Homelessness While her Spouse & ex- CCDC Official is Paid $225 Per Hour in Redevelopment Money "Solving" Homelessness — June 7, 2011
- San Diego Redevelopment: They Prey, We Pray — April 13, 2011