Good News for Californians: Redevelopment Agencies Shut Down

In the face of substantial budgetary problems, California’s legislature voted to shut down its more than 400 redevelopment agencies that used tax dollars to partner with developers to redevelop blighted areas. Governor Jerry Brown proposed shutting down those agencies, saying the $5 billion they spent annually could be better spent elsewhere.

One reason this is worth a comment is that it is rare to see an existing government program shut down.

Even though some beneficial projects were undertaken by redevelopment agencies over the years, there is no evidence that the money spent on those projects was used more productively than if development had been left to the private sector. Meanwhile, there is also ample evidence that in many cases the money was not productively used.

The incentives are ripe for abuse in this type of government program. Bureaucrats who run the redevelopment programs have no incentive to keep costs down, because the costs are being paid by taxpayers, so the agencies often overpay for property. This may be due to the limited competence of government employees who are dealing with more experienced developers, or it may be a way to channel benefits to friends and associates. And, bribery and fraud has been a part of some projects. The development agencies had lots of money, and very little oversight, so it is likely that the bribery, fraud, and mismanagement that did become visible were just the tip of the iceberg.

Needless to say, those who had control of this money were quick to criticize the decision to shut the development agencies down. Lots of benefits come with the ability to spend other people’s money. But this is a clear win for California’s citizens and taxpayers. As Ben Powell and I document in Housing America, Californians, and all Americans, already suffer from too much government planning in land use decisions.

Randall G. Holcombe is a Senior Fellow at the Independent Institute, the DeVoe Moore Professor of Economics at Florida State University, and author of the Independent Institute book Liberty in Peril: Democracy and Power in American History.
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