by Shirley Svorny
Cato Institute
July 30, 2014
Regulation
California shut down its 400-plus local redevelopment agencies (RDAs) in 2012, following years of local governments using the entities to skirt constitutional requirements and fiscal responsibility. The California Constitution mandates that municipal governments secure voter approval to issue debt or increase tax rates. But state legislators authorized the formation of RDAs with access to “tax increment financing,” allowing municipal governments to borrow without voter approval under the notion that the debt would be paid with new tax revenues generated by RDA activity. The state constitution’s framers clearly wanted to empower voters to limit municipal government debt issuance and growth. RDAs completely undermined that goal, giving city politicians access to revenue that would otherwise have gone to local agencies, including education districts. Though RDAs have been done away with, there remain other means of acquiring the equivalent of debt without voter approval. This practice should end.



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