By Casey Barr
Local governments face the perennial dilemma of obtaining money to fund community redevelopment projects. Requesting state or federal funds can be an arduous bureaucratic process, and these funds are often awarded to larger, more prominent cities, ignoring smaller towns where need is arguably greater. Community Redevelopment Agencies (CRAs) allow local governments to fund public and private projects by setting up special districts. This community designation and the public financing tools it utilizes are increasingly important parts of municipal budgeting. CRAs are not without their critics, however, and several scandals have erupted over their transparency, spending priorities, and ineffectiveness.
The Community Redevelopment Act of 1969 was a body of state legislation that allowed for the formation of CRAs in Florida. A special district government, the CRA, manages specific areas of the city deemed fit for redevelopment. A maximum of 80 percent of a municipality can be deemed a CRA. CRAs allow for the financing of private and public development projects through revenue bonds. Revenue bonds are loans paid back with a percentage of revenue generated by the development projects that they fund.
CRAs can also take advantage of an indirect government subsidy program called tax increment financing (TIF), wherein future increases in property tax revenues are deferred for a time and instead invested into the community through a trust fund. The CRA appraises the existing properties within its boundaries in order to establish a cumulative property value which will serve as a fixed tax base. Ideally, the property values within the CRA district increase over time, and the taxable revenue generated from property tax growth above the base amount (called the increment) is deposited in the CRA trust fund. The local government still receives the baseline amount of revenue, while the increment can only be spent by the CRA on projects within the district. This money can be invested in numerous ways: subsidizing commercial projects, awarding business grants, or constructing infrastructure.
In theory, TIF provides local governments with a way to eliminate blight, but critics say that TIF isn’t effective and can even be a vehicle for crony capitalism. Crony capitalism describes an economy where success depends on personal relationships with government officials rather than consumer demand or productivity as in a free market. There have been instances where TIF funds were given to developers who made campaign contributions to local politicians. Some towns in Florida have seen conflict between city, county, and CRA governments over spending priorities and mismanagement of funds.
The effectiveness of TIF in eliminating blight is also questionable. A study by University of Illinois economists Richard F. Dye and David F. Merriman found that property values in cities which use TIF-districts in order to stimulate development grow at the same rate, if not slower, than cities which do not use TIF. Dye and Merriman found evidence that when higher growth does occur in TIF-districts, it comes at the expense of non-TIF districts and leads to a lower growth rate for the city as a whole. Cities may face a decision of whether to eschew overall municipal growth in favor of the redevelopment of blighted areas.
The City of Tallahassee has made liberal use of its own CRA. Launched in 1998, the Tallahassee CRA currently oversees two CRA districts: the Greater Frenchtown Redevelopment Area and the Downtown District Redevelopment Area. In both areas, CRA funding has assisted numerous public and private projects. Notable examples include the Marriott Residence Inn on West Gaines Street, the Tish Byrd Community Garden in Frenchtown, and the Alliance Center in downtown Tallahassee, as well as popular student housing properties College Town, the Catalyst, Onyx, and Stadium Centre. In 2015, the CRA awarded grants totalling $65,000 to help support 15 different festivals and parades. It also awarded business grants to architectural firm Lewis & Whitlock, communications and design company Sachs Media Group, and Urban Outfitters, a popular retail clothing store.
The effectiveness of Tallahassee’s CRA spending, which is likely different from how the city government might have directed the funds, remains to be seen. CRAs are somewhat more insulated from voter sentiment, a typical feature of special district governments. The fact that much of the CRA’s funding benefits private for-profit enterprises means that a high level of transparency in CRA decision making is important for ensuring accountability and securing public trust. CRAs in California were found ultimately to be a vehicle for politicians to fund pet projects and award well-connected cronies, and such abuse should be avoided.
CRAs can be useful to local government financing redevelopment projects. By keeping all of the financing local, the CRA avoids the complicated and time-consuming process of requesting state or federal funds. However, CRAs have also been criticized because of a lack of transparency, a lack of evidence supporting their effectiveness, and examples of outright corruption. Free markets and private enterprise are essential for sustainable community development. To the extent that CRAs redirect tax dollars and private investment toward less productive activities, CRAs may do more harm than good. More attention should be paid to Tallahassee’s CRA to ensure it supports sustainable community redevelopment and doesn’t become another example of a CRA gone wrong.