REDEVELOPMENT

REDEVELOPMENT

Community Redevelopment Law (Health and Safety Code Sections 33000, et seq.) authorizes a local
government to adopt an ordinance subject to referendum to establish a redevelopment agency for the purpose of
correcting blighted conditions in a project area within its territorial jurisdiction. A project area for
redevelopment is not restricted to buildings, improvements, or lands which are detrimental to the public health,
safety, or welfare, but may also consist of an entire area in which such conditions predominate. A project may

also include lands, buildings, or improvements which are not detrimental to the public health, safety or welfare,
but whose inclusion is found necessary for the effective redevelopment of the area of which they are a part.

The fundamental purposes of redevelopment include: the expansion of the supply of low and moderate income
housing; the expansion of employment opportunities for jobless, underemployed, and low-income persons; and
the development of an environment for the social, economic, and psychological growth and well-being of all
citizens. To ensure that these objectives are met, the law provides special redevelopment financing and land use
control authority. The use of this authority may affect the title, resale, and use of properties within a
redevelopment project area. Under some circumstances, redevelopment powers and controls may extend to
low- and moderate income housing developed, with agency assistance, outside of redevelopment project areas.
Housing is the only activity a redevelopment agency may aid outside redevelopment areas.

In most instances, the city or county’s elected officials function as the community redevelopment agency board
of directors for the jurisdiction. For legal purposes, the redevelopment agency has status separate from that of
the jurisdiction in which it is established. The agency can sue and be sued; acquire property by eminent domain;
dispose of property; construct public improvements; borrow money from any public or private source; and
engage in a wide range of government and development activities mandated by redevelopment law.
Enforcement of redevelopment law occurs through public monitoring of agency planning functions and annual
reports, and civil legal challenges to perceived violations of the redevelopment plan or state or federal
requirements.

Housing Powers, Responsibilities, and Activities of Redevelopment Agencies

A community redevelopment agency (CRA) must replace, or cause to be replaced, low and moderate income
housing which is lost as a result of redevelopment activities. Replacement must be accomplished within four
years of the destruction, removal, rehabilitation or development of a dwelling unit. The agency must also
provide relocation benefits to households or businesses displaced as a result of its activities.

Prior to 1988, properties developed or assisted by a CRA were subject to affordability requirements that were
often contained in written agreements, and which were to be part of resale and leasing arrangements. The
agency monitors these arrangements for continuing compliance. Beginning in 1988, affordability requirements
on CRA units must be enforced through covenants, conditions, and restrictions in recorded deeds.

Funding Redevelopment Projects

Most redevelopment projects are funded through the issuance of tax allocation bonds secured by anticipated
property tax revenues. This procedure, called tax increment financing, allows the CRA to receive any increases
in project area property taxes which are a direct result of redevelopment activities. Tax allocation bonds are not
obligations of the city or any public entity other than the CRA. They can be issued by a CRA without voter
approval. Before issuing bonds to be secured by tax increments, the taxes being realized from all property
within the designated redevelopment area are calculated and recorded. This tax base, plus an equivalent portion
of the annual reassessments permitted under state law, continue to be allocated to the county and any other
taxing entities entitled to property taxes from the area. Property tax increments resulting from redevelopment
activities which may not begin to flow until two or three years after the project becomes active are allocated
back to the CRA to pay for debts incurred to accomplish redevelopment of the project area.

Expenditure of tax increments. All CRAs, unless exempted under the law, must set aside not less than twenty
percent (20%) of their tax increments in a special fund for low and moderate income housing. (See Health and
Safety Code Sections 50052.5, 50093, and 50105.) In carrying out this mandate, the agency may exercise any
or all of its powers, including the following: acquire and improve land or building sites; construct, acquire or
rehabilitate buildings or structures; donate land to private or public persons or entities; provide subsidies to or
for the benefit of low or moderate income households; develop land, pay principal and interest on bonds, loans,
advances, other indebtedness, or pay financing and carrying charges; and maintain the community’s supply of
mobilehomes.

Although tax increments are the major source of redevelopment financing, there are other tools available to
CRAs, such as general obligation lease revenue and mortgage revenue bonds; transient occupancy taxes; and
shares of sales taxes generated within the project area.