• Why is redevelopment important?
• Why can't private enterprise do it alone?
• How is redevelopment financed?
• What is tax increment?
• Will property taxes be raised?
• What is a Project Area Committee (PAC)?
• What is the process of establishing a redevelopment area?
• Where can I find more information?

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.

Redevelopment enables communities to grow inward, not just outward. Redevelopment enhances and expands local businesses, renovates declining housing stock and improves public infrastructure systems and facilities. Redevelopment helps encourage new housing and businesses to locate within already developed areas.  It helps reduce crime and long commutes, promotes affordable housing, and preserves the environment.

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Why can't private enterprise do it alone?

Community redevelopment is usually accomplished by forming a partnership of public and private enterprise.  Public funds are used to lay the foundation and provide the pre-conditions that are necessary for private enterprises to be interested in and capable of investing their financial resources.  Through the redevelopment process, a partnership of public and private efforts can join forces to bring new life to deteriorating areas.

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Redevelopment is primarily financed by tax increment revenue.  Other revenue sources include loans, grants and issuance of tax allocation bonds. Typically, agencies use tax increment funds to leverage financial assistance from various agencies of the state and federal governments, and private sources.

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Tax increment is the primary source of revenue that redevelopment agencies have to undertake redevelopment projects.  It is based on the assumption that a revitalized project area will generate more property taxes than were being produced before redevelopment.  When a redevelopment project area is adopted, the current assessed values of the property within the project area are designated as the base year value.  Tax increment comes from the increased assessed value of property, not from an increase in tax rate.  Any increases in property value, as assessed because of change of ownership or new construction, will increase tax revenue generated by the property.  This increase in tax revenue is the tax increment that goes to the Agency.

For example, a property owner pays $1,000 (the standard property tax rate of one percent) on land assessed at $100,000 this year, pursuant to Proposition 13.  If, as a result of new construction on the property, the property increases in assessed valuation to $500,000, the property owner would pay $5,000 at the same standard tax rate.  The $4,000 increase is called “tax increment.”  Redevelopment agencies are entitled to collect this increase in property tax revenues, or tax increment, on the acreage they redeveloped to repay the debt involved in the project, and to reinvest these dollars in redevelopment activities within the project area.  As well, 20 percent of that tax increment money goes into a housing fund set aside specifically to finance low- to moderate- income housing.

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The redevelopment agency has no power to set tax rates or levy property taxes.  Property taxes on properties within a redevelopment project area are governed by the same laws as properties outside redevelopment project areas. Until a property is improved or sold assessed value and tax rates on redevelopment areas are restricted by property limitations.

When redevelopment activities are successful, the property values within and around the redevelopment project area increase over time due to the sale of property, or the rehabilitation and new construction of buildings.  Thus, property tax increment revenues are the result of the rise in property values, not an increase in tax rates.  The changed image and improved economic base increase the marketability of property in the area.  Redevelopment activities enhance the marketability of properties.

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A PAC is a group of community members from the project area who both provide input on the project and inform the community of the progress of the project.  They play a key role in forming the direction of the project.  They also help bridge the communication gap between the community and the agency.

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Creating a redevelopment area is a lengthy and complicated process. The formation of a new redevelopment district is regulated by California Community Redevelopment Law (Health and Safety Code sections 3000, et. seq.) and requires a great deal of documentation and public hearings before the Planning Commission, Redevelopment Agency and City Council. The ultimate adoption of a redevelopment area requires an action by the City Council.

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For Additional Frequently Asked Questions please visit the California Redevelopment Association.

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