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What is Redevelopment?

Redevelopment is a process created to assist local governments in eliminating physical and economic blight from a designated Redevelopment Project Area and to achieve desired development, reconstruction and rehabilitation, including but not limited to: residential, commercial, industrial, and public infrastructure. The goal of Redevelopment is to create a safe, economically viable and balanced project area that provides all of the socially desirable attributes communities want: sound public and private improvements, good jobs, safe places, strong commerce, recreational opportunities, decent and affordable housing, and increasing property values.

A Redevelopment Agency is able to use special legal and financial mechanisms to achieve these goals. This authority is granted to the Agency through the state of California's Health and Safety Code (Section 33000-et.seq.), also known as the California Community Redevelopment Law. The law requires that a Redevelopment Project Area must exhibit conditions of both physical and economic blight before any redevelopment activity can occur. Symptoms of economic blight include inability to develop vacant lots, high vacancy rates in existing commercial space, and high turnover in commercial space. Physical blight may include graffiti, deterioration of buildings and property, irregularly shaped lots, and inadequate infrastructure to support development. The surveys and analyses of a proposed redevelopment project area must address whether or not these types of blighting conditions are present before a City Council can pass legislation permitting the use of redevelopment authority in that given area.

What is the Redevelopment Agency?

Every city and county in California is authorized by the California Community Redevelopment Law to establish a Redevelopment Agency to pursue the elimination of blight in designated Redevelopment Project Areas.

In Santa Barbara, as in most cities, the City Councilmembers are also the governing board for the Redevelopment Agency; however, the Council and the Agency are two separate, distinct legal entities. The Redevelopment Agency reimburses the City for staff services to carry out the day-to-day operations in pursuit of the Redevelopment Plan for the Redevelopment Project Area.

What is the Redevelopment Project Area?

A Redevelopment Project Area is a distinctly identified area of a city or a county that evidences physical or economic blight that cannot be corrected by private forces acting alone. Redevelopment Project Areas are established by ordinance of the City Council after an extensive and deliberative process that includes blight surveys, economic analysis, environmental review, citizen participation, and the adoption of a Redevelopment Plan.

Santa Barbara has one Redevelopment Project Area, the Central City Redevelopment Project Area, which encompasses most of the Downtown commercial core and the Waterfront, including Stearns Wharf and the Harbor.

What is the Redevelopment Plan?

A Redevelopment Plan is a formally adopted document that identifies the boundaries of the Redevelopment Project Area, the existence of blight, the programs and projects that will be pursued to eliminate that blight and provide affordable housing, the time limits for redevelopment activities in the Redevelopment Project Area, and the specific powers that will be exercised by the Redevelopment Agency.

Santa Barbara's Central City Redevelopment Project Plan was adopted in 1972 and has been amended four times. It establishes that activities in the Project Area are to be completed in the year 2015.

What are Typical Powers of a Redevelopment Agency?

A Redevelopment Agency is empowered by the California Community Redevelopment Law to include in its Redevelopment Plan such powers as: the right to acquire and dispose of property to facilitate projects that assist in the elimination of blight, including the use of eminent domain to acquire private property in certain circumstances; the right to make loans or grants to effectuate redevelopment; the right to construct infrastructure; the right to issue long-term debt; and the right to collect Tax Increment to service debt.

The Central City Redevelopment Project Plan contains all of the powers identified above.

What is Tax Increment?

The California Community Redevelopment Law provides redevelopment agencies with a method of obtaining funds called Tax Increment Financing.

Here's how it works:

  • In the year the Redevelopment Project Area is adopted, the total property tax value within the Project Area is established as the base year value.
  • Over the life of the Redevelopment Agency, the base year taxes continue to be distributed to the taxing agencies on the tax role in the same proportion as in "pre-redevelopment" years.
  • Any increase in property tax revenue (above the base year value) generated within the Project Area is redirected to the redevelopment agency.
  • These funds are called Tax Increment and they are available for re-investment in the project area and may be used to pay off any debt created in implementing the Redevelopment Plan.
  • The Agency is required by law to set aside 20% of the total annual Tax Increment for affordable housing projects.
  • Tax Increment does not create new taxes; it simply redistributes the growth in the annual tax base.
Usually, the flow of Tax Increment to the Agency will not be sufficient in itself to finance the full scope of redevelopment activities and development projects. Therefore, agencies issue bonds to capitalize the Tax Increment. These bonds are not a debt of the City or County and are repaid solely from Tax Increment revenues.

In the Central City Redevelopment Project Area, Tax Increment of $12.1 million is expected to be available for FY 2002-03. This revenue is used to pay the Agency's operating expenses, service the Agency's debt and fund Agency projects and programs (current budget information). Tax Increment can only be used to finance projects within the Redevelopment Project Area, except when they are applied toward Affordable Housing Projects, in which case they can typically be used citywide.

How does Tax Increment Affect Other Taxing Agencies?

Other taxing agencies lose part of the new property taxes generated in Redevelopment Project Areas, but they continue receiving their share of the base tax role. However, in blighted areas, the property values would not increase without redevelopment activities. Other taxing agencies benefit from increases in other, non-property tax revenues and revenues generated outside the project area as a direct result of Redevelopment activities, such as sales taxes, hotel room taxes, higher income taxes derived from job generation, and property taxes. Most school districts are fully compensated by the State for the loss of any property tax revenue due to Tax Increment.

How Does Being in a Redevelopment Project Area Benefit a Resident or Property Owner?

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, raise property values, and gain active participation and investment by citizens which would not otherwise occur.

What Obligations Does a Redevelopment Agency have to Provide Affordable Housing?

In addition to eliminating blight, a Redevelopment Agency is responsible for preserving or improving the supply of affordable housing available to residents of the Project Area. Without a supply of decent, safe, sanitary, and affordable housing in a Project Area, or serving the needs of a Project Area, redevelopment will not be successful. Redevelopment Agencies are required to set-aside 20% of their annual Tax Increment revenues for the purpose of increasing, improving, or preserving the community's supply of low income housing (for households earning up to 80% of Median Income) and moderate income housing (for households earning between 80% and 120% of Median Income). Redevelopment Agencies must spend these funds for affordable housing, and they may be spent on such activities as land or building acquisition, new construction, rehabilitation, onsite or offsite improvements, and grants or loans to providers or purchasers of affordable housing. 

The Redevelopment Agency will set aside approximately $2.6 million for affordable housing in FY 2003-2004. Please take a look at our Affordable Housing Programs to see the extensive affordable housing activities accomplished and planned by the Santa Barbara Redevelopment Agency. The Agency has been in the vanguard among California Redevelopment Agencies in the provision of affordable housing.

Last Updated: Apr 20, 2013