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introduced with the Community Redevelopment Law. This new financing technique allows
redevelopment agencies to “receive and spend property tax revenues from the increase in
assessed value that has occurred after adopting a redevelopment project” (Beatty, D. F. et al.,
1995:5). After the wipeout of the federal urban renewal program TIF became very important
in other states as well. TIF can be considered a reaction of local governments to federal
government departure in urban issues.
TIF have become increasingly attractive to municipalities since local governments can finance
land management and public improvement with TIF bonds backed by future tax increments.
Moreover, the issuance of TIF bonds don’t require voter approval and subsidies can be
targeted to special TIF districts (TIFS). That explains, why TIF has become one of the leading
downtown strategies. In this connection, redevelopment and TIF depend highly on the success
of the private sector. TIF is so popular since municipalities use it without raising taxes. In
California it allows the floating of revenue bonds and avoid restrictions on general obligation
bonds imposed by Proposition 13. San Francisco, Los Angeles and San Diego have used TIF
particularly in downtown.
As the addition of Article XIII.A to the California Constitution in 1978, called the Proposition
13, considerably reduced property tax revenue of local governments and redevelopment
agencies in California as well as eliminated general obligation bonds, TIF became the
principle source of financing of redevelopment projects. According to Eisinger, California is
the state in which TIF is most widely spread (Eisinger, P. K., 1988:185). The decrease in
property tax revenue led cities to compete for development that generate high sales taxes such
as auto malls, shopping malls, and ‘big box’ retail developments. Whereas redevelopment
used to be an urban development tool of large cities, it has spread to medium-sized and small
cities as a result of decreasing property tax revenues.
The Community Redevelopment Act and later the Community Redevelopment Law give
every city and council in California the authority to establish redevelopment agencies.
Redevelopment agencies are unique among public agencies since in order to achieve goals of
revitalization they must rely upon cooperation with the private sector. Therefore, virtually
everything what redevelopment agencies have done is a partnership with the private sector.
The following tools give redevelopment agencies essential power to influence urban
development (Beatty, D. F. et al., 1995:1-2):
• The authority to buy real property including, if necessary, the power to use eminent
domain (traditionally, eminent domain could be used only for public purposes);
• The authority to develop property (but not to construct buildings);
• The authority to sell real property without bidding;
• The authority and obligation to relocate persons who have interests in property
acquired by the agency;
• The authority to finance their operations by borrowing from federal or state
governments and selling bonds;
• The authority to impose land use and development controls pursuant to a
comprehensive plan of redevelopment.
There are three options regarding the organization of redevelopment agencies: First, the city
government may establish itself as the governing board of the redevelopment agency. Second,
the city government may establish a separate governing board of the redevelopment agency.
Or third, the city government may establish a community development commission (Beatty,
D. F. et al., 1995:15). The vast majority of cities in California has appointed the city council
as governing body of the redevelopment agency. But an redevelopment agency is always a
separate legal entity from the city. That means, that there is a clear legal distinction between
the city council and its redevelopment agency (Beatty, D. F. et al., 1995:19).