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LS MERMAIDS 17 dive bar.JPGGov. Jerry Brown's proposed 2011-12 budget has many controversial aspects, but one of the most contentious is his call for eliminating 425 local redevelopment agencies and redirecting about a third of their property tax revenues into other state and local services.

Last week, nine big city mayors called on Brown to abandon his proposal, claiming that redevelopment is central to economic development. But Brown insists that supporting schools and other public programs is a more important use of the funds.

Underlying the political exchanges is a phenomenal growth in redevelopment agency activity -- especially their diversion of property tax money into their own activities. By law redevelopment agencies can retain property taxes on increased development within redevelopment projects, although they must share some of it with other local governments and schools under reform legislation enacted in the 1990s.

Each year, the state controller's office publishes a thick report on the activities of redevelopment agencies, most of which are operated by city governments. And the latest report, covering the 2008-09 fiscal year, details the extent of their finances.

It reveals, for instance, that redevelopment agencies captured about 12 percent of all the property taxes collected in the state, $5.7 billion. It shared $1.2 billion of those revenues with schools and other local governments, but retained the other $4.5 billion.

That $5.7 billion is well over three times as much tax money as redevelopment agencies captured 10 years earlier, an examination of the 1998-99 controller's report shows. And the debt incurred by redevelopment agencies also has grown sharply. In 1998-99 they had $42.7 billion in debt. By 2008-09, that had more than doubled to $87.5 billion, most of it in the form of bonds.

Brown would allow the agencies to retain enough tax money to pay their debts, but shift about $1.7 billion to the state for one year, and then to schools and local governments. That $1.7 billion represents 40 percent of the money redevelopment agencies retain, calculated to be the portion of the retention that the state must pay to schools under Proposition 98, enacted by voters in 1988.

The 710-page controller's 2008-09 report on redevelopment agencies is available here.

PHOTO CREDIT: Rachel Smith swims as a mermaid in the aquarium above the Dive Bar in downtown Sacramento on Thursday, Jan. 6, 2011. Sacramento's redevelopment agency recently gave $6.75 million to revamp properties at the intersection of 10th and K streets. Of that, $3.7 million went to developer David Taylor, whose project resulted in the Dive Bar, Pizza Rock and District 30, according to Wendy Hoyt, a planning consultant who worked with Taylor. Lezlie Sterling / Sacramento Bee



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