The twilight of the local redevelopment era: the past, present, and future of urban revitalization and urban economic development in Nevada and California

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THE TWILIGHT OF THE LOCAL REDEVELOPMENT ERA: THE PAST,
PRESENT, AND FUTURE OF URBAN REVITALIZATION AND URBAN
ECONOMIC DEVELOPMENT IN NEVADA AND CALIFORNIA

by

Frederick Anthony Steinmann

A Project Presented to the
FACULTY OF THE USC SCHOOL OF POLICY, PLANNING,
AND DEVELOPMENT
UNIVERSITY OF SOUTHERN CALIFORNIA
In Partial Fulfillment of the
Requirements for the Degree
DOCTOR OF POLICY, PLANNING AND DEVELOPMENT

May 2010

Copyright 2010 Frederick Anthony Steinmann

ii

Dedication

Dedicated to my Father, Dr. Michael George Steinmann, whose tireless and
unconditional love and support made all of this possible. I love you Dad.

iii

Acknowledgments
I would like to take this opportunity to thank everyone who has helped me along
the way during this exciting, and often difficult, journey and experience. I would like to
especially thank Dr. Chester Newland for serving as my Advisor and Committee Chair,
whose patience and guidance have been, and will continue to be, most appreciated.
Additional thanks go to Dr. Elizabeth Currid, Dr. Glen Atkinson, Mr. Steven Meyers, and
Mr. Peter Gillon for serving as Members of my Committee. Appreciation and special
thanks go to Dr. Mark and Jody Nichols, Dr. John and Gail Scire, Mr. Robert and Lisa
Newberg, Mr. Richard and Gracie Bartholet, Father George and Gloria Bratiotis, Mr.
Kerry Lyman, and Mr. Chris VanDuyne for their support and encouragement over the
years. A wide thank you goes out to the faculty, staff, and students of the School of
Policy, Planning, and Development at the University of Southern California, the
University of Nevada, Reno’s College of Business Administration and Department of
Economics, the Nevada Small Business Development Center, the City of Carson’s
Economic Development Department, David Rosen Associates, and the countless others
that have stuck with me and supported me from the beginning to the end. Finally, I wish
to personally thank my Parents, Dr. Michael and Stephanie Steinmann. Without the both
of you, your love, your support, your patience, your mentoring, and your prodding, I
could have never achieved this. Thank you all.

iv

Table of Contents

Dedication ii

Acknowledgments iii

List of Tables x
List of Figures xv
List of Illustrations xvi

Abstract xvii

Foreword 1

Part I – The Historical Role of American Government in Urban
Economic Development and the Development of Local Redevelopment
Agencies, the Practitioner’s Experience 16
a. Introduction 16

Chapter 1 – American in Transition: A Rural to Urban Society 29
a. Introduction 29
b. Founding of the United States to the Late 1800’s, the Evolution of
Contemporary American Urban Society 30
c. The Rise of the American Urban Society, Late 1800’s to World War II 51

Chapter 2 – Urban America, the Urban Revitalization and Local Redevelopment
Era 79
a. Introduction 79
b. The Urban Renewal Era, the End of World War II to the mid 1970’s 80
c. The Contemporary Local Redevelopment Era, the mid 1970’s to the
Early 21
st
Century 105
d. Contemporary Redevelopment under Assault, the mid 1990’s to the
Early 21
st
Century 138

Chapter 3 – Part I Conclusions and Propositions 150
a. Introduction 150
b. Previewing the Criticisms of Contemporary Local Redevelopment 151
c. Propositions 154

v

Part II – Five Criticisms of Contemporary Local Redevelopment Agencies 159
a. Introduction 159
b. The Goals of Urban Revitalization and Urban Economic Development 161
c. Introducing the Five Criticisms of Contemporary Local Redevelopment
Agencies 170
Chapter 4 – Criticisms Pertaining to Local Urban Revitalization and Urban
Economic Development 186
a. Introduction 186
b. Criticisms No. 1: Property-Based Economic Development Strategies are
Insufficient to meet the Goals of Urban Revitalization and Urban
Economic Development 187

Chapter 5 – Criticisms Pertaining to Urban Economic Development 196
a. Introduction 196
b. Criticism No. 2: Local Redevelopment Agencies Lack Regional Focus.
Without a Regional Focus, True Local Economic Development is
Unattainable 196
c. Criticism No. 3: Redevelopment’s Role in the “Fiscalization of Land
Use” Undermines True Local Economic Development 205

Chapter 6 – Criticisms Pertaining to Urban Revitalization 226
a. Introduction 226
b. Criticism No. 4: The Use of Eminent Domain by Local Redevelopment
Agencies has Limited Ability and Authority to Revitalize Neighborhoods 226
c. Criticism No. 5: Redevelopment is Subject to Principal-Agency
Corruption, Thereby Retarding True Local Urban Revitalization Efforts 244

Chapter 7 – Part II Conclusions and Propositions 262
a. Introduction 262
b. Propositions 265

Part III – Contributions of Political Science, Political Economy, and Public
Administration to Local Urban Revitalization Efforts, Processes and
Institutional Arrangements, the Scholar’s Experience 271
a. Introduction 271
Chapter 8 – Contributions of Political Science, Political Economy, and Public
Administration 284
a. Introduction 284
b. Political Independence vs. Dependence in the Provision of Local
Urban Economic Development Services 285

vi

c. Balancing Public Accountability and Responsibility with Functional
Economy, Efficiency, and Effectiveness 297
1. Traditional Bureaucratic Hierarchies 304
2. Regulatory-Based Governance Approaches 309
3. Network-Based Governance Approaches 314
4. Market-Based Governance Approaches 320

Chapter 9 – Contributions of Local Public Finance 328
a. Introduction 328
b. Defining an Efficient System of Local Public Finance and the Impact
it has on Local Urban Revitalization and Economic Development Efforts 330
c. Examining the Actual Financing of Contemporary American Local
Government 338

Chapter 10 – Contributions of Local Economic Development 343
a. Introduction 343
b. Local Economic Development Strategies: Property-Based and
Non-Property Based Approaches to Urban Economic Development 344
c. Industry Clustering: How Industry Clusters Operate Regionally, not
Locally 355
d. Regional-Oriented vs. Local-Oriented Economic Development in
Economic Development Policy Making 361
e. The Implications of Regional Organizations and Institutions 369

Chapter 11 – Part III Conclusions and Lessons 377
a. Introduction 377
b. Lessons 377

Part IV – Introduction of the Methodology 383
a. Introduction 383

Chapter 12 – Research Methodology 384
a. Introduction 384
b. Central Research Question and Individual Research Propositions 384
c. Identification of the Primary Data Sets Used 393
1. Introduction, Identification and Comparison of the Primary
Data Sets 393
2. Advantages and Limitations of Each Data Set 399
3. Required Data Cleaning of the Primary Data Sets 404
d. Identification of the Primary Analytical Techniques 420
1. One-Way Analysis of Variance (ANOVA) 421
2. Factor Analysis 424

vii

3. Multiple Regression Analysis 427
4. Case Studies 435

Part V – Research Results 438
a. Introduction 438

Chapter 13 – Results of the Quantitative Analysis 440
a. Introduction 440
b. Results of the One-Way ANOVA Testing 440
c. Results of the Factor Analysis 445
d. Results of the Multiple Regression Models 446
1. Multiple Regression Results using “Long Term Debt”
Independent Variables 447
2. Multiple Regression Results using “Assets” Independent
Variables 449
3. Multiple Regression Results using “Liabilities” Independent
Variables 452
4. Multiple Regression Results using “Expenditures” Independent
Variables 454
5. Multiple Regression Results using “Other Financing”
Independent Variables 456
6. Multiple Regression Results using “Revenues” Independent
Variables 458
7. Multiple Regression Results using “Pass Through”
Independent Variables 460
8. Multiple Regression Results using “Project Area” Independent
Variables 463
9. Multiple Regression Results using Multiple Independent
Variables from Multiple Primary Categories 464
e. Primary Conclusions from the Quantitative Analysis Results 467

Chapter 14 – Results of the Case Studies, General Information 475
a. Introduction 475
b. Profile of Each Local Redevelopment Agency – State of Nevada 475
1. The Henderson Redevelopment Agency, City of Henderson 476
2. The North Las Vegas Redevelopment Agency, City of
North Las Vegas 483
3. The Reno Redevelopment Agency, City of Reno 490
c. Profile of Each Local Redevelopment Agency – State of California 496
1. The Carson Redevelopment Agency, City of Carson 496
2. The Chico Redevelopment Agency, City of Chico 503
3. The Redevelopment Agency of the City of Long Beach, City of
Long Beach 509

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4. The Redevelopment Agency of the City of Oakland, City of
Oakland 515
5. The Redevelopment Agency of the City of Pittsburg, City of
Pittsburg 521
6. The Redevelopment Agency of the City of Sacramento, City of
Sacramento 527
7. The Sonoma County Community Development Commission,
Sonoma County 533
d. Preliminary Conclusions from the Case Studies 540

Chapter 15 – Results of the Case Studies, General Conclusions 544
a. Introduction 544
b. Transparency 544
c. Organizational and Institutional Structure 553
d. Management 560

Part VI – Conclusions, Policy Recommendations, and Areas of Future
Research 570
a. Introduction 570

Chapter 16 – Conclusions, Policy Recommendations, and Ares of Suggested
Future Research 572
a. Introduction 572
b. Conclusions 573
1. General Conclusions 574
2. Concluding Observations for the Eight Research Propositions 579
c. General Policy Recommendations 589
1. Policy Recommendations for the Present and Existing Local
Redevelopment Agencies 589
2. Policy Recommendations for the Future – Envisioning an
Alternative Institutional Arrangement for Urban Revitalization
and Urban Economic Development 601
d. Areas of Suggested Future Research 613

Bibliography 621

Appendix 1 – One-Way ANOVA Results 630

Appendix 2 – Factor Analysis Results 631

ix

Appendix 3 – Multiple Regression Results, “Inc” and “Rev_Tax_Inc_Tot” and
“Long Term Debt” Independent Variables 632

Appendix 4 – Multiple Regression Results, “Inc” and “Rev_Tax_Inc_Tot” and
“Assets” Independent Variables 633

Appendix 5 – Multiple Regression Results, “Inc” and “Rev_Tax_Inc_Tot” and
“Liabilities” Independent Variables 634

Appendix 6 – Multiple Regression Results, “Inc” and “Rev_Tax_Inc_Tot” and
“Expenditures” Independent Variables 635

Appendix 7 – Multiple Regression Results, “Inc” and “Rev_Tax_Inc_Tot” and
“Other Financing” Independent Variables 636

Appendix 8 – Multiple Regression Results, “Inc” and “Rev_Tax_Inc_Tot” and
“Revenues” Independent Variables 637

Appendix 9 – Multiple Regression Results, “Inc” and “Rev_Tax_Inc_Tot” and
“Pass Through” Independent Variables 638

Appendix 10 – Multiple Regression Results, “Inc” and “Rev_Tax_Inc_Tot” and
“Project Area” Independent Variables 639

Appendix 11 – Multiple Regression Results, “Inc” and “Rev_Tax_Inc_Tot” and
Multiple Independent Variables 640

x

List of Tables

Table F-1: Summary Budgetary Figures – All Local Redevelopment Agencies
State-wide in California, FY 2007 2

Table F-2: Summary Economic Impacts – All Local Redevelopment Agencies
State-wide in California, FY 2007 3

Table 1-1: Miles of Railway Line in Operation, 1830 to 1860 36

Table 1-2: Employment Distribution by Industry of the American Workforce
(in thousands), 1810 to 1860 42

Table 1-3: Labor Force Expansion, Select 1910 Multiples of 1860,
1860 to 1910 55

Table 1-4: Output Expansion, Select 1910 Multiples of 1860,
1860 to 1910 56

Table 1-5: Ten Largest Industries – Measured by “Value Added”,
1860 and 1910 58

Table 1-6: Governmental Expenditures vs. Total Private Sector Investment,
1927 to 1940 76

Table 2-1: Two Measures of the Size of Government, Total Government
Spending Relative to GNP and Total Government Purchases of Goods and
Services Relative to GNP, 1940 to 1970 81

Table 2-2: Two Measures of the Size of Government, Total Government
Spending Relative to GNP and Total Government Purchases of Goods and
Services Relative to GNP, 1940 to 1992 118

Table 5-1: Factors Influencing New Development and Redevelopment Project
Decisions, 1998 219

Table 6-1: Public Opinion on Kelo by Household Income 237

Table 12-1: Primary Sections – “Local Government Finance Redbook”,
FY 2008-2009 394

xi

Table 12-2: Budgetary Data for Local Redevelopment Agencies by Section –
“Local Government Finance Redbook”, FY 2008-2009 395

Table 12-3: Primary Sections – “Annual Local Government Indebtedness”
Report, FY 2008-2009 396

Table 12-4: Listing of Primary Categories and Number of Sub-Categories –
“Community Redevelopment Agencies Annual Report”, FY 1991 to FY 2007 398

Table 12-5: Major Differences and Discrepancies – California State
Controller’s Office vs. California State Department of Housing and
Community Development, FY 2007 402

Table 12-6: Final Sub-Categories/Variables Used – “Entity” Primary Category 407

Table 12-7: Final Sub-Categories/Variables Used – “Long Term Debts”
Primary Category 407

Table 12-8: Final Sub-Categories/Variables Used – “Assessed Valuation”
Primary Category 408

Table 12-9: Final Sub-Categories/Variables Used – “Assets” Primary Category 410

Table 12-10: Final Sub-Categories/Variables Used – “Liabilities” Primary
Category 411

Table 12-11: Final Sub-Categories/Variables Used – “Expenditures”
Primary Category 413

Table 12-12: Final Sub-Categories/Variables Used – “Other Financing”
Primary Category 414

Table 12-13: Final Sub-Categories/Variables Used – “Revenues” Primary
Category 415

Table 12-14: Final Sub-Categories/Variables Used – “Pass Through” Primary
Category 416

Table 12-15: Final Sub-Categories/Variables Used – “Project Areas” Primary
Category 417

Table 12-16: Number of Local Redevelopment Agencies by Fiscal Year – Final
Dataset, FY 1991 to FY 2007 418

xii

Table 12-17: Number of Local Redevelopment Agencies by Governing Board,
FY 1991 to FY 2007 419

Table 12-18: Independent Variables Chosen from the “Long Term Debt”
Primary Category 429

Table 12-19: Independent Variables Chosen from the “Assets” Primary
Category 430

Table 12-20: Independent Variables Chosen from the “Liabilities” Primary
Category 430

Table 12-21: Independent Variables Chosen from the “Expenditures” Primary
Category 431

Table 12-22: Independent Variables Chosen from the “Other Financing”
Primary Category 432

Table 12-23: Independent Variables Chosen from the “Revenues” Primary
Category 432

Table 12-24: Independent Variables Chosen from the “Pass Through” Primary
Category 433

Table 12-25: Independent Variables Chosen from the “Project Area” Primary
Category 433

Table 12-26: Independent Variables Chosen from Across All Primary
Categories 434

Table 12-27: Jurisdictions Selected for Case Study Analysis – Nevada and
California 436

Table 13-1: One-Way ANOVA Results – “Inc” and “Governing_Board_
Dummy”, California Redevelopment Agencies 441

Table 13-2: One-Way ANOVA Regression Results – “Inc” and “Governing_
Board_Dummy”, California Redevelopment Agencies 442

Table 13-3: One-Way ANOVA Results – “Rev_Tax_Inc_Tot” and
“Governing_Board_Dummy”, California Redevelopment Agencies 443

Table 13-4: One-Way ANOVA Regression Results – “Rev_Tax_Inc_Tot” and
“Governing_Board_Dummy”, California Redevelopment Agencies 444

xiii

Table 13-5: Principal-Components Factoring Results – “Governing_Board_
Dummy”, “Inc”, and “Rev_Tax_Inc_Tot”, California Redevelopment Agencies 445

Table 13-6: Factor Loading (Pattern Matrix) and Unique Variances –
“Governing_Board_Dummy”, “Inc”, and “Rev_Tax_Inc_Tot”, California
Redevelopment Agencies 446

Table 13-7: Multiple Regression Results – “Inc” and “Rev_Tax_Inc_Tot”
Dependent Variables, “Long Term Debt” Independent Variables, California
Redevelopment Agencies 448

Table 13-8: Multiple Regression Results – “Inc” and “Rev_Tax_Inc_Tot”
Dependent Variables, “Assets” Independent Variables, California
Redevelopment Agencies 450

Table 13-9: Multiple Regression Results – “Inc” and “Rev_Tax_Inc_Tot”
Dependent Variables, “Liabilities” Independent Variables, California
Redevelopment Agencies 453

Table 13-10: Multiple Regression Results – “Inc” and “Rev_Tax_Inc_Tot”
Dependent Variables, “Expenditures” Independent Variables, California
Redevelopment Agencies 455

Table 13-11: Multiple Regression Results – “Inc” and “Rev_Tax_Inc_Tot”
Dependent Variables, “Other Financing” Independent Variables, California
Redevelopment Agencies 456

Table 13-12: Multiple Regression Results – “Inc” and “Rev_Tax_Inc_Tot”
Dependent Variables, “Revenues” Independent Variables, California
Redevelopment Agencies 458

Table 13-13: Multiple Regression Results – “Inc” and “Rev_Tax_Inc_Tot”
Dependent Variables, “Pass Through” Independent Variables, California
Redevelopment Agencies 460

Table 13-14: Multiple Regression Results – “Inc” and “Rev_Tax_Inc_Tot”
Dependent Variables, “Project Area” Independent Variables, California
Redevelopment Agencies 463

Table 13-15: Multiple Regression Results – “Inc” and “Rev_Tax_Inc_Tot”
Dependent Variables, Multiple Independent Variables across Primary Budgetary
Categories, California Redevelopment Agencies 465

xiv

Table 14-1: Key Economic and Demographic Characteristics – Henderson
Redevelopment Agency and the City of Henderson, 1990, 2000, 2007 482

Table 14-2: Key Economic and Demographic Characteristics – North Las Vegas
Redevelopment Agency and the City of North Las Vegas, 1990, 2000, 2007 489

Table 14-3: Key Economic and Demographic Characteristics – Reno
Redevelopment Agency and the City of Reno, 1990, 2000, 2007 495

Table 14-4: Key Economic and Demographic Characteristics – Carson
Redevelopment Agency and the City of Carson, 1990, 2000, 2007 501

Table 14-5: Key Economic and Demographic Characteristics – Chico
Redevelopment Agency and the City of Chico, 1990, 2000, 2007 509

Table 14-6: Key Economic and Demographic Characteristics – Redevelopment
Agency of the City of Long Beach, City of Long Beach, 1990, 2000, 2007 514

Table 14-7: Key Economic and Demographic Characteristics – Redevelopment
Agency of the City of Oakland, City of Oakland, 1990, 2000, 2007 520

Table 14-8: Key Economic and Demographic Characteristics – Redevelopment
Agency of the City of Pittsburg, City of Pittsburg, 1990, 2000, 2007 526

Table 14-9: Key Economic and Demographic Characteristics – Redevelopment
Agency of the City of Sacramento, City of Sacramento, 1990, 2000, 2007 531

Table 14-10: Key Economic and Demographic Characteristics – Sonoma
County Community Development Commission and Sonoma County, 1990, 2000,
2007 539

xv

List of Figures

Figure 2-1: U.S. National Homicide Rate per 100,000 Population,
1950 to 2005 102

Figure 2-2: Estimated Total Number of U.S. National Homicides,
1950 to 2005 103

Figure 2-3: Total Number of California Active Local Redevelopment Agencies
Created Statewide – by Year, 1948 to 2007 110

Figure 2-4: Total Number of California Active Local Redevelopment Agencies
Created Statewide – by Decade, 1948-1949 to 2000-2007 111

Figure 2-5: Total Number of California Active Local Redevelopment Project
Areas Created Statewide – by Year, 1948 to 2007 112

Figure 2-6: Total Number of California Active Local Redevelopment Project
Areas Created Statewide – by Decade, 1948-1949 to 2000-2007 114

Figure 2-7: Total Number of California Active Local Redevelopment Project
Areas Created Statewide – by Year, 1997 to 2007 148

Figure 5-1: Base and Incremental Assessed Value – Reno Redevelopment
Project Area No. 1, FY 1985 to FY 2005 210

xvi

List of Illustrations

Illustration 2-1: Models of Government 124

Illustration 8-1: Continuum of Accountability and Responsibility versus
Efficiency and Effectiveness by Governance and Organizational Structure 302

Illustration 15-1 546

xvii

Abstract
Redevelopment has been the current dominant institutional form through which
local municipal and county governments in Nevada and California have pursued the
processes and goals of urban revitalization and urban economic development for the past
half century. In both states, local redevelopment agencies have generated billions of
dollars in new property tax revenues, sales tax revenues, transient occupancy and hotel
tax revenues, and business licenses. Local redevelopment agencies have also been
responsible for creating hundreds of thousands of new jobs in physically and
economically blighted neighborhoods. Local communities in both Nevada and California
have come to heavily rely upon redevelopment to generate billions of dollars in direct and
indirect economic impact. But over the next 15 to 20 years, the majority of existing local
redevelopment project areas are set to expire. Recent political, social, economic, and
legal trends suggest that redevelopment has become an increasingly unpopular way for
local governments to pursue the goals of urban revitalization and urban economic
development. The courts and the state legislatures in Nevada and California have issued
judgments and passed legislation over the past two decades that have continually sought
to reduce the effectiveness of redevelopment in the urban environment. An opportunity
exists today to consider alternative institutional arrangements that can address the
criticisms of contemporary local redevelopment, including the criticisms that property-
based economic development strategies are insufficient to meet the goals of urban
revitalization and urban economic development, that local redevelopment agencies lack a
regional economic development focus, that redevelopment is used to further fiscalize

xviii

existing land uses, and that the use of eminent domain and possible principal-agent
corruption of local redevelopment agencies renders local redevelopment agencies
incapable of achieving true urban revitalization. Future institutional arrangements of
urban revitalization and urban economic development in Nevada and California must
embrace non-property based economic development strategies and employ them using a
regional focus. To do so, a new system of incentives, using a network-based model of
government, must drive the future efforts of local governments to eliminate and mitigate
physical and economic blight while encouraging true urban economic activity.

1

Foreword

Over the past half century, redevelopment has become the dominant institutional
form in Nevada and California through which local municipal and county governments
pursue the goals of both urban revitalization and urban economic development. As this
institution has evolved, local redevelopment agencies in both states have become
increasingly efficient and effective in targeting the manifestations of physical and
economic blight found in their local communities. Over the past 50 years, local
redevelopment agencies have invested billions of dollars in new real estate oriented
projects and have successfully leveraged their resources to generate billions of new
dollars in new private real estate development. Throughout its brief history as the
dominant institutional form through which local municipal and county governments
organize their urban revitalization and urban economic development efforts,
redevelopment in Nevada and California has been responsible for the creation of millions
of new jobs, hundreds of thousands of new affordable and market housing units,
hundreds of thousands of new jobs, and even billions of dollars in new locally generated
property tax revenues, sales tax revenues, business license revenues, transient occupancy
lodging tax revenues, and various other sources of public revenues collected by
municipal, county, and state governments.
Table F-1 demonstrates the importance of redevelopment in California by
summarizing key budgetary figures including the amount of incremental assessed value
and incremental property tax revenue generated and collected by all local redevelopment

2

agencies state-wide in FY 2007 alone. For example, in FY 2007, all local redevelopment
agencies combined state-wide generated a total incremental assessed value level that was
279.07% over the established base assessed value level of the 841 active project areas
located throughout the State of California. In FY 2007 alone, all local redevelopment
agencies combined throughout the State of California collected approximately $4.6
billion in ad valorem property tax incremental revenue.
Table F-1
Summary Budgetary Figures – All Local Redevelopment Agencies State-wide in
California
FY 2007
Category State-wide Figures

Number of Agencies 398
Number of Project Areas 841

Total Base Assessed Value $154,127,965,224
Total Incremental Assessed Value $430,125,471,621

Percentage Increase Over the Base 279.07%

Total Property Tax Incremental Revenue $4,560,734,122

Principal Amount of Debt Authorized $36,491,479,745
Principal Amount Unmatured $26,134,888,193
Source: State of California, California State Controller’s Office, “Community
Redevelopment Agencies Annual Report” FY 2007.

In California, local redevelopment agencies have significantly contributed to
overall levels of economic activity and growth. For example, Gallo and Koehler (2009)
estimate that the combined state-wide economic output of all local redevelopment
agencies in California was an estimated $40.79 billion in FY 2007 alone. For FY 2007,
Gallo and Koehler (2009) further estimate that efforts of local redevelopment agencies

3

state-wide employed 303,946 individuals and generated an increase of approximately
$2.0 billion in state-wide state and local taxes not collected by local redevelopment
agencies. Table F-2 summarizes the estimated combined economic impact of
redevelopment in California for FY 2007.
Table F-2
Summary Economic Impacts – All Local Redevelopment Agencies State-wide in
California
FY 2007
Category State-wide Impacts

State-wide Economic Output $40.79 Billion

State-wide Construction Output $22.1 Billion
State-wide Manufacturing Output $3.1 Billion
State-wide Professional Services Output $2.2 Billion
State-wide Retail Trade Output $2.2 Billion
State-wide Health & Social Service Output $1.6 Billion

Increase in State-wide Personal Income $22.74 Billion

Employment (No. of Jobs) Created 303,946 Individuals Employed

Increase in State-wide State/Local Taxes $2.0 Billion
Source: Gallo and Koehler (2009), “The Impact of Fiscal 2006-07 Community
Redevelopment Agency Activities on the California Economy.” Time Structures, Inc.

But despite the impressive success to successfully revitalize physically and
economically blighted communities and encourage tremendous levels of new local urban
economic activity, redevelopment is approaching its final years as the dominant
institutional arrangement through which local municipal and county governments in
Nevada and California pursue the goals of urban revitalization and urban economic
development. Although there is considerable disagreement as to exactly when local

4

redevelopment project areas and agencies will begin to sunset, a large number of them,
due to existing state laws in both Nevada and California, will begin to expire within the
next 15 to 20 years. Due to growing hostility of redevelopment among rival local
governments and a growing hostility to redevelopment present in the state legislatures of
both states, it is unlikely that new project areas will be created to take the place of
sunsetting project areas or that existing project areas will be permitted to extend their
time horizons beyond their current expiration dates. Over the past few years, the state
legislatures in both Nevada and California have passed and proposed a series of
legislative acts that do and could further curtail the effectiveness of local redevelopment
agencies to continue their urban revitalization and urban economic development efforts.
This shift in legislative activity signals a possible end to the era of local redevelopment in
Nevada and California as the dominant institutional arrangement through which
municipal and county governments pursue the goals of urban revitalization and urban
economic development.
Although there is considerable evidence to suggest that the era of local
redevelopment is coming to a close, municipal and county governments still have a
strong incentive to pursue the goals of both local urban revitalization and local urban
economic development. Through the processes of local urban revitalization, local
municipal and county governments strive to eliminate or mitigate the negative effects that
physical and economic blight have on a local community’s ability to encourage tourism,
new development, and the creation of new jobs. Through the processes of local urban
economic development, local municipal and county governments strive to create jobs that

5

not only employ the people of a community, but also provide people with meaningful
opportunities for general upward mobility. The processes of local urban economic
development also allow municipal and county governments to encourage local-level
entrepreneurship, new business formation, innovation through research and development,
and overall goal of improving a community’s overall quality of life level.
Underscoring the ability of local municipal and county governments to pursue the
processes and goals of urban revitalization and urban economic development is the need
to fund the publicly provided services, programs, and projects needed to successfully
revitalize aging and dilapidated central urban neighborhoods and encourage new levels of
economic activity. As the federal government began to de-escalate its role in the
revitalization of central urban neighborhoods during the early to mid 1970’s, local
governments in Nevada and California turned to the use of redevelopment to fund these
urban-oriented economic development services, programs, and projects. Since the mid
1970’s, local redevelopment in both states has been used to successfully leverage federal
grants and other monies provided by federal and state agencies with locally collected ad
valorem property tax revenue to create a positive environment attractive to the private
sector. In addition to being the dominant institutional arrangement for local government
urban revitalization and urban economic development efforts, redevelopment has also
become the primary way in which local municipal and county governments fund the
services, programs, and projects needed to revitalize physically and economically
blighted central urban neighborhoods while simultaneously stimulating new levels of
economic activity.

6

Although the efforts of local redevelopment agencies have been profound in both
their scope and overall success, like any institution of government, redevelopment has not
escaped the often severe criticisms of other institutions, agencies, and levels of
government, nor has redevelopment escaped the sometimes severe criticisms of the
private sector and the public in general. The research of many scholars and the
experience of many practitioners who have spent countless years in the general field of
economic development have grown increasingly concerned that redevelopment has lost
much of its original purpose over the past half century and has moved too far away from
its urban revitalization and urban economic development roots.
Many have criticized redevelopment for adopting too narrow a focus on just the
property-based approach to economic development. Although there are many examples
of local redevelopment agencies engaging in a wide variety of strategies, they largely rely
on the use of property-based approaches as the primary way to pursue the goals and
processes of urban revitalization and economic development. This overly narrow focus
on just property-based approaches is largely the result of how local redevelopment
agencies are financed. For the most part, local redevelopment agencies are self-funding
through the collection of incremental property tax revenue collected from local
redevelopment project areas. As a result, these agencies have little formal incentive to
invest in workforce development programs, community-oriented programs and projects,
or entrepreneurial and small business development programs that generate very little new
incremental ad valorem property tax revenues. But workforce development programs,
community-oriented programs and projects, and entrepreneurial and small business

7

development programs are vital to the efforts of any municipal and county government
interested in generating new levels of economic activity.
There is also significant evidence to conclude that the authorizing municipal or
county governments have not always used the powers of their local redevelopment
agencies either efficiently or properly. In California, before legislative reforms of the
early 1990’s amended existing state law governing the activities of local redevelopment
agencies, it had become increasingly popular for local municipal and county governments
to use redevelopment in ways that generated the highest levels of new sales tax revenues
from which these governments could then benefit. It had become uncomfortably
common for local city councils and county boards of supervisors/commissioners, as the
governing boards of the local redevelopment agencies, to create new redevelopment
project areas in largely undeveloped rural areas or to use redevelopment tax increment
financing to build new retail big-box shopping centers or automobile dealerships. These
practices offer very little in the way of meaningful economic development but do offer
local municipal and county governments a way to enhance existing levels of municipally
or county collected tax revenues. As a result, redevelopment became a tool through
which municipal and county governments could further fiscalize their existing land uses.
The growing pressure on municipal and county governments to enhance existing
revenue sources also led to increased competition between neighboring jurisdictions for
new sales tax revenues, business license revenues, and transient occupancy lodging tax
revenue. As redevelopment became increasingly used to fiscalize existing land uses,
redevelopment also became part of the larger competition between neighboring political

8

jurisdictions. Local city councils and county boards of supervisors/commissioners, acting
as the governing boards of their local redevelopment agencies, promised vast amounts of
different public subsidies to retailers, sports teams, hotel operators, and other businesses
that offered the potential of new sales tax revenue, business license revenue, and transient
occupancy lodging tax revenue. This increased inter-jurisdictional competition for new
sources of public revenue, and redevelopment’s own role in it, has led to a growing body
of scholarly and practitioner work which suggests that the efforts of local redevelopment
agencies to successfully revitalize blighted central urban neighborhoods and stimulate
new economic activity works contrary to the new ways the private sector and private
markets are organizing themselves. The evidence suggests that firms, businesses, and
even individuals are increasingly organizing their economic activities regionally, not just
locally. But the continued competition between local jurisdictions for new sources of
public revenues have led to a series of polices, projects, and programs that are largely
destructive to the organization and effectiveness of regional markets and economies.
The individual practices of local redevelopment agencies in Nevada and
California, and the ways in which their policies have been developed and implemented,
have also come under increased criticism. The use of eminent domain and the
increasingly technical nature of redevelopment has led many scholars and practitioners to
conclude that redevelopment has become increasingly used by the private sector to
pursue and fund private real estate projects that increasingly ask the general public, and
vulnerable elderly and minority populations, to bear an increasing amount of the costs

9

associated with urban revitalization and urban economic development without returning
an equal share of the benefits of these processes and projects.
Policy makers and the public in general over the next several years will have to
begin considering what will replace redevelopment as the dominant institutional form
through which local municipal and county governments continue to pursue the processes
and goals of urban revitalization and urban economic development as the era of local
redevelopment begins to end. The public, the private sector, and government all still
have strong incentives to use public sector resources in ways that efficiently and
effectively revitalize blighted central urban neighborhoods while also stimulating new
levels of urban economic activity. The possible loss of redevelopment will certainly
disrupt the existing efforts of local governments in Nevada and California to revitalize
central urban neighborhoods and encourage new local urban economic activity in the
short-term. But in the long-term, the possible loss of redevelopment presents the public,
the private sector, and government an opportunity to re-evaluate their overall efforts in
physically and economically blighted neighborhoods while purposefully and directly
addressing the growing criticisms of how local municipal and county governments
currently organize the majority of urban revitalization and urban economic development
efforts.
The central purpose of this study is to explore the ways in which local
redevelopment agencies in Nevada and California have successfully contributed to long-
term, stable, local economic growth. As policy makers begin to consider alternative
institutional forms that might replace redevelopment, this study also explores the possible

10

new institutional arrangements that might be used to organize local municipal and county
government urban revitalization and urban economic development efforts in the near
future as a significant number of local redevelopment project areas and redevelopment
agencies begin to expire over the next 15 to 20 years. Underlying this central research
purpose and question is the examination of what organizational structures have been used
and what organizational structures could be used to positively impact local urban
economic growth. This study also examines the many types of policies, programs, and
projects used by local redevelopment agencies in the past to successfully revitalize
central urban neighborhoods, while also speculating as to what types of policies,
programs, and projects might be developed and implemented in the future as local
redevelopment project areas and agencies begin to expire.
Part I of this study examines the evolving and historical role that government has
played in urban economic development and its evolving relationship to American urban
society. By examining the practitioner’s experience with urban revitalization and urban
economic development throughout American history, it is discovered that the relationship
between government and the urban environment is both dynamic and difficult to predict.
At best, redevelopment has been used by local municipal and county governments for the
past 50 years. Prior to the current dominance of local government in the provision and
performance of local urban revitalization and urban economic development services, the
federal government dominated through its urban renewal policies and programs during
the urban renewal era. Prior to the urban renewal era, government’s relationship to the
urban environment developed almost out of necessity as the majority of Americans lived

11

in largely rural communities until the early 1900’s. From the American Revolution to the
early part of the 20
th
Century, the federal, state, and local governments focused a majority
of their economic development efforts on the development of infrastructure, the
development of a local, state, and national system of courts, and the security of individual
communities and the nation itself. But as America became increasingly urban,
government began to respond to the growing new problems and demands of newly
urbanized society.
Looking forward, policy makers who might be considering alternatives to
redevelopment as the dominant institutional arrangement for local urban revitalization
and urban economic development efforts should keep in mind that relationships between
government and the American urban society are perpetually dynamic. As has happened
during several points in American history, practitioners of urban revitalization and urban
economic development have learned through trial and error what policies and programs
work and which ones do not in order to meet the goals of urban revitalization and urban
economic development. Even if an alternative to redevelopment is found and agreed
upon, any alternative will likely evolve and change as the specific demands of the urban
environment continue to change. Enough flexibility should be built in to any new
alternative institution of local urban revitalization and urban economic development in
order to ensure that public sector efforts do not overly stifle private sector activities.
Although regulation and supervision of private sector markets and activities is a primary
function of government, government should not overly constrict the functioning of
private markets. Instead, as a primary goal of any new alternative institutional

12

arrangement, policy makers should consider how government can bring stability to the
chaos of markets and the urban environment without overly restricting their ability to
create wealth and prosperity.
Part II explores five primary criticisms of local redevelopment agencies in
Nevada and California that appear to be common in both the scholarly literature and in
the experiences of practitioners. It should be noted that this study is not intended only to
criticize redevelopment. The lengthy presentation of the contemporary criticisms of local
redevelopment agencies in Nevada and California are presented to serve two primary
purposes. First, as policy makers begin to consider alternative institutional arrangements
to local redevelopment, a unique opportunity has presented itself. Unlike many
institutions, the expiration of a large number of local redevelopment project areas and
redevelopment agencies offers society the opportunity to capitalize and maintain the
policies, programs, and practices of the past that have positively contributed to urban
revitalization and urban economic development while also repairing the legitimate
failures of the institution of redevelopment. Second, the honest and frank presentation of
the contemporary criticisms of local redevelopment presented in Part II of this study
offers the institution of redevelopment the opportunity to fully examine its own successes
and its own failures. History teaches that there has never been an institution of
government that has been completely free of failure or legitimate criticism. For
institutions to evolve and better serve society and society’s interests, any institution of
government, be it national, state, or local, must continually assess itself and make the

13

modifications necessary in order to remain relevant in a very dynamic and constantly
evolving and changing society.
Part III of this study presents the scholar’s experience with urban revitalization
and urban economic development. Different theories, ideas, and suggestions from the
fields of political science, political economy, economics, public administration, and
economic development are explored in order to provide policy makers a blueprint for the
development of an alternative institutional arrangement to local redevelopment as the
dominant institutional arrangement through which local governments in Nevada and
California currently organize their urban revitalization and urban economic development
efforts. In considering an alternative institutional arrangement, policy makers should
consider such concerns as how to balance public accountability and responsibility with
organizational efficiency and effectiveness. The degree of political independence or
dependence to give to any new alternative organization is another major issue policy
makers need to consider. Finally, policy makers at both the state and local levels must
also remember that economic development is a very broad and general concept.
Technology-led development, small business and entrepreneurial development,
workforce development, business retention and expansion, real estate development and
reuse, and neighborhood or community oriented development are all elements of a
successful economic development strategy. Furthermore, policy makers at both the state
and local levels must also accept the conclusion that regional levels of economic activity
and organization are increasingly replacing the outdated “smoke-stack chasing” locally-

14

oriented economic development approach that dominated local urban revitalization and
economic development efforts for most of the 20
th
Century.
Part IV and Part V introduce and present the primary quantitative and qualitative
research methods used in this study to test several research propositions developed as part
of the central research question. It is hoped that policy makers use the results of this
study to better shape whatever alternative institution of local urban revitalization and
economic development is chosen in addition to the political considerations that will
undoubtedly affect the decision making process. From the results of the quantitative and
qualitative analysis, it is learned that the composition and structure of the local
redevelopment governing board has made a considerable difference in the successful
revitalization of physically and blighted central urban neighborhoods. It is also learned
that the types of projects local redevelopment agencies have chosen to pursue and invest
in have also made significant impacts on the ability of local redevelopment agencies to
eliminate and mitigate the effects of physical and economic blight. The results of the
quantitative and qualitative analysis further illustrate that the processes of urban
revitalization and urban economic development remain a fundamentally local process.
Although some generalities can be drawn from the results of the quantitative and
qualitative analysis, local redevelopment agencies in both Nevada and California have
demonstrated a considerable ability to tailor policy and projects to fit the needs of their
local populations. Policy makers at the state level should keep this conclusion in mind
and not try to develop a state-wide alternative that fails to provide some degree of local
flexibility.

15

Part VI, the final part of this study, presents a series of final conclusions and
policy recommendations. Part VI concludes by identifying areas of future research that
could potentially provide policy makers in Nevada and California with additional insights
and information as they begin to consider new alternative institutional arrangements
through which local municipal and county governments will continue the urban
revitalization and urban economic development efforts of local redevelopment agencies
once a significant number of local redevelopment project areas begin to expire. Much of
the work presented in this study is based upon the past research and experience of
scholars and practitioners from many different disciplines and fields. It is hoped that
future scholars and practitioners will find this work of value and use it to begin their own
important research on the processes and goals of urban revitalization and urban economic
development. It is also hoped that the work presented in this study can help further the
important discussion centering on how government can effectively and efficiently
revitalize blighted neighborhoods and stimulate levels of local economic activity while
also being accountable and responsible to the varied publics that government ultimately
serves.

16

Part I – The Historical Role of American Government in Urban Economic
Development and the Development of Local Redevelopment Agencies, the
Practitioner’s Experience

I.1 – Introduction
Urban economic development in the United States is an activity into which
different levels of government grew as the complexities, orientations, and demographics
of the country have changed over time. As the nation increasingly urbanized, the various
levels of American government became increasingly active in the development, and
subsequent revitalization, of cities. In the east, governments used new powers at the turn
of the 20
th
Century to force an ordered system of growth and revitalization on to older,
largely unplanned cities. In the west, the creation of “boomtowns” and new urban centers
during the middle to latter part of the 19
th
Century largely preceded the formal structure
of state or local government. Many western cities were settled before their respective
territories became states. Outside of a few notable American cities, the federal, state, and
local governments have historically had very little control on how urban environments
have grown.
American governments gradually grew as both providers and performers of public
services over the gradual development of urban society. The United States grew from a
largely agrarian, rural society into a largely metropolitan, urban society. The shift from
rural to urban required changes in the relationships between government and civil

17

society. People gradually began to demand new types and levels of services from the
federal government, their state governments, and their local municipal and/or county
governments. In response, these governments expanded their respective roles in shaping
how the urban environment would grow and how cities would be revitalized. For
example, the development of zoning ordinances provided local governments with
considerably expanded powers to directly influence how their local communities would
be shaped. State governments would create local and county school districts and state-
run universities to directly influence the education of the next generation of workers. The
federal government also assumed new responsibilities for providing new services like
housing for the poor and interstate freeways to support a growing automobile industry.
Today, governments in the United States face strong incentives to pursue
economic development strategies in the urban built environment of cities. Urban
economic development is how government provides housing, encourages job creation,
and promotes neighborhood stability and public safety. It is also how governments
directly foster the creation of wealth, upon which the federal, state, and local
governments receive revenue primarily in the form of income taxes, property taxes, and
sales taxes. Without these revenue sources, government is unable to fund the services
that it both provides and often performs.
Tracing the history of urban development and urban renewal in the United States
provides an important insight into how government’s role in the United States in the
development of American urban society has changed. This history also provides a useful

18

insight into how the national, state and local governments have grown into the roles of
both provider and performer of urban economic development services.
By the late 19
th
Century and early 20
th
Century, the United States had sufficiently
evolved into a largely urbanized society. In 1890, the majority of Americans were living
in rural communities. Within only three decades, by the 1920’s, the majority of
Americans were living in urbanized cities. A mass migration from rural communities to
urbanized cities starting at the end of the American Civil War, and the large influx of
immigrants from Eastern Europe, were the two forces largely responsible for the sudden
development and rise of a newly urbanized America.
According to Cullingworth and Caves (2003), between 1890 and 1920, the
population of the United States increased by an estimated 42 million people. This sudden
surge in America’s population between 1890 and 1920 was largely fueled by immigration
from Eastern Europe, such nations as Italy, Poland, Russia, and Greece. Between 1851
and 1860, nearly two and a half million people immigrated to the United States. After the
American Civil War between 1871 and 1880, another two and a half million people
immigrated to the United States. Between 1881 and 1890, a total of approximately five
million more people immigrated, and between 1891 and 1910, nearly nine million more
immigrants arrived.
As immigration rates into the United States swelled between 1890 and 1920, the
population of American cities also rose at a substantial rate as migration from rural areas
to urbanized cities continued in the decades immediately following the end of the

19

American Civil War. The majority of new immigrants into the United States between
1890 and 1920 also chose to settle in existing American cities instead of settling further
west or in the more rural parts of the American south and south-east. According to
Cullingworth and Caves (2003), the American urban population had swelled from just 22
million people in 1890 to an estimated 54 million people in 1920. The percentage of all
Americans living in established and officially chartered cities with a population of 50,000
people or more had increased from just 35 percent in 1890 to 51 percent in 1920.
The development and creation of a newly urbanized American society represented
not only a change in how the majority of Americans lived and worked, but also in how
the federal, state and local governments related to American society. The development of
an urban American society led to changes in both the variety and scope of services that
the public demanded from government, and in what types of services government would
provide, and how different levels of government would provide them. Many of the
services that government would provide and perform for a largely urbanized society are
services that a largely rural society does not need. For example, a largely rural society
does not need overly complex sewer systems. There is no need in a rural society for an
elaborate and complex housing policy. Since the 1920’s, American government, at all
levels, has developed a complex and diverse bureaucracy to organize, provide, and fund
these different services.
Numerous social, political, and economic realities in different periods of
American history have acted as powerful forces in shaping the evolving roles and
responsibilities of government to both provide and perform an ever expanding number of

20

public services. An urban society, by definition, faces vastly different sets of problems
and challenges over time than those of a rural society. Even within a stable urban
society, the problems and challenges that society faces vary and change over time. One
hundred years ago, many American cities found themselves almost completely incapable
of providing its residents with basic services like fire and police protection, sanitary and
sewer services, and traffic and transportation control services. Today, through
technological advances and through the development of sophisticated, complex, and
highly technical bureaucracies like fire and police departments, sanitation and sewer
departments, and municipal, state, and federal transportation departments, the urban
problems of the past have largely been solved, although they do remain primary areas in
which all levels of American government still must improve. Today, cities face what
could perhaps be considered “old” problems in “new” forms, like air and water pollution,
energy development and distribution, quality affordable housing, and job creation.
In the United States, government has always had some type of influence in the
shaping, planning, building, and even rebuilding of American cities. For example, the
U.S. federal government helped shape the formation of existing and new cities through its
support, both technical and financial, of the development of canals, railroads, and
eventually freeways. According to both Brinkley (2000) and Walton and Rockoff (1998),
the U.S. federal government embarked on one of the world’s greatest infrastructure and
transportation projects from about 1820 to the 1950’s when the federal government
provided land, labor, and financing for, first, the development of an elaborate network of
interconnected canals. Then second, with the development of the locomotive and steam

21

power, the federal government began to support the development of a vast and
interconnected national railway network. Finally, by the 1950’s and into the present day,
the federal government has been the largest provider of funds in support of the national
freeway and interstate highway system. The development of canals, railroads, and
freeways helped directly shape the physical development, and even the problems and
challenges of American cities. As cities have grown and as technologies have changed,
and as Americans have changed the ways they both live and work, the specific means by
which government in the United States has impacted the shaping, planning, building, and
rebuilding of American cities has changed dramatically over time. The different policies
pursued and implemented by government, and the specific degrees of government actions
and involvement in the urban built environment, have also changed dramatically over
time in reaction to the different demands the American public has placed on government.
For much of the first half of American history, between the Revolution and the
early 20
th
Century, America remained a largely agrarian and rural society. It was not
until the 1920 U.S. Census did the majority of Americans, 51 percent, officially reside in
a recognized urban city. As a result, the relationship between the national government,
the state (and even territorial) governments, local governments, and society remained
philosophically grounded in the principle of the preservation and protection of individual
property rights. Political and social leaders of this period, despite recognizing the
justified need for some type of government, largely believed in a limited and restricted
role for government in the day-to-day lives of Americans. Authors like Newbold (2005)
have commented that, even in the most justifiable of cases, political and civic leaders like

22

Thomas Jefferson struggled mightily in justifying “big” actions taken by the federal
government like the Louisiana Purchase of 1803. Newbold (2005) argues that President
Jefferson’s primary concern was that the Louisiana Purchase would unduly increase the
power of the federal government and threaten not only the constitutional restrictions
placed on the American Presidency, but also expand the general role of government in
the United States beyond what could reasonably be tolerated. President Jefferson’s
action to purchase the Louisiana Territory from France is largely regarded as perfectly
justifiable by today’s contemporary standards and helped grow the overall social and
economic prosperity of the United States. But at the time, just the idea that the federal
government had the power to expand the physical size and jurisdiction of the United
States was unthinkable to some people and their political and civic leaders.
As America began to urbanize, due to both increased immigration and increased
internal migration from rural parts of the country to established urbanized cities,
government slowly began to expand its role to include the active promotion and
protection of public health and safety. Slowly, the federal government, state
governments, and local governments began to adopt zoning policies, housing policies and
other urban-related policies designed to directly shape, plan, build, and rebuild the
growing urban centers of American cities in very specific ways. In the United States,
government shifted its long held purpose in the urban environment from the planning of
symbolic cities and the paramount protection of individual property rights to an
aggressive and proactive promoter and protector of public health and safety. The
promotion and protection of public health and safety would slowly become the primary

23

justification for the expanded authorities the federal, state, and local governments would
use to expand various types of services.
The years both immediately before and after World War II saw yet additional
significant shifts in the evolving roles and relationships of government in service of urban
American society. After World War II, soldiers returning home from Pacific and
European battlefields were encouraged by the federal government, through policies like
the G.I. Bill, the 1949 Federal Housing Act, and the 1954 Federal Housing Act, to settle
in the new, rapidly expanding suburbs then growing outwards from the historical urban
centers of many American cities. State and local governments also directly encouraged
the development and expansion of new suburbs. State governments increasingly ceded
state-controlled or county-controlled land to be incorporated and chartered as cities. In
return, city governments revamped existing zoning ordinances or created altogether new
zoning regulations that allowed for suburban development. Zoning ordinances and
regulations drafted and adopted by local municipal governments in the years immediately
following World War II discouraged mixed-use development and largely encouraged vast
tracts of single-use, primarily residential, development.
Although millions of new homeowners had been created due to suburbanization,
this shift in residential patterns led to a “hollowing-out” of the inner central cores of
many American cities. As businesses and employment opportunities followed the
residential migration to the expanding suburban neighborhoods, and in some cases even
preceded the expansion of the suburbs, the remaining and largely minority inner-city

24

populations were left without meaningful employment opportunities and without
opportunities for better and higher quality housing.
The federal, state and local governments, which had directly encouraged the
expansion of the suburbs, were now left with socially and economically depressed inner
cities. Institutionalized racism, poverty, and crime quickly became the defining
characteristics of America’s largest inner cities. In response, state governments
authorized the creation of local redevelopment agencies and the federal government
began to develop policies designed to directly intervene into these new social and
economic problems. By the mid 1950’s, the political stage had been set for the “urban
renewal and redevelopment era” which would represent a period of one of the largest
expansions of government’s relationship to American society.
From the mid 1950’s to the present day, government has steadily increased its
direct involvement in the shaping, planning, building, and rebuilding of American cities,
and it has steadily increased both the variety and depth of public services it provides and
performs. During the first half of this period, from the mid 1950’s to the mid 1970’s, the
federal government would spend billions of dollars through urban renewal programs and
policies. These programs and policies were designed to plan and complete new
transportation, housing, and community and economic development projects. Unlike the
federal government’s prior support of canal building, railroad networks, and the national
freeway and interstate program, the federal government would attempt to directly
stimulate economic activity in the specifically defined socially and economically
depressed inner central cores of America’s largest cities. The federal government had an

25

indirect role in stimulating economic activity prior to urban renewal. The development
and funding of canals, railways, and freeways were designed to support national
economic growth through lowering the indirect transportation costs of goods, services
and people. Urban renewal took a much more targeted and focused approach through
which the federal government attempted to stimulate economic growth by targeting
individual neighborhoods through community-level programs and projects.
Between the mid 1950’s and mid 1970’s the federal government had further
expanded its already substantial role in protecting and proactively promoting the public’s
general health and safety. Federal programs began to emphasize a type of environmental
determinism where government, especially the federal government, could and morally
should use its vast powers to directly improve the social and economic lives of America’s
least fortunate people. Unlike Jefferson’s time, the majority of political and social
leaders of this period did not wrestle with the possibility that the federal government had
overstepped its constitutional authority in attempting to directly improve the social and
economic lives of the public. Instead, the majority of political and social leaders of this
period saw an opportunity to use the powers of the federal government in a proactive and
very positive way.
But hampered by both the clear failures to improve the social and economic lives
of American inner city residents and by increasingly reduced federal resources, the
federal government by the mid 1970’s began to de-escalate its role in both the provision
and performance of public urban renewal services. In place of direct federal government
involvement, local governments assumed the primary responsibility of directly improving

26

the shape and form of America’s cities. Local governments through state-authorized
legislation would create local redevelopment agencies and, in partnership with other local
government entities, would directly determine how to spend both local and federal money
and resources in their own local communities. In place of urban renewal, urban
economic development would become the principal goal of local governments and the
primary way through which local governments would attempt to stimulate local urban
economic activity. Local governments by the end of the 20
th
Century and by the
beginning of the 21
st
Century had become the dominant government force in the efforts to
stimulate local urban economic growth.
First, Part I traces and outlines the evolving and sometimes controversial roles
that government has had in the shaping, construction, and even reconstruction of
America’s urban society. Second, this introductory part, by viewing redevelopment as
the dominant contemporary institution of local urban economic development in
California and Nevada, concludes with a preliminary outline of the criticisms of
contemporary redevelopment agencies in both California and Nevada that is expanded
upon in Part II.
The national, state, and local governments have found their respective efforts to
stimulate urban economic growth during different periods of American history to be
hampered by both a lack of available resources and by the overall size of the urban
central-city problem. These varying levels of government have also been hampered by
both what the American public in general will tolerate in-terms of government action and
by the organizational and bureaucratic limitations of government itself. In many ways

27

government has helped to create many of the social and economic maladjustment
problems that soon came to characterize many parts of many American cities. As a
result, government has found itself forced to expand its role as both a provider and
performer of public services in the urban central parts of many American cities.
The historical development of American governments’ relationships to changing
urban American society is seen in the political, social, economic and legal changes of the
country over time. Politically, the federal, state, and local governments have increased
the depth and variety of different services that they have provided over time, especially
pertaining to local urban economic development services. Socially, the public has, over
time, become increasingly tolerant and demanding of government’s involvement in urban
economic development services. Economically, cities have required more active roles of
government to encourage the revitalization of declining and aging urban central city
neighborhoods. Legally, the courts have regularly expanded the legal powers of
governments to pursue the revitalization of cities through contemporary zoning
ordinances, governmental and bureaucratic planning efforts, urban renewal,
redevelopment, and many other devices.
Historically, the political, social, economic, and legal changes that have allowed
all levels of government to routinely expand their authority to directly stimulate local
urban economic growth can be traced through different parts of American history. Part I
outlines five different historical periods in which political, social, economic, and legal
changes within American society can be identified. Chapter 1 begins with the first half of
American history and traces the gradual development of American urban society from the

28

founding of the United States to the late 1800’s. The rise of the American urban society
from the late 1800’s to World War II is chronicled next in Chapter 2, followed by the
“urban renewal era” which lasted between the end of World War II and the mid 1970’s.
The final period of American urban economic development history, presented in Chapter
2, covers the “contemporary local redevelopment era” from the mid 1970’s on to the
early 21
st
Century.

29

Chapter 1 – America in Transition: A Rural to Urban Society

1.a – Introduction
The United States began as a predominantly agrarian nation. As a result, there
was little need for elaborate, formalized, and complex national, state, or even local
economic development policy. For much of the first 125 years of American history,
national, state, and local government economic development policy focused on large
issues such as transportation and national defense. But as the United States gradually
began to urbanize, new problems quickly grew as more and more Americans settled in
established cities. Problems of over population, residential overcrowding, the reliable
delivery and distribution of food and potable water, sewage treatment, and general
concerns regarding basic human health and safety grew in both their magnitude and
complexity as established cities became the dominant political, social, and economic way
in which American society had begun to organize itself.
This chapter explores the different political, social, and economic realities and
paradigms that helped influence public-sector economic development policy for the first
125 years of American history. From the founding of the United States to the early 20
th

Century, these general realities and paradigms shifted as America became increasingly
urbanized. These changes are explored in this chapter as a way of providing some
general insights into why local governments ultimately have used redevelopment as the
dominant institutional arrangement for local urban economic development and
revitalization activities in contemporary times.

30

1.b – Founding of the United States to the Late 1800’s, the Evolution of
Contemporary American Urban Society
For the first 125 years of American history, the federal, state, and local
governments struggled to form their own respective identities and relationships to the
people they served. From the years immediately following the Revolution up to the end
of the 19
th
Century, the federal government slowly evolved into a complex bureaucracy
and gradually moved from a distant national government to a more involved provider and
performer of public services. In regard to urban economic development, the federal
government gradually moved from assisting private economic development at the
national level to regulating private-sector led economic development to directly
encouraging economic development. As the nation remained largely agrarian from the
years immediately following the Revolution up to the end of the 19
th
Century, much of
the federal government’s indirect effort to encourage and regulate economic development
focused on the development of national infrastructure. From canals and waterways to the
intercontinental railway system to a private network of roads, the federal government’s
primary effort was to link agrarian areas of production to urbanized centers of trade and
manufacturing.
State governments were also struggling to build a relationship between
themselves and the people they served. In the decades immediately after the Revolution,
the original 13 state governments were still struggling to adapt to a new form of
federalism and transition from being territorial extensions of the British Crown and
Parliament into relatively autonomous state legislatures. Outside the original 13 state

31

governments, territorial governing bodies had been created as the United States moved
geographically westward from the Louisiana territories into the Utah territory and further
west. Over time, these territorial governments became state governments. During this
period, state governments in the United States either overlooked or simply did not
purposefully consider the role of provider and performer of public services. Just the very
concept of economic development was foreign to the many state and territorial
governments of the time. For much of the 19
th
Century, they were simply focused on
developing the very basic infrastructure of state and territorial government such as a state
court system, basic law enforcement, control and parceling of land, development of an
effective state legislature, and the development of “primitive” gubernatorial executive
offices.
Local governments faced similar challenges that the state governments were
facing during the first 125 years of American history. Especially in the western
territories, the migration of settlers to newly settled urban areas typically preceded any
formal structure of local government. For example, much of local law enforcement
consisted primarily of federal marshals. In some cases even the U.S. Army, as Walton
and Rockoff (1998) point out, were used to maintain a semblance of law and order in
developing states and territories. Although existing urbanized areas in the northern and
southern United States had well developed municipal governments for the time, there was
still little legal authority that municipal governments could use to justify becoming a
provider and performer of services.

32

Further restraining the development of the federal, state, and local governments
was a fairly stable set of political, economic, and social paradigms coupled with a fairly
stable set of national demographic and socio-economic conditions. These paradigms and
conditions helped prevent the intrusion of any level of government into the economic
development of urban cities. The introduction of professional bureaucratic management,
which emphasized a fairly independent, highly trained and technical bureaucracy, did not
become fully embraced until the later part of the 19
th
Century and the early part of the
20
th
Century. The dominant laissez-faire economic theory of the time emphasized free
and unregulated private markets. Socially and demographically, the nation remained
largely agrarian for much of America’s early history. Even as cities steadily grew in the
east and along coastal areas in the north and south, the migration west of the Mississippi
River in the years both immediately before and after the American Civil War moved a
significant amount of the population into territorial areas where there was little federal
government oversight, generally weak territorial “state” governments, and little to no
organization of local municipal governments. In western territories prior to statehood,
urban centers along major transportation corridors grew organically with little real
influence from any level of government.
Three separate views are taken in this section to illustrate how the federal, state,
and local governments gradually became providers and performers of public services, and
how different levels of government treated the concept of economic development in
general. Initially, the first 125 years of American history is examined through the
transportation lens. That shows how, over time, the federal, state, and local governments

33

used macro-transportation policies to encourage private economic development between
urbanized centers of trade and commerce. Next, the first 125 years of American history
is examined through a socio-economic and demographic lens, showing how, for much of
America’s early history, the nation remained largely agrarian and therefore did not
require formal urban economic development public policies. Third, the first 125 years of
American history is examined through a legal lens, linking key legal decisions and laws
to concrete changes in the economic development policies of the federal, state, and local
governments.
According to both Brinkley (2000) and Walton and Rockoff (1998), the
development of a national transportation system, designed to link key urban centers
across vast rural areas, was a primary policy concern of the federal, state, and local
governments for much of the 19
th
Century. Brinkley (2000) points out that education and
literary policies, medical and scientific policies, technological advancement policies, and
even cultural and religious policies were almost nonexistent for much of America’s first
125 years. Even by 1815, Brinkley (2000) argues that, “…no state had actually created
an effective system of free (public) schools…instead, schooling remained primarily the
responsibility of private institutions, most of which were open only to those who could
afford to pay for them.” (pg. 181).
For much of the 19
th
Century, government in the United States was largely
focused on transportation and infrastructure development. Even though the federal
government saw a need for a national transportation policy, much of the early
development of canals and waterways occurred through private-sector action. As Walton

34

and Rockoff (1998) argue, “Transportation developments on the natural waterways,
especially on the rivers through the Southern Gateway, but along the Northern Gateway
avenues as well, were predominantly a product of private investment…calls for federal
action to improve the rivers often went unheeded because of strict constitutional
interpretations.” (pg. 193).
Because the federal government could rarely support the development of canals
and waterways directly as part of a national transportation policy designed to encourage
regional and national economic development, state governments soon began to support
and even directly fund and build internal state-level canals. Walton and Rockoff (1998)
found that it was the New York state legislature that, in 1816, began the first major canal
building project with the construction of the Erie Canal and the Champlain Canal. By
1825, Walton and Rockoff (1998) found that most existing state legislatures had also
begun to develop, finance, and even build the development of separate state-wide canal
systems. According to Walton and Rockoff (1998), all state-wide canal building projects
in the early 1800’s had three primary goals in common. The first general goal was to link
“back country” or mostly rural areas to tidewater and coastal areas where agricultural
goods could be easily transported by sea to European markets or to markets in existing
American cities. The second general goal of the early state-wide canal building projects
was to traverse the largely empty and rural areas between “older” states and the Ohio
valley where vast mineral and metal deposits had been found. The linking of the Ohio
valley region through a series of canals and manmade waterways would help spark the
American Industrial Revolution. Tied to the opening of the Ohio valley region through

35

manmade canals was the third goal of providing greater transportation access to the
western American frontier. Implicit in all three of these goals is the idea that
government, through its access to capital, land, and labor, can positively impact at least
regional, and possibly local, economic development.
The largely state-wide canal building projects of the early 1800’s were designed
to connect different regional and local markets through a well maintained and efficient
transportation system. But instead of focusing on developing the infant urban markets of
American cities, the driving force behind the massive investment in canal building was
largely the extraction and movement of natural resources and agricultural goods from
rural areas to urban markets. Agricultural goods would flow into cities, but the
motivation behind the canal projects was to move cash and finished goods back into the
rural areas.
Although the state government sponsored canal building projects of the early
1800’s were an indirect attempt to stimulate economic activity, it was primarily a
transportation project and not a formal economic development policy. However, these
investments in the development of manmade canals, during what Walton and Rockoff
(1988) label the “…great canal-building era…” (pg. 197), were substantial. Walton and
Rockoff (1998) estimate that nearly $31 million was invested in the development of
various canals nationwide between 1815 and 1843. During the second wave of
nationwide canal building, but again largely initiated, built, and financed by state
governments, an additional $66 million was spent between 1843 and 1860. Again,

36

Walton and Rockoff (1998) found that about three-quarters of the $66 million in canal
financing between 1843 and 1860 came from state government treasuries.
Although canals maintained their dominance as the primary mover of goods
between rural and urban areas in the United States for much of the 19
th
Century, the
railroad would quickly become the transportation mode of choice. The rise of the
railroad would also mark an important change in American history as the federal
government took a much more active and direct role in the provision and performance of
public services and in the development of the nation’s economy. Table 1-1 shows growth
in the miles of railway line in operation between 1830 and 1860 in five-year increments.
Table 1-1
Miles of Railway Line in Operation
1830 to 1860
Year Number of Miles Annual Percentage
Change

1830 23 -
1835 1,098 4673.91%
1840 2,818 156.65%
1845 4,633 64.14%
1850 9,021 94.71%
1855 18,374 103.68%
1860 30,626 66.68%

1830-1860
Actual Change
30,603 -
1830-1860
Percentage Change
133056.52% -
1830-1860
5-Year Average
9,513 860.01%
Source: Reproduced from Walton and Rockoff (1998), pg. 199, “Historical Statistics”
(Washington, D.C.; Government Printing Office, 1960), Series Q 15.

37

Between 1830 and 1860, approximately 9,513 total miles of new railway line
were built every five years. Between 1830 and 1860, the total number of railway line
miles in operation grew from just 23 total miles in 1830 to an astonishing 30,626 miles in
1860, a net increase of 30,603 total miles. By 1860, largely thanks to federal government
action, railroads had become the primary mode of transportation linking largely rural
areas to existing urban cities.
Although it did not take long for the railroads to supplant the canal as the primary
mode of inter-regional transportation in the United States, many state governments
quickly voiced their opposition to the direct federal government assistance it had
provided to the railroads early in their development. Walton and Rockoff (1998)
reproduce a letter from 1829 from then governor of New York Martin Van Buren to
President Andrew Jackson (pg. 198). This letter, presented below in its entirety, best
shows the uneasiness of direct federal government intervention into market forces that
typified the dominant political and economic paradigms of the time.

To: President Jackson

The canal system of this country is being threatened by the
spread of a new form of transportation known as
‘railroads.’ The federal government must preserve the
canals for the following reasons:

One. If canal boats are supplanted by ‘railroads’, serious
unemployment will result. Captains, cooks, drivers,
hostlers, repairmen and lock tenders will be left without
means of livelihood, not to mention the numerous farmers
now employed in growing hay for horses.

Two. Boat builders would suffer and towline, whip and
harness makers would be left destitute.

38

Three. Canal boats are absolutely essential to the defense
of the United States. In the event of the expected trouble
with England, the Erie Canal would be the only means by
which we could ever move the supplies so vital to waging
modern war.

As you may well know, Mr. President, ‘railroad’ carriages
are pulled at the enormous speed of 15 miles per hour by
‘engines’ which, in addition to endangering life and limb of
passengers, roar and snort their way through the
countryside, setting fire to crops, scaring the livestock and
frightening women and children. The Almighty certainly
never intended that people should travel at such breakneck
speed.

Martin Van Buren
Governor of New York.

Although the direct and indirect intervention of state governments for economic
development and transportation purposes had become largely acceptable by 1829, it was
still largely inconceivable to many that the federal government either had or should have
the right to intervene in market conditions for transportation and economic development
purposes. As Walton and Rockoff (1998) conclude, “Despite the opposition of those who
feared the railroads, construction went on…at the time the federal government was
restrained by the prevailing political philosophy of strict constitutionalism from
financially assisting and promoting railways. The (federal) government did, however,
make surveys to determine rights of way and provided tariff exemptions on railroad
iron.” In the years after 1839 however, the federal government would move far beyond
simply providing tariff exemptions and performing right of way surveys. This shift in
political and economic philosophy would be most noticeable as railroad construction

39

moved from the “antebellum era” of railway line building to the “transcontinental era” of
railway line building where direct public aide was seen as a necessity for completing a
transcontinental railway line network.
The “transcontinental era” of railway line development in the United States in the
latter half of the 19
th
Century would be dominated by the federal government and various
local governments who were eager to have railway lines pass through their communities
in the hope of linking their city with larger eastern cities. According to Walton and
Rockoff (1998), state and local government contributions to the railroad companies
during the “transcontinental era” largely came in the form of purchased or guaranteed
railroad bonds, granted tax exemptions, and provided terminal facilities. In contrast, the
federal government largely dealt in land. Although Walton and Rockoff (1998) estimate
that the federal government might have initially provided as much as $175 million in
government bonds loaned to the Union Pacific, Central Pacific, and four other
transcontinental railroad companies, the federal government provided nearly 80 total land
grants to the railroad companies, amounting to nearly 200 million acres of public land,
before railroad land grants were discontinued in 1871.
The federal government’s direct support of the railroad had a surprisingly
important impact on the development of the growing urban environment throughout the
United States. Local governments largely rebelled against their state governments in
support of the development of a transcontinental railway network. For local governments
the railroad meant, according to Brinkley (2000), two very important things. First, for
local governments, primarily in and west of the Ohio valley and around the Great Lakes,

40

it meant linking their relatively small communities to the larger markets of the eastern
and northeastern coastal cities. As Brinkley (2000) states, “Where railroads went, towns,
ranches, and farms grew up rapidly along their routes. Areas once cut off from markets
during winter and other spells of bad weather found that the railroad could transport
goods to and from them at any time of year.” (pg. 282). Second, for local governments
and the residents of more rural communities the railroad became symbolic of
technological growth and urban sophistication that many rural communities wanted to
emulate. As Brinkley (2000) points out, the railroad “…also became a symbol to many
Americans of the nation’s technological prowess, and as such turned into something close
to a national obsession. To many people, railroads were the most visible sign of the
country’s progress and greatness.” (pg. 283).
Due to the expansion of the railroad and the prosperity that it brought to many
cities, urban expansion from 1840 to 1860 was significant. As Brinkley (2000)
illustrates, cities like New York, for example, grew in total residential population from
just 312,000 in 1840 to nearly 805,000 by 1860. Philadelphia grew from 220,000 people
in 1840 to almost 565,000 people in 1860, and Boston grew from just 93,000 people in
1840 to almost 177,000 people in 1860. Although Brinkley (2000) traces a significant
portion of this urban growth to immigration and reductions in American urban city infant
mortality rates, Brinkley (2000) also finds that much of the urban population growth
between 1840 and 1860 in the United States was largely due to a booming agricultural
national economy which helped major cities like St. Louis, Pittsburgh, Cincinnati, and
Louisville become major centers of agricultural trade because of their central location to

41

major rural areas and access to major transportation waterways and railway line
junctions.
Although there was significant urban growth between 1840 and 1860, the United
States still remained largely agrarian. Dominant political, economic, and social
philosophies were still deeply anchored in an agrarian tradition which viewed both
government involvement in markets and in the provision and performance of public
services as undesirable. Although the federal government had significantly increased its
ability to directly impact the physical development of land through the direct support of a
transcontinental railroad network, the nation remained largely rural for much of the 19
th

Century. The development of federal, state, and local government regulation focused
almost solely on the management of agricultural and rural land. This trend can be
attributed to the observation that it was agriculture, not industry, which drove westward
expansion and migration for the much of the mid to latter half of the 19
th
Century.
Between 1810 and 1860, agriculture remained the dominant employment industry
for the entire United States. From 1810 to 1860, employment in agriculture accounted
for, on average, 67.31 percent of nationwide employment. Comparatively, all other
industries accounted for just a fraction of nationwide employment. For example,
manufacturing was the second largest industry between 1810 and 1860 in terms of total
nationwide employment, but only accounted for, on average, approximately 12.38
percent of nationwide employment. Trade, construction, and services accounted for just
6.87 percent, 4.92 percent, and 4.81 percent of nationwide employment respectively. At
the lowest end of the spectrum, transportation, mining, and fishing accounted for just

42

1.95 percent, 0.80 percent, and 0.35 percent of nationwide employment respectively
between 1810 and 1860. As Table 1-2 shows, the composition of the American
workforce remained largely agrarian for much of the first half of the 19
th
Century.
Table 1-2
Employment Distribution by Industry of the American Workforce
(in thousands)
1810 to 1860

Industry

1810

1820

1830

1840

1850

1860
Average
Percentage
of Total

TOTAL 2,330 3,135 4,200 5,660 8,250 11,110 100.00%

Agriculture 1,950 2,470 2,965 3,570 4,520 5,880 67.31%
Manufactures 75 - - 500 1,200 1,530 12.38%
Trade - - - 350 530 890 6.87%
Construction - - - 290 410 520 4.92%
Services 82 130 190 285 430 715 4.81%
Transportation 60 50 70 112 155 225 1.95%
Mining 11 13 22 32 102 176 0.80%
Fishing 6 14 15 24 30 31 0.35%
Source: Reproduced from Walton and Rockoff (1998), pg. 236, “Historical Statistics”
(Washington, D.C.; Government Printing Office, 1960), Series Q 15.

Although the United States remained largely agrarian and rural for most of the
19
th
Century, it was, somewhat ironically, America’s agricultural expansion westward
that would eventually lead to a greater liberalization of federal and state regulatory
systems and eventually the shift from a primarily agrarian society to a largely urban
society. Federal land policy in the mid to late 1800’s largely emphasized transferring
federal land to private ownership beginning with the Homestead Act of 1862. Between
1870 and 1900, the federal government, according to Walton and Rockoff (1998), more
than doubled the amount of federally held land transferred to private ownership, growing

43

from approximately 408 million acres transferred to private ownership in 1870 to almost
839 million acres transferred in private ownership in 1900 (pg. 328).
Although the transfer of federally held land to private interests did not
significantly increase until 1870, the federal government had slowly increased its
regulatory control of the agricultural sector of the American economy. Over time,
political, economic, and social philosophies would change to allow the federal
government, and eventually state and local governments, to become active regulators of
the private-sector and become active providers and performers of various public services
in both the urban and rural environments. But for most of the 19
th
Century, only the
federal government, and only in the rural environment, could increase both its regulatory
powers and its ability to be both a provider and performer of public services.
Walton and Rockoff (1998) do point out that the federal government had been
actively involved in the regulation and supervision of the American rural environment as
early as 1839 when the Agricultural Division of the U.S. Patent Office was created.
However, the real beginning of federal regulation of the American rural landscape did not
occur until 1862 when the U.S. Congress approved the creation of the Department of
Agriculture. But it was not until 1889 when the U.S. Congress approved the Department
of Agriculture’s status as a Presidential Cabinet level department. Until 1920, according
to Walton and Rockoff (1998), the Department of Agriculture performed three principle
functions. First, the Department of Agriculture would be responsible for encouraging and
supervising research and experimentation in plant exploration, plant and animal breeding,
and insect and disease control. Second, the department would be responsible for the

44

distribution of agricultural information through publications, agricultural experiment
stations, and county demonstration work. Finally, the department was responsible for the
regulation of the quality of products through the authority to condemn diseased animals,
to prohibit shipment in interstate commerce of adulterated or misbranded foods and
drugs, and to inspect and certify meats and dairy products in interstate trade.
Shortly after the creation of the Department of Agriculture, Walton and Rockoff
(1998) point out that a series of other federal congressional acts would lead to an even
larger role for the federal government in directly providing and performing a series of
rural oriented public services. The Morrill Act of 1862 provided land grants to state
governments for the primary purpose of building public universities that would be
committed to agricultural training at the university level. Eventually, as Walton and
Rockoff (1998) argue, the Morrill Act of 1862 would eventually lead to state-level
leadership in agricultural research and development. Later, the Hatch Act of 1887
provided direct federal funding and assistance to state agricultural experiment stations.
Even into the early 20
th
Century, the federal government was expanding its role as a
provider and performer of, yet still largely agrarian, public services when, in 1917,
Congress passed the Smith-Hughes Vocational Education Act which authorized the
federal government to provide state governments with financing and assistance to expand
their vocational training, largely at the high school level, in agriculture, the trades, and
home economics.
Walton and Rockoff (1998) further argue that the period between 1870 and 1880
saw the most liberalization of federal regulation of public rural lands. At the same time,

45

state governments were also passing new regulations that were largely designed to
regulate the railroad in mostly rural areas, but, for really the first time, in urban areas as
well. At the federal level, Walton and Rockoff (1998) identify four key pieces of federal
legislation between 1870 and 1880 which shifted the federal government’s role from a
passive participant in shaping the rural environment to a much more active participant as
both a regulator of the private-sector and as a provider and performer of public services.
In 1873 Congress passed the Timber-Culture Act which was specifically designed to
encourage growth of timber in arid regions. The Timber-Culture Act of 1873 made 160
acres of federally owned land in largely arid regions available to any individual willing to
plant trees on at least 40 of the 160 acres. In 1877 Congress passed the Desert Land Act.
The Desert Land Act of 1877 allowed any individual to purchase a total of 640 acres of
federally owned land at $1.25 per acre if the purchaser agreed to irrigate the land within
three years of purchase. In 1878 Congress passed the Timber and Stone Act which,
according to Walton and Rockoff (1998), provided anyone the right to purchase federally
owned timber and stone lands in Nevada, California, Oregon, and Washington for $2.50
an acre. Finally, Congress passed the Timber-Cutting Act of 1878 which authorized
existing residents of certain specified areas to cut trees on federally owned land without
charge as long as the cultivation of timber resulted in agricultural, mining, or domestic
building purposes.
At the state level state governments, between 1871 and 1874, set out to regulate
railroads, grain elevators, and public warehouses in urban areas. The series of laws,
regulations, and court cases that transpired between 1871 and 1874, according to Walton

46

and Rockoff (1998), would become known as the “…Granger movement, the legislation
as the Granger laws, and the review of the laws by the Supreme Court as the Granger
cases.” (pg. 363). Between 1871 and 1874, a series of laws passed by the state
legislatures of Illinois, Iowa, Wisconsin, and Minnesota would attempt to, among other
things, fix the schedules for the maximum rates charged by railroad companies. These
rates would be set by independent state railroad commissions. Railroad companies in
these states would be required to charge pro rata shares based upon the distance
agricultural goods were transported over. Railroad companies would also be prohibited
from charging “short shippers” more than what an independent state commission would
determine to be a “fair share” of the transportation costs. Another important part of the
Granger laws would be the power given to the independent state commissions to
investigate complaints of unfair pricing leveled against railroad companies and the ability
to instigate suits against possible violators.
Although only six separate suits were ultimately brought before the U.S. Supreme
Court to test the validity of the Granger laws, Walton and Rockoff (1998) identify two
U.S. Supreme Court cases thought to be most instrumental in advancing the authority of
state governments to both regulate the rural and the growing urban environment. Walton
and Rockoff (1998) also argue that the series of Granger cases that resulted from passage
of the Granger laws helped establish state governments as providers and performers of
new public services in both the rural and urban environment. The first case identified by
Walton and Rockoff (1998) is the Munn v. Illinois (1877) U.S. Supreme Court case. In
Munn v. Illinois (1877), the U.S. Supreme Court found that state governments have the

47

right to regulate railroad companies. Quoting Chief Justice Morrison Remick Waite in
the majority opinion, Walton and Rockoff (1998) state, “…that when businesses are
‘clothed with a public interest’, their regulation as public utilities is constitutional.” (pg.
364). In short, the U.S. Supreme Court settled the constitutionality of a state
government’s right to regulate railroad companies and other related businesses within
their own jurisdictions. However, the U.S. Supreme Court in Munn v. Illinois (1877) did
not settle the constitutional question of regulating business across state lines.
The U.S. Supreme Court, in Wabash, St. Louis and Pacific Railroad Company v.
Illinois (1886), settled the question of regulating business across state lines. In this case,
the State of Illinois had found that the Pacific Railroad Company had been charging more
for a shorter haul between Gilman, Illinois and New York City and charging a smaller fee
for a longer haul between Peoria, Illinois and New York City. Eventually, the
independent railroad regulatory commission in Illinois ordered the Pacific Railroad
Company to alter its rates for transporting goods between Gilman and New York City to
reflect the prorated requirements established earlier under the Granger laws. Ultimately,
the U.S. Supreme Court found that, according to Walton and Rockoff (1998), “…Illinois
could not regulate rates on shipments in interstate commerce because the Constitution
specifically gave the power to regulate interstate commerce to the federal government.”
(pg. 364).
In response to Wabash, St. Louis and Pacific Railroad Company v. Illinois (1886),
the U.S. Congress passed the 1887 Act to Regulate Commerce. The 1887 Act to
Regulate Commerce established the federal Interstate Commerce Commission (ICC).

48

First, the ICC was required to annually examine the business practices and pricing
schemes of interstate railroad companies. The ICC was given the power to subpoena
witnesses and demand that the railroad companies furnish the ICC with copies of
contracts, financial ledgers, and other related documents. Second, the ICC was put in
charge of hearing complaints that arose from possible violations of the1887 Act to
Regulate Commerce. If the ICC found that a railroad company was in violation of the
1887 Act to Regulate Commerce, the commission could issue “cease and desist” orders
and impose new pricing schemes on the railroad companies. Third, the ICC required
railroad companies to submit annual reports and audits to the commission. The ICC
would eventually establish a uniform system of accounts for all individual railroad
companies.
In the latter years of the 19
th
Century between 1870 and 1900, the federal and
state governments had successfully won the right to not only regulate, but to enhance and
expand the variety of public services provided and performed. Both the federal and state
governments were also beginning to shift their attention from largely rural areas to the
urban environment. Although the nation still remained largely agrarian, past political,
economic, and social paradigms were beginning to change. These shifting paradigms
supported a more activist role for government at both the federal and state level. A
growing sense of skepticism of the private-sectors ability to create wealth, and a growing
sense that private markets alone could not produce wealth for everyone, gradually opened
the door for the federal and state governments to take a much more active role in

49

regulating the private-sector and also in providing and performing a much wider variety
of public services.
Local governments, especially in established cities, throughout the United States
were also able to expand their regulatory powers in the urban environment. Local
governments were increasingly becoming called upon to develop, provide, and perform a
much larger variety of urban public services. As already mentioned, Brinkley (2000)
identified a trend of urbanization in the United States beginning as early as the 1840’s.
According to Brinkley (2000), three trends characterized much of the domestic
population growth and change between 1820 and 1840. First, the American residential
population was growing rapidly. Between the end of the Revolution and 1790, the
American population remained constant at approximately 4 million people per year. But
between 1790 and 1820, the American population grew by nearly 6 million people,
reaching an estimated total of nearly 10 million people by 1820. By 1840, the American
residential population had grown to an estimated 17 million people. Brinkley (2000)
attributes this rapid population growth in the United States between 1790 and 1820 to
general improvements in public health, a far lower number and far milder occurrence of
epidemics when compared to Brittan or other European countries, and a relatively high
birth rate. Brinkley (2000) estimates that in 1840 white women in the United States bore,
on average, 6.14 children over the course of a lifetime.
The second trend of urbanization in the United States identified by Brinkley
(2000) between 1790 and 1840 was the obvious movement westward. Brinkley (2000)
attributes much of westward expansion to declining agricultural production in the

50

northeastern parts of the United States. According to Brinkley (2000), “As the
agricultural regions of New England and other areas grew less profitable, more and more
people picked up stakes and moved – some to promising agricultural regions in the West,
but many to eastern cities.” (pg. 275). In 1790, Brinkley (2000) estimates that only one
in 30 persons living in the United States had lived in an American city (defined as a city
or community with a minimum residential population of 8,000 or more). By 1820, nearly
one in 20 persons living in the United States had lived in an American city. By 1840,
nearly one in 12 persons living in the United States had lived in an American city.
The third trend evident in the American population was the observation that a
significant portion of westward migrants from eastern cities and coastal areas eventually
settled in new towns and cities where new industries were being created and new
residents could provide a work force for industry. Brinkley (2000) argues that new urban
centers west of the established eastern cities and coastal areas, “…benefited from a
strategic position on the Mississippi River or one of its major tributaries. All of them
became centers of the growing carrying trade that connected the farmers of the Midwest
with New Orleans and, through it, the cities of the Northeast.” (pg. 275). Brinkley
(2000) also finds that, “After 1830, however, an increasing proportion of this shipping
moved from the (Mississippi) river to the Great Lakes and created major new urban
centers that gradually superseded the river ports. Among them were Buffalo, Detroit,
Milwaukee, Cleveland, and – most important in the end – Chicago.” (pg. 275).
Clearly, America had been urbanizing as early as the 1820’s and as late as the
1840’s. But this urbanization was not being driven by true urban forces. It was being

51

driven by largely agrarian and rural forces. Even though new and existing urban centers
were growing due to an agricultural economic expansion across the United States, federal
and state regulatory focus, and federal and state public service performance and
provision, was still largely geared toward the rural environment.
The federal and state governments were not aggressively pursuing either urban
economic development efforts or policies and regulatory structures that directly affected
the urban environment. Just the phrase “economic development” would not enter the
lexicon of the federal, state, or local governments until much later in the 20
th
Century
around the time of the American Great Depression.
Economic development policies would be, largely unintentionally, masked by
national and state-wide transportation policies, and interstate commerce regulatory
schemes, for much of the 19
th
Century. The tensions and problems of the urban
environment would largely be left to local governments, and a significant increase in the
power of local governments in the United States to regulate the urban environment and
provide and perform urban-oriented public services would not come until the later part of
the 19
th
Century.

1.c – The Rise of the American Urban Society, Late 1800’s to World War II
The city itself is a dynamic force that has the potential to provide people with
great opportunities for prosperity and wealth, while also forcing others to confront the
horrible realities of poverty and misery. Cities are difficult to understand conceptually
because of their dynamic nature. They are constantly changing and evolving to meet the

52

needs and demands of their often changing and dynamic populations. City governments,
be it today or a hundred years ago, are faced with a multitude of problems, and many of
these problems differ in their nature, their causes, and their remedies. Between 1880 and
1920, the American demographic would be forever changed; in 1920 the majority of
Americans would be living in a city. Nearly 125 years of agrarian dominance
evaporated, seemingly overnight. The American federal, state, and local governments
found themselves forced to change their policies, their philosophies, and the types and
scope of public services they provided and performed. For much of the period between
1880 and World War II, local governments found themselves at the forefront of this
change. While local governments were struggling to modernize services and expand
their regulatory powers in their own jurisdictions, the federal and state governments
remained largely focused on nationwide and state-wide concerns relating to such issues
like economic growth, transportation, security, and natural resource conservation and
management. For maybe the first time in American history, local governments would
now take center stage in the shaping, planning, building, and even rebuilding of their own
jurisdictions.
Many authors and scholars have examined the unique dynamic forces of the city
as opposed to the unique dynamic forces of the rural environment. Jacobs (1969)
provides, perhaps, one of the most important investigations into how cities grow, why
they prosper, and why the tensions and problems cities confront require unique and tailor-
made solutions for the urban environment that are different from the rural environment.
In answering the question “why cities grow”, Jacobs (1969) writes:

53

…cities are settlements where much new work is added to
older work and that this new work multiplies and
diversifies a city’s divisions of labor; that cities develop
because of this process, not because of events outside of
themselves; that cities invent and reinvent rural economic
life; that developing new work is different from merely
repeating and expanding efficiently the production of
already existing goods and services, and thus requires
different, conflicting conditions from those required for
efficient production; that growing cities generate acute
practical problems which are solved only by new goods
and services that increase economic abundance; and that
the past development of a city is no guarantee of future
development because the city can stop vigorously adding
new work into the economy and thus can stagnate. (pg.
123).

For Jacobs (1969), the key precursor to a city’s growth is how “old work” is
transformed into “new work” through a constant division of labor. Cities grow naturally
as the invention of new work from old work causes an increase in the demand for new
labor. New crafts and new guilds are born from older ones due to technological
innovation. The resulting increase in demand for new labor encourages migration from
the surrounding rural areas. Eventually, the population of a city will increase, and the
increase in population leads to increased demand for new housing, new services, new
commercial goods, and even new forms of entertainment and distraction. Even more new
work is created which triggers a continual increase in the demand for new labor which, in
turn, triggers a further increase in population growth. The cycle repeats itself as the city
continues to expand as even more new work is added to the obsolete and aging older
work.

54

Both Brinkley (2000) and Walton and Rockoff (1998) link the beginning of the
American industrial revolution to the rapid growth of urbanization in the United States.
By the late 1800’s, manufacturing and industry were quickly overtaking agriculture as the
primary area of employment in the United States. As many manufacturing and industrial
uses were centered in established cities, it would only take a few short decades for the
population of the United States to shift from largely rural to largely urban. As America’s
demographic characteristics began to change during this period, major structural changes
to the American economy were also happening. Although there is considerable debate as
to what force occurred first as the United States was industrializing and urbanizing, the
major structural changes to the American national economy also led to changes in
overarching political, economic, and social philosophies. New and emerging theories,
like scientific management, professional administration of municipal, state, and federal
government services, and the growing belief that government could, and perhaps should,
directly impact the planning, shaping, building, and eventual rebuilding of American
cities to accommodate the demographic and economic changes occurring at the time,
would reshape the relationship between government and the public..
Table 1-3 below shows labor force expansion, expressed in output multipliers for
nine different employment categories between 1860 and 1910. An output multiplier is a
basic economic tool used to measure the relative growth of a particular industry over a
period of time. An output multiplier of a single industry is usually compared to the
output multiplier of an entire work force. If an industry’s employment output multiplier

55

is greater than the output multiplier estimated for the entire workforce over a period of
time, it is assumed that the industry is growing faster than the economy as a whole.
Table 1-3
Labor Force Expansion, Select 1910 Multiples of 1860
1860 to 1910
Employment Category Output Multiplier

Railroads 23.2
Primary Iron and Steel 7.1
Mining 6.7
Trade 6.0
Total Manufacturing 5.4
Teachers 5.2
Construction 3.7
Cotton Textiles 3.0
Agriculture 2.0

TOTAL LABOR FORCE 3.4
Source: Reproduced from Walton and Rockoff (1998), pg. 374, Derived from Stanley
Lebergott, “Manpower in Economic Growth: The American Record Since 1800” (New
York McGraw-Hill, 1964, pg. 510).

Between 1860 and 1910, the estimated output employment multiplier for the total
civilian American labor force was 3.4. Of the nine employment categories presented by
Walton and Rockoff (1998), only those employment categories more closely associated
with urban employment opportunities reported output employment multipliers greater
than the two employment categories more related to rural employment opportunities.
Table 1-4 presents output expansion multipliers for seven separate industries,
estimated for the period between 1860 and 1910. Unlike the employment output
multipliers presented above in Table 1-3, the output expansion multipliers by industry
presented below in Table 1-4 measures actual physical production of goods and services.
Compared to a 10.8 output multiplier estimated for “total manufacturing products”

56

between 1860 and 1910, only those five industries most closely associated with urban
industrial manufacturing had output multipliers greater than the output multiplier for
“total manufacturing products”.
Table 1-4
Output Expansion, Select 1910 Multiples of 1860
1860 to 1910
Production Industry Output Multiplier

Railroad Freight Ton Miles 98.1
Cement 70.7
Bituminous Coal 46.1
Iron and Steel and Their Products 25.2
Railroad Passenger Miles 17.1
Textiles and Their Products 6.2
Food and Kindred Products 3.7

TOTAL MANFUCATURING
PRODUCTS
10.8
Source: Reproduced from Walton and Rockoff (1998), pg. 375, Derived from “Historical
Statistics” (Washington D.C.: Government Printing Office, 1960, Series M, 178 Part 1);
from Edwin Frickey “Production in the United states, 1860-1914” (Cambridge, Mass.:
Harvard University Press, 1947, pg. 38-43, 54); and from Alert Fishlow, “Productivity
and Technological Change in the Railroad Sector, 1840-1910” (in ‘Output, Employment
and Productivity in the United States after 1860, Studies in Income and Wealth’, National
Bureau of Economic Research, New York: Columbia University Press, 1966, vol. 30, pg.
585).

Between 1860 and 1910, manufactured and produced goods most associated with
rural manufacturing (i.e. “Food and Kindred Products”, and “Textiles and Their
Products”) had output multipliers less than the output multiplier estimated for “total
manufacturing products”. Walton and Rockoff (1998) argue that, “Like the English
Industrial Revolution before it, the rise of the industrial manufacturing sector in the

57

United States was a key feature of modern economic growth and development.” (pg.
374).
Brinkley (2000) sums up this economic and demographic change by stating,
“Large areas of the nation remained overwhelmingly rural…Even so, America’s
economy, and along with it the nation’s society and culture, were being profoundly
transformed.” (pg. 543). According to Brinkley (2000), much of this societal and
cultural change can be traced to the emergence of new technologies, new forms of
corporate management, new supplies of labor through rural migration to the city, and
from new immigration from outside the United States. As Brinkley (2000) concludes,
“The factory system contributed to the growth of the nation’s cities, and at times created
entirely new ones. Immigration provided a steady supply of new workers for the growing
industrial economy.” (pg. 543). Walton and Rockoff (2000) also comment on the vast
social transformation that underlaid the economic and social transformation the United
States experienced between the latter part of the 1800’s and the early part of the 1900’s.
As Walton and Rockoff (2000) state, “…tastes were changing as cottons and linens,
cigars and cigarettes, and store-bought alcoholic beverages added to or replaced other
items, many previously homemade.” (pg. 376).
Table 1-5 compares the ten largest industries, in-terms of valued added, for 1860
to 1910. As Table 1-5 illustrates, a massive shift in American economic production
occurred between 1860 and 1910. By 1910, four new industries (“Printing/Publishing”,
“Malt Liquor”, “Tobacco Goods”, and “Railroad Cars”) had entered the top 10
manufacturing industries. Four industries that had been in the top 10 of manufacturing

58

industries in 1860 (“Flour and Meal”, “Woolens”, “Wagons and Buggies”, and “Leather
Goods”) had fallen out of the top 10. As individual social tastes changed, America’s
manufacturing base also changed. And as America’s manufacturing base shifted to a
more urban manufacturing base, cities began to experience significant growth in
population until 1920, when, for the first time in American history, the majority of
Americans would formally be living in an American city.
Table 1-5
Ten Largest Industries – Measured by “Value Added”
1860 and 1910

Category
1860 Value
Added
(In Millions of
Dollars)

Category
1910 Valued
Added
(In Millions of
Dollars)

Cotton Goods $55 Machinery $690
Lumber $54 Lumber $650
Boots and Shoes $49 Printing/Publishing $540
Flour and Meal $40 Iron and Steel $330
Men’s Clothing $37 Malt Liquors $280
Iron $36 Men’s Clothing $270
Machinery $33 Cotton Goods $260
Woolen Goods $25 Tobacco Goods $240
Carriages/Wagons $24 Railroad Cars $210
Leather $23 Boots and Shoes $180

All Manufacturing $815 All Manufacturing $8,529
Source: Reproduced from Walton and Rockoff (1998), pg. 375, Derived from U.S.
Bureau of the Census, “Census of the United States: 1860, vol. 3” (Washington, D.C.:
Government Printing Office, 1861, pg. 773-742); and U.S. Bureau of the Census,
“Census of the United States: 1910, vol. 8” (Washington, D.C.: Government Printing
Office, 1913, pg. 40).

According to Cullingworth and Caves (2003), the number of American cities with
a total residential population of 50,000 or more grew from just 50 in 1890 to 144 by
1920. America’s oldest cities also experienced tremendous residential population growth

59

from the late 1800’s to the early 1900’s. Between 1890 and 1920, the City of New York
grew from an estimated total residential population of approximately 1.5 million residents
in 1890 to almost 5.7 million residents in 1920. Philadelphia grew from an estimated
total residential population of approximately 847,000 people in 1890 to over 1.8 million
people in 1920. Boston grew from approximately 332,000 people in 1890 to nearly
733,000 people in 1920. Increased migration from rural areas of the United States to
cities, and a significant increase in total foreign immigration, fueled the growth of
American cities between 1890 and 1920. As Cullingworth and Caves (2003) point out,
approximately 8.8 million total immigrants entered the United States between 1901 and
1910. The overwhelming majority of these immigrants settled in existing cities.
A new urbanized America brought about a radical shift in how the majority of
Americans worked and lived. With little doubt, a newly urbanized America led to one of
the greatest historical increases in individual wealth. But it also was quickly apparent
that the urbanization of America would not be without its negative side-effects. By the
1920’s, it became increasingly clear that most American cities were no longer capable of
naturally absorbing the increasing number of individuals immigrating and migrating to
them. Local city services quickly became overwhelmed. As Ranney (1961), Lineberry
and Sharkansky (1971), Chudacoff and Smith (2000), and Cullingworth and Caves
(2003) point out, garbage and refuse quickly began to clog the streets of America’s
largest cities, including New York, Chicago, Boston, Detroit, and even San Francisco.
Drinking water became unsafe for human consumption. Sewer lines could not be
adequately maintained or expanded to meet the dramatic increase in demand. Even the

60

demand for new housing could not be met quickly enough, and many parts of many cities
quickly became dangerously overcrowded.
The problems facing the emerging American urban environment helped trigger a
shift in the dominant political, economic, and social paradigms of the time. Cullingworth
and Caves (2003) argue that, “The American experience, born of its different history, was
essentially entrepreneurial and disdainful of government.” (pg. 46). But the growth of
new federal, state, and local government power to directly shape, plan, build, and rebuild
the urban environment grew directly out of two problems. The first problem, identified
by Cullingworth and Caves (2003), was economic, and the second, also identified by
Cullingworth and Caves (2003), was social. According to Cullingworth and Caves
(2003), “Economic development itself required government support. The building of
roads, canals and railroads involved large amounts of capital, and were important in the
competition between towns for key developments.” (pg. 46). Because private capital
resources were insufficient to support large private infrastructure projects, private
developers soon turned primarily to the treasuries of the federal and state governments.
The second more social problem grew directly out of the many negative downsides
associated with urbanization. As Cullingworth and Caves (2003) point out, “The second
type of problem was an outcome of the very success in the growth of the new towns.
These gave rise to novel problems of public health and sanitation, overcrowding and
congestion, public order, fire protection, education, and poverty.” (pg. 46).
As cities quickly grew and the problems of this growth soon become apparent,
local governments began to adopt rudimentary zoning and ordinance policies which were

61

designed to directly shape how the city grew. Municipal governments also began to
expand the types of public services they performed and provided. The advent of
municipal and city planning is the first real shift in political, economic, and social
paradigms. From the late 1800’s to the early 1900’s, local governments began to
experiment with new planning ordinances and zoning. City planning grew in reaction to
the poor conditions of many American cities. These poor conditions, as many scholars
suggest, grew directly from the impact industrialization had on many American cities.
As Ranney (1961) argues, “It has been suggested that modern city planning began when
people started looking for a way to undo what the Industrial Revolution had done and to
prevent a reoccurrence of the haphazard development of the 19
th
century city reflected.”
(pg. 22). Ranney (1961) continues, “Planning as a function of local government began in
the early 20
th
century, stimulated by the wretched conditions of cities. The kinds of dirt,
noise, and congestion of the city proposed by our first planners consisted of physical
alterations in the urban structure.” (pg. 22).
Although Americans, in general, still held on to their long held beliefs in
entrepreneurialism and general distrust of government intervention into market forces,
the urban American public began to tolerate high degrees of local government
involvement in the shaping, planning, building, and rebuilding of their cities, and
ultimately demanded, of local government in particular, a higher degree and variety of
public services. The first true increase in the power of local government, and the
responsibility of local government to be a performer and provider of services, would be
in the form of planning. Planning, as a professional discipline for people in city

62

government, would become a precursor for the political and bureaucratic reform
movement that would transform the very structure of local government. Planning would
also serve as a precursor to the direct involvement of all levels of government in local
urban economic development in the decades that would soon follow immediately after
World War II.
Socially and politically, as planning slowly grew into a recognized professional
discipline between the late 1800’s and the early 1900’s, different “movements” would
help to shape the eventual relationship local government would have with the newly
minted urban American society. The early planning movements of the late 1800’s and
early 1900’s would share a deep belief in “environmental determinism”. At the time, it
was believed that a local government could positively impact the demographic, social,
and economic characteristics of a city through its physical development. The political
and bureaucratic reform movements, which eventually would lead to a professionally
trained and highly technical civil service, were still in their infancy by the turn of the 20
th

Century. The concept of public-private partnerships for local urban economic
development purposes, although used extensively to build canals and a transcontinental
railroad network during most of the early to mid-1800’s, would remain foreign to most
local governments until the American Great Depression. Planning, and its new found
belief in “environmental determinism”, would come to define much of the newly evolved
relationship between local government and the new urban American society.
Cullingworth and Caves (2003) identify seven district “movements” of the early
municipal land use planning era between the late 1800’s and the early 1900’s: 1) the

63

Sanitary Reform and Public Health Movement, mid to late 19
th
Century, 2) the City
Beautiful Movement, late 19
th
Century to early 20
th
Century, 3) the Garden City
Movement, late 19
th
Century to early 20
th
Century, 4) the City Efficient or City
Functional Movement, early 20
th
Century, 5) the City Visionary Movement, early 20
th

Century, 6) the City Renewable Movement, early to mid 20
th
Century, and 7) the City
Grassroots Movement, mid to late 20
th
Century. Each of these different movements in
local municipal land use planning were defined by a unique set of principles and beliefs
that encouraged the use of local government in the shaping, building and rebuilding of
the urban built environment.
By the mid to late 19
th
Century, a developing scientific understanding of
infectious diseases, and the development of urban slum communities, led to the first true
period of American urban land use planning. The Sanitary Reform and Public Health
Movement was underlaid by a philosophy that linked poor physical housing, inadequate
sewage treatment, and poor water treatment in the growing urban slum communities in
cities to high rates and concentrations of infectious disease and dysentery. Even prior to
the release of the “1900 New York Tenement House Commission Report”, as argued by
Cullingworth and Caves (2003), it had become apparent by many that America’s
economic prosperity could be threatened by the seemingly increasing level of negative
social, physical, and economic conditions of the American urban central city. Immediate
intervention by local governments through physical land use planning was believed to be
needed.

64

Cullingworth and Caves (2003) argue that the Sanitary Reform and Public Health
Movement, through various public laws like the New York Tenement Laws, established
minimum standards for quality housing and a mandatory provision for natural light and
air within the city. The development of urban recreation spaces, the development of a
water carriage sewage system, and the development of city ordinances that precluded
certain land uses within established geographic districts were also all part of the New
York Tenement Laws established by the city government in the late 1800’s and early
1900’s.
The City Beautiful Movement soon overshadowed the Sanitary Reform and
Public Health Movement. The City Beautiful Movement, unlike the Sanitary Reform and
Public Health Movement, would spread well beyond New York City as other local
governments nationwide adopted rudimentary zoning and land use control ordinances
that were in keeping with the underlying philosophy of the City Beautiful Movement. In
addition to rudimentary zoning and land use control ordinances, the City Beautiful
Movement might also be considered a precursor to urban revitalization.
According to Cullingworth and Caves (2003), the City Beautiful Movement was
the first planning movement that emphasized the actual physical removal of physical,
social, and economic blight through direct municipal government efforts. As slums were
cleared, the City Beautiful Movement encouraged the public financing and development
of municipal and outdoor art and the development of civic improvements in place of the
cleared slums. Planners guided by the City Beautiful Movement largely believed that the
placement and development of municipal and outdoor art, in conjunction with other civic

65

improvements such as improved sewer treatment and drainage facilities, could
significantly improve the social and economic conditions of people living within the
urban central city. Emphasis on the development of urban parks, urban open spaces,
public plazas, and tree-lined boulevards further underscored the physical planning
principles of the City Beautiful Movement.
The next three movements in American land use planning and in subsequent
American urban economic development theory – the Garden City Movement, the City
Efficient or City Functional Movement, and the City Visionary Movement – occurred
almost simultaneously during the early to mid 1900’s. According to Cullingworth and
Caves (2003), these three latter movements were much more formalized than their
predecessors. For example, in the Garden City Movement, it was believed that various
“satellite cities” would be developed around a central city. Each “satellite city” would be
limited in growth in-terms of total population. A set maximum population level in each
“satellite city” would prevent sprawl at the edges. The first real use of planning for
predominantly residential areas, with open spaces, parks, shopping centers and schools,
would eventually give rise to the contemporary use of zoning and land-use restriction
ordinances.
The planning movements of the late 1800’s and early 1900’s gave rise to a wave
of subsequent attempts by various local governments to control the physical development
of their jurisdictions through zoning and land-use restriction planning ordinances.
According to Gerckens (1988), one of the first attempts to separate different land uses
was the City of San Francisco’s 1867 ordinance that prohibited the building of

66

slaughterhouses, hog storage facilities, and curing plants in certain districts within the
city that had become predominantly residential. The City of San Francisco, according to
Gerckens (1988), justified its ordinance on the grounds that incompatible residential land
uses posed a “nuisance” to adjacent residents in the form of noxious odors and sounds. It
was also believed that the presence of noxious odors and sounds posed a real and tangible
threat to public health and safety. In fact, the true importance of the 1867 City of San
Francisco ordinance was that it was preventative rather than reactive. The City of San
Francisco had a preventative step in separating future land uses that could pose a serious
threat to public health and safety. In subsequent attempts to create new zoning and land-
use restriction ordinances, local governments would routinely use the protection of public
health and safety as their primary justification.
The Standard State Zoning Enabling Act (SSZEA) of 1926 was originally drafted
by the United States Department of Commerce. According to Cullingworth and Caves
(2003), the Standard State Zoning Enabling Act of 1926 was modeled, on what many
believe to be, the first contemporary zoning ordinance passed and adopted by the City of
New York in 1916. Although cities like the City of San Francisco had adopted
rudimentary zoning and land use restriction ordinances prior to 1916, the City of New
York’s 1916 zoning ordinance was the first fully comprehensive zoning ordinance which
established land use restrictions for an entire municipal jurisdiction. According to
Cullingworth and Caves (2003), “The SSZEA (of 1926) gave state legislatures a
procedure, based upon an accepted concept of property rights and careful legal precedent,
for each community to follow.” (pg. 70).

67

According to Cullingworth and Caves (2003), SSZEA had eight sections, each of
which redefined the regulatory relationship between local government and the
municipality it was responsible for governing. First, SSZEA granted power directly to
local governments to regulate land use. Second, SSZEA allowed local governments to
zone or divide land into districts. For example, local governments could now exclude
industrial uses in parts of a city that the local government had zoned as residential. Third,
local governments were required to develop a comprehensive land use plan for the entire
jurisdiction. Local governments now had direct legal authority to plan, shape, build, and
even rebuild any part of their respective jurisdiction. Fourth, local governments were
required to hold public hearings before any proposed regulation or restriction of land use
went into effect. Fifth, local governments could amend, modify, or repeal an existing
regulation or restriction even if the general public opposed the modification. Sixth,
SSZEA required that local jurisdictions form semi-autonomous planning commissions to
oversee the development, implementation, and eventual management of the local
jurisdiction’s comprehensive land use and zoning plan. Raney (1969) and Cullingworth
and Caves (2003) both recognize that this section of SSZEA was the beginning of an
independent, non-political, bureaucratic planning profession that would eventually come
to heavily believe in technical competence. Seventh, in addition to the requirement that
local jurisdictions create a semi-autonomous planning commission that was to be separate
from the local city governing entity (i.e. an elected city council), SSZEA also required
that local jurisdictions form semi-autonomous “boards of adjustment” that would hear
and rule on appeals to the local jurisdictions comprehensive land use and zoning plan.

68

Eighth, and finally, SSZEA authorized local governments to enforce SSZEA through
zoning and other restrictive land use ordinances.
The impact of SSZEA on local government was almost immediate. According to
Cullingworth and Caves (2003), 48 states had, by the end of 1926, adopted zoning
enabling legislation, which were all largely modeled on SSZEA. Nearly 420 local
governments nationwide by the end of 1926 had adopted new zoning ordinances. Nearly
a quarter of the American urban residential population lived in a city by the end of 1926
that had adopted a comprehensive zoning and land use plan. By 1929, a total of 754 local
governments nationwide had adopted a comprehensive zoning and land use plan; by
1929, nearly three-fifths of the American urban residential population lived in a city that
had adopted a comprehensive zoning and land use plan that used the guidelines of
SSZEA.
The legal interpretation of a municipal government’s right to protect the public’s
health and safety through zoning and land-use restriction planning ordinances was also
beginning to change during the late 1800’s and early 1900’s. Three U.S. Supreme Court
cases, one in 1887, a second in 1917, and a third in 1926, were critical in establishing the
constitutional authority of a local jurisdiction to exercise its “police power” in the
protection of public health and safety. From 1887 to the present day, the direct
involvement of government in the shaping, building, and rebuilding of the urban
environment and the continued expansion of government’s role as both a provider and
performer of an expanding variety of public services has almost always been done under

69

the guise of the right of government to exercise its “police power” in the protection and
direct promotion of the general public’s health and safety.
In the first U.S. Supreme Court case, Mugler v. Kansas (1887), the court
determined that the prohibition of an existing use on a piece of privately owned land for
health and human safety concerns was a proper exercise of a government’s use of police
powers. According to Cullingworth and Caves (2003), Mugler’s Brewery was made
virtually worthless due to a State of Kansas legislative act that prohibited the
manufacturing and sales of intoxicating liquor within the state. Although Mugler’s
Brewery still retained ownership of the land upon which the brewery had been built, the
brewery was forced to terminate its operations. Previously, the State of Kansas liquor
prohibition act had prohibited the brewing and sale of intoxicating liquor largely on
public health and safety grounds. As Cullingworth and Caves (2003) conclude, “The
Court recognized the limits of the police power by advancing a ‘harm/benefit’ test where
it held that if government acts to prevent a harm to the public health, safety, and welfare,
then it is an exercise of the police power.” (pg. 66). The U.S. Supreme Court also found
that the Kansas prohibition of intoxicating liquors, and the subsequent closing of
Mugler’s Brewery, was not a physical taking and that Mugler’s Brewery was not entitled
to any compensation from either the state government or the local government.
The second important U.S. Supreme Court case, Hadacheck v. Sebastian (1915),
focused further on the use of police power. In Hadacheck v. Sebastian (1915),
Hadacheck had legally operated a brickworks in an unincorporated, undeveloped part of
Southern California, just outside the legal jurisdiction of the City of Los Angeles. The

70

brickworks had been in operation since 1902. But within just a few short years, new
residential development was built on the surrounding land around the Hadacheck
brickworks. By 1909, the City of Los Angeles had annexed a large portion of the
unincorporated areas around the city, including the Hadacheck brickworks and the
adjacent residential developments. As part of its annexation, the City of Los Angeles,
according to Fulton and Shigley (2005), also imposed strict zoning ordinances on the
newly annexed land which prohibited certain industrial uses, like the Hadacheck
brickworks, in residentially zoned areas. Eventually, the City of Los Angeles required
the Hadacheck brickworks, which had operated legally for many years prior to the
annexation, to shut down permanently. Although Hadacheck challenged the ordinance of
the City of Los Angeles in court, the U.S. Supreme Court eventually upheld the
ordinance and the closing of the Hadacheck brickworks. Quoting the majority opinion of
the U.S. Supreme Court in Hadacheck v. Sebastian (1917), Fulton and Shigley (2005)
state, “‘…there must be progress,’ the Supreme Court said, ‘and if in its march private
interests are in the way, they must yield to the good of the community.’” (pg. 49).
The third important U.S. Supreme Court case between the late 1800’s and 1900’s
that had a powerful impact on government’s relationship to America’s urban society was
the court’s decision in Euclid v. Ambler Realty Co. (1926). According to Fulton and
Shigley (2005), “Euclid v. Ambler was a test case brought by the real estate industry,
selected because it provided a strong and clear-cut attack on zoning.” (pg. 53). The town
of Euclid had been a small suburb of Cleveland which, in 1922, established a
comprehensive zoning ordinance that attempted to prohibit the development of industrial

71

uses and multi-family apartment housing. Ambler Realty Company, in 1922, owned
approximately 68 acres in Euclid. At the time when the zoning ordinance was passed,
most of the land Ambler Realty Company owned had already been zoned for broad
commercial and industrial use. In Euclid v. Ambler Realty Co. (1926), Ambler Realty
claimed that Euclid’s zoning ordinance took a significant portion of their land without
due process of law and that the city further denied Ambler Realty equal protection under
the law. Ultimately, the U.S. Supreme Court upheld Euclid’s zoning ordinance.
According to Fulton and Shigley (2005), “In part, (the court’s) decision arose from a
recognition of ‘the complex conditions of our day’, as compared with the ‘comparatively
simple’ urban life that had existed only a few decades before. Crowded cities, the
justices seemed to suggest, provided a legitimate rationale for more regulation.” (pg. 53).
Theories in public management and bureaucratic administration were also
developing and significantly reshaping the relationship between government and
American society between the late 1800’s and the early 1900’s. These new theories and
approaches in public management and bureaucratic administration can largely be
attributed to the public’s eventual disdain for the corruption and “machine politics” that
had grown too large for the public to ignore. A new approach to how the federal, state,
and local governments conducted their business was needed. The problems facing the
urban part of society were also, by the early 1900’s, too great to be ignored. But to solve
these problems new approaches and new organizational and managerial approaches in
government would be needed. The period between the late 1800’s and early 1900’s in
the United States saw the birth of the “Reform Movement” and the development of a

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largely independent and autonomous civil service that was separate from, what many had
come to view, the complete corruption of the political process. “Bureaucrats” would be
professionally trained and highly skilled. They would be part of an independent civil
service that could apply technical solutions, largely developed from the still emerging
fields of scientific management and public management, to the problems America’s
urban society faced.
The “Reform Movement” had one of the largest historical impacts on the behavior
and organization of local government. During the late 1800’s and early 1900’s, non-
partisan local elections, the secret long ballot, professional city management, and the
development of a politics-administration dichotomy in the development of local public
policy and its implementation would have long lasting impacts on how local governments
conducted their business. Authors, scholars, and practitioners like Woodrow Wilson,
Leonard White, W.F. Willoughby, Luther Gulick, Dwight Waldo, and John M. Pfiffner
would lay out new approaches to the administration of government that would reshape
the relationship between the public and government. Of course, many of the ideas and
principles set down by the early writers and founders of contemporary public
administration would borrow heavily from past ideas. For example, Denhardt (1984)
traces the lineage of contemporary public administration in the United States from
Woodrow Wilson and Dwight Waldo to as far back as Hamilton’s writings in the
Federalist Papers.
Contemporary scholars in the field of public administration, like Davis (1974),
Nigro and Nigro (1980), Denhardt (1984), Hummel (1987), Lane (1990), Stillman

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(1991), and Frederickson (1997), have concluded that the early public administration
scholars and writers of the late 1800’s and early1900’s redefined the relationship between
government in the United States and the larger public. The new administrative roles for
government would initially be regulatory, but shortly grew into direct service provision
and performance. Nigro and Nigro (1980) comment that the development of a largely
urban society during the late 1800’s and early 1900’s required a professionalized
bureaucratic organization to effectively determine and provide new public services. As
Nigro and Nigro (1980) argue, “As long as the great majority of Americans lived in rural
areas and economic and social relations did not require much regulation by government,
the discretionary powers of public officials could be kept relatively modest…the
developments in the physical and social technology, which had created a highly
interdependent economy, largely account for the greatly enhanced role of administrative
officials.” (pg. 8).
The early role for government as a regulator was a critical first step in the
expansion of government’s power. As mentioned earlier, the growing problems of the
urban environment facing many cities during the late 1800’s and early 1900’s led many
municipal governments to create local zoning and land use restriction ordinances.
Effectively, local government was becoming a regulator of the built, urban environment.
In the few short decades to come, government in the United States would become more
than just a regulator; government would be a direct provider and performer of various
public services within the American urban environment.

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Cornelius M. Kerwin, in Cooper and Newland (1997), presents a detailed history
of the development of negotiated rulemaking in the United States. Although Kerwin
argues that, “…conventional wisdom and several studies fix the origins of negotiated
rulemaking during John Dunlop’s term as secretary of labor…” (pg. 226), Kerwin points
out that, “The first systematic study of rulemaking between responsible agencies and
external parties has been common from as early as the beginning of the twentieth century,
and in some instances the express purpose of these communications has been the
development of a consensus.” (pg. 226).
The American Great Depression and the federal government’s response to it,
perhaps alone, represented the largest shift in economic thought during this period.
Without presenting an overly in-depth discussion of the American Great Depression,
including its causes, its impacts, and its long lasting effects, it is reasonable to argue that
there are very few people alive today that can truly appreciate the widespread misery and
pain that so many Americans endured during the Great Depression. Even in past
American recessions, and even in past depressions, the enormity and grand scale of the
American Great Depression of the 1930’s demanded a new role for government. For
many Americans, it had appeared that the free market economy of the United States had
completely failed. And in many respects, the free market economy of the United States
had, indeed, completely failed. In response, the federal government reshaped its entire
relationship to the American people. But the Great Depression did not just reshape the
relationship and responsibilities of the federal government. The American Great

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Depression also dramatically changed and reshaped the way state and local governments
related to the communities they served.
With little exaggeration, the work of John Maynard Keynes during the American
Great Depression led to a new societal belief that government should use its full range of
power to stimulate economic growth and activity in times of recession, depression, and
general economic downturn. Keynes’ work, specifically in his 1936 publication, General
Theory of Employment, Interest and Money, was, for the time, a radical departure from
the Classical School of economic thought that had dominated much of American
economic thinking and policy making since the publication of An Inquiry into the Nature
and Causes of the Wealth of Nations, published by Adam Smith in 1776.
Buchholz (1990) lays out a strong foundation that helps explain why Keynesian
economic theory seemed to so quickly replace the entrenched Classical School of
economic thought. Buchholz (1990) writes:

Recall the scary Malthusian scenario, with the world
seemingly splitting, leaving victims scrambling for survival.
Once upon a time not far removed and in a place familiar
to us, it nearly happened. From 1929 to 1933 in the United
States, the invisible hand of the free market slapped
prosperity in the face. Unemployment rocketed from about
3 to 25 percent, and national income plummeted by half.
Residential construction stopped. Many lost their homes
and businesses. The Stock Market crash of 1929, with
brokers jumping to their deaths, became both symbol and
cause of further economic decline. The roaring twenties
sputtered to a halt, leaving income in 1933 lower than that
of 1922. Workers scrambled for the few jobs available.
Soup kitchens sprang up. And psychological depression
accompanied economic depression. (pg. 205).

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In response to the American Great Depression, Keynes advocated an activist role
for all levels of government in stabilizing and stimulating national economic growth and
activity. According to Buchholz (1990), “Keynes blasted the Treasury view, which
prescribed patience and promised recovery in the long run. What is the point of having
such a government? ‘In the long run we are all dead,’ (Keynes) wrote in his Tract on
Monetary Reform.” (pg. 206). According to Walton and Rockoff (1998), “Keynesian
theory suggests that the role of government spending is to offset decreases in autonomous
private spending such as investment or consumption.” (pg. 533).
As Table 1-6 illustrates, the federal, state, and local governments dramatically
increased their total spending while the private-sector experienced general declines in
their investment spending between 1927 and 1940.
Table 1-6
Governmental Expenditures vs. Total Private-sector Investment
1927 to 1940
Year Total Federal
Expenditures
Total State and
Local Expenditures
Total Net Private
Investment

1927 $2.9 million $7.8 million $14.5 million
1932 $4.8 million $8.4 million $3.4 million
1934 $6.5 million $7.8 million $4.1 million
1936 $7.6 million $8.5 million $7.2 million
1938 $7.2 million $10.0 million $7.4 million
1940 $9.6 million $11.2 million $11.0 million
Source: Reproduced from Walton and Rockoff (1998), pg. 532, Derived from “Historical
Statistics” (Washington, D.C.: Government Printing Office, 1976, Series F53, Y335,
Y336, Y339, Y340, Y652, Y671).

Total net private investment nationwide between 1927 and 1932 had almost
completely collapsed, falling from a high of $14.5 million in 1927 to a low of just $3.4
million in 1932. Comparatively, total federal government expenditures between 1927

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and 1932 nearly doubled, growing from just $2.9 million in 1927 to approximately $4.8
million in 1932. By 1940, total federal government expenditures reached its height, at an
estimated total of $9.6 million. Total state and local government expenditures nationwide
also dramatically rose between 1927 and 1940. Between 1927 and 1940, total state and
local government expenditures nationwide rose from just $7.8 million in 1927 to a high
of approximately $11.2 million in 1940.
Both Buchholz (1990) and Walton and Rockoff (1998) point out that as total net
private investment collapsed throughout most of the American Great Depression, the
large numbers of unemployed Americans turned to the federal, state, and local
governments for employment and general relief. Government responded by providing
direct employment through a vast array of public works programs. Government also
responded by providing immediate capital to failing financial institutions and private
corporations. Programs like Social Security and the Federal Deposit Insurance
Corporation were formed to provide both a tangible and psychological safety net for
individuals and individual financial investments. In short, the suffering caused by the
American Great Depression, and the nearly complete failure of the private-sector, left the
federal, state, and local governments alone to provide direct economic relief to the public.
This new economic philosophy, that supported an activist role for government in private
economic markets, had set the stage for the readjustment era, moving from wartime to
peacetime, after World War II, and the urban renewal era of the 1950’s to the early and
mid 1970’s.

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Much of this period, between the late 1800’s and early 1900’s, had little to do
with urban economic development. Instead, this period saw a tremendous shift in the
relationship between government and the American public. The swift urbanization of
American society required a more activist role for government that could not only
intervene in the shaping, planning, building, and eventual rebuilding of the urban
environment, but become a much larger provider and performer of public services
tailored to meet the unique characteristics of a newly urbanized American society.
Although there were certainly exceptions, by the beginning of World War II, new
political, social, legal, and economic paradigms favored a more interventionist and
activist role for government.
By the beginning of World War II, it was no longer a question of whether or not
government should directly intervene in the development, shaping, planning, building,
and rebuilding of American cities. Instead, the question would largely focus on what
types of urban-oriented policies and programs government should adopt and what types
of services, and to what degree, government should provide and perform. The next few
chapters focus specifically on the types of policies and programs different levels of
American government would adopt in an attempt to directly spark and support local
urban economic development.

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Chapter 2 – Urban America, the Urban Revitalization and Local Redevelopment
Era

2.a – Introduction
The political, social, and economic problems that confront a largely urban society
vary greatly from those that face a largely agrarian society. As America transformed
itself from largely agrarian to urban during the first few decades of the 20
th
Century,
American government found itself called upon by the public to increase its responsibility
for the provision and performance of urban-oriented economic development and
revitalization services. The changed political, social, and economic realities of the now
largely urbanized American society led to many different political, social, and economic
paradigms that helped create and shape federal, state, and local government public
economic development policies. Redevelopment, as the current dominant institutional
arrangement through which local governments now pursue the processes of urban
revitalization and urban economic development, grew out of the many failures of federal
urban renewal policies and efforts. This chapter explores the changing ways in which
different levels of American government developed and implemented public urban
revitalization and economic development policies and programs over the last 50 years of
American history, and how redevelopment at the local level now typifies public-sector
efforts in Nevada and California to revitalize the urban environment and stimulate urban
economic activity.

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2.b – The Urban Renewal Era, the End of World War II to the mid 1970’s
In the years between the end of World War II and the mid 1970’s, the federal,
state, and local governments would exponentially increase their active roles in directly
shaping, building, and rebuilding the American urban environment. The expanded
administrative and bureaucratic roles of government, combined with the changed social,
demographic, and economic characteristics of the nation, had set the political, social, and
economic stages for an expansion of public policies that would increase both the depths
and variety of urban public services government would both provide and perform.
Between the end of World War II and the mid 1970’s, a period that Walton and
Rockoff (1998) term “The Liberal Era, 1945-1976” (pg. 599), all levels of American
government began to develop a new series of budget priorities. According to Walton and
Rockoff (1998), the largest increases in federal, state, and local government non-military
spending occurred in income security (i.e. social security, federal employee retirement
and disability insurance, housing assistance, food and nutrition assistance, etc.), and
education and health care (i.e. Medicare, health-care services, medical and
pharmaceutical research and development, etc.).
According to Walton and Rockoff (1998), the percentage of total federal non-
military spending relative to U.S. Gross National Product (GNP) between 1940 and 1970
grew from an estimated 10.1 percent in 1940 to nearly 20.6 percent in 1970. State and
local governments were also growing, measured in relation to the percentage of total state
and local government combined spending nationwide between 1940 and 1970. The
percentage of total state and local government non-military spending relative to GNP

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between 1940 and 1970 grew from an estimated 11.2 percent in 1940 to nearly 14.6
percent in 1970. Combined, the total percentage of all federal, state, and local
government non-military spending as a percentage of GNP increased dramatically
between 1940 and 1970. Between 1940 and 1970, combined federal, state, and local
government spending as a percentage of GNP grew from an estimated 20.4 percent in
1940 to approximately 32.5 percent in 1970. Table 2-1 presents two different measures
of the size of government between 1940 and 1970.
Table 2-1
Two Measures of the Size of Government
Total Government Spending Relative to GNP and Total Government
Purchases of Goods and Services Relative to GNP
1940 to 1970

Measure/Year

Federal
State and Local
Combined
Total
Federal, State and
Local

Total Government
Spending Relative to
GNP

1940 10.1% 11.2% 20.4%
1950 15.6% 9.7% 24.5%
1960 18.9% 11.9% 29.5%
1970 20.6% 14.6% 32.5%

Total Government
Purchases of Goods and
Services Relative to GNP

1940 6.0% 7.8% 13.8%
1950 7.0% 6.7% 13.8%
1960 10.8% 8.7% 19.4%
1970 9.9% 11.1% 21.0%
Source: Reproduced from Walton and Rockoff (1998), pg. 596, Derived from “Historical
Statistics of the United States Colonial Times to 1970” (Washington D.C.: Government
Printing Office, 1975, Series: Y533, Y590, Y671); and “Statistical Abstract of the United
States: 1995” (U.S. Bureau of the Census, Washington D.C.: Government Printing
Office, 1995, pg. 299 and 451).

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Although Table 2-1 is useful in illustrating the growth of the federal, state, and
local governments in terms of government spending and purchases of goods and services,
it does little to illustrate what specific policies and programs government was
implementing between the late 1940’s and the mid 1970’s. To a large degree, the federal,
state, and local governments were each pursuing very different approaches to the
performance and provision of services to the urban environment. During this period, the
federal government jumped state and local government jurisdictions by directly pursuing
and funding public projects in the urban environment between the late 1940’s and mid
1970’s. State governments were largely focusing on providing education services, health
and human services, and welfare services. State governments would also begin to
authorize the expansion of municipal jurisdictions through annexation and
suburbanization. Direct federal and state government highway and road construction
spending would become a catalyst for suburban development and ultimately accelerate
the decline of the inner central core of many American cities.
At the same time, local governments were beginning to form local redevelopment
agencies, authorized initially by state legislation. Local redevelopment agencies would
eventually focus, almost solely, on property-based approaches to urban revitalization
through a variety of public-private real estate partnerships. Although different levels of
government pursued different strategies for resolving the growing problems of the urban
environment, each level of government saw a direct need for direct intervention. It had
become believed by the late 1940’s that the problems of the urban environment, that had
started during the late 1800’s and early 1920’s, could no longer be addressed through just

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the use of regulation, zoning ordinances, and land use restrictions. Each level of
government would move away from simple regulation, to direct intervention through
property-based approaches to urban economic development in the late 1940’s.
Netzer (1970) identifies seven specific problems of the urban environment that
eventually grew into a national crisis, starting in the late 1940’s: 1) a growing urban
minority poor, 2) a general decline in the stock of social capital, including housing, and
public and institutional facilities, 3) a more general set of housing problems including the
general affordability of quality housing, 4) the growing inequitable distribution of
economic activity, both between the remaining urban areas and the growing suburbs, and
between different urban areas, 5) growing ecological and health problems due to air and
water pollution in the urban central city cores, 6) growing dissatisfaction and reduced
quality of public transportation in the urban central city core, and 7) a general, and
growing, lack of available resources and money to solve each of these problems.
Each of these seven uniquely urban problems identified by Netzer (1970) had
been developing for much of the period between the late 1800’s and early 1900’s. But by
the end of World War II, government’s role as a regulator of public health and safety, and
government’s attempt to solve them through zoning ordinances and land use restrictions,
were clearly insufficient to properly alleviate them. Prior to the late 1940’s, historical
movements like the City Beautiful Movement emphasized regulation of the urban
environment as a way to create a problem-free and idealistic urban environment. But
regulation of the urban environment soon gave way to new, interventionist public policies
at the federal, state, and local levels. Urban revitalization, for much of the late 1940’s

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and mid 1970’s, become an umbrella term used to describe a myriad of public policies
designed to directly stimulate urban economic growth and activity. Redevelopment,
beginning in the late 1940’s, would become a legal, institutional, and organizational
approach through which local government pursued the goals and objectives of urban
revitalization.
According to Meyers (2005), as early as 1941, state governments began to
respond to the growing problems of the urban environment by allowing local
governments to take the necessary steps to ensure and directly promote public health and
safety by passing the very first redevelopment statutes. In 1941, the State of New York
passed the first redevelopment statute which authorized local governments within the
state to form a public redevelopment authority. In 1945, the State of California was the
second state to pass a redevelopment statute which authorized local governments in
California to form similar public redevelopment agencies. By 1947, nearly one half of all
state legislatures in the United States had enacted similar redevelopment statutes. These
redevelopment statutes eventually gave local governments within their state jurisdictions
enormous power to acquire land, perform demolition, and finance new private
development in urbanized areas.
Two important powers were the use of eminent domain and the use of property
tax increment financing. It is important to note that redevelopment agencies in Nevada
and California are by law semi-autonomous public entities that exist and operate, to a
large degree, outside the normal structure of local government. The original
redevelopment state statutes in Nevada and California allowed local governments to

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create independent and autonomous redevelopment agency boards that were granted
municipal powers to collect, but not set, incremental property tax revenues within
designated redevelopment project areas.
Redevelopment agencies in Nevada and California could, and still do to this day,
issue tax increment financing bonds on the incremental property tax revenue they collect
from their designated redevelopment project areas. Local redevelopment agencies were
allowed to condemn privately owned properties found to be a threat to local public health
and safety, then transfer such condemned land to other private interests, and finally
provide property tax revenues to a private developer to support new private real estate
development. Prior to the enabling state redevelopment statutes, local municipal
governments did not have the ability to pursue urban revitalization in this manner. Local
municipal governments could only pursue urban revitalization through regulatory powers.
The creation of local redevelopment agencies allowed local governments to more directly
intervene in the problems of the urban environment.
Another key development pertaining to the processes of urban revitalization and
the institutional arrangement of redevelopment during the late 1940’s was the definition
of “blight” as a legal term. According to Fulton and Shigley (2005), “From the
beginning, California redevelopment, like federal urban renewal, sought to solve the
problems of troubled urban neighborhoods by attacking the physical conditions of those
neighborhoods.” (pg. 262). To complement federal urban renewal programs of the late
1940’s and early 1950’s, the State of California passed its first comprehensive
“Community Redevelopment Law” in the early 1950’s. According to Fulton and Shigley

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(2005), “In laying out redevelopment’s mission, the state law (of the 1950’s) makes this
orientation clear by stating that redevelopment must attack neighborhoods where blight is
so substantial that it constitutes a serious physical and economic burden on the
community which cannot be reversed or alleviated by private enterprise or governmental
action, or both without redevelopment.” (pg. 262).
The California Community Redevelopment Law of the early 1950’s did three
unique things. First, it clearly separated redevelopment from both the private-sector and
local government. Onward from the early 1950’s, as an institution of local public finance
and local urban economic development, redevelopment would be considered as a go-
between existing between the local government and the private-sector within a
municipality with the powers to directly target neighborhoods determined to have a
significant need for urban revitalization. Second, California’s Community
Redevelopment Law of the early 1950’s is also one of the earliest attempts by a state
legislature to provide a meaningful definition of blight. The definition of blight, as
prescribed by California Community Redevelopment Law in the 1950’s, focused on a
direct physical and economic burden caused by depressed property values, dilapidated
structures, and poorly subdivided lots of land within the urban central city core. Third,
California’s Community Redevelopment Law of the early 1950’s granted local
redevelopment agencies in California two unique powers: 1) the power to directly and
purposefully rearrange private land ownership patterns, and 2) the financial resources to
directly subsidize private development projects that were deemed to be in the public’s
interest by promoting and ensuring the public’s health and safety.

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California’s Community Redevelopment Law of the early 1950’s soon became
the national standard for state level redevelopment statutes. The first legal challenge to
these statutes came in 1954 in the U.S. Supreme Court case Berman v. Parker (1954).
According to Cullingworth and Caves (2003), in 1945, just after the State of California
enacted its first state redevelopment statutes, the United States Congress passed the
District of Columbia Redevelopment Act of 1945. From 1945 to the early 1950’s,
Congress had amended the act several times to allow the District of Columbia to form a
five member commission called the District of Columbia Redevelopment Land Agency.
By 1950, the District of Columbia Redevelopment Land Agency had created, adopted,
and implemented its first comprehensive redevelopment plan for Project Area B, a
neighborhood in the southwestern part of Washington, D.C. The comprehensive plan,
and the subsequent amendments to the 1945 District of Columbia Redevelopment Act,
gave the D.C. Redevelopment Land Agency the power of eminent domain.
In Berman v. Parker (1954), the plaintiffs argued that the D.C. Redevelopment
Land Agency had violated the public use clause of the 5
th
Amendment to the U.S.
Constitution. The D.C. Redevelopment Land Agency had used its new eminent domain
powers to acquire a department store within Project Area B and then transferred the land
it had acquired through eminent domain to a new private owner. The D.C.
Redevelopment Land Agency argued that, for aesthetic purposes, the department store
and the surrounding properties posed a direct threat to public health and safety. The D.C.
Redevelopment Land Agency had determined that the department store was blighted,

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eligible for inclusion in the District of Columbia’s redevelopment Project Area B, and
also eligible to be acquired through eminent domain.
Eventually, the U.S. Supreme Court ruled in favor of the D.C. Redevelopment
Land Agency and found that the Agency’s taking, through its powers of eminent domain,
was a just extension of the government’s police power to protect and promote the
public’s health and safety. According to Cullingworth and Caves (2003), “…in the 1954
Berman v. Parker case…it was held that the public purchase of a slum area and its
leasing for redevelopment by private enterprise constituted a public use. The court went
further: in magisterial terms it declared that the public use requirement of the
Constitution was ‘conterminous with the scope of a sovereign’s police powers’. It also
declared that the concept of public welfare was so broad that it could encompass aesthetic
matters…” (pg. 82).
As a separate institution of local urban economic development and local public
finance, redevelopment was steadily developing its own institutional and legal identify
for much of the late 1940’s and 1950’s. For state and local governments, redevelopment
was slowly becoming the dominant institutional form through which state and local
governments pursued the processes of local urban economic development and
revitalization. Redevelopment was also slowly becoming the primary institutional way
that state and local governments would develop and implement urban economic
development and urban revitalization public policies.
At the same time the federal government, by the end of World War II, was
assuming a much more active and proactive role in the rehabilitation, rebuilding, and

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rejuvenation of the urban central core of many American cities. From 1945 through the
mid 1970’s, the federal government would directly involve itself, through a myriad of
federal legislative acts and public policies, in addressing urban minority poverty, urban
housing problems, urban employment problems, and urban transportation problems.
By the end of World War II, according to Meyers (2005), the United States had
emerged as one of the most powerful nations in the world. But as millions of soldiers
began returning home from Pacific and European battlefields, the federal government
responded by creating new agencies and public policies such as the Federal Housing
Administration and the G.I. Bill. Both programs provided guaranteed home mortgages to
returning soldiers. But instead of returning to either their original central city
neighborhoods or rural communities, many soldiers returning from World War II, and
other “qualified” households, were encouraged by both the 1949 Federal Housing Act
and the 1954 Federal Housing Act to relocate to new housing that had been built in the
new suburbs of many American cities.
Between 1946 and 1947, Meyers (2005) found that approximately 62 percent of
all new home construction in the United States had occurred in the suburbs. Between
1950 and 1956, the American suburban residential population grew by 62 percent while
the residential population of America’s inner cities grew by only 3 percent over the same
1950 to 1956 six-year period. This dramatic shift in American housing and demographic
characteristics forced the federal government to consider a comprehensive nationwide
housing policy. It is widely accepted that the 1949 Federal Housing Act, and its
amendment in 1954, were the first comprehensive attempts by the federal government to

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develop and implement a national housing policy designed primarily to provide direct
federal funding for slum clearance programs and the development of affordable public
housing.
Netzer (1970), Lineberry and Sharkansky (1971), Chudacoff and Smith (2000),
and Fulton and Shigley (2005) each trace the beginning of federal urban renewal policies
directly back to the passage of the 1949 Federal Housing Act and the 1954 Federal
Housing Act. According to Chudacoff and Smith (2000), Title I of the 1949 Federal
Housing Act, “…established the principle of urban redevelopment, committing federal
funds to the clearance of slums by local redevelopment agencies.” (pg. 274). Originally,
Title I of the 1949 Federal Housing Act required that federal funds provided to local
redevelopment agencies could only be used in predominantly residential areas that met
certain conditions of blight. Shortly after the act’s passage, local redevelopment agencies
began using federal funds to acquire and demolish entire inner city residential
neighborhoods that had been declared legally blighted. Eventually, local redevelopment
agencies used federal funds to replace the acquired and demolished property to support
the development of new office buildings, shopping complexes, luxury apartments, and
even parking lots in place of the cleared slums. Despite this use, the federal government
continued to provide federal funding as local governments and local redevelopment
agencies argued that the new land uses and development would raise property values
within the inner city, help trigger new private investment, increase locally collected tax
revenues, and generally restore economic vitality to the inner city.

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Title II of the 1949 Federal Housing Act authorized the Federal Housing
Authority to build 810,000 units of affordable inner city housing over the next six years.
But as Chudacoff and Smith (2000) point out, “Public housing advocates were skeptical
of the redevelopment provision of Title I but believed that a compromise that included
Title II was the only way public housing could be achieved. They lobbied hard for the
act, countering opposition from NAREB and the Savings and Loan League.” (pg. 274.)
Advocates of affordable inner city public housing had every right to be skeptical of the
federal government’s commitment to developing a significant number of inner city
affordable housing. Meyers (2005) found that through 1940 and 1950, the National
Association of Real Estate Boards (NAREB) had directly called upon the federal
government to “curb ruinous urban decay.” As quoted by Meyers (2005), the Los
Angeles Town Hall Report wrote, on March 1, 1944, that, “…the decay of large areas of
American cities, notably in the central sections, is one of the major problems of today.
Blight and slums have spread over an estimated one-fourth of the urban America. The
deterioration of property originally assessed at an estimated $40 billion has destroyed a
larger part of the tax base of our cities.” The NAREB went on to create the Urban Land
Institute (ULI), which by 1950 had studied 2,221 cities and published seven major case
studies of major urban metropolitan areas detailing the financial impact of blight on local
and state government budgets. The ULI eventually recommended to federal policy
makers that the wholesale condemnation and resale of land to private developers be
employed as a primary tool for solving the conditions of blight and urban decay.

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The NAREB was a central driving force behind both the 1949 Federal Housing
Act and the 1954 Federal Housing Act. According to Meyers (2005), the private real
estate industry had set the basic agenda and public policy goals for redevelopment and
urban renewal. The public policy goals set by the private real estate industry, and
institutionalized through federal, state, and local government redevelopment law, was a
product of three primary beliefs: 1) that the private-sector is most efficient for the
delivery of urban renewal and revitalization public services, 2) that the creation of new
markets for real estate development is a “good” and “desirable” thing, and 3)
government’s role is to assist the marketplace where and when it is necessary. As
Chudacoff and Smith (2000) conclude, “Downtown revitalization became the rallying cry
for local city mayors, who built support based on coalitions of politicians, businessmen,
labor unions, and planners who favored economic growth over social reform.” (pg. 275).
These beliefs became institutionalized when the federal government passed the
1954 Federal Housing Act. According to Netzer (1970), Lineberry and Sharkansky
(1971), Chudacoff and Smith (2000), and Fulton and Shigley (2005), the 1949 Federal
Housing Act was amended in 1954 to replace “redevelopment” with “urban renewal”.
Over time, but beginning with the 1954 amendments, fewer federal dollars were allocated
to affordable housing development in the inner city and more federal dollars, through
urban renewal, were allocated to non-residential development. As Chudacoff and Smith
(2000) point out, “The amendment included a provision that allocated 10 percent of
federal grants-in-aid in nonresidential areas, allowing localities to use a tenth of federal
funds for projects that did not fit the loose, predominantly residential criterion.” (pg.

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275). Further amendments to the 1949 Federal Housing Act in 1961, largely supported
and lobbied for by the private real estate market, increased the proportion of
nonresidential funds to 30 percent. Eventually, the 1954 and subsequent future
amendments to the 1949 Federal Housing Act further removed local redevelopment from
the solution of inner city housing problems. Property-based approaches also became the
dominant public policy choice for the federal, state, and local governments under the
1954 Federal Housing Act amendments. The 1954 Federal Housing Act called for wide-
spread slum clearance programs and the federal government began directly subsidizing
the efforts of local governments to acquire and demolish entire inner city blocks.
With little federal, state, and local government support for inner city housing, the
inner central core of many American cities continued to experience significant declines in
urban residential populations. Perhaps intentionally, the slum clearance programs, and
the favorable terms of mortgages underwritten and financed by the federal government,
encouraged excessive population growth in outlying suburban communities and
continued excessive population decline in the remaining inner central city cores. Federal
transportation policy also encouraged the continued expansion of the suburbs and the
continued decline of the inner city. Although Netzer (1970) points out that as urban
transportation concerns had reached near-crisis levels by the late 1940’s and 1950’s, the
federal government had decided to allocate its resources to the building of a national
highway system. Like the canals and the railroad before it, the federal government’s
financial and political support of a national interstate and highway network would have

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dramatic and long lasting impacts on the shaping, building, and rebuilding of America’s
urban environment.
According to Chudacoff and Smith (2000), the Interstate Highway Act of 1956,
and the subsequent creation of the Federal Highway Trust Fund created by the 1956
Highway Revenue Act, helped strengthen the already growing pattern of urban decay and
suburban flight that had started in the late 1940’s and continued into much of the 1950’s.
As Chudacoff and Smith (2000) point out, “Though ostensibly intended to aid intercity
travel for purposes of civil defense, the highway act served as a means to ease downtown
traffic congestion…road construction leveled some older downtown neighborhoods and
cut through the middle of others.” (pg. 268).
As the federal government continued to directly support the development of a
national interstate highway system, the impact on the urban central city environment
throughout much of the United States was unmistakable. Many scholars, including
Netzer (1970), Lineberry and Sharkansky (1971), Chudacoff and Smith (2000), and
Fulton and Shigley (2005), point out that suburban development was specifically
designed for highway construction. People able to afford housing in the suburbs could
easily commute back to the inner central city for employment reasons. The situation in
many American inner cities grew progressively worse as, according to Chudacoff and
Smith (2000), “…businesses naturally followed the residential expansion and sometimes
even preceded it…as populations radiated outward, it became increasingly convenient for
a family to fill its materials needs in malls rather than in old downtowns.” (pg. 270).

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As businesses followed and sometimes preceded the “white flight” from the inner
city to the suburbs, trapped minority and ethnic populations, which could not qualify for
federally guaranteed government mortgages for housing in the suburbs, soon fell into
deep poverty. Racism, segregation, and discrimination quickly became institutionalized
through the redlining practices of major commercial and mortgage lenders and the strict
requirements of the federal government and the Federal Housing Administration.
Increased frequencies of crime soon followed as poverty levels quickly rose. This soon
triggered even further flights of populations capable of moving out of the inner city and
into the suburbs, which in turn triggered the exodus of even more businesses and
employment opportunities out of the inner city of many American cities.
One of the lasting impacts of federal government urban renewal policy between
1950 and 1970 was a hollowed out inner city. According to Chudacoff and Smith (2000),
the residential population of American suburbs was growing at a rate of ten times faster
than that of central inner city neighborhoods in 1950. Between 1950 and 1970, cities like
New York and Chicago had lost a significant portion of their total residential populations,
while the suburban rings of New York and Chicago had grown by 195 percent and 117
percent respectively. The residential population of Detroit fell by approximately 20
percent between 1950 and 1970 while the residential population of Detroit’s growing
suburban communities had grown by nearly 206 percent between 1950 and 1970. Similar
residential population growth trends were seen in cities like Boston, Washington, D.C.,
Cleveland, St. Louis, Minneapolis, and Pittsburgh. Even in cities like Los Angeles,
Dallas, and Houston, which experienced central city population increases of 43 percent,

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94 percent, and 104 percent respectively between 1950 and 1970, their surrounding
suburban communities experienced even greater rates of population growth, growing by
an estimated 141 percent, 107 percent and 330 percent respectively between 1950 and
1970.
As central inner city neighborhoods began to lose significant portions of their
residential populations, and as businesses and employment opportunities continued to
follow the population exodus to the suburbs between the late 1940’s and mid 1970’s, the
remaining central cities were left with a disproportionate level of the burden while the
growing suburban communities were left with a disproportionate share of the resources.
Lineberry and Sharkansky (1971) explain this disproportionate distribution of burdens
versus resources between the central inner city and the outlying suburban communities by
comparing different conditions in both the central inner city and outlying suburban
communities. According to Lineberry and Sharkansky (1971), the central inner city, for
the most part, contains the following (pg. 29):

1. More crime, necessitating heavier expenditures on law enforcement;
2. Older buildings and housing, necessitating more costly fire protection;
3. More poverty and more unemployment, necessitating higher welfare
expenditures;
4. More aged persons, necessitating greater public assistance to the aged;
5. More substandard housing units, necessitating more public housing;

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6. Higher traffic counts, necessitating more highway expenditures and traffic
control; and
7. More students from culturally disadvantaged backgrounds, necessitating
more compensatory-education programs in schools.

Although the central inner city is forced to contend with a much higher share of
urban problems, suburban communities tend to have much higher shares of available
resources. As Meyers (2005) pointed out, while the inner central cores of many major
American cities began to experience significant declines in levels of total assessed value
and other principal sources of public revenues, the suburbs were experiencing
tremendous growth in total assessed value and in other principal sources of public
revenues largely due to federal housing policy which encouraged suburban development
and inner city neighborhood slum clearance programs.
The first half of the urban renewal era, between the end of World War II and the
late 1950’s, saw a steady growth in the amount of federal resources and monies
transferred from the federal government to local governments in support of urban
renewal, transportation, housing, and economic development programs and projects. By
the mid 1950’s, the role of the national, state, and local governments to be a provider and
performer of urban related public services changed dramatically due to the new realities
and growing problems present in many of the urban central city cores of America’s
largest cities. The passage of the 1949 Federal Housing Act and the 1954 Federal
Housing Act gave federal agencies, such as the Federal Housing Administration,

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sweeping powers to reshape the urban environment in the areas of transportation,
housing, and community and economic development. At the local level, new local
redevelopment agencies were given power to acquire privately owned property through
direct purchase or eminent domain, collect incremental property tax revenues for the
purposes of financing new private real estate development, and enter into public-private
partnerships with private developers.
As Chudacoff and Smith (2000) point out, local governments had grown to favor
economic growth over social reform and had become highly focused on downtown,
property-based, programs and approaches to urban economic development. Social
programs, that could have been designed to confront the social-based problems of the
inner city, were either ignored or not considered by either the federal, state, or local
governments during the rise of property-based approaches to urban economic
development between the late 1940’s and late 1950’s.
The dominance of property-based programs and approaches to urban economic
development continued into much of the second half of the urban renewal era between
the 1960’s and 1970’s. Chudacoff and Smith (2000) identify a sharp increase in the
involvement of the federal government in local downtown revitalization projects, largely
due to the 1954 Federal Housing Act which supplanted local redevelopment with federal
urban renewal. According to Chudacoff and Smith (2000), President John F. Kennedy, in
1960, “…captured the attention of civic leaders with promises of federal (largely
financial) support for urban needs such as schools, medical care, mass transit and
planning.” (pg. 285). President Lyndon B. Johnson continued to escalate the

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involvement of the federal government in local downtown revitalization projects with the
passage of the 1964 Economic Opportunity Act and the 1966 creation of the U.S.
Department of Housing and Urban Development. In 1966, President Johnson also
launched, according to Chudacoff and Smith (2000), the “…Model Cities program, a new
variant of renewal that targeted federal funds to special districts where locally elected
boards had hammered out a coordinated plan for the improvement of housing, health,
education and employment.” (pg. 285). As Cullingworth and Caves (2003) point out,
“Federal programs proliferated on a bewildering scale: more than tripling in the 1960’s.
These covered the whole spectrum of public policy, from food stamps to regional
development, from the ‘War on Poverty’ to health services, from education to model
cities and the Community Action Program.” (pg. 234).
Frieden and Kaplan (1977) point out that the efforts of President Kennedy and
President Johnson during the 1960’s helped to restructure and formalize the relationship
between federal agencies and state and local governments that had previously started at
the end of World War II through the 1954 Federal Housing Act. According to Frieden
and Kaplan (1977), the bewildering proliferation of federal programs, “…generated a
massive federal administrative structure and a significant transformation of federal-state-
city relationships.” (pg. 3). One of the main goals of this restructured federal-state-city
relationship was to achieve a higher degree of coordination among federal programs and
agencies than had ever existed before. The creation of the U.S. Department of Housing
and Urban Development (HUD), and a task force created by President Johnson designed
to advise HUD on the organization and responsibilities of the new organization, resulted

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in the “model cities” program. According to Cullingworth and Caves (2003), the model
cities program, “…incorporated programs in areas such as city planning, day-care
centers, employment, drug abuse, the elderly, and housing rehabilitation programs.” (pg.
234).
The federal government, through primarily property-based approaches to urban
revitalization, would dominate the local urban economic development policy agenda.
Compared to state and local governments, the federal government would also become the
dominant provider and performer of urban-oriented public services. State and local
governments were largely forced to submit themselves to federal authority. This trend
would continue, almost unopposed, until the mid 1970’s. Until the mid 1970’s, an
independent local redevelopment institutional arrangement for urban economic
development would remain largely dormant. Although the authorizing state legislation
that had been so popular nationwide in the early to mid 1940’s remained intact, the
federal government would become the primary urban public policy maker and provider of
urban-oriented public services for much of the second half of the urban renewal era.
Direct federal funding and involvement in local downtown revitalization projects
reached its zenith during the President Nixon and President Ford administrations.
According to Chudacoff and Smith (2000), in 1960, at the end of President Eisenhower’s
administration, there were only a total of 44 federal programs that had allocated
approximately $3.9 billion directly to the nation’s largest cities for urban renewal
purposes. In 1969, by the end of President Johnson’s administration, there were nearly
500 federal programs that had allocated approximately $14 billion to the nation’s largest

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cities for urban renewal purposes. In 1974, by the end of President Nixon’s
administration, direct federal aid to American cities for urban renewal purposes,
channeled directly through the programs of various federal agencies, had risen to nearly
$27 billion. Between the mid 1950’s and the early 1970’s, the federal government had
dramatically increased its direct involvement and direct financial support of local
downtown revitalization projects. Much of the direct federal aid transferred from the
federal government to local inner cities came in the form of federal slum clearance
programs and federal highway-transportation projects. Entire inner city neighborhoods
had been razed through slum clearance programs to make way for new highways built
and directly administered by the U.S. Department of Transportation established in 1966,
and by the federal housing programs administered by the U.S. Department of Housing
and Urban Development.
But by the mid 1970’s, it had become clear that federal government direct and
proactive involvement in the planning, shaping, construction, and reconstruction of the
inner central city cores of many American cities had failed to deliver on the promise of
long-term local economic prosperity. The use of property-based economic development
strategies, which had dominated federal urban renewal policy from the mid 1950’s to the
mid 1970’s, had not adequately alleviated the problems of institutional racism, poverty,
crime, and general social and economic maladjustment that had paralyzed the urban inner
central cores of many American cities.
Figure 2-1 shows that the U.S. national homicide rate per 100,000 population
grew substantially during the entire urban renewal era between 1950 and 1970. U.S.

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national homicide rates are used here to show that federal urban renewal policy between
the 1950’s and 1970’s had little impact on crime rates.
Figure 2-1

Between 1950 and 1973, the U.S. national homicide rate per 100,000 population
grew from an estimated 4.6 homicides per 100,000 per year in 1950 to an estimated 9.4
homicides per 100,000 per year in 1973, a net increase of 4.8 homicides per 100,000 per
year. Between 1950 and 1973, the U.S. national homicide rate per 100,000 population
grew at an annual average rate of 3.35 percent. Comparatively, the U.S. national
homicide rate per 100,000 population between 1974 and 2005, when the federal
government had largely discontinued its national urban renewal policies, decreased from

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an estimated 9.8 homicides per 100,000 per year in 1974 to an estimated 5.6 homicides
per 100,000 per year in 2005, a net decrease of 4.2 homicides per 100,000 per year.
Between 1974 and 2005, the U.S. national homicide rate per 100,000 population
decreased at an annual average rate of 1.46 percent per year.
Figure 2-2 shows that the estimated total number of all homicides throughout the
United States grew substantially during the entire urban renewal era between 1950 and
1970. The estimated total number of all nationwide homicides is used here to further
illustrate that federal urban renewal policy between the 1950’s and 1970’s had little
impact on total crime rates.
Figure 2-2

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The trend in the total number of U.S. nationwide homicides between 1950 and
1973 follows a near identical trend as the change in U.S. national homicide rate per
100,000 population presented above in Figure 2-1. Between 1950 and 1973, the total
number of reported homicides in the United States per year increased from an estimated
number of 7,020 homicides per year in 1950 to an estimated number of 19,640 homicides
per year in 1973, a net increase of 12,620 homicides per year. The total number of
reported homicides per year in the United States increased at an average annual rate of
4.70 percent per year between 1950 and 1973. Comparatively, the total number of
reported homicides in the United States per year between 1974 and 2005 decreased from
an estimated number of 20,710 homicides per year in 1974 to an estimated total number
of 16,692 homicides per year in 2005, a net decrease of 4,018 homicides per year. The
total number of homicides per year in the United States decreased at an average annual
rate of 0.30 percent per year.
Ranney (1969), Netzer (1970), Lineberry and Sharkansky (1971), Chudacoff and
Smith (2000), and Cullingworth and Caves (2003), conclude that the obvious failure of
federal urban renewal programs, combined with declining federal resources, led to
another watershed moment in the relationship between federal-state-city agencies and in
the nationwide urban renewal effort when the federal government, during the mid 1970’s,
abruptly reversed nearly 20 years of federal urban renewal policy. If the urban renewal
era between the end of World War II and the mid 1970’s was characterized by the
dominance of the federal government in developing and implementing local urban
economic development public policy, the period between the mid 1970’s to the early 21
st

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Century could best be characterized as the “contemporary local redevelopment era”,
where local governments became the dominant developer of local urban economic
development public policy, and the dominant provider and performer of local urban
economic development services.

2.c – The Contemporary Local Redevelopment Era, the mid 1970’s to the Early 21
st

Century
Beginning with President Gerald Ford in 1974, the relationship between the
federal, state, and local governments, in regard to how government pursued and
implemented urban economic development policy and how government developed and
provided urban-oriented public services, shifted once again. The federal government
would, beginning with President Ford, reduce its direct involvement in the shaping,
building, and rebuilding of the urban environment. State governments would continue
their role as a coordinator of government’s response to the problems of the urban
environment by largely providing funds to local governments through local county
governments. Local governments became the primary vehicle for government shaping,
building and rebuilding of the American urban environment.
Local redevelopment, and local government urban revitalization efforts, would
replace federal urban renewal policies and programs in most American states. If federal
government urban renewal policy during the years between the end of World War II and
the mid 1970’s employed a “one-size fits all” approach to urban revitalization, the
response of state and local municipal and county governments across the United States

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was highly varied. Western states like California and Nevada turned towards the use of
redevelopment as the dominant institutional arrangement for local urban economic
development and revitalization. From the mid 1970’s to the early 21
st
Century, local
urban revitalization and local urban economic development institutional arrangements
would develop largely based on the local characteristics of the state and local community
in which the policies and programs of local urban economic development were being
implemented. The development of a wide variety of state and local government
approaches and institutional arrangements to local urban economic development can be
tied directly to the federal government’s passage of the 1974 Housing and Community
Development Block Grant Act.
According to Chudacoff and Smith (2000), beginning with President Ford’s
administration, “The federal-city relationship, which had originated during the New Deal
in the 1930’s and tightened during the Great Society of the 1960’s, began to dissolve in
1974 with passage of the Housing and Community Development Block Grant Act.” (pg.
298). The most important aspect of the 1974 Housing and Community Development
Block Grant Act (HCDBGA), as it pertains to local urban economic development and
local urban revitalization, was the act’s creation of revenue sharing between the federal
and local governments. The HCDBGA signaled a significant shift in the philosophies
and beliefs which underpinned most federal urban policies at the time. Local
governments, even though the federal monies were being channeled through state
governments, were given almost complete discretion on how the HCDBGA funds could
be used and spent. According to Chudacoff and Smith (2000), “Instead of mandating

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spending on specific inner-city problems, these grants gave local officials more discretion
over how to spend federal funds. Pledging that the act would avoid excessive federal
regulation, Ford announced that cities would have greater certainty about the level of
federal funding they could expect and that local officials could concentrate on broad
programs of community betterment rather than applying for money for individual small-
scale projects.” (pg. 299).
Funds provided by the federal government to local governments, through their
state government, were originally based on a formula. Population density levels, the
estimated age of the existing residential housing stock, and the city’s individual crime
rate were initially used as the primary measures of a city’s eligibility level for
Community Development Block Grant (CDBG) funds. This formula was an attempt by
the federal government to ensure that more needy cities would receive a proportionately
greater share of federal funds than cities that were considered to be better off. The
formula used in the 1974 HCDBGA also attempted to direct more federal funds to
American inner cities while avoiding the possibility that suburban and non-urban
communities would not receive a greater share of federal funds.
Lineberry and Sharkansky (1971) conclude that the inner central core of many
American cities, by the end of the 1960’s, were suffering from a distinct revenue
disadvantage when compared to their suburban counterparts. More heavily urbanized
inner central city cores suffer a larger portion of urban problems, like poor housing, high
levels of unemployment, poor academic performance amongst school aged children, and
higher levels of crime, but receive, in general, fewer funds from local sources of public

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revenues, like sales tax and property tax revenues, than their suburban counterparts.
According to Chudacoff and Smith (2000) and Cullingworth and Caves (2003), the 1974
HCDBGA was an attempt by the federal government to resolve this funding-problem
discrepancy between central cities and suburban jurisdictions. Eventually, as Chudacoff
and Smith (2000) and Cullingworth and Caves (2003) point out, local central city
governments would use HCDBG funds in a variety of ways. Under the revenue sharing
agreement in the 1974 HCDGA, the funds provided by the federal government were used
for a variety of projects, including public works projects, salaries for local government
staff specializing in urban-oriented public services, law enforcement, housing, and even
job training.
Another critical element of the 1974 HCDBGA was the act’s requirement that
local jurisdictions, in order to be eligible for CDBG funds, must provide local matching
funds. At the time, local municipal and county governments were reluctant to pledge and
commit funds from their respective general funds. Instead, as Gianakis and McCue
(1999) point out, local municipal and county governments, as a general statement of
public budgeting policy, strive to protect their general funds at all costs. In Nevada and
California, local redevelopment agencies, because of their unique legal and financial
relationship to the local municipal and county governments that create them, were an
ideal method of securing and creating local matching funds for federal Community
Development Block Grant (CDBG) funds.
Because the 1974 HCDBGA largely required that the federal CDBG monies be
spent in predominantly urban areas that suffered from a variety of social, physical, and

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economic blight, and because redevelopment agencies were already authorized by state
law to operate within predominantly urban areas that also suffered from a variety of
social, physical, and economic blight, redevelopment funds, generated from the
incremental increases in property tax revenues from their respective redevelopment
project areas, were natural ways for local municipal and county governments to match
federal CDBG funds. This not so coincidental similarity between local redevelopment
law in Nevada and California and the requirements of federal CDBG fund eligibility
eventually led to the dominance of redevelopment as the primary institutional
organization for local government urban revitalization public policy development and
implementation, and the dominant institutional process of how local governments would
finance local urban economic development and revitalization strategies.
According to the California Controller’s Office, “Community Redevelopment
Agencies Annual Report” for FY Ending June 30, 2007, there were 398 separate local
redevelopment agencies operating within the State of California as of FY Ending June 30,
2007. As Figure 2-3 illustrates, a significant number of local redevelopment agencies
operating within the State of California were initially formed in the years immediately
before and immediately after the passage of the 1974 Housing and Community
Development Block Grant Act. In 1981, 1982, and 1983, a total of 50 separate local
redevelopment agencies were created. Figure 2-4 shows that the decade between 1970
and 1979, and the decade between 1980 and 1989, saw the largest expansion of local
redevelopment agencies in the State of California.

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Figure 2-3

Of the 398 existing local redevelopment agencies currently operating in the State
of California as of FY Ending June 30, 2007, approximately 65 percent, or 259 of the 398
total, were created in the 1970’s and the 1980’s. The decade between 1980 and 1989 saw
the largest increase in the number of currently active local redevelopment agencies in the
State of California. Between 1980 and 1989, a total of 153 local redevelopment agencies,
or 38.4 percent of the 398 currently operating agencies, were created by local California
municipal and county governments. Between 1970 and 1979, a total of 106 local
redevelopment agencies, or 26.6 percent of the 398 currently operating agencies, were
created by local California municipal and county governments.

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Figure 2-4

A more specific measure of the expansion of local redevelopment agencies in
California can be illustrated by examining the total number of individual local
redevelopment project areas currently operating state-wide and presenting them by the
year in which they were adopted. In California, a single redevelopment agency can
operate within multiple, local redevelopment project areas. For example, the City of Los
Angeles has a single redevelopment agency, the “Community Redevelopment Agency of
the City of Los Angeles” (CRA/LA). But the CRA/LA currently manages and
administrates seven separate and independent redevelopment project areas, including the
East Valley Project Area, the West Valley Project Area, the Hollywood & Central Project

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Area, the Downtown Project Area, the Eastside Project Area, the South Los Angeles
Project Area, and the Los Angeles Harbor Project Area. According to the California
Controller’s Office, “Community Redevelopment Agencies Annual Report” for FY
Ending June 30, 2007, there were 841 separate local redevelopment project areas
operating within the State of California as of FY Ending June 30, 2007.
Figure 2-5 presents the total number of individual redevelopment project areas
established throughout the State of California for each year between 1948 and 2007.
Although the California Controller’s Office reported that there were a total of 841 active
redevelopment project areas located throughout the State of California as of FY Ending
June 30, 2007, a total of 96 project areas had an unspecified “date established”.
Figure 2-5

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Like the analysis presented above for the total number of active redevelopment
agencies created between 1948 and 2007, Figure 2-5 shows that a significant number of
local redevelopment project areas operating within the State of California were initially
formed in the years immediately before and immediately after the passage of the 1974
Housing and Community Development Block Grant Act. In 1983, 1984, 1986 and 1987,
a total of 148 separate local redevelopment project areas were created.
But the Housing and Community Development Block Grant Act of 1974 was only
the beginning of the federal government’s de-escalation of its direct involvement in the
shaping, building, and rebuilding of the urban environment. The 1974 HCDBGA was
also only the beginning of the increased direct responsibility of local governments to
provide and perform an increasing variety of urban-oriented public services. Over the
entire mid 1970 to early 21
st
Century period, local redevelopment agencies in Nevada and
California would gradually grow into the dominant institutional form through which local
governments would pursue the processes, programs, and projects pertaining to local
urban economic development and local urban revitalization.
Figure 2-6 shows that the decades between 1970 and 1979 and between 1980 and
1989 saw the largest expansion of local redevelopment project areas in the State of
California. Of the 841 existing local redevelopment project areas currently active in the
State of California as of FY Ending June 30, 2007, approximately 49.5 percent, or 416 of
the 841 total, were created in the 1970’s and the 1980’s. The decade between 1980 and
1989 saw the largest increase in the number of currently active local redevelopment

114

agencies in the State of California. Between 1980 and 1989, a total of 238 local
redevelopment project areas, or 28.3 percent of the 841 currently operating project areas,
were established by local California municipal and county governments. Between 1970
and 1979, a total of 178 local redevelopment project areas, or 21.2 percent of the 841
currently operating project areas, were created by local California municipal and county
governments.
Figure 2-6

Certainly, the 1974 HCDBGA had a profound and direct role in making
redevelopment the dominant institution of local urban revitalization and local urban
economic development in Nevada and California. Ultimately, the local matching

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requirements of the 1974 HCDBGA, combined with the legal structure of local
redevelopment agencies in Nevada and California, encouraged a significant expansion of
local redevelopment agencies and local redevelopment project areas in the years
immediately before and after the passage of the 1974 HCDBGA.
The 1974 HCDBGA had one other important impact on how local governments
would pursue the processes, programs, and projects pertaining to local urban economic
development and local urban revitalization. In both Nevada and California, local
redevelopment agencies are primarily funded through the incremental increases in the
amount of local property, or ad-valorem, taxes collected from the agency’s specific
redevelopment project areas. Because of this funding structure, local redevelopment
agencies generally pursue property-based approaches to the revitalization of their
individual project areas. As a result of this funding structure, the matching requirements
of the Housing and Community Development Block Grant Act of 1974, and the use of
local redevelopment agencies to produce local Community Development Block Grant
matching dollars, a property-based economic development approach has become the
primary method by which local municipal and county governments and local
redevelopment agencies currently attempt to accomplish the goals of local urban
revitalization and local urban economic development.
Each U.S. president since President Ford, including President Carter, President
Reagan, President Bush (41), President Clinton, and President Bush (43), have continued
a pattern of federal de-escalation in direct federal government involvement in the
revitalization of American inner cities. As Chudacoff and Smith (2000) point out,

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President Carter, “…eventually crafted an urban policy that made his suburban opponents
more hostile. But his fiscal conservatism paved the way for other politicians to pursue a
policy of urban neglect.” (pg. 299) President Carter had promised to develop a
comprehensive new federal urban policy that would reshape the, then existing, federal
urban policy that had originally been crafted by the 1949 Federal Housing Act and the
1954 Federal Housing Act. As part of his first presidential campaign, Carter had
proposed an expansion of the federal government’s leadership role in the economic and
social development of the urban central city core of America’s cities. But, according to
Chudacoff and Smith (2000), “Carter, however, diverged from urban and black interests
over several ideological issues.” (pg. 301).
In office, President Carter came to believe that the federal government’s initiative
and leadership alone could not effectively revitalize the urban central core of American
cities. President Carter would eventually develop and implement the similar conservative
measures and approaches to local urban revitalization and local urban economic
development that President Ford had started under the Housing and Community
Development Block Grant Act of 1974. Chudacoff and Smith (2000) argue that, “Instead
of extensive (federal) government (direct) assistance, (Carter) offered ‘a New
Partnership, involving all levels of government, the private-sector, and neighborhood and
voluntary organizations.’ The (federal) government would maintain popular programs
such as the Urban Development Action Grants, providing fiscal relief to cities in crisis,
and initiating an old-fashioned $1 billion public works program.” (pg. 301).

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President Carter’s belief that local governments and the private-sector should take
on a more direct role in local urban revitalization and local urban economic development
efforts would become the central public policy belief of the presidential administrations,
and their urban public policy agendas, that came after him. According to Cullingworth
and Caves (2003), “Carter’s policy consisted of a large package of existing legislation
and new proposals, with an emphasis on the stimulation of private investment.
According to Carter, it was the private-sector that would expand the economy, not the
government.” (pg. 237). One of President Carter’s most important impacts on the way in
which local governments approached local urban revitalization and local urban economic
development was the passage and implementation of the Urban Development Action
Grant (UDAG) program, which was an extension of President Ford’s Housing and
Community Development Block Grant Act. Through the UDAG program, the federal
government would provide financial assistance to local governments which, in turn,
would use the funds, in combination with local dollars, to make loans to private housing,
commercial, and industrial developers.
According to Cullingworth and Caves (2003), “Funding could be used for such
activities as site acquisition, clearance and demolition, clean-up, construction, soft costs,
and capital equipment.” (pg. 237). Like the 1974 HCDGBA, the UDAG program’s
local matching requirement would help continue the further creation of new local
redevelopment agencies and new redevelopment project areas. The UDAG program
would also further the decline of direct federal government involvement in the
revitalization of the inner central core of American cities; it would also help further

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reduce the federal government’s direct involvement in the provision and performance of
urban-oriented public services.
Table 2-2 presents two different measures of the size of government between
1940 and 1992.
Table 2-2
Two Measures of the Size of Government
Total Government Spending Relative to GNP and Total Government
Purchases of Goods and Services Relative to GNP
1940 to 1992

Measure/Year

Federal
State and Local
Combined
Total
Federal, State and
Local
Total Government
Spending Relative to
GNP

1940 10.1% 11.2% 20.4%
1950 15.6% 9.7% 24.5%
1960 18.9% 11.9% 29.5%
1970 20.6% 14.6% 32.5%
1980 22.8% 16.0% 35.4%
1990 25.1% 17.6% 40.0%
1992 25.4% 22.5% 41.3%

Total Government
Purchases of Goods and
Services Relative to GNP

1940 6.0% 7.8% 13.8%
1950 7.0% 6.7% 13.8%
1960 10.8% 8.7% 19.4%
1970 9.9% 11.1% 21.0%
1980 7.7% 11.0% 18.7%
1990 7.7% 11.2% 18.9%
1992 7.5% 11.2% 18.7%
Source: Reproduced from Walton and Rockoff (1998), pg. 596, Derived from “Historical
Statistics of the United States Colonial Times to 1970” (Washington D.C.: Government
Printing Office, 1975, Series: Y533, Y590, Y671); and “Statistical Abstract of the United
States: 1995” (U.S. Bureau of the Census, Washington D.C.: Government Printing
Office, 1995, pg. 299 and 451).

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The shift from the federal government directly performing and providing urban-
oriented public services to state and local governments can be seen in federal, state, and
local government spending and expenditure patterns between 1970 and the 1990’s.
Recall that Table 2-1, presented earlier, presents the same measures of the size of
government, but only from 1940 to 1970. Although total federal government spending as
a percentage of U.S. GNP continued to be larger than total state and local government
spending combined as a percentage of U.S. GNP between 1970 and 1992, total federal
government purchases of goods and services relative to GNP would be significantly less
than total state and local government combined purchases of goods and services between
1970 and 1992. This provides some evidence to support the conclusion that, during the
“contemporary local redevelopment era” of local urban revitalization and local urban
economic development between the mid 1970’s and early 21
st
Century, state and local
governments, but particularly local governments, became the dominant provider and
performer of urban-oriented public services after 1970. Although the federal government
continued to provide state and local governments with increased levels of funding for
local urban revitalization and local urban economic development purposes, largely
through Community Development Block Grants and the UDAG program, local
governments had become the primary developers and implementers of local urban
revitalization and local urban economic development policies and programs.
Eventually, one of the largest legacies of President Carter’s UDAG program, and
the 1974 Housing and Community Development Block Grant Act signed by President
Ford, would be the use of public-sector and private-sector partnerships where the public-

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sector, largely through local redevelopment agencies, would provide financing to local
private-sector real estate developers. Like the period between the late 1880’s and early
1900’s, new political and administrative theories developed during the latter half of the
20
th
Century, which emphasized more market-based approaches to governance and a
greater usage of public-private partnerships in the delivery of public services, helped
further decrease the federal government’s role in the direct shaping, planning, and
rebuilding of the inner central core of American cities.
As in the late 1880’s and early 1900’s, there was another major shift in political,
administrative, and economic paradigms and realities in the later part of the 20
th
Century.
These shifts in political, administrative, and economic paradigms and realities helped
give rise to redevelopment as the dominant institutional form through which local
jurisdictions in Nevada and California would use to pursue the goals and objectives of
urban revitalization and urban economic development.
Throughout the new findings in administrative, organizational, and political
theory, there was growing support for market-based and network-based approaches to the
organization of government and the provision and performance of public services.
Donahue and Nye (2000), Goldsmith and Eggers (2004), and Agranoff (2007), conclude
that political and administrative theories of government began to favor market-based and
network-based approaches. During the 1970’s, 1980’s, and continuing into the 1990’s, it
became widely believed that traditional government intervention into local social,
political, and economic activities had become largely inefficient. As a result, movements
in administrative and political theory, such as the “New Public Management”,

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encouraged a reduced and contracted role for government and greater use of private
market forces.
Elaine Kamarck, in Donahue and Nye (2000), argues that, “Citizens who used to
argue about the ends of government now find themselves more or less universally
dissatisfied with the means of government. In the last decades of the twentieth century,
American public leaders – adept, as are all political leaders, at putting their ears to the
ground – identified and articulated these feelings.” (pg. 228). Although President Ford
and President Carter began the de-escalation of the federal government’s direct
involvement in the revitalization of American inner cities, Kamark ties the height of the
revolt against traditional bureaucratic organizational approaches to public service
provision to President Reagan who famously stated that government was not the solution
to the problem, but was the problem. Although the new administrative approaches to the
organization of government and the provision of public services would not necessarily be
fully adopted and implemented, Kamark identifies three new governmental forms that
would begin to replace the traditional bureaucratic state: 1) entrepreneurial government,
2) networked government, and 3) market government. Each of these forms, according to
Kamark, began to replace traditional top-down, command-and-control hierarchical
organizational structures with new approaches that emphasized a greater role for local
governments and the private-sector.
Goldsmith and Eggers (2004) trace the development of the new political and
administrative theories of the last few decades of the 20
th
Century to the rise of
complexity in the problems society has increasingly been forced to confront. According

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to Goldsmith and Eggers (2004), “The traditional, hierarchical model of government
simply does not meet the demands of this complex, rapidly changing age. Rigid
bureaucratic systems that operate with command-and-control procedures, narrow work
restrictions, and inward-looking cultures and operational models are particularly ill-suited
to addressing problems that often transcend organizational boundaries.” (pg. 7). The rise
of new approaches to government through market and network-based approaches are,
according to Goldsmith and Eggers (2004), the result of four influential trends that started
in the mid to late 1970’s. The first, third-party government, emphasizes the use of private
firms and nonprofit organizations in the delivery of public services and the fulfillment of
public policy goals. The second, joined-up government, emphasizes the need for
multiple agencies in government across political boundaries, and sometimes across
different levels of government, to join together in the provision of public services. The
third, the digital revolution, has, through the development of new information
technologies, allowed different public-sector and private-sector organizations to
collaborate in ways that, historically, were not possible. The fourth, increased citizen-
consumer demand for more control in the way government delivers public services and
for more variety in the types of services government provides, has forced the public-
sector to turn to the private-sector. Each of these four forces, according to Goldsmith and
Eggers (2004), have led to a significantly reduced direct role for government in the
provision and performance of public services, and an increased role for the private-sector.
The impact of these four forces can be seen in the rise of local redevelopment
agencies as the dominant institutional form for how local governments pursue the process

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of urban economic development and the goals of urban revitalization. For Goldsmith and
Eggers (2004), the reduced role for government in the 21
st
Century is manifested in the
rise of public service networks where government remains active in service delivery, but
becomes only one partner in a larger networked web of public and private agencies,
entities, and organizations.
Contemporary local redevelopment agencies operate just as Goldsmith and
Eggers (2004) would predict. In order to accomplish the goals of urban revitalization and
implement the processes of urban economic development, a local redevelopment agency
will often partner with other public entities and private developers. A local
redevelopment agency could be a provider of funds to developers seeking capital to
pursue private real estate projects within the redevelopment agency’s project area. The
local redevelopment agency might also partner, on a project-by-project basis, to work
with other public agencies, like a local tourism authority, a local university, another
department within the city or county government, local school districts, and federal
agencies like the U.S. Department of Housing and Urban Development to accomplish
specific real estate projects within the redevelopment agency’s project area. The local
redevelopment agency might also work with non-profit organizations like a local small
business development center or a regional private-sector economic development
corporation. Once the project is completed, the network could be either dissolved or
reformed with new partners to accomplish a new real estate project.
As Goldsmith and Eggers (2004) argue, “Local governments often face
interrelated, seemingly intractable problems – youth crime, teenage pregnancy, drug

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abuse, lack of affordable housing. To address these, governments often weave together
networks of solutions and then push the delivery down to community groups.” (pg. 19-
20). Four new models of government, according to Goldsmith and Eggers (2004), have
become increasingly common across all levels of government in the United States.
Illustration 2-1 presents each of these four new models of government, each according to
the degree of public-private collaboration and network management capabilities each new
form offers.
Illustration 2-1
Models of Government

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Depending upon the individual real estate or other economic development project
the local redevelopment agency is pursuing, the network management capabilities might
either be low or high. But in any case, public-private collaboration is likely to be high.
Local redevelopment agencies, given their unique relationship to the local municipal or
county government, are likely to pursue either an outsourced government model or a
networked government model. In either case, these relatively new developments in
political, organizational, and administrative theory have had a profound impact on how
local governments continue to pursue the processes of urban economic development and
the goals of urban revitalization within their own communities. In many cases, the local
municipal or county government is effectively “outsourcing” the revitalization of a local
redevelopment project area to the local redevelopment agency that the municipal or
county government created. In many other cases, the local redevelopment agency will
participate with a variety of other public-sector or private-sector partners within a
network to accomplish the urban revitalization goals of the agency’s redevelopment
project area.
According to Agranoff (2007), another force that drove considerable change in
how government organized itself and how government set out to perform and provide a
variety of public services during the 1970’s, 1980’s, and 1990’s was the recognition that
government agencies had to expand their organizational focus to include new
collaborative approaches in public service delivery and in tackling increasingly complex
and difficult problems. Agranoff (2007) found that the development of “Public
Management Networks” (PMN’s), have, over the past several decades, become an

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increasingly popular approach that different government agencies, at different levels of
government, have used to deliver a variety of public services. According to Agranoff
(2007), “These PMNs bring the nonprofit and for-profit sectors together with government
in a number of policy arenas, including economic development, health care, criminal
justice, human services, information systems, rural development, environmental
protection, biotechnology, transportation, and education.” (pg. 8). The use of
informational networks, development networks, outreach networks, and action networks
have all received increased attention and use by different agencies and levels of
government as the public has demanded a greater degree of service provision, while also
demanding an increased level of efficiency and effectiveness in public service provision.
Various “semi-new” economic theories and paradigms developed during the early
to mid 1970’s also signaled a titanic shift in the relationship between government and
society. During the late 1920’s and early 1930’s, the American Great Depression had
greatly enhanced the role of government in the direct stimulation of both micro and
macro economic conditions. But, according to Walton and Rockoff (1998), “…even
though new welfare and regulatory legislation would continue to be passed for the
remainder of the decade and into the early 1970’s, there were signs, as early as 1966, that
the ‘Little New Deal’ was losing momentum.” (pg. 604).
Beginning with the Monetarists in the 1950’s, the decades old belief that the
federal government could, through direct intervention into market forces, provide for
long-term economic stability and economic growth quickly came under siege during the
mid to late 1970’s. According to Buchholz (1990), “A titanic struggle took place

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between Keynesians and monetarists from the 1950’s through the 1970’s. Led by Milton
Friedman, Karl Brunner, and Allan Meltzer, the monetarists were initially greeted with
derision…but as they kept producing cogent studies and courageous graduate students,
they wore down Keynesian opposition and earned more respect and prominence…” (pg.
222). The Monetarists had finally, during President Carter’s administration, convinced
the U.S. Congress to direct the U.S. Federal Reserve and the Chairman of the Federal
Reserve Board to employ more monetarist economic practices. This crucial victory
signaled the beginning of the end of Keynesian economic theory dominance in federal
government public policy decision making and implementation. The Monetarists, and
later the Neo-Classical school of economic thought, would eventually emphasize private-
sector delivery of public services and a reduced role for the federal government.
Beginning with the Carter administration’s effort to pursue federal economic deregulation
of key industries, state and local governments would have an increased role in the direct
shaping, building, and rebuilding of their own communities.
According to Walton and Rockoff (1998), “The underlying reasons were the
disillusionment with government produced by the long and futile war in Vietnam, the
failure of some liberal programs to deliver benefits consistent with optimistic forecasts,
and the deterioration in the performance of the economy.” (pg. 604). Eventually,
periods of recession, hyper-inflation, and stagflation during the 1970’s and into the early
1980’s, had significantly contracted discretionary federal spending. Although the federal
government would create new programs, like federal tax credits for new market
development and “enterprise zones” in the years between the mid 1980’s and the late

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1990’s, the federal government would never again provide the same level of direct
financial aid it had once provided American cities during the “urban renewal era” in the
years between the end of World War II and the early 1970’s. According to Walton and
Rockoff (1998), “…the Carter administration, though it supported many traditional
Democratic programs, emphasized economy and efficiency in government, and,
surprisingly, deregulation in a number of areas of the economy.” (pg. 604). The
emphasis on effectiveness, efficiency, and economy in government that was sweeping
through political, organizational, and administrative paradigms and practices, was also a
driving force behind the reduced role for the federal government in local urban economic
development and local urban revitalization efforts.
While new, but somewhat old and revisited, political, administrative,
organizational, social, and economic paradigms and realities of the mid 1970’s were
pushing the federal government out of its “urban renewal era” role, local redevelopment
agencies were winning new, expanded powers throughout most of the contemporary
“local redevelopment era” between the mid 1970’s and early 21
st
Century from state and
federal courts. Whereas Berman v. Parker (1954) had expanded the definition of public
use and provided the federal, state, and local governments with expanded authority to
acquire private property for redevelopment purposes, state and federal courts in the
1980’s gave local redevelopment agencies a means and a way to actually acquire private
property for urban economic development and revitalization purposes.
According to Cullingworth and Caves (2003), the Fifth Amendment of the United
States Constitution has historically been recognized as the primary legal authority which

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grants government in the United States the power to “take” private property for “public
use”. The relevant portion of the Fifth Amendment, that provides government agencies
with the power of eminent domain, states:
…nor be deprived of life, liberty, or property, without due
process of law; nor shall private property be taken for
public use without just compensation.

The “public use” clause and the “just compensation” clause of the Fifth
Amendment provides government agencies in the United States with the power to evoke
eminent domain. The “public use” clause, according to Cullingworth and Caves (2003),
permits government to acquire an individual’s private property through due process if,
and only if, government can prove that the taking of the individual’s private (real)
property is necessary to ensure a higher “public use”, such as the public’s general health,
safety, and/or well-being. The “just compensation” clause, also according to
Cullingworth and Caves (2003), requires that government must provide the affected
private party, whose private (real) property is taken, with an appropriate type of
compensation; either the market value of the property or some other “just” form of
compensation. Cullingworth and Caves (2003) point out that such other “just” forms of
compensation can include, but are not limited to, the trading of comparable property,
relocation cost reimbursement, and other cash and non-cash forms of compensation.
In Berman v. Parker (1954), the U.S. Supreme Court expanded the definition of
“public use” to include slum clearance and the acquisition of real property (i.e. land,
buildings, etc.) by a government agency for the purposes of redevelopment.

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Cullingworth and Caves (2003) and Fulton and Shigley (2005) identify two important
cases, one in 1981 decided by the Michigan State Supreme Court and a second one in
1984 decided by the U.S. Supreme Court, that granted local redevelopment agencies with
expanded powers to pursue the goals of local urban revitalization and local urban
economic development. Both cases, Poletown Neighborhood Council v. Detroit (1981)
and Hawaii Housing Authority v. Midkiff (1984), would focus on the “public use” clause
and the “just compensation” clause of the Fifth Amendment to the United States
Constitution. In the end, the courts would conclude that a government agency’s use of
eminent domain, largely used by local redevelopment agencies, was just and proper.
Both cases would add the use of eminent domain to the powers that local redevelopment
agencies already had, including the use of public-private partnerships, property tax
increment financing, the ability to issue debt, the ability to acquire property through
direct purchases, and the ability to provide private developers with the resources, either
through land, capital, or both, needed to complete a private real estate development
project within the established redevelopment project area.
In the first case, Poletown Neighborhood Council v. Detroit (1981), the Supreme
Court of the State of Michigan concluded, according to Hill (1986), that:
…the power of eminent domain is to be used in this
instance primarily to accomplish the essential public
purpose of alleviating unemployment and revitalizing the
economic base of the community. It would benefit a small
portion of the public. The benefit to a private interest is
merely incidental. The new factory led to the destruction of
1,021 homes and apartment buildings, 155 businesses,
churches and a hospital, displaced 3,500 people, and all

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but obliterated a more or less stably integrated community
embodying a century of Polish cultural life. (pg. 111)

The City of Detroit, through its local redevelopment agency, had used its eminent
domain powers to acquire a large portion of a community of mostly elderly and retired
Polish-American immigrants to make way for the development of a new plant for
General Motors. Eventually, the City of Detroit had condemned and acquired
approximately 465 acres of land, according to Cullingworth and Caves (2003), and
transferred it, on favorable terms, to General Motors. General Motors then proceeded to
build its new plant. Although the Supreme Court of the State of Michigan found that the
City of Detroit’s actions, through its local redevelopment agency, had significantly
distressed a viable community, the court found that the city of Detroit’s actions, and the
actions of Detroit’s local redevelopment agency, were justifiable and perfectly legal
under existing state and federal eminent domain law. Because the use of eminent domain
was critical in obtaining the 465 acres of land that General Motors needed to build its
new plant, and because the opening of a new plant led to the creation of new jobs and
new sources of public revenue, the Supreme Court of the State of Michigan upheld the
city’s and redevelopment agency’s use of eminent domain, arguing that the new job
creation, and the creation of new sources of public revenues, led to a direct promotion of
the public good.
Up until the 1980’s, local governments and local redevelopment agencies could
exercise their eminent domain powers only for projects like schools, roads, or other
publicly owned improvements that were built on the land that had been acquired by the

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local government or local redevelopment agency through eminent domain. Poletown
Neighborhood Council v. Detroit (1981) was the first case that expanded public use and
eminent domain powers to include projects that ultimately ended up in the hands of other
private interests. The U.S. Supreme Court, in Hawaii Housing Authority v. Midkiff
(1984) seemed to confirm the Michigan Supreme Court’s 1981 decision when, according
to Fulton and Shigley (2005), “In a landmark case, the U.S. Supreme Court ruled that it is
not essential that the entire community, nor even any considerable portion…directly
enjoy or participate in any improvements in order for it to constitute a public use.” (pg.
268).
Beginning in the mid-1960’s, the Hawaii state legislature had enacted a state law
which implemented a “condemnation scheme” to acquire privately held property for the
purposes of redistributing land to the larger public. The Hawaii state legislature had
concluded that because the majority of all privately held land throughout the state was
held by only a few private interests, residential housing prices were being skewed in
favor of a few land owners. The Hawaii Housing Authority, under direction of the
Hawaii state legislature, used its eminent domain powers to acquire privately held land
that had been held through an oligopoly of a few private property owners. The Hawaii
Housing Authority then used its financial resources to produce below-market rate
housing which began to deflate housing prices as the Hawaii Housing Authority either
sold or rented the newly built affordable housing units to other private citizens. In an
eight to zero ruling, according to Fulton and Shigley (2003), the U.S. Supreme Court held
that the Hawaii Housing Authority’s actions, specifically its use of eminent domain to

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acquire privately held property, build affordable housing, and then transfer ownership of
those units to other private citizens, did constitute a proper and legitimate use of the
state’s eminent domain powers. The U.S. Supreme Court further found that the
development of affordable housing, through eminent domain powers, was a proper and
legitimate expansion of the “public use” doctrine of the Fifth Amendment even if the
property was eventually transferred to other private interests.
Many local governments nationwide seized upon the use of eminent domain
through their local redevelopment agencies as a primary method of revitalizing areas
within their jurisdiction that had been classified by the local municipal or county
government as blighted. These jurisdictions eventually claimed that the acquisition of
blighted private property through eminent domain for the purposes of urban revitalization
and urban economic development was absolutely needed in order to ensure the proper
completion of “large scale” redevelopment projects. Local governments nationwide
concluded that these projects had an intrinsic and direct “public use” or benefit in that
they would result in increased employment opportunities, increased public property and
sales tax revenue, and significantly reduce the negative social costs and externalities
associated with “blight” and the presence of slums within the local government’s
jurisdiction.
Between the mid 1970’s and early 21
st
Century, redevelopment slowly became the
dominant institutional form through which local municipal and county governments
pursued the processes of urban revitalization and the goals of the local urban economic
development. Fulton and Shigley (2005) identify two powers of immense importance

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that were granted to local cities and counties through state level redevelopment law in
Nevada and California which helps to explain the rapid growth in redevelopment
agencies during the 1975 to 1985 period. First, local redevelopment agencies were given
the power to acquire privately held property by eminent domain. Local redevelopment
agencies could acquire privately held property through eminent domain proceedings even
if private development plans already existed for the site. Second, cities and counties,
through their local redevelopment agencies, were given the power to create “tax
increment financing districts”, which permitted the local redevelopment agency to bond
against future incremental increases in the property tax level of these districts. As Fulton
and Shigley (2005) conclude, “In short, the redevelopment law gives local governments
(1) the power to rearrange private land ownership patterns; and (2) the financial resources
to subsidize private development projects deemed to be in the public interest. There is
simply no other planning tool in California that gives local governments such sweeping
power to operate pro-actively.” (pg. 262).
In California specifically, another force was, in the late 1970’s and early 1980’s,
contributing to the spread of redevelopment and the rise of redevelopment as the
dominant institutional form through which local municipal and county governments
pursued the processes of local urban revitalization and local urban economic
development. In 1978, California voters approved Proposition 13 (Prop 13), officially
titled the “People’s Initiative to Limit Property Taxation”. Many scholars and
practitioners who have studied redevelopment in California trace the development of
contemporary redevelopment practices to the passage of Prop 13, and the subsequent

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“fiscalization of land use” that occurred in the years and decades afterward. In short,
Prop 13 restricted the growth of ad valorem property tax revenues in the State of
California to approximately 1.0 percent annually. In the years prior to the passage of
Prop 13, ad valorem property tax revenues were the primary sources of municipal and
county revenues. At the same time, property values across the State of California were
growing at rates far greater than the growth in personal income. Frustrated by both
growing property tax bills and increased government spending, voters approved
Proposition 13 in an attempt to limit rising property tax bills, to reduce revenues collected
by government, and ultimately to slow, if not reverse, the growth of government itself in
California.
Instead of reducing the size or growth of government, the passage of Prop 13 led
to a “fiscalization of land use”, where local governments across California would use
local redevelopment as a financial weapon to ensure that the local government would
control an increasing share of locally generated property tax revenues. As Fulton and
Shigley (2003) argue, “In the decade after the passage of Proposition 13, redevelopment
became more popular than ever. And the reason was money. Within redevelopment’s
vague and flexible requirements lay an opportunity for cities to manipulate the use of
land and the division of tax revenue for their own financial benefit.” (pg. 263). In most
cities and counties in California, there is little actual separation between the municipal or
county government and their local redevelopment agency. In most cases, according to
Fulton and Shigley (2003), it is common that the city or county manager will also serve
as the redevelopment agency’s executive director, and the city council or county board of

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commissioners/supervisors will often serve as the redevelopment agency’s board of
directors. As Fulton and Shigley (2003) point out, “…once a redevelopment project area
was created, all or most of the subsequent increases in property tax revenue within the
area went to the redevelopment agency’s treasury. The city did not have to share those
funds with the county government, school districts, and special districts. In extreme
cases, cities were able to shield virtually all of their property tax revenue from other
government agencies.” (pg. 263).
Because of a redevelopment agency’s ability to control virtually all incremental
property tax revenues generated from the redevelopment project area, and because of a
redevelopment agency’s unique ability to provide direct financial assistance to private
developers, and because many redevelopment agencies in Nevada and California are
directly controlled by the local city council or board of county commissioners,
redevelopment quickly became a dominant form of local public finance in many local
communities in addition to being the dominant institutional form of local urban
revitalization and economic development. The increased scope of “public use” provided
through various state supreme court rulings, and subsequent U.S. Supreme Court rulings,
also contributed to the expansion of redevelopment in Nevada and California.
Even though redevelopment was becoming the dominant institutional form that
local governments used to pursue the processes of urban revitalization and the goals of
local urban economic development during the mid 1970’s, redevelopment was also
coming under sharp attack from its critics. According to Fulton and Shigley (2005),
redevelopment was beginning to be criticized for two reasons. First, starting in the late

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1970’s, many of the most prominent sites within the urban inner central core of cities like
Los Angeles, San Francisco, and Sacramento remained vacant for decades, largely
because private developers simply did not want to assume the risk of investing in blighted
and declining urban inner central city cores. Second, various community organizer and
anti-poverty activist groups began to argue that the use of eminent domain, a common
practice by local redevelopment agencies for much of the period between the mid 1970’s
and early 1990’s, unfairly and unnecessarily razed entire neighborhoods and displaced
the very people that redevelopment was designed to supposedly help.
The property-based approach to economic development that is common to local
redevelopment agencies, and the existing way in which real property is assessed and
taxed, and the specific way in which local municipal and county governments are
financed in Nevada and California, encourages local redevelopment agencies to acquire
entire neighborhoods through eminent domain, and then transfer the property to other
private interests, and then subsidize entirely new, higher-scale, larger density residential
and commercial real estate projects. The approaches and methods of local redevelopment
agencies, including the use of tax increment financing, the use of eminent domain, and
the very definition of blight used to determine eligible redevelopment project areas,
would be severely scrutinized and criticized by citizen activist groups, local school
districts, other local governments, and even state legislatures for most of the period
between the mid and late 1990’s and into the early 21
st
Century.

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2.d – Contemporary Redevelopment under Assault, the mid 1990’s to the Early 21
st

Century
Just as redevelopment was becoming increasingly popular among local municipal
and county governments, state legislatures were already considering amending existing
state redevelopment law to curtail their growing authority and power. In 1993, the
California state legislature passed one of the broadest reforms to existing state
community redevelopment law. According to Fulton and Shigley (2005), the 1993
California state redevelopment law reforms were initially started by the California State
Department of Finance, which was then seeking ways to balance the state’s fiscally
strapped budget. According to Fulton and Shigley (2005), “The Finance Department had
estimated that redevelopment cost the state general fund some $400 million per year.”
(pg. 262). At the same time that the California Department of Finance was looking to
redevelopment as a way to “backfill” their own budget shortfalls and “backfill” local
school districts through state financing, other critics of redevelopment were arguing that
local municipal and county governments were using redevelopment and the
redevelopment process to shield property tax revenues.
Others also criticized the practices of redevelopment by municipal and county
governments to lure large retailers to their jurisdictions. Because state legislative and
ballot initiatives, like Prop 13, had severely constricted the development of new locally
collected property tax revenues, municipal and county governments became increasingly
dependent on sales tax revenues and other non-property tax revenues to supplement their
budgets. The ability of redevelopment to directly subsidize private real estate

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development naturally led many local governments to use their local redevelopment
agencies to attract new retailers to their jurisdiction. In many cases however, local
municipal and county governments were using the broad definitions of blight to create
new redevelopment project areas at the request of new retailers who were not interested
in opening new stores in the urban inner central city core. Instead, redevelopment project
areas were frequently being created in outlying suburban areas. The emphasis on urban
revitalization and urban economic development quickly shifted to public revenue
development through redevelopment powers. This criticism of contemporary local
redevelopment agencies, along with others, is presented in more detail in Part II.
Eventually, the State of California passed AB 1290 in 1993. AB 1290, or what is
commonly referred to today as “1993 California Community Redevelopment Law”, had
six critical provisions, according to Fulton and Shigley (2005), that drastically reshaped
the function of local redevelopment agencies in the State of California, and dramatically
reduced the flexibility and powers of redevelopment. First, and perhaps most
importantly, was the establishment of “property tax set-asides” for other municipal and
county governments, and local school districts, which were adversely impacted by the
presence of a redevelopment project area within their jurisdictions. Previously, impacted
government entities would attempt to negotiate for a share of the incremental property tax
revenue collected from the redevelopment project area. But the local redevelopment
agency, and the authorizing municipal or county government, had no legal and no
economic incentive to share any of the incremental property tax revenue with other
impacted local jurisdictions. AB 1290 ended the case-by-case negotiation and fixed

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explicit pass-through or set-aside payments to other impacted local governments and
local school districts. After 1993, local redevelopment agencies have had to share their
incremental property tax revenues with other local governments and school districts.
Second, AB 1290 established explicit time limits on the existence of local
redevelopment project areas in California. One of the criticisms of redevelopment that
became increasingly hard for the California state legislature to ignore was the observation
that no redevelopment project area had ever really expired. According to Fulton and
Shigley (2003), despite the presence of time limits in existing California state
redevelopment law, local municipal and county governments were able to amend and
reconfigure existing redevelopment project areas to ensure that the project area would
never expire and that the local redevelopment agency would continue to collect
incremental property tax revenues indefinitely. AB 1290 established explicit 30 to 40
year time limits on the life of a single redevelopment project area, and established limits
on the number of amendments and extensions a local municipal or county government
could pass in the hopes of extending the ability of the local redevelopment agency to
collect incremental property tax revenues indefinitely.
Third, AB 1290 dramatically reformulated the definition and application of blight
used to determine the eligibility of new redevelopment project areas. According to
Fulton and Shigley (2005), “For years, raw land could be declared blighted…the
(California) legislature banned the practice of declaring raw land blighted in 1984.
Thereafter, any land inside a redevelopment project had to be at least 80 percent
urbanized.” (pg. 266). But the 1984 change to the definition of blight apparently did not

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prevent further wide-spread abuse by local municipal and county governments. As
Fulton and Shigley (2005) point out, “Blight could be found wherever there were
irregular lots, economic dislocation or disuse, or loss of population.” (pg. 266). One of
the major goals of the 1993 reforms in AB 1290 was the tightening of the definition of
blight. AB 1290 redefined blight so that a blighted area must be predominantly
urbanized, that blight conditions must be prevalent and substantial, and that blight
conditions must cause both a serious physical and economic burden to the community.
AB 1290 further tightened the definition of blight to exclude the problem of inadequate
public infrastructure and prohibited the use of “social blight” as the sole basis for a
finding of blight. In short, local municipal and county governments have found it
increasingly difficult to declare new areas within their jurisdiction eligible for inclusion
into a previously existing, or new, redevelopment project area.
Fourth, AB 1290 repealed the ability of local redevelopment agencies to receive a
portion of local sales tax revenue generated from retailers within the local redevelopment
project area. Prior to AB 1290, the local redevelopment agency, in partnership with the
authorizing local municipal or county government, could pledge a portion of new sales
tax revenue dollars to support new retail development. The ability of local
redevelopment agencies to receive a portion of locally generated sales tax revenue, and
the ability of the local redevelopment agency to enter into “sales tax increment deals”
with private retail developers, prior to AB 1290 was a leading cause of the criticism that
redevelopment was being abused by the local municipal or county government for the

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sole purpose of generating new sales tax revenue dollars while ignoring the obligation to
alleviate physical and economic blight.
Ironically, the Nevada legislature in 2005 passed Nevada Senate Bill 306 which
authorized local governments, along with local redevelopment agencies, to create
Tourism Improvement Districts for the purpose of issuing Sales Tax Anticipated Revenue
(STAR) bonds. STAR bonds have been used to support new commercial-retail real estate
development by pledging up to 75 percent of newly generated sales tax revenue. Nevada
SB 306 undid similar sales tax restrictions placed on Nevada redevelopment agencies that
the Nevada legislature had also adopted in the early 1990’s. Since 2005, only two
jurisdictions – the City of Reno and the City of Sparks – throughout the entire State of
Nevada have used STAR bonds. Both jurisdictions, however, overlaid a Tourism
Improvement District (TID) over an existing redevelopment project area and combined
the use of redevelopment property tax increment financing with the use of STAR bond
financing. Not surprisingly, both the City of Reno and the City of Sparks have had to
face strong criticism about the combined use of STAR bond financing and redevelopment
property tax increment financing. Although the legislation ultimately failed to pass, the
Nevada legislature during the 2009 Nevada state legislative session had considered
Nevada Assembly Bill 422 which would have prohibited local jurisdictions using STAR
bond financing and local redevelopment property tax increment financing together.
The fifth important provision of AB 1290 in California, according to Fulton and
Shigley (2005), was the tightened “finding requirements” used for the disposition of
publicly owned land, or land owned directly by the local redevelopment agency, that

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allowed transfer of the publicly owned land to private real estate developers. AB 1290
also restricted the ability of a local municipal or county government to use redevelopment
to finance public infrastructure projects and other public improvements. A major concern
of redevelopment prior to the 1993 reforms was that local redevelopment agencies were
being primarily used to fund new public infrastructure like roads, freeways and highways,
bridges, flood control walls and levies, sidewalks, and streetlights. Redevelopment
agencies were also requiring that private developers put in these public improvements as
part of the land transfer agreements between the redevelopment agency and the private
developer. In short, AB 1290 prohibited both of these practices and required local
municipal and county governments to better account for, and more transparently fund,
public infrastructure and public improvement projects.
The sixth and final important provision of AB 1290, according to Fulton and
Shigley, was the creation of a “death penalty” for local redevelopment agencies that
failed to use required affordable housing set-asides within the local redevelopment
agencies budget. Even prior to AB 1290, the majority of local redevelopment agencies in
the State of California have been required to set-aside at least 20 percent of all
incremental property tax revenue the agency collects annually from its local
redevelopment project area. The local redevelopment agency, either by itself or through
a partnership(s) with other public entities like a local housing authority, must use this 20
percent affordable housing set-aside to build or rehabilitate low and moderate income
housing. Nevada state redevelopment statutes have nearly identical affordable housing
set-asides.

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But until the requirements of AB 1290 and similar legislation in Nevada, getting
the local redevelopment agency to actually spend the housing set-aside on low or
moderate income housing had always proved difficult. According to Fulton and Shigley
(2005), local redevelopment agencies either delayed spending the funds or used the funds
in ways that did not directly increase the stock of low or moderate income affordable
housing. AB 1290 put in place steps that can lead to the early termination, or other legal
sanction, of a local redevelopment agency that refuses to spend their affordable housing
set-aside within a reasonable period of time. Subsequent legislation passed after AB
1290 also established low and moderate income affordable housing unit “targets” for
local redevelopment agencies. These “targets”, largely based on total population and area
median family income levels, now require local redevelopment agencies to either build or
rehabilitate a set number of low or moderate income affordable housing units each year.
While the state legislatures in both Nevada and California have worked to curtail
local redevelopment agency powers over the past decade, various state and federal courts
have also significantly reversed previous decisions which have resulted in new
restrictions on the powers of local redevelopment agencies. And even in the rare case in
which the courts have supported or expanded the powers of local redevelopment
agencies, judicial support of local redevelopment agencies has triggered even more
legislative reform which have sought to further impede and reduce the powers of local
redevelopment agencies and the powers of local municipal and county governments to
use redevelopment.

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Between 1998 and 2002, Fulton and Shigley (2005), identify four separate
California state appellate court decisions which significantly curtailed the ability of local
municipal and county governments to create new redevelopment project areas or expand
existing redevelopment project areas to include more land. Each of these four California
state appellate court decisions sanctioned local governments in California for improperly
applying the 1993 revised definitions of blight. In each case, the California state
appellate courts threw out the redevelopment plan because the definition of blight had
been too vaguely applied. In one of the cases, the California state appellate courts also
found that land being included in one redevelopment plan was not sufficiently urbanized
as required by the 1984 and subsequent 1993 reforms.
In the first case, the California appellate court, in County of Riverside v. City of
Murrieta (1998), threw out the City of Murrieta’s redevelopment plan for a 3,700 acre
redevelopment project area. The court concluded that the redevelopment plan’s
identification of only 41 total blighted structures, out of a total of 1,100 structures within
the proposed redevelopment project area, did not satisfy the blighting criteria established
in AB 1290. The court also failed to uphold, according to Fulton and Shigley (2005), the
city’s “…assertion of incompatible, nonstandard and nonconforming uses, functionally
obsolete buildings, and inadequate parking.” (pg. 266). The court also found that the
proposed project area did not cover an area that was predominantly urbanized.
Ultimately, the City of Murrieta was unable to pursue its efforts to create a new
redevelopment project area based upon the court’s findings.

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In the second case, the California appellate court, in Beach-Courchesne v. City of
Diamond Bar (2000), struck a redevelopment plan for a 1,300 acre proposed
redevelopment project area in the City of Diamond Bar, California. Again, the court
concluded that the City of Diamond Bar’s assertion of blight violated the tightened
definitions of blight established in AB 1290. Originally, the City of Diamond Bar
claimed that the existence of small parcels, small buildings, and incompatible uses
hindered general economic development within the proposed redevelopment project area
and throughout the entire city. According to Fulton and Shigley (2005), not only did the
court find the city’s claim of blight to be incorrect and inappropriate, the court also found
that, “…the project area contained undeveloped parcels of 24, 35, 36, 41, and 47 acres…”
(pg. 267). In its final conclusion, the California appellate court also determined,
according to Fulton and Shigley (2005), that redevelopment, “…is not simply a vehicle
for cash-strapped municipalities to finance community improvements.” (pg. 267).
Only three months after Beach-Courchesne v. City of Diamond Bar (2000), the
California appellate court also threw out a redevelopment plan for Mammoth Lakes,
California in Friends of Mammoth v. Town of Mammoth Lakes Redevelopment Agency
(2000). Here, the town of Mammoth Lakes, California and the Mammoth Lakes
Redevelopment Agency were attempting to form a new redevelopment project area. The
court rejected the redevelopment plan because the new project area did not meet the “80
percent urbanized” standard required by AB 1290 and did not meet the revised
definitions of blight passed in the 1993 reforms. According to Fulton and Shigley (2005),
the court argued that, “‘The facts of this case exemplify the misuse of redevelopment

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power the legislature sought to curb,’ the court said in a blunt ruling. ‘The Town sought
to include in the Project Area undeveloped and obviously non-blighted land which is
planned and approved for extensive private development.’” (pg. 267-268).
Finally, in 2002, the California appellate court, in Graber v. City of Upland
(2002), threw out an amendment plan that moved approximately 77 acres from an
existing redevelopment project area in the City of Upland to a newly created
redevelopment project area. According to Fulton and Shigley (2005), “Yet again the
court rejected the city’s conclusions regarding blight and urbanization, with the court
specifically finding that a rock quarry, a garbage dump, and a flood-control basin did not
qualify as urban.” (pg. 268).
Combined, these four cases sent a strong message to both city and county officials
that were hoping to use redevelopment for largely non-urban revitalization and non-urban
economic development reasons. Even if municipal and county officials could push their
way through political opposition, the California appellate court had made it clear that it
would become increasingly difficult to meet the legislature’s revised definitions of blight
and the requirement that at least 80 percent of the proposed redevelopment project area
be urbanized.
Figure 2-7 presents the number of active redevelopment project areas in the State
of California in the year they were established between 1997 and 2007.

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Figure 2-7

Over the past decade, there has been a noticeable decline in the number of new
redevelopment project areas established throughout the State of California. Between
1997 and 2007, a total of just 115 new redevelopment project areas were created
throughout the entire State of California. This accounts for just 13.7 percent of the 841
active redevelopment project areas located throughout the State of California at the end
of FY 2007. As Figure 2-7 clearly shows, the number of new redevelopment project
areas created in the State of California between 1997 and 2007 has significantly slowed.
In just the State of California, between 1997 and 2007, the number of new redevelopment
project areas created state-wide actually declined by approximately 16.9 percent

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annually, despite the uptick in new redevelopment project areas created in 2002 and
2003.
In addition to criticisms of overly-stretching the definition of blight to include
areas that the law never intended to be included in a redevelopment project area, and in
addition to criticisms that redevelopment has been used in largely non-urban areas to
support non-economic development oriented projects, the criticisms surrounding the use
of eminent domain have, perhaps by themselves, received the most attention from the
public, the courts, and different legislatures across the United States. The criticism that
redevelopment employs eminent domain which does not advance economic development
objectives and unfairly targets disadvantaged minority and elderly communities, and the
subsequent legislative response, is covered in more detail in Part II. In the following
chapter, Chapter 3, it is sufficient for now to only preview this and other criticisms.

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Chapter 3 – Part 1 Conclusion and Propositions

3.a - Introduction
The historical development of redevelopment in the United States, as a dominant
institutional form through which local municipal and county governments pursue the
processes of urban revitalization and the goals of local urban economic development, has
led to a point in time in which government’s direct role in the provision and performance
of urban-oriented services is now widely accepted. Today, many people do believe that
government, and in particular local government, plays a vital and direct role in ensuring
long-term, stable, local urban economic growth and development. Government provides
a source of financing and technical expertise needed to overcome the limitations and
problems confronting the urban inner central core of many of America’s largest cities.
Without government action, it has become widely believed that the private-sector
alone is unable, or unwilling, to invest the necessary resources within the urban
environment to overcome the problems of poverty and race, declining social capital, the
growing lack of available and quality affordable housing, the unequal distribution of
wealth between the inner central city and the outlying suburbs, growing ecological and
environmental problems, continued lack of available public transportation, and a general
lack of resources to combat these problems of the urban environment that Netzer (1970)
and Lineberry and Sharkansky (1971) outlined over 30 years ago. But many of
government’s own actions have either helped enforce and entrench these problems, or

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have completely ignored the underlying causes. In many ways, government has also
been used by narrow private interests in the urban environment to advance the financial
interests of a select few at the expense of the truly needy.

3.b – Previewing the Criticisms of Contemporary Local Redevelopment Agencies
Many of the criticisms leveled against contemporary redevelopment agencies, and
against the contemporary approaches to urban revitalization and local urban economic
development, relates to the dominant property-based approach to economic development
that drives most, if not all, of the activities of local redevelopment agencies in Nevada
and California. But as Netzer (1970) and Lineberry and Sharkansky (1971) pointed out
over 30 years ago, property-based approaches to economic development cannot solve any
of the problems that the urban environment faces by themselves. Contemporary
practitioners and writers in the field of economic development argue that a multiple of
approaches are needed in order to effectively overcome the often crippling problems of
the urban inner central city core. Non-property based approaches to economic
development are needed to ensure long-term local urban economic growth. This first
criticism is expanded upon in Chapter 4.
A second major criticism of contemporary local redevelopment agencies
expanded upon in Chapter 5 stems from the criticism of a dominantly property-based
approach to urban economic development. A property-based approach to urban
economic development suggests, through its very nature, a very much localized
orientation. But as scholars and practitioners in the field of economic development have

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come to understand how local economies work in the 21
st
Century, it is increasingly
evident that a regional focus is needed. A regional approach to urban economic
development is needed as most of the markets that impact local economic activity are
regional. Employees can travel across multiple local jurisdictions in communities like
the larger Los Angeles-Long Beach Metropolitan Statistical Area (MSA) in order to get
to work, go to school, to enjoy leisure and recreation activities, and consume a wide array
of other goods and services. Businesses and firms often do not respect local municipal
and/or county boundaries in the marketing and selling of their own goods and services.
Businesses and firms want to expand their market as much as possible without doing
damage to either the quality or demand for their goods and/or services. If residents,
workers, businesses, and firms do not respect municipal and/or county political
boundaries, why then should the local municipal or county government do so in terms of
their economic development policy?
A third major criticism of contemporary local redevelopment agencies has already
been touched upon in some detail in the previous chapter. Due to mounting fiscal stress
on the budgets of local municipal and county governments, largely due to the way in
which local governments are financed, redevelopment agencies have been used as part of
a local government’s larger efforts to “fiscalize” the land use in their jurisdiction. This
criticism also stems from the inherent competition between adjacent and neighboring
jurisdictions for scarce property tax revenue, sales tax revenue, business license tax
revenue, hotel room and transient lodging tax revenue, and other sources of municipal
and county revenue. This criticism is also a byproduct of the local focus most municipal

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and county governments have in their economic development policies. A local
orientation to urban economic development threatens the long-term, stable, growth of a
regional economy. Competition between jurisdictions for scarce financial resources
forces local jurisdictions to plan locally in their economic development goals largely
because of the way local government is financed. The fiscalization of land use, the
competition between adjacent and neighboring jurisdictions for scarce financial
resources, and the role redevelopment plays are all part of the third major criticism of
contemporary local redevelopment agencies presented in greater detail in Chapter 5.
The fourth criticism of contemporary local redevelopment agencies, presented in
Chapter 6, explores the use of eminent domain by local redevelopment agencies.
Eminent domain has become a lightening rod of controversy for local governments. In
the years both immediately before and after the U.S. Supreme Court’s ruling in Susette
Kelo, et al. v. City of New London, Connecticut, et al. (2005), state legislatures across the
United States have either enacted or are currently considering new legislation that has or
will significantly curtail the use of eminent domain by local municipal and county
governments. But the public backlash against eminent domain has not necessarily
triggered a legislative response that would effectively eliminate the use of eminent
domain and the public taking of privately held land for larger economic development
purposes. As Chapter 6 will elaborate upon, the onslaught of “anti-eminent domain”
legislation has largely been an anti-redevelopment effort in disguise.
The fifth and final criticism of contemporary local redevelopment agencies
presented in Chapter 6 explores the deeper possibility that redevelopment, as the

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dominant institutional form in which local governments pursue the processes of urban
revitalization and the goals of local urban economic development, has become prone to
principal-agency corruption and does little to advance individuals, neighborhoods, and
communities that genuinely suffer the problems of the urban environment. In this
discussion is a larger consideration of “power” and “knowledge” discrepancies between
people of status and people of poverty. Has redevelopment been captured by private real
estate interests? Does local redevelopment return positive economic advantages to the
neighborhoods slated for urban revitalization by local redevelopment agencies? Does
redevelopment really work to alleviate physical and economic blight in the urban inner
central city core of cities that use redevelopment agencies? An attempt to answer these
questions is made in Chapter 6.

3.c –Propositions
Part I has presented a lengthy summary of how government, slowly and over
time, has developed its dominant role in the direct provision and performance of urban-
oriented economic development services. Between the American Revolution and the late
1800’s, a predominantly agrarian American society demanded limited and relatively
small federal, state, and local governments. But as society became largely urban, with
the majority of Americans living in U.S. cities between the late 1800’s and early 1900’s,
society needed a new and more complex political, administrative, and economic
relationship between society and government.

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New political, administrative, organizational, and economic paradigms and
beliefs, coupled with the new and growing social and economic realities of a largely
urban society, led to a shift in relationships between government and society. This shift
created a new role for government at the federal, state, and local levels. It became
increasingly believed that governments should have a prominent and permanent place in
the delivery of urban-oriented economic development services.
The years immediately after World War II led to a struggle largely between the
federal and local governments as to which level of government would be directly
responsible in the shaping, planning, building, and rebuilding of the urban inner central
core of America’s growing cities. Ultimately, the federal government, through federal
legislation like the 1949 Federal Housing Act and the 1954 Federal Housing Act,
successfully supplanted local government as the dominant provider and performer of
urban-oriented economic development services. The federal government, during the
“urban renewal era” between the late 1940’s and mid 1970’s, became the primary force
behind local urban revitalization and local urban economic development efforts.
But by the mid 1970’s, the federal government was no longer able to retain its
dominant role in the shaping, building, and rebuilding of the American urban
environment. It was clear that federal government intervention, through the public
policies of urban renewal, was unable to solve many urban-oriented problems that had
grown to near crisis levels by the mid 1970’s. The federal government, along with the
entire country, was facing new political, administrative, organizational, social, and
economic paradigms and realities that began to shift the focus of urban-oriented

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economic development service provision back to local governments. In response, local
municipal and county governments began to create new redevelopment agencies and new
redevelopment project areas. Within a few short decades, between the mid 1970’s and
late 1990’s, redevelopment became the dominant institutional form through which local
governments would pursue the processes of urban revitalization and goals of urban
economic development.
The observations and conclusions presented in this chapter suggest three specific
research propositions that can be tested through both qualitative and quantitative analysis.

Proposition 1: Over time, redevelopment in Nevada and California has become the
dominant institutional arrangement by which local municipal and county governments
have pursued the processes of local urban revitalization and the goals of local urban
economic development.

Proposition 1 can be tested by exploring the trend in the development of both new
local redevelopment agencies and new local redevelopment project areas over time in
Nevada and California. If redevelopment has become the dominant institutional
arrangement by which local municipal and county governments have pursued the
processes of urban revitalization and goals of urban economic development, then it would
be expected that a significant majority of cities and counties that have large urban
residential populations would have at least one active redevelopment agency and at least
one active redevelopment project area.

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Proposition 2: The mid 1970’s to early 21
st
Century saw the rise of redevelopment as the
dominant institutional form, in both Nevada and California, through which local city and
county governments pursue the processes and goals of local urban revitalization and local
urban economic development. Changing political, administrative, organizational, social,
and economic paradigms and realities of the mid 1970’s led to an expansion of local
redevelopment agencies in the 1980’s.

Like Proposition 1, Proposition 2 can be tested by examining when currently
active local redevelopment agencies and local redevelopment project areas were adopted
in Nevada and California. Unlike Proposition 1, Proposition 2 will be tested by looking
specifically at the year-to-year changes between 1965 and 2007. An additional level of
investigation is required here as well. In addition to determining when existing local
redevelopment agencies and local redevelopment project areas were created, a closer
examination of each existing local redevelopment agency’s budget is needed in order to
determine the spending priorities of local redevelopment agencies in Nevada and
California. Historical budgetary data for local redevelopment agencies in Nevada and
California should illustrate the changing political, administrative, organizational, social,
and economic paradigms and realities that led to the growing role of local redevelopment
agencies in the provision and performance of urban-oriented economic development
services.

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Proposition 3: Because contemporary redevelopment agencies are the dominant
institutional form that local municipal and county governments in Nevada and California
use to pursue the processes of urban revitalization and the goals of local urban economic
development, it stands to reason that local municipal and county governments have
strong incentives to retain direct control of their local redevelopment agency.

Proposition 3 can be tested by exploring the specific structure of each individual
redevelopment agency in Nevada and California and the exact relationship between the
local redevelopment agency and the city or county government that created it. If a
significant portion of local redevelopment agencies do not enjoy a high degree of
administrative autonomy from their authorizing local government (for example, the city
council or county board of commissioners serves as the redevelopment agency’s board of
directors, or the city manager or county manager serves as the redevelopment agency’s
executive director), it would be reasonable to conclude that local city and county
governments do have a strong incentive to retain control over their local redevelopment
agency. This proposition also suggests that administrative and organizational structure,
and the relationship between local redevelopment agencies and other government entities,
do play significant roles in a local redevelopment agency’s effectiveness in executing its
duties to revitalize deteriorated and blighted neighborhoods.

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Part II – Five Criticisms of Contemporary Local Redevelopment Agencies

II.a – Introduction
Over the past quarter century, local communities have heavily relied on the use of
redevelopment agencies to revitalize aging and deteriorating urban inner central city
cores. In FY 2007, there were a total of 398 active local redevelopment agencies in the
State of California. According to the California Redevelopment Association (CRA), the
activities of local redevelopment agencies across the State of California generated nearly
$31.8 billion in total economic impact, both direct and indirect, in 2003 alone. The CRA
also estimated that, in 2003, the efforts of local redevelopment agencies in the State of
California created approximately 310,000 full and part time jobs, generated an estimated
$1.58 billion in additional municipal, county and state government collected revenues,
and, between 1994 and 2003, funded the successful construction and eventual occupancy
of 71,127 total affordable housing units. After the U.S. federal government, the CRA
estimates that local redevelopment agencies in the State of California combined are the
second largest provider of affordable housing.
But the success of redevelopment tells only half of the story. Redevelopment
provides local government both the organizational structure and the financial capital
needed to reverse decades of urban decline in some of America’s largest cities. As
Fulton and Shigley (2005) point out, “Redevelopment has been used to clear slums, to
build hotels and convention centers, to lure auto dealers and other retailers across

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municipal boundaries, to construct both low-income and luxury housing, to provide basic
stores to inner-city neighborhoods that needed them, to build City Halls, schools, and
other public facilities, to solve flooding problems on horse trails, and even to build golf
courses on raw land.” (pg. 259). At first glance these activities seem perfectly
acceptable and do indeed tend to provide local communities with increased levels of
public revenues while also providing people with new entertainment, commercial,
employment, and even residential opportunities that might not exist if not for the efforts
of local redevelopment agencies. However, the activities of local redevelopment
agencies have also sparked significant criticism of how redevelopment is used by both
the authorizing local government and private-sector real estate interests.
The criticisms of contemporary local redevelopment agencies largely stem from
what local redevelopment agencies currently do, what local redevelopment agencies
currently do not do, and what local redevelopment agencies were initially designed to do.
When Nevada and California passed state legislation that allowed local governments to
form local redevelopment agencies and capture incremental property tax revenues from
the local redevelopment project area, it was hoped that the incremental property tax
revenue collected by the local redevelopment agencies would be used to revitalize
declining and depressed inner city neighborhoods, while also providing local municipal
and county governments a formal institutional form for urban economic development.
Since the mid 1970’s, redevelopment has become the dominant institutional form through
which local municipal and county governments now finance and pursue the processes of
urban revitalization and the goals of local urban economic development. The five

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contemporary criticisms of local redevelopment agencies presented in this section stem
largely from the failure of local redevelopment agencies to meet either the goals of urban
revitalization or local urban economic development. To better understand this argument,
the goals of urban revitalization and local urban economic development are discussed
first.
Chapters 5, 6, and 7 expand upon each of the five criticisms of contemporary
local redevelopment agencies. Each criticism is linked to the goals of both urban
revitalization and urban economic development. Each criticism also introduces a
potential remedy that is further expanded upon in Part III. Part II closes with some
concluding comments, including a list of propositions that can be tested through a series
of qualitative and quantitative analysis presented in Chapter 7.

II.b – The Goals of Urban Revitalization and Urban Economic Development
Since the late 1940’s, urban revitalization became the process by which local
municipal and county governments have targeted and sought to eliminate physical and
economic blight as defined by codified state statutes in states like Nevada and California.
Nevada Revised Statutes (NRS), Chapter 279, Section 388, defines “blight” as:

1. Except as otherwise provided in subsection 2, “blighted area” means an area
which is characterized by at least four of the following factors:
(a) The existence of buildings and structures, used or intended to be used
for residential, commercial, industrial or other purposes, or any
combination thereof, which are unfit or unsafe for those purposes and
are conducive to ill health, transmission of disease, infant mortality,
juvenile delinquency or crime because of one or more of the following
factors:
1) Defective design and character of physical construction.

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2) Faulty arrangement of the interior and spacing of buildings.
3) Inadequate provision for ventilation, light, sanitation, open spaces
and recreational facilities.
4) Age, obsolescence, deterioration, dilapidation, mixed character or
shifting uses.
(b) An economic dislocation, deterioration or disuse.
(c) The subdividing and sale of lots of irregular form and shape and
inadequate size for proper usefulness and development.
(d) The laying out of lots in disregard of the contours and other physical
characteristics of the ground and surrounding conditions.
(e) The existence of inadequate streets, open spaces and utilities.
(f) The existence of lots or other areas which may be submerged.
(g) Prevalence of depreciated values, impaired investments and social and
economic maladjustment to such an extent that the capacity to pay
taxes is substantially reduced and tax receipts are inadequate for the
cost of public services rendered.
(h) A growing or total lack of proper utilization of some parts of the area,
resulting in a stagnant and unproductive condition of land which is
potentially useful and valuable for contributing to the public health,
safety and welfare.
(i) A loss of population and a reduction of proper use of some parts of the
area, resulting in its further deterioration and added costs to the
taxpayer for the creation of new public facilities and services
elsewhere.
(j) The environmental contamination of buildings or property.
(k) The existence of an abandoned mine.

2. If the subject of the redevelopment is an eligible railroad or facilities related to
an eligible railroad, “blighted area” means an area which is characterized by at
least four of the factors set forth in subsection 1 or characterized by one or
more of the following factors:
(a) The existence of railroad facilities, used or intended to be used, for
commercial, industrial or other purposes, or any combination thereof,
which are unfit or unsafe for those purposes of age, obsolescence,
deterioration or dilapidation.
(b) A growing or total lack of proper utilization of the railroad facilities
resulting in a stagnant and unproductive condition of land which is
potentially useful and valuable for contributing to the public health,
safety and welfare.
(c) The lack of adequate rail facilities that has resulted or will result in an
economic hardship to the community.

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The State of California has similar definitions of “blight”, as defined by
California state law, in Article 3, Section 33031 “Physical and economic blight” of
California Community Redevelopment law:

(a) This subdivision describes physical conditions that cause blight:
(1) Buildings in which it is unsafe or unhealthy for persons to live or work.
These conditions may be caused by serious building code violations,
serious dilapidation and deterioration caused by long-term neglect,
construction that is vulnerable to serious damage from seismic or
geological hazards, and faulty or inadequate water or sewer utilities.
(2) Conditions that prevent or substantially hinder the viable use or capacity
of buildings or lots. These conditions may be caused by buildings of
substandard, defective, or obsolete design or construction given the
present general plan, zoning, or other development standards.
(3) Adjacent or nearby incompatible land uses that prevent the development
of those parcels or other portions of the project area.
(4) The existence of subdivided lots that are in multiple ownership and whose
physical development has been impaired by their irregular shapes and
inadequate sizes, given present general plan and zoning standards and
present market conditions.

(b) This subdivision describes economic conditions that cause blight:
(1) Depreciated or stagnant property values.
(2) Impaired property values, due in significant part, to hazardous waste on
property where the agency may be eligible to use its authority as specified
in Article 12.4 (commencing with Section 33459).
(3) Abnormally high business vacancies, abnormally low lease rates, or an
abnormally high number of abandoned buildings.
(4) A serious lack of necessary commercial facilities that are normally found
in neighborhoods, including grocery stores, drug stores, and banks and
other lending institutions.
(5) Serious residential overcrowding that has resulted in significant public
health or safety problems. As used in this paragraph, “overcrowding”
means exceeding the standard referenced in Article 5 (commencing with
Section 32) of Chapter 1 of Title 25 of the California Code of Regulations.
(6) An excess of bars, liquor stores, or adult-oriented businesses that has
resulted in significant public health, safety, or welfare problems.
(7) A high crime rate that constitutes a serious threat to the public safety and
welfare.

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In both legal definitions of “blight”, the phrase “public health, safety, and
welfare” occurs several times. In NRS 279.388, the legal definitions of blight refer to the
public’s health, safety and welfare either directly or indirectly five separate times in NRS
279.388 subsection 1 (a), 1 (h), 1 (j), and in subsection 2 (a) and subsection 2(b). In
California state law, Article 3, Section 33031, the legal definitions of blight refer to the
public’s health, safety and welfare either directly or indirectly four separate times in
Section 33031 subsection (a) (1), in subsection (b) (5), (b) (6), and in subsection (b) (7).
These legal definitions of blight codified the social and economic problems that
started to develop as America quickly urbanized. The social and economic problems of
the urban environment eventually reached the level of crisis during the mid 1970’s after
the failure of federal urban renewal policies and programs to adequately address and
solve them. The goal of urban revitalization was to solve the social and economic
problems of the urban environment by eliminating physical and economic blight.
Redevelopment, starting in the mid to late 1970’s, became the dominant institutional
form through which local municipal and county governments pursued the processes and
attempted to meet the goals of urban revitalization that had been established through the
federal urban renewal programs and policies.
Unlike urban revitalization, successful urban economic development is more
difficult to define. The goals of urban revitalization have been effectively defined by
state statutory definitions of physical and economic blight. For example, in NRS
279.388, subsection 1. (a) (1), buildings and structures that have been determined to have
a defective design and character in the building’s physical construction are blighted. The

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removal or rehabilitation of buildings with a defective design and character constitutes,
according to Nevada state law, the successful revitalization of an urban neighborhood. In
California, according to Article 3, section 33031, subsection (b) (6), an excessive
physical presence of bars, liquor stores, or other adult-oriented businesses constitutes a
blighted urban neighborhood. The successful removal of these types of businesses
constitutes, according to California state law, the successful revitalization of an urban
neighborhood. But neither California nor Nevada state law provides any direction on
how to successfully achieve a measurable level of local urban economic development.
While the goals of urban revitalization have been codified in state law in states
like Nevada and California, these state legislatures have not defined the goals of local
urban economic development. In fact, neither definition of physical and economic blight
provided by either the California or Nevada state legislatures makes any direct or indirect
reference to economic development. One of the reasons why urban economic
development is not defined might be because economic development defines more of a
relationship between government and private markets that often significantly differs
between different local communities. Comparatively, urban revitalization tends to define
more the specific actions that a government should take to support private markets and
promote the public’s health, safety and welfare.
The International Economic Development Council (2006), defines economic
development as, “…a program, group of policies, or activity that seeks to improve the
economic well-being and quality of life for a community by creating and/or retaining jobs
that facilitate growth and provide a stable tax base.” (pg. 4). Inherent in the International

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Economic Development Council’s (IEDC) definition of economic development are four
specific goals for local communities. The first goal is “job creation”. Job creation,
according to the IEDC (2006), is “…the traditional objective of economic development.
It is important to note the difference between creating jobs and creating better jobs.” (pg.
4). The IEDC (2006) links the types of jobs created to the ability of the new jobs created
to support a desired standard of living, offer stability and decent working conditions, and
provide individual workers with an opportunity for employment and career advancement.
“The goal of job creation is not the job per se rather it is to boost local income.” (pg. 5).
Inherent in job creation is the goal of boosting the income of families and individuals
within a defined community.
The second goal of economic development is “job retention”. According to the
IEDC (2006), “It is important to retain as well as create jobs because a job lost means the
loss of economic advantages that resulted from the position.” (pg. 5). But the IEDC fails
to distinguish between existing jobs that contribute to individual opportunity for
employment and career advancement and existing jobs that do not, or from existing jobs
that boost family or individual income and existing jobs that do not. It is reasonable to
assume that given the IEDC’s emphasis on new job creation that does provide individual
employment and career advancement opportunities and boosts family and personal
income that the same standard should apply for the retention of existing jobs. Inherent in
the goal of retaining existing jobs is the ability of existing jobs to provide personal
employment and career advancement while also boosting overall community income
levels.

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A third goal of economic development is the preservation of a stable local tax
base. All local municipal and county governments have a strong incentive to pursue
public policies and programs which ultimately contribute to the jurisdiction’s ability to
collect a variety of different public taxes in order to support increased levels of public
services. According to the IEDC (2006), tax base enhancement or stability, “…enables
communities to support local services and pursue other activities without having to raise
taxes.” (pg. 5). This particular goal of local economic development is even more
difficult to define than job creation or job retention. Whereas job creation and job
retention can be measured by physically counting the number of new jobs created or
retained from year-to-year, a “stable” local jurisdiction tax base is somewhat more
complicated.
Certainly, a stable local tax base would be expected to grow year-over-year. But
does the successful enhancement of a local tax base mean that the local tax base grows by
10 percent per year? Or maybe 20 percent per year? One useful definition might be that
the local tax base grows year-over-year at a rate equal to the growth in public services
provided by the municipality. However, as one of the five criticisms of contemporary
local redevelopment agencies presented here illustrates, local municipal and county
governments have largely used this goal of economic development to justify the
“fiscalization” of land use and use redevelopment as a way to compete against other
neighboring local jurisdictions for new public revenues.
The fourth goal of economic development is the obtainment of a certain level of
“quality of life”. This goal, “quality of life”, is perhaps the most difficult to either define

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or measure. According to the IEDC (2006), “Quality of life is a very difficult factor to
measure but can be the difference between failure and success for economic development
organizations.” (pg. 5). The IEDC lists several factors which, by themselves and in
combination, add to a local community’s overall quality of life. These factors include
safety, education quality and opportunity, poverty reduction, environmental quality, and
cultural and recreational amenities. Detractors, which lead to a declining quality of life
for a local community, can include things like racism and crime. Although the IEDC
argues that issues like racism and crime should receive the attention of local economic
development organizations, they usually do not given the complexity and overall
difficulty involved in solving these types of social problems.
Not surprisingly, many of the positive factors that contribute to a local
community’s overall quality of life, and the detractors listed that can decrease a local
community’s overall quality of life, are surprisingly similar to the problems of the urban
environment that Netzer (1970) first identified. Recall from Part I that Netzer’s seven
problems of the urban environment are: 1) an increasing proportion of African
Americans and Spanish-speaking minorities living in poverty in the urban core of many
American cities, 2) failure to properly address the continued spread of physical decay and
deterioration of the urban, built environment, 3) an increasing inability of the federal
government, state governments, and local governments, to provide an adequate stock of
quality, affordable housing for urban workers and urban residents, 4) the decentralization
of local economic activity as a result of urban sprawl, 5) an overall decline in the
deterioration in the quality of the urban environment with specific regard to noise

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pollution, water pollution, and air pollution, 6) the increasing inability of the federal
government, state governments, and local governments, to provide adequate transit
facilities and equipment, and 7) a failure of all levels of government, especially local
governments, to generate enough resources and money to adequately address these
various problems.
Given the similarity between the IEDC’s goals of local economic development
(job creation, job retention, local tax base enhancement, and quality of life) and Netzer’s
seven problems confronting the urban environment, it can be argued that a primary goal
of local economic development organizations should be to solve, or at least reduce, the
negative social and economic problems found in the urban environment. Given that
redevelopment has become the dominant institutional form through which local
municipal and county governments pursue the goals of urban revitalization and urban
economic development, the primary goal of local redevelopment agencies should also be
the alleviation and reduction of the social and economic problems of the urban
environment. The achievement of the goals of local urban revitalization and local urban
economic development can also be used to determine whether or not a local
redevelopment agency has been “successful”. If the alleviation and reduction of social
and economic urban problems are to be the formal goals of local redevelopment agencies,
then the policies, programs, and processes of local redevelopment agencies should be
designed so that there is a measurable and significant reduction in the level of urban
problems found in a local redevelopment agency’s redevelopment project area. But as
the five criticisms of contemporary redevelopment agencies introduced in this chapter

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show, contemporary local redevelopment agencies fall well short of these goals and, in
some cases, can actually exacerbate the problems of the urban environment.

II.c – Introducing the Five Criticisms of Contemporary Local Redevelopment
Agencies
Fulton and Shigley (2005) point out, “Redevelopment has been used to clear
slums, to build hotels and convention centers, to lure auto dealers and other retailers
across municipal boundaries, to construct both low-income and luxury housing, to
provide basic stores to inner-city neighborhoods that needed them, to build City Halls,
schools, and other public facilities, to solve flooding problems on horse trails, and even to
build golf courses on raw land.” (pg. 259). Initially, it may appear that all the activities
of local redevelopment agencies – the building of hotels, schools, golf courses, and
affordable and market rate housing – are perfectly acceptable and provide local
communities with increased levels of public revenues while also providing people with
new entertainment, commercial, cultural, employment, and even residential opportunities
that might not otherwise exist if not for the efforts of the local redevelopment agency.
Certainly, as Fulton and Shigley (2005) point out, redevelopment has become an
increasingly popular tool among local governments interested in stimulating depressed
and economically stagnant parts of their jurisdiction through local urban revitalization
and local urban economic development activities. Without much debate, it is reasonable
to say that government, and specifically local government, has a strong incentive to
stimulate local economic activity. By not actively stimulating local economic activity,

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local governments would lose many of the revenue sources upon which they depend on to
provide and fund public services that the public has increasingly grown to demand from
local government.
Redevelopment, despite its largely narrow property-based approach to local urban
revitalization and local urban economic development, has historically provided local
municipal and county governments the opportunity to engage in a broad range of
economic development strategies. Redevelopment can be used as a financial and land
use development tool to build new hotels and convention centers that can generate new
hotel room or transient lodging tax revenues for a local government, while also providing
the local municipal or county government with new sources of property tax revenue and
sales tax revenue. Redevelopment can be used to build new schools and help improve the
surrounding areas of local community colleges and universities which helps local
municipal and county governments build a population that can, at least in the long-run,
earn higher levels of personal and family income and add to the level of property and
sales tax revenue collected from within the jurisdiction. But, as Fulton and Shigley
(2005) warn, “Not all of these activities are currently legal under redevelopment law; in
fact, a number of them are specifically outlawed because of the way redevelopment has
been used by particular localities. But the sheer breadth of these activities suggests why
redevelopment is at once so popular and so despised.” (pg. 259).
Fulton and Shigley (2005) touch on an interesting paradox that many
contemporary local redevelopment agencies are now forced to confront. Redevelopment
has been increasingly used by local municipal and county governments to successfully

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revitalize and develop deteriorating and economically depressed neighborhoods. In many
ways, residents directly benefit from the activities of local redevelopment agencies
through increased entertainment, commercial-retail, cultural, and residential opportunities
while also benefiting from the increased employment opportunities that the successful
completion of redevelopment-led real estate projects create. But redevelopment has also
drawn sharp criticism from the public and many other government entities precisely
because of the past and current success redevelopment has had.
Through decades or trial and error, redevelopment has also become exceedingly
technical and the individuals who work for local redevelopment agencies are highly
skilled, trained and capable individuals who are able to transform areas of physical and
economic blight into areas that are vibrant and economically prosperous in a seemingly
short period of time. But redevelopment has also been transformed into, what Fulton and
Shigley (2005) call, “…dozens of different mutations to serve whatever political ends
seemed important in a particular place at a particular time.” (pg. 259). As Fulton and
Shigley (2005) conclude, “…redevelopment is complicated and technical…because the
basic concept of redevelopment is financial in nature, the whole orientation of the
redevelopment community is toward financial mechanisms. Because bonds are usually
used by redevelopment agencies to pay for community investments, the redevelopment
field has become enshrouded in a ‘culture of debt’ – dominated by government number-
crunchers and Wall Street bond salesmen.” (pg. 260).
Each of the five criticisms of contemporary local redevelopment agencies outlined
in this section stem from not only the technical orientation of redevelopment, but also

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from the way in which local redevelopment agencies are structured. The way in which
local redevelopment agencies are funded provides strong financial incentives for local
redevelopment agencies to dedicate scarce resources to certain projects in lieu of others.
This is also a source of criticism because a local redevelopment agency might pass on a
project that could successfully revitalize an area and provide for greater levels of local
economic development because another project enhances the redevelopment agency’s
own financial resources or provides greater public tax revenues to the authorizing local
municipal or county government. Like any other part of a local municipal and county
government, individual redevelopment agencies can only spend a set level of money
which is determined by the level of revenue they collect. Redevelopment agencies have
overcome this limitation by using their ability to issue bonds or other instruments of long-
term debt to fund different projects and programs. But even the issuance of long-term
debt is still limited by the amount of incremental property tax revenue a redevelopment
agency can collect over a limited period of time. This means that local redevelopment
agencies must evaluate the projects they finance on the basis of the project’s ability to
enhance the local redevelopment agency’s annual financial resources in order to either
pay the agency’s annual costs or finance the agency’s long-term debt. Finally, even the
public policies and the specific methods of implementation that local redevelopment
agencies develop are also sources of criticism. Each criticism presented here in Part II, in
some way or another, fails to meet the goals of either local urban revitalization or the
goals of local urban economic development.

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The first criticism presented is based on the observation that local redevelopment
agencies in Nevada and California are overly dependent on property-based approaches to
local urban revitalization and local urban economic development. The problems of the
urban environment that still exist today cannot be solved by property-based, real estate
driven approaches to urban revitalization and urban economic development. Long-term,
stable, local economic growth can only be achieved through a broad-based economic
development strategy that includes both property-based and non-property based
approaches. Solving the problems of the urban environment and achieving long-term,
stable, local economic growth will require a much broader policy approach. But
redevelopment largely employs only property-based, real estate driven urban
revitalization and urban economic development policies and approaches. Because
redevelopment has also become the dominant institutional form through which local
municipal and county governments pursue the goals of urban revitalization (i.e. tackling
the problems of the urban environment) and pursue the goals of urban economic
development (i.e. providing long-term, stable economic growth through job creation and
retention, income generation, and increased levels of quality of life), property-based
approaches to urban revitalization and urban economic development have all but
completely eclipsed the use of non-property based approaches. But to successfully
achieve all the goals of urban revitalization and urban economic development, new
policies and programs that include non-property based approaches to urban revitalization
and urban economic development, along with a new institutional form that encourages

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the implementation of both property-based and non-property based approaches, are
needed.
The criticism centering on the dominance of property-based approaches to urban
revitalization and urban economic development is largely the result of how contemporary
local redevelopment agencies are financed. Because local redevelopment agencies are
funded primarily through property tax increment financing, local redevelopment agencies
have a strong incentive to invest in projects that generate the highest possible level of
property tax revenue. For the most part, only a property-based approach to urban
revitalization and local urban economic development can directly increase the level of
property tax revenue generated and collected in the period of time that redevelopment
agencies require in order to function and finance bonds and other debt instruments. The
creation of new jobs, the creation of new firms and new businesses, and even the
investment into new technologies produces very little direct increase in property tax
revenues in the short-term. New jobs, new firms and businesses, and new technologies
can produce new sources of property tax revenue in the long-term. But in the short-term,
redevelopment agencies constantly must push the land within their local redevelopment
project area to the “highest and best” use in order to generate the highest level of
incremental property tax revenues in the shortest period of time possible. But property-
based approaches to local economic development are insufficient to achieve long-term,
stable, local economic growth because the problems that prevent long-term local
economic growth go well beyond the limited reach and impact of property-based local
economic development approaches. For local urban economic development to be

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successful in the long-term, local economic development strategies must employ a wider
variety of economic development approaches. The property-based approach to urban
revitalization and urban economic development that dominates the activities of local
redevelopment agencies fails, by itself, to meet the larger goals of both urban
revitalization and urban economic development.
Second, redevelopment has always been locally oriented. Very little of what a
local redevelopment agency does has any direct measurable impact on a region’s overall
level of economic health. A regional economy can suffer from the presence of localized
physical and economic blight. But redevelopment agencies, as they are currently
structured and as they currently operate, spend little time considering how the real estate
projects they pursue impacts the wider regional economy. In some ways, a local
orientation to urban revitalization and urban economic development is the result of how
local municipal and county financing works in Nevada and California. Generally
speaking, local municipal and county governments can only spend the revenues they
collect locally, so there is little incentive for local municipal and county governments to
adopt urban revitalization and urban economic development strategies that contribute to
wider regional economic activity. But, there is little local economic activity that occurs
and has impacts that remain solely local. For example, in the U.S. Census designated Los
Angeles-Long Beach Metropolitan Statistical Area (MSA), a resident who lives in
Manhattan Beach may work in downtown Los Angeles. The same resident may buy a car
from a dealership in Long Beach. The resident might also decide to travel outside the
MSA to attend a sporting event in Anaheim or San Diego and then travel to Ontario, CA

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to attend a play or other cultural activity. A business that operates in Los Angeles may
have distributors in the City of Carson, CA, but the business may receive its goods from
the Port of Long Beach in Long Beach. The same business may also draw its employees
from across and even from outside the MSA. But the current system of local public
finance in California and Nevada fails to take into consideration these social and
economic realities.
Local jurisdictions are primarily funded through sales tax revenue, property tax
revenue, business license revenue, and other types of local public revenues that are
generated primarily from within their own jurisdiction. As a result, local redevelopment
agencies, as de facto extensions of local municipal and county government, are, for
example, used to lure businesses from other jurisdictions in order to capture the sales tax
revenue, property tax revenue, business license revenue, and other local tax revenue that
these businesses generate. Within the larger region, there may be no appreciable gain in
overall levels of economic activity because the economic activity generated from the
business is simply transferred from one part of the region to another part of the region
through the relocation incentives that local redevelopment agencies provide. Although
one jurisdiction within the region has benefited, another neighboring jurisdiction has
suffered. This type of regional “cannibalization” does little to improve overall regional
economic health and can actually reduce overall regional economic prosperity as some
local jurisdictions may lose businesses and other drivers of economic activity to
neighboring local jurisdictions. For this reason, the local focus of local redevelopment
agencies does little to meet the goals of wider regional urban economic development.

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Third, in response to a growing demand for increased levels of government
services, local municipal and county governments have used redevelopment, as an
institution of local public finance, to generate new sources of local government revenues.
As already mentioned, local municipal and county governments are restricted in the types
and amounts of public taxes they can collect. Local municipal and county governments
are primarily funded through sales tax revenue, property tax revenue, business license
revenue, and other forms of locally generated taxes which are only generated and
collected from within their political boundaries. This limitation on municipal and county
governments has been made more severe by approved voter ballot initiatives and other
measures taken by the state legislatures in Nevada and California. At the same time
voters were approving measures like Proposition 13 in California which limited annual
growth in private property values and the amount of property tax revenue collected from
an individual property, and at the time the state legislature in Nevada passed legislation
which restricted annual appreciation in both commercial and residential property tax
levels, the public was demanding an increasing level of public services. Faced with
growing demand for increased public services, and faced with a declining or restricted
level of public revenues a local municipal or county government could collect, local
governments began to “fiscalize” their land use in order to generate the highest level of
public revenues possible. In many cases, local municipal and county governments zoned
vast tracks of suburban land for commercial-retail use, paving the way for large “big-
box” retailers like Wal-Mart, Best Buy, Target, and Home Depot to build new retail
outlets. These “big-box” retailers generate vast sums of sales tax revenue annually that

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local governments can collect and use to finance growing demand for new and expanded
levels of public services.
Over time, as local municipal and county governments became increasingly
capable of using the powers of redevelopment, local redevelopment agencies, as de facto
extensions of the locally authorizing municipal or county government, were used to
further “fiscalize” the land use of land within redevelopment project areas created both
within and outside the urban inner central city core. Because many local municipal and
county governments view their local redevelopment agency as a de facto extension of the
local government, and because local governments have a strong positive incentive to
encourage real estate development that maximizes the potential for increased levels of
public revenue, and because redevelopment agencies have considerable and often covert
powers to shape and promote very specific land use patterns, local redevelopment project
areas quickly were formed in largely suburban areas that included large tracts of
undeveloped land.
Redevelopment, by the mid to late 1980’s in California after the passage of
Proposition 13 in 1978, and by the late 1980’s and early 1990’s in Nevada after the state
shifted from property tax revenue dependence to sales tax revenue dependence, was
increasingly used to attract new retailers to largely undeveloped parts of a municipality’s
incorporated, or county’s unincorporated, suburban neighborhoods. The financial
incentives that a redevelopment agency could provide a new retailer through the agency’s
property tax increment financing powers were used to generate new sales tax revenue for
the controlling municipal or county government. At the same time, redevelopment

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agencies focused less on stimulating levels of economic activity within the older, more
urban, existing redevelopment project areas. Another downside of this new usage of
redevelopment powers was that new job creation in new redevelopment project areas
established outside traditional, more urban, redevelopment project areas consisted mainly
of low-pay, low-skill commercial-retail jobs that offered little in the way of personal
employment and career advancement. As a result of this “fiscalization” of land use, local
redevelopment agencies currently do little to meet the goals of urban economic
development.
Fourth, local redevelopment agencies have increasingly become criticized for
their use of eminent domain. Historically, redevelopment agencies have always used
eminent domain to acquire privately held property determined to be a threat to public
health, safety, and welfare and a general threat to positive economic growth within a
community. Redevelopment agencies have also always used eminent domain to transfer
privately held property from one private owner to another in the hopes of promoting the
public’s health, safety, and welfare and promoting general economic growth through new
real estate developments. Recently however, state legislatures nationwide have either
adopted or are currently considering a wide variety of different legislative acts that would
significantly curtail both the powers of local redevelopment agencies and the future usage
of eminent domain.
The use of eminent domain, regardless of its ethical considerations, has been
effective in revitalizing aging and declining inner city neighborhoods with new public
and private real estate developments. In some cases, the local redevelopment agency, in

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partnership with other public entities, has used eminent domain to build new sports
stadiums, event centers, and convention halls which have had a direct and positive impact
on tourism levels and public revenues. Redevelopment agencies have also partnered with
other public entities to use eminent domain as a way of acquiring and clearing land to
make way for needed public improvements which were deemed vital to the revitalization
of an economically stagnant and depressed area, and also deemed necessary to promote
public health, safety and welfare. In other cases, the local redevelopment agency, in
partnership with private developers, has used eminent domain to build new housing, new
commercial-retail centers, and new office buildings which have replaced properties with
depressed values and eliminated properties that suffer from a wide range of physical
blighting characteristics. But the use of eminent domain has also led to a legislative
backlash in which redevelopment agencies have had many of their traditional powers
significantly reduced or taken away completely.
It has been historically noted that various federal, state, and local government
agencies have used eminent domain to transfer privately held land from one private
property owner to another for economic development purposes. Given the high cost of
urban in-fill development, fragmented ownership patterns, and intransigent sellers,
redevelopment agencies have found that the use of eminent domain is sometimes
necessary in order to assemble the required land within a redevelopment project area to
ensure that new private real estate projects move forward. In some cases, the use of
eminent domain is justified. There are many documented cases in which a local
redevelopment agency used eminent domain to acquire privately held property owned by

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“slum lords”. These “slum lords” profit from providing substandard, unsanitary housing
to low or moderate income families and individuals. In cases such as these, the private
property owner will resist selling his or her property to the redevelopment agency or any
other potential buyer because the rental income the “slum lord” collects far exceeds the
potential selling price of the property.
In other cases, eminent domain is not justified. There are many studies that
suggest that eminent domain has disproportionately impacted financially poor minority
and elderly populations without imparting additional economic and community benefits
to the neighborhoods or on the existing residents where eminent domain has been most
often used historically. If the use of eminent domain cannot impart a significant amount
of the additional economic and community benefits that are generated from its use in the
areas that it is used in, then eminent domain and its usage by local redevelopment
agencies cannot successfully meet the goals of urban revitalization that local
redevelopment agencies where first established to meet.
Fifth, and finally, a growing body of scholarly research suggests that local
redevelopment agencies, and other local economic development organizations and local
government in general, has become subject to a form of principal-agency corruption
through which private real estate developers enjoy the advancement of their own interests
at the expense of minority, elderly, and impoverished individuals and communities.
Many scholars and citizen activist groups have argued that private real estate developers
benefit from an unequal distribution of “power” and “knowledge” between themselves
and the larger public. Much of this criticism stems from the overly-technical nature of

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redevelopment. Redevelopment is much more than just a simple planning tool.
Redevelopment has evolved into the dominant institutional form through which local
municipal and county governments pursue the goals of urban revitalization and urban
economic development. Redevelopment is also a highly formalized legal institution
through which private real estate developers can acquire vast sums of financial capital.
As already mentioned, Fulton and Shigley (2005) point out that redevelopment has been
transformed from a planning and economic development tool into a technical financial
mechanism that is dominated by people with financial expertise and high levels of
experience in municipal and county bond financing.
Because the field of redevelopment has become enshrouded by a “culture of
debt”, as illustrated by Fulton and Shigley (2005), redevelopment, as an institution of
local public finance, local urban revitalization, and local urban economic development,
has become so technical that it offers little opportunity for meaningful public input.
Public hearings conducted by a local redevelopment agency board typically focus on the
highly technical aspects of project financing and economic impact and usually provide
little opportunity for discussion into how a specific redevelopment sponsored real estate
project will have direct and meaningful impact on the personal and professional lives of
various residents and businesses.
Even redevelopment ‘public advisory boards’, which are required by both Nevada
and California community redevelopment law, are largely populated by either
commercial business interests or even the real estate developers themselves. In many
cases, redevelopment staff is populated by former private real estate developers and/or

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former private financial advisors. Although this arrangement of staff may provide the
agency with the needed technical expertise, it may provide little opportunity for the
general public to participate in meaningful ways. It may also mean that staff becomes
overly focused on the technical aspects of the particular public-private partnership the
redevelopment agency is pursuing, leaving little room for consideration of how the
specific public-private partnership actually tackles one or more of the problems the urban
environment currently faces. In other cases, redevelopment staff may move on to
positions within the private real estate or private financial sectors. Former redevelopment
agency staff are coveted by private real estate developers or private financial advisors
who work with local redevelopment agencies because former redevelopment agency staff
provide useful ‘shortcuts’ around the bureaucratic red-tape that might hinder meaningful
participation from the general public. In either case, the private-sector and the local
redevelopment agency are able to function and communicate using the same technical
language that is simply not very well understood by the larger public.
The ‘inside’ use of technical language between redevelopment staff and private-
sector actors creates a “power” and “knowledge” discrepancy between the private-sector
and the larger public. It is this discrepancy that private real estate developers, along with
private financial and legal advisors, can manipulate to satisfy their own individual
interests, even if those interests conflict with the interests of the larger public to eliminate
and successfully solve the current problems of the urban environment. To the degree that
local redevelopment agencies exclude meaningful public participation and sacrifice the
interests of the larger public for the interests of a narrow group of private real estate

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developers and financial advisors, redevelopment fails to meet the goals of urban
revitalization and the initial goals of redevelopment to alleviate real physical and
economic blight.

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Chapter 4 – Criticisms Pertaining to Urban Revitalization and Urban Economic
Development

4.a – Introduction
Practitioners and scholars in the fields of urban economic development and urban
economics have long held that local economic development strategies based solely on
property-based approaches are insufficient by themselves to either contribute to overall
long-term local economic prosperity or successfully mitigate the many social and
economic problems that the urban environment in the United States still faces. Currently,
the majority of local redevelopment agencies in Nevada and California solely employ the
use of property-based approaches in attempting to stimulate local urban economic
development.
This chapter explores the first criticism of local redevelopment agencies in
Nevada and California by first examining wider urban revitalization and urban economic
development strategies. Property-based approaches to economic development are, by
themselves, insufficient to effectively meet the goals of either urban revitalization or
urban economic development. Second, this chapter explores the actual shortcomings of
only employing a property-based approach as it relates to the goals of urban revitalization
and urban economic development.

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4.b – Criticism No. 1: Property-Based Economic Development Strategies are
Insufficient to meet the Goals of Urban Revitalization and Urban Economic
Development
The problems of the urban environment that still exist today are just too large and
too complex for property-based economic development strategies to effectively work by
themselves. The International Economic Development Council (2006) has taken a much
more broad approach to community-level economic development. The IEDC identifies
and recommends a holistic approach to urban revitalization and urban economic
development that consists of seven different economic development strategies. They
include: 1) economic development marketing and attraction, 2) business retention and
expansion, 3) real estate development, reuse, and redevelopment, 4) entrepreneurial and
small business development, 5) technology-led development, 6) neighborhood economic
development, and 7) workforce development.
The IEDC (2006) states that economic development encompasses three major
areas, including (pg. 4):
1. Policies that governments undertake to meet broad economic objectives such as
price stability, high employment, and sustainable growth. Such efforts include
monetary and fiscal policies, regulation of financial institutions, trade, and tax
policies. These policies are national in scope and are referred to as macro-
economic policies.
2. Policies and programs to provide infrastructure and services such as highways,
managing parks, and providing medical access to the disadvantaged. Although
the primary purpose of these programs is not economic development, they have
implications for economic development.
3. Policies and programs explicitly direct at improving the business climate through
specific efforts in business finance, marketing, neighborhood development, small

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business development, business retention and expansion, technology transfer, and
real estate redevelopment among others.

Clearly, economic development encompasses a wide array of policies and
programs found in approaches outside the predominantly property-based real estate
driven orientation of many local redevelopment agencies in Nevada and California. The
property-based real estate driven orientation of many local redevelopment agencies today
signals a disturbing trend in the economic development programs of local municipal and
county governments. Because redevelopment is now the dominant institutional form
through which local municipal and county governments pursue the goals of urban
economic development, local municipal and county government economic development
programs and policies are likely to ignore many of the non-real estate drivers of local and
regional economic growth. Blakely and Bradshaw (2002) identify five key drivers of
local economic growth and prosperity: 1) long-wave strategic drivers, 2) demographic
drivers, 3) technology drivers, 4) financial drivers, and 5) global drivers. Each of these
drivers contributes, according to Blakely and Bradshaw (2002), to the long-term
economic prosperity of a local community. Blakely and Bradshaw (2002) further argue
that over dependence on property-based economic development approaches are
insufficient to capitalize on each of these five drivers.
Blakely and Bradshaw (2002) suggest three new goals for local economic
development that go beyond simple property-based, real estate oriented approaches.
First, Blakely and Bradshaw (2002) suggest that local municipal and county
governments, through their local economic development organizations, should strive to

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build high quality jobs for their respective populations. A historical “trap” that many
local communities and local redevelopment agencies fall into is the assumption that any
job created is a good job. But as both Blakely and Bradshaw (2002) and the IEDC (2006)
point out, local economic development policies that call for the investment of vast sums
of capital and financial resources into workforce development and job creation should
strive to get the most out of the resources expended. Redevelopment agencies that invest
millions of dollars of incremental property tax revenue on attracting auto dealerships or
big-box retailers are simply not creating the types of jobs that offer improvement in
personal or family income, or opportunities for general upward mobility. A combination
of property-based and non-property based local economic development strategies are
needed. Certainly, property-based approaches are needed to lower the cost of land
acquisition, possible demolition of dilapidated and obsolete structures, and possible site
remediation of environmental contamination so that businesses and firms can build new
structures to produce the jobs a local community needs. But non-property based
approaches are also needed in order to provide the existing workforce with the skill set
needed to support high growth, high skill, and high paying industries and businesses that
provide jobs to the community’s existing population that offer opportunities for both
improvement in personal or family income and opportunities for general upward
mobility.
The second new goal for local economic development organizations, according to
Blakely and Bradshaw (2002), is to achieve local economic stability through approaches
designed to meet all the needs of business, not just private land developers. Communities

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must strive to match local human resource capacities with local and global employment
opportunities through the use of new technologies and new approaches to workforce
development and training. Land and location mean far less today in an integrated global
economy than it once did. Advances in information and communication technologies
have freed most industries from selling and marketing their goods to a local market.
Combined with the advancements made in transportation technologies, businesses and
firms are now able to market their goods and services to an international market and
deliver their goods and services to customers thousands of miles from their centers of
production. Again, property-based approaches to local economic development do have
an important role in achieving local economic stability. Property-based approaches,
through local redevelopment agencies, can significantly reduce the cost incurred by
businesses and firms in the physical development of their centers of production. But non-
property based approaches are needed to support the continued development of new
technologies which will continue to allow businesses and firms to operate and compete
globally. These non-property based approaches are also needed to ensure that the
existing local workforce is capable of providing the skills needed by different businesses
and firms in different industries.
The third new goal of local economic development organizations, according to
Blakely and Bradshaw (2002), is to build a diverse economic and employment base.
Local redevelopment agencies, because of the fiscal pressures on the local authorizing
municipal or county government to generate the highest possible level of locally collected
property taxes, sales taxes, hotel room and transient lodging tax revenue, and business

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license revenue, have increasingly been used to attract businesses in a narrow set of
industries that are the most likely to generate these types of public revenues for the local
municipal or county government. Local redevelopment agencies have increasingly
moved away from a broad based approach designed to diversify a local economy and
have increasingly turned to either commercial-retail development or tourism development
through the financial subsidy of large hotels and convention centers. But, as Blakely and
Bradshaw (2002) point out, many of the businesses and firms in the retail and tourism
industries produce few “good” jobs that offer meaningful opportunities for either income
development or general upward mobility. To properly diversify a local economic and
employment base, local institutions and organizations of urban economic development
must embrace a wider set of economic development strategies that not only attract
retailers, but also attract new businesses and firms that offer opportunities for income
development and general upward mobility. These types of businesses are also looking
for more than just a skilled workforce. They are also looking for amenities that offer
their employees the opportunity to enjoy a relatively high quality of life level. In order
for local communities to successfully attract these types of firms, a combination of
property-based and non-property based approaches to local urban economic development
is needed.
By itself, sole reliance on property-based approaches to urban economic
development is also insufficient to effectively tackle the complex social and economic
problems of the urban environment. The current property-based real estate oriented
approach that many local redevelopment agencies take to revitalizing a deteriorating and

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economically stagnant part of a local community simply cannot adequately address the
underlying causes that drive many of the urban problems many American cities face
today. This observation underlies an important paradox in the way municipal
governments in Nevada and California currently tackle the problems of the urban
environment through the processes of urban revitalization. In examining the use and role
of redevelopment in California, Fulton and Shigley (2005) state, “For 50 years at least, it
has been a basic tenet of public policy in America to use the planning process
(specifically the redevelopment planning process) to try to revive inner-city
neighborhoods.” (pg. 254). But Fulton and Shigley (2005) point out that this effort has
largely failed. Despite some impressive gains in solving some of the problems of the
inner city, many of the largest cities in the United States still face the daunting challenge
of providing meaningful upward mobility for the urban poor, tackling the environmental
threats of noise pollution, air pollution, and water pollution, and developing effective and
efficient public transportation networks.
Although revitalization of distressed neighborhoods remains a basic goal for local
communities in Nevada and California, local approaches to urban revitalization remain
grounded in property-based real estate driven principles. Even though most of the federal
urban renewal programs, policies, and services of the 1950’s through 1970’s have been
discontinued, local redevelopment agencies still use similar programs, policies, and
services to revitalization declining inner city neighborhoods in the belief that the removal
of physical blight will eliminate the economic and social blight that still plagues many
inner city neighborhoods. This continuing strategy of trying to mitigate economic and

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social ills through physical improvements is evidenced by the definition of “blight”
codified in state statutes and by how blight is generally understood by the public. As
Fulton and Shigley (2005) point out, “In large part, this is because the ‘blight’ in these
neighborhoods is usually reflected in their physical appearance – rundown houses,
potholed streets, vacant storefronts. Therefore, many of the public policy efforts in this
area have been directed toward improving the physical design and appearance of these
neighborhoods.” (pg. 255).
Some of the more commonly used property-based urban revitalization approaches
have been to target public improvements or locate public facilities in distressed
neighborhoods. Fulton and Shigley (2005) point out that a city or county government
may use their share of federal Community Development Block Grant funds, in
combination with the financial resources of their local redevelopment agency, to either
repair streets, improve infrastructure, or make other investments in, what Fulton and
Shigley (2005) label as, the public domain. But Fulton and Shigley (2005) point out that
there is no evidence to suggest that filling potholes, building sidewalks, developing new
parks and plazas, or financing the installation of new streetlights has any direct or
measurable impact on reducing crime in the inner city, increasing educational attainment
of the urban minority poor, or on reducing aggregate levels of noise, air, and/or water
pollution.
In their examination of the City of Riverside, CA, Fulton and Shigley (2005)
found that the city, in partnership with its local redevelopment agency, invested a
tremendous amount of redevelopment financial resources in centralizing city, county,

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state, and even federal office buildings and courthouses in the city’s deteriorating and
blighted downtown. The City of Riverside believed that as different government
agencies began to locate their centers of operation within the downtown, new private
investment would be stimulated and new jobs and new opportunities for the city’s urban
poor would be created. But, as of 2005, there is little evidence to suggest that the city’s
and the redevelopment agency’s property-based strategy in revitalizing downtown
Riverside has resulted in any measurable positive change in the lives of the city’s urban
poor. According to Fulton and Shigley (2005), “…the concentration of ‘8 to 5’
government offices (in downtown Riverside) has done little to entice private investment
in downtown, and city officials have had to use other incentive programs in an attempt to
revitalize what was a thriving district during the early 20
th
century.” (pg. 255-256).
Although the City of Riverside has expanded its use of public property-based subsidies to
individual businesses and developers to entice new private real estate development within
the downtown, the City of Riverside is also now looking at other non-property based
urban revitalization strategies to encourage private-sector development like regulatory
streamlining. The affects of these non-property based urban revitalization strategies have
yet to be fully measured, but the early results are encouraging.
But the obsession with property-based approaches to solving the social and
economic problems of the urban inner central core of many cities still remains. As
federal government urban renewal policies, programs, and services began to decline in
the mid-1970’s, local municipal and county governments in Nevada and California were
increasingly using the institution of local redevelopment in order to revitalize declining

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inner city neighborhoods. Although the emphasis shifted from federal intervention to
local government intervention, the assumption behind federal urban renewal policies,
programs, and services that property-based approaches could solve the social and
economic problems of the urban environment remained front and center in the policies,
programs, and services of local redevelopment agencies. This prevailing orientation and
assumption is why local redevelopment agencies, in their current institutional form,
cannot hope to fully and successfully revitalize declining inner city neighborhoods. In
further examining the success of local redevelopment agencies in California, Fulton and
Shigley (2005) conclude, “Given this narrow purpose, redevelopment cannot by itself
hope to solve California’s urban problems. It cannot prevent crime. It cannot eradicate
drug abuse. It cannot keep troubled kids in school and give them the training they need
to become productive citizens.” (pg. 260).
Successful urban revitalization of socially and economically maladjusted
neighborhoods will require a combination of both property-based and non-property based
urban revitalization approaches. A future institutional form of urban revitalization and
urban economic development must consider the underlying causes of social and
economic maladjustment. Without this new outlook, true urban revitalization and true
urban economic development will continue to remain just out of the reach of local
municipal and county governments.

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Chapter 5 – Criticisms Pertaining to Urban Economic Development

5.a – Introduction
The second primary criticism of local redevelopment agencies in Nevada and
California presented in this chapter focuses on the local orientation contemporary
redevelopment agencies have in attempting to meet the goals of urban economic
development. By adopting a largely local orientation in their approaches and practices,
local redevelopment agencies currently ignore larger regional economic forces. The third
primary criticism of local redevelopment agencies presented in this chapter focuses
primarily on how contemporary redevelopment agencies in Nevada and California have
become increasingly used by their authorizing local municipal or county government to
further “fiscalize” existing land uses for the primary purpose of increasing municipally or
county collected tax revenues. Combined, both criticisms argue that contemporary local
redevelopment agencies in both Nevada and California, in their current form and through
their current practices, are no longer able to adequately meet the goals of urban economic
development.

5.b – Criticism No. 2: Local Redevelopment Agencies Lack Regional Focus.
Without a Regional Focus, True Local Economic Development is Unattainable
Today, there is no such thing as a purely local economy. Local communities and
local municipal and county governments are increasingly finding that their future

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economic prosperity is tied directly to the economic futures of wider regions that
transcend local municipal and county political boundaries. Despite this growing reality,
the economic development policies, programs, and services that local municipal and
county governments continue to deliver remain fundamentally grounded in the belief that
their efforts should only concentrate on the local issues within their political boundaries.
Because redevelopment has become the dominant institutional form through which local
municipal and county governments in Nevada and California pursue the goals of urban
economic development, local redevelopment agencies have tailored their strategies,
approaches, and the projects they pursue and finance to serve largely local interests
without considering the impact they have on the wider regional economy or the impact
the wider regional economy has on the economic fortunes of their local jurisdictions. For
this reason, the local orientation that dominates local redevelopment agencies cannot
truly hope to sustain long-term, stable, economic growth and development.
Many contemporary professional and academic studies of regional economic
growth have successfully shown that businesses and firms, that are vital to providing
local communities with the necessary jobs needed to ensure opportunities for income
growth and general upward mobility, tend to operate regionally in today’s modern
economy. Technological innovation has allowed businesses and firms today to operate
well beyond traditional local markets. Because of the increased pressure to compete
globally, many contemporary businesses and firms are now looking to the competitive
economic advantages of entire regions.

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The increased demand for highly skilled workers, coupled with the need to
continually decrease the costs of production through the employment of new technologies
and methods of production, means that individual businesses and firms must now be able
to take advantage of the competitive advantages of entire regions. Businesses and firms
are also now looking to partner with other businesses and firms within a wider region to
form regional economic “clusters” in order to maximize revenues and minimize costs. At
the same time that regional economic clusters are becoming an increasingly popular way
for businesses and firms to organize their operations, local redevelopment agencies still
remain obsessed with “outbidding” their neighboring jurisdictions to attract retailers,
hotel operators, sports teams, and other businesses and industries with locally oriented
incentives that do little to actually support long-term, stable, local and regional economic
growth and activity.
Porter (1998) illustrates why regional economic clusters are so important to local
economic development efforts and why the new economics of competition suggest an
important role for regional economic clusters. In short, location, at the municipal level,
means far less today than it did 30, 50, or 100 years ago. According to Porter (1998),
“Now that companies can source capital, goods, information, and technology from
around the world, often with the click of a mouse, much of the conventional wisdom
about how companies and nations compete needs to be overhauled. In theory, more open
global markets and faster transportation and communication should diminish the role of
location in competition.” (pg. 77).

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Economic clusters are, according to Porter (1998), “…geographic clusters of
interconnected companies and institutions in a particular field.” (pg. 78). Typically, a
cluster will encompass a linked array of industries and other entities that provide separate
firms within the cluster a competitive advantage that would not be found outside the
cluster. Clusters can and often do extend to channels and customers both horizontally
and laterally to different manufacturers of different, but complementary, products and to
other firms in industries related to each other through skills, technologies, or common
inputs. Clusters also typically incorporate government and other public institutions like
universities, regulatory agencies, trade and professional associations, think tanks,
vocational training centers, and local and regional economic development organizations.
The incorporation of government and other public institutions within the regional
economic cluster typically provides specialized training, workforce education,
information, research and development services, and even technical support to the
private-sector firms within the cluster.
Clusters are, according to Porter (1998), “…a striking feature of virtually every
national, regional, state, and even metropolitan economy, especially in more
economically advanced nations.” (pg. 78). Although economic clusters are now just
beginning to be recognized for their importance, Porter (1998) also points out that there is
nothing that is particularly new about economic clustering of complimentary industries
and governmental institutions. In fact, economic and industry clustering has always been
a very common way in which industry has historically organized itself. But in a global
economy, the importance of clusters and the importance of how a local community

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relates to the cluster are both receiving considerably more attention. Porter (1998)
identifies an interesting paradox underlining the importance of regional economic clusters
and the importance of local economic development policies. In one sense, without a
strong and competitive local community the regional economic cluster will suffer
because the firms and businesses within the cluster depend heavily on a local supply of
labor that is highly skilled and highly trained. The ability of businesses and firms within
the cluster to draw from a local supply of highly skilled workers, specifically trained in
areas that directly relate to the economic cluster’s industry, is what provides the cluster
its comparative economic advantage. Businesses and firms that can draw upon a highly
skilled workforce that is trained in the industry that comprises the cluster gives the
businesses and firms within the cluster an advantage over businesses and firms located
outside the regional economic cluster.
The presence of highly skilled workers trained in areas that directly relate to the
economic cluster’s industry is also what makes the cluster attractive to new businesses
and firms. This is part of the paradox. Without a strong competitive cluster, the local
communities that make up the regional economic cluster will eventually suffer. As
businesses and firms enter into the regional economic cluster in an attempt to capture the
same comparative economic advantage that pre-existing businesses and firms enjoy, the
new businesses and firms entering the regional economic cluster create more jobs that
tend to offer opportunities for income growth and general upward mobility. This tends to
lead to even higher employment rates, higher incomes levels, and even increased
population growth as residents from outside the cluster migrate into the cluster in search

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of better paying jobs and new opportunities for general upward mobility. Local
municipal and county governments within a strong and growing regional economic
cluster typically see enhanced public revenues as incomes rise, as new residents move
into the area, and as greater levels of disposable income are created that generate even
further levels of economic activity through personal consumption. But if the regional
economic cluster is shrinking, then the opposite is also likely true. The local
communities within the cluster will experience declining revenues, a declining population
base, and ultimately declining levels of public revenues.
Local redevelopment agencies, as they tend to currently operate in states like
Nevada and California today, tend to ignore the subtle complexities of how regional
economic clusters are formed, how they function, and how they impact the local
communities within the cluster. A local redevelopment agency also has little incentive to
consider how the projects they pursue impact the wider regional economic cluster. In
fact, in more developed metropolitan areas, like the Los Angeles-Long Beach MSA in
Southern California, there may be several competing local jurisdictions, each with its
own local redevelopment agency. To make matters more complicated, each local
redevelopment agency within the same MSA or regional economic cluster may attempt to
attract the same firm away from one neighboring jurisdiction in the hopes of capturing
the locally generated property tax revenue, sales tax revenue, or business license revenue
that the firm could potentially create. If the local redevelopment agency is successful in
luring the firm away from a neighboring local jurisdiction, there has been no real
improvement in the overall regional economic cluster. The net level of economic activity

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produced by the firm has simply been moved from one part of the economic cluster to
another.
To make matters even more complicated, the competing local redevelopment
agencies may also attempt to create new regional economic clusters without any
consideration to how that might impact an existing, but growing, economic cluster. As
Porter (1998) points out, “In (traditional) industrial policy, governments ‘target’
industries and intervene – through subsidies or restrictions on investments by foreign
companies, for example – to favor local companies. In contrast, the aim of cluster policy
is to reinforce the development of all clusters. This means that a traditional cluster like
agriculture should not be abandoned; it should be upgraded. Governments should not
choose among clusters, because each one offers opportunities to improve productivity
and support rising wages.” (pg. 89). In short, the use of redevelopment, as the dominant
institutional form through which local municipal and county governments pursue the
processes and goals of economic development, tends to pit one neighboring jurisdiction
against another for the short-sighted reason of maximizing the amount of locally
generated and collected public revenues. In the end, vast sums of public resources could
be spent to entice big-box retailers or hotel operators into one local community that
provides no real benefit to the wider regional economic cluster.
Porter (1995), in an earlier study, found that the inner city has a unique
competitive advantage to offer regionally-operating businesses and firms that operate
within a wider regional economic cluster. According to Porter (1995), the true
advantages of the inner city, as it relates to supporting a wider regional economic cluster,

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are: 1) strategic location, 2) local market demand for goods and services, 3) built-in
integration with regional clusters, and 4) a pent-up supply of available human capital.
Companies that can benefit from close physical proximity to downtown business districts,
logistical infrastructure, entertainment and tourist centers, and a high concentration of
different but complimentary companies, can further benefit from a strategic location
within the inner city. A high population density within the inner city also provides the
regional economic cluster with a competitive advantage. Although inner city residential
populations tend to have lower per capita incomes, the high population density levels
tend to create large pools of combined disposable income. Inner cities also offer
opportunities for strong integration with the wider regional economic cluster. Successful
integration with the regional cluster offers inner city residents opportunities for both
career and income improvement. A regional economic clusters successful integration
with inner city neighborhoods may also provide firms within the cluster the opportunity
for expansion through related product and service development that can be manufactured
and sold to residents in the inner city. Inner city residents are also looking for
opportunities to increase their existing income levels and achieve some level of upward
mobility. Combined with workforce development and training programs, and a degree of
patience, inner city residents could be used to provide new and emerging businesses
within the regional economic cluster a vital source of new labor.
For inner cities and regional economic clusters to both be able to take advantage
of these unique competitive advantages, a new role for government-led local economic
development is needed. Porter (1995) argues that, “…the goal should be to provide

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building-ready sites at market prices. A single government entity could be charged with
assembling parcels of land and with subsidizing demolition, environmental cleanup, and
other costs. The same entity could also streamline all aspects of building – including
zoning, permitting, inspections, and other approvals.” (pg. 65). In fact, the many roles
for local government that Porter (1995) suggests that are critical in helping the inner city
integrate with a larger regional economic cluster are the same functions that many local
redevelopment agencies in Nevada and California already provide and pursue.
But, Porter (1995) also argues that one of the barriers preventing local
government-led economic development institutions from successfully stimulating
economic activity within the inner city is how scarce resources have been distributed
historically at the local level and how these scarce resources are still distributed today.
Porter (1995) charges that, “…many of the programs in areas such as infrastructure,
crime prevention, environmental cleanup, land development, and purchasing preference
spread funds across constituencies for political reasons.” (pg. 64). Although government
has, for several decades now, assumed the primary responsibility for bringing about and
stimulating economic activity within the inner central core of many American cities, little
consideration has actually been given to how public resources, including the resources of
local redevelopment agencies, are distributed. Instead of distributing and expending
these resources for political and local financial reasons, local redevelopment agencies and
other local economic development organizations should better consider how the
individual policies, programs, services, and projects they develop, provide, and pursue
impact the wider regional economic cluster. Local redevelopment agencies, despite the

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financial pressures that the authorizing local municipal or county governments might be
facing, must pay greater attention to how their projects both impact and fit within the
larger regional economic cluster. Without this greater appreciation, it is likely that local
redevelopment agencies will continue to push against regional economic cluster forces
that attempt to stimulate both regional and local economic activity. Instead of pushing
against these forces through unnecessary competition between neighboring jurisdictions
for retailers and hotel operators in the hopes of marginally increasing locally generated
and collected public revenues, local redevelopment agencies should first consider how
their policies, programs, services, and projects can benefit the wider regional economic
cluster.

5.c – Criticism No. 3: Redevelopment’s Role in the “Fiscalization of Land Use”
Undermines True Local Economic Development
Beginning in the mid to late 1970’s, local municipal and county governments in
both Nevada and California faced the uncertainties of a changed fiscal reality. In
California, voters passed Proposition 13 in 1978 which placed restrictions on locally
assessed property tax rates. As a result of Proposition 13, local governments increasingly
became dependent on sales tax revenue in addition to other locally controlled, assessed
and collected revenue sources. Although local municipal and county governments in
California became increasingly dependent on non-property tax revenue sources,
California’s fiscal system became highly centralized because of the passage of
Proposition 13. In 1979, the Nevada legislature passed a tax relief package that moved

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control of locally controlled, assessed, and collected revenue from local municipal and
county governments to the Nevada legislature, the state’s Interim Finance Committee,
and the Nevada Tax Commission. By the 1990’s, Nevada had one of the most
centralized tax structures in the United States. The Nevada tax shift in 1981 further
shifted the dependence of local governments away from locally collected and generated
property tax revenue to sales tax revenue and other forms of locally collected and
generated tax revenue.
From the mid to late 1970’s and on, local municipal and county governments in
Nevada and California have had to contend with a strong and steady increase in the
public’s demand for increased municipal and county services. During this period, these
municipal governments found themselves even more exposed to the problems of
increased public demand for public services and an increasingly shrinking tax base than
their county government counterparts. In both Nevada and California, county
governments are extensions of the state government. Although this requires county
governments to provide the services the state legislature requires, it also allows county
governments to access state funds. Rarely do municipal governments have the luxury of
turning to the state government to augment municipal budgets when budgetary revenues
fail to meet budgetary demands for services.
As incorporated cities grow, new roads must be built and older roads must be
maintained. Sewer lines must be extended as well as repaired. Additional resources are
needed to expand police, fire, and other emergency services. While municipal
governments have had to contend with the growing strain on their financial resources and

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budgets due to increased public service demand, local government have also had to
contend with reduced revenue sources. Although municipal revenues have, on average,
grown consistently over time in Nevada after the 1979 property tax relief legislation and
the 1981 tax shift legislation, and have grown consistently over time in California after
the 1978 passage of Proposition 13, local municipal governments have had to find more
creative ways to finance even the most basic of municipal services. As if municipal
governments did not have enough to worry about, further property-tax “revolts” during
most of the first decade of the 21
st
Century, the diminished growth in sales tax revenues,
and the constant threat of other jurisdictions enticing away existing businesses, have
placed even more strain on an already over strained local municipal fiscal system. Over
time, beginning with the passage of California’s Proposition 13 in 1978 and beginning
with the passage of Nevada’s 1979 tax relief legislation and the 1981 tax shift, local
governments in Nevada and California have increasingly turned to the powers of
redevelopment to further fiscalize the existing land use within their jurisdiction in the
hopes of augmenting existing levels of municipal government revenue.
As redevelopment agencies have increasingly become institutions of local
municipal and county finance, redevelopment has increasingly moved away from being
an institution through which local governments pursue the processes of urban
revitalization and urban economic development. Local municipal and county
governments, and their locally elected officials, face a strong temptation to use the power
of redevelopment to entice retailers and other businesses to their jurisdiction in the hopes
of enhancing the jurisdiction’s level of sales tax revenue, business license revenue, hotel

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room and transient lodging tax revenue, and other non-property tax revenue sources
collected from within the jurisdiction’s political boundaries.
Because local municipal and county governments are legislatively prohibited
from increasing the property tax rate levied on real property located within the local
government’s political jurisdiction, any policies, programs, services, and real estate
projects which would largely lead to the enhancement of property tax revenue are largely
undesirable. Local municipal and county governments, due to these legislative
restrictions on the amount of property tax revenue they can collect, are also largely
indifferent to whether or not small incremental levels of property tax revenue is collected
by the local redevelopment agency. Through the local redevelopment agency however,
the locally authorizing municipal or county government, whose elected officials may also
serve as the redevelopment agency’s board of directors, can use the incremental property
tax revenue collected by the redevelopment agency from the local redevelopment project
area to entice big-box retailers and other businesses that generate a significant amount of
non-property tax revenue like sales tax revenue and business license revenue. The
controlling local municipal or county government can use the local redevelopment
agency’s powers, specifically the powers to use eminent domain, the ability to issue long-
term debt, the ability to collect incremental property tax revenues, and the ability to
provide land and financial capital to private real estate developers through public-private
partnerships (in the form of a Disposition and Development Agreement or Owner
Participation Agreement), to rearrange land use patterns within the municipality or
county to serve the fiscal purpose of supporting commercial-retail development.

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By rearranging existing land use patterns to discourage residential development
while encouraging commercial-retail development, the local municipality or county
benefits from a reduced level of public services demanded as commercial-retail projects
typically generate a far smaller level of public service demand (i.e. fire, police, education,
infrastructure, sewer, water, etc.). Build enough commercial-retail and there are simply
fewer citizens per acre in the local government’s jurisdiction to demand public services.
The local municipal or county government further benefits by “shifting” the amount of
land within the local government’s jurisdiction dedicated to residential usage (land zoned
as residential, with existing residential uses, generates property tax revenue which is
capped in Nevada and California and provides little opportunity for positive growth in
public revenues), to land within the local government’s jurisdiction that is primarily
dedicated to commercial-retail or other non-residential use (land zoned as commercial-
retail, with existing commercial-retail uses, generates sales tax revenue and business
license revenue, and other types of non-capped revenue in Nevada and California and
provides significant opportunity for positive growth in public revenues).
Another element of this “fiscalization of land use” is the observation that some
local municipal and county governments have used redevelopment to gain a financial
advantage over rival local governments through the power of property tax increment
financing. Although there are certain “pass-through” requirements in California and
there is increased interest in Nevada to adopt similar measures, for the most part, local
redevelopment agencies collect and can control all the incremental property tax revenue
generated from the agency’s local redevelopment area.

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When a redevelopment project area is first established, a “base assessed value”
level is set. Any property tax revenue generated from this base assessed value is
distributed normally to various taxing entities, like a county or school district, as if the
redevelopment project area did not exist. In each year after the establishment of the
redevelopment project area, an “incremental assessed value” level is estimated. It is from
the incremental assessed value level that the local redevelopment agency receives its
incremental property tax revenue. Property tax revenue that would have been allocated to
other taxing entities, like a county or school district, generated from the incremental
assessed value level goes directly to the local redevelopment agency and not to the other
taxing entities. Figure 5-1 below illustrates this point.
Figure 5-1

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Figure 5-1 shows both base and incremental assessed value for the City of Reno’s
“Reno Redevelopment Project Area No. 1”, located in Reno, Nevada, for each year
between FY 1985 and FY 2005. In Figure 5-1, property taxes generated from the bottom
curve, “Base Assessed Value – Reno Redevelopment Project Area No. 1”, are normally
distributed to the local school district, the county government and other impacted local
governments. But the property tax revenues generated from the top curve, “Incremental
Assessed Value – Reno Redevelopment Project Area No. 1”, minus the base assessed
value, are collected solely by the Reno Redevelopment Agency. As Figure 5-1 shows, in
each year between FY 1985 and FY 2005, the level of incremental assessed value
significantly exceeded the level of base assessed value generated in Reno Redevelopment
Project Area No. 1. Overtime, the amount of incremental property tax revenue collected
by the Reno Redevelopment Agency from Reno Redevelopment Project Area, between
FY 1985 and FY 2005, has totaled approximately $116.3 million, according to the
Nevada Department of Taxation. Clearly, this is a significant amount of property tax
revenue that the Reno City Council, acting as the Reno Redevelopment Agency’s Board
of Directors, can control and effectively keep away from other local jurisdictions that the
City of Reno competes against for locally generated property tax revenue.
As a result of the passage of 1978’s Proposition 13 in California and similar
legislation passed in 1979 and 1981 in Nevada, local municipal and county governments
in Nevada and California began to use redevelopment as a way to circumvent the
restrictions these state legislative acts had imposed on the amount of property tax revenue

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a local government could collect and control. As already mentioned, redevelopment
property tax increment financing works by reallocating the majority of incremental
property tax revenue generated from a redevelopment project area away from other
property tax collecting jurisdictions and reallocates the incremental property tax revenue
to the local redevelopment agency. Local city councils, or county boards of
commissioners or supervisors, that serve the dual-role as the locally elected officials and
the redevelopment agency board members, find themselves in the enviable position of
controlling vast sums of property tax revenue that normally would be allocated to other
rival taxing jurisdictions outside their control.
Fulton and Shigley (2005) also argue that redevelopment agencies have been used
to help create other forms of local government revenues including new sources of hotel
room and transient lodging tax revenue and sales tax revenue. Redevelopment agencies,
under the control of a local city council or board of county commissioners, have used the
powers of their local redevelopment agencies to lure new hotels and retailers into
distressed redevelopment project areas as a means of generating new revenues to offset
the restrictions placed on local governments by 1978’s California Proposition 13 and
similar legislative acts in 1979 and 1981 in Nevada. The use of redevelopment to alter
the land use patterns within a local jurisdiction’s political control in order to enhance the
probability of additional non-property tax revenue streams is generally referred to as the
“fiscalization of land use”. Several important studies, conducted by Chapman (1998),
Lewis (1998), and Lewis and Barbour (1999), provide considerable evidence that local

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municipal and county governments have used redevelopment as a way to fiscalize local
land use patterns.
Chapman (1998) documents several unintended consequences that occurred in the
years and decades after the passage of 1978’s Proposition 13 in California. Behind the
rationale of the voter’s approval of Proposition 13 was the experience many homeowners
in California had with a sudden and unmanageable spike in property values and the
subsequent amount of property tax revenue private property owners in California were
forced to pay. During much of the 1970’s, the United States was experiencing periods of
economic decline and stagnation, followed by a period of inflation and then
hyperinflation by the late 1970’s and early 1980’s. According to Walton and Rockoff
(1998), when President Carter took office in 1976, the national rate of inflation was just
under 5 percent. But in the following years the Carter administration, in league with the
U.S. Federal Reserve, pursued an expansionist monetary policy. Between 1975 and
1976, the U.S. Federal Reserve had increased the stock of money at an annual rate of 13.7
percent. Between 1976 and 1977, the stock of money circulating in the U.S. national
economy was 10.6 percent. According to Walton and Rockoff (1998), “By the fall of
1978, inflation was advancing at a rate twice that of two years earlier.” (pg. 652). By
1979 and 1980, the United States national economy was facing the full blunt of a
hyperinflationary cycle. The U.S. Federal Reserve, in a desperate attempt to cut inflation,
raised the prime rate of interest to just under 20 percent in April 1980; by midsummer
1980, the U.S. Federal Reserve had lowered the prime rate to 11 percent; but by

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Christmas of 1980, the prime rate of interest set by the U.S. Federal Reserve reached its
highest recorded point in U.S. history at 21 percent.
At the same time inflationary and hyperinflationary forces were driving up the
value of real estate in California and personal incomes and individual purchasing power
were starting to fall. A driving force behind California’s Proposition 13 in 1978 was the
collision of these two forces. According to Chapman (1998), Lewis (1998), Lewis and
Barbour (1999), and Fulton and Shigley (2005), California private property owners had
experienced a sudden dramatic increase in their property tax bill between 1975 and 1978.
At the same time, California private property owners had also experienced a sudden
dramatic decrease in their real net incomes. California private property owners could not
afford to pay the rising property tax bills due to sinking incomes and declining personal
purchasing power.
The dramatic rise in property values in California between 1975 and 1978 also
had a secondary affect that prompted voters to approve Proposition 13 in 1978. While
private citizens were being “squeezed”, state and local government coffers were now
flush due to the dramatic increase in property tax revenues collected as a result of the
inflationary and hyperinflationary pressures that drove property values and levels of
property tax revenue up. In an attempt to curtail government spending in California
through a hard cap on the amount of property tax revenue the state government and local
governments could collect, voters approved Proposition 13 in 1978. According to Fulton
and Shigley (2005), “The stated purpose of Proposition 13 was to protect longtime
homeowners who had bought houses for low prices but could not afford rapidly

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escalating property taxes. Another motive was to constrain local governments from
liberal spending practices.” (pg. 250).
Because Proposition 13 limited locally assessed property tax rates to one percent
of a property’s total assessed value, local governments quickly turned to other forms of
local tax revenues that were not limited in their ability to grow. Shifting land patterns
from residential uses to commercial-retail uses has the benefit of shifting land uses to
patterns that generate the maximum level of locally collected tax revenues that are not
capped by Proposition 13. This shift also has the added benefit of reducing public
demand for services. Typically, according to Fulton and Shigley (2005), local
governments can significantly reduce the amount of public services demand when they
reduce the total percentage of land within their jurisdiction dedicated to residential use
and increase the total percentage of land within their jurisdiction dedicated to
commercial-retail and other non-residential uses.
One of the unintended consequences of Proposition 13 in California was the
fiscalization of land use. According to Chapman (1998), “Because Proposition 13
reduced the revenues that would be received from property taxes from any particular
development, local jurisdictions began to pay even more attention to the fiscal outcomes
of land use decisions. In particular, land uses that generated revenues in addition to
property taxes become more important. To the extent that land use decisions are now
driven by their fiscal consequences, fiscalization has occurred.” (pg. 11). Part of this
fiscalization of land use consequence has been the trend of converting redevelopment
from an institution through which local municipal and county governments attempt to

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stimulate local economic activity to a municipal or county revenue generator. Chapman
(1998) found that the use of redevelopment by local municipal and county governments
in California increased dramatically in the years after the passage of Proposition 13.
Although California first passed redevelopment authorizing legislation as early as 1945,
and became the first state to use redevelopment tax increment financing in the early
1950’s, the number of local redevelopment agencies in operation in 1980, according to
Chapman (1998), was just 197 with an estimated 300 active redevelopment project areas.
By the end of 1996 however, Chapman (1998) estimates that there were 399 total
redevelopment agencies currently operating, with an estimated 744 active redevelopment
project areas. “It may be that after Proposition 13, many cities attempted to use tax
increment financing to alleviate some of the fiscal pressures caused by the initiative.
Certainly, much of the redevelopment was used to attract commercial activities that
would generate substantial sales tax revenues, while new housing was often not
encouraged because it generated less sales tax and produced a smaller tax increment.”
(pg. 12)
The consequences of the trend in redevelopment becoming more of a municipal
and county revenue generator and less a formal institutional approach to local economic
development are both significant and varied. Chapman (1998) identifies three such
consequences. First, because blight had traditionally been loosely defined, local
governments could effectively deem any piece of land within their jurisdiction as
blighted. Before the 1993 redevelopment reforms in California, it had become common
practice for local jurisdictions to place large tracts of undeveloped land within new

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redevelopment project areas. The local government could then use redevelopment’s
power of property tax increment to encourage and finance commercial-retail development
and discourage residential development in the hopes of generating new sales tax revenue.
Second, local governments quickly began to use redevelopment’s power to issue long-
term debt through property tax increment financing to finance private commercial-retail
development.
Prior to the 1993 reforms, redevelopment debt issuances did not require voter
approval. The local government could, through the local redevelopment agency, issue
vast sums of debt secured by incremental property tax revenue to finance very specific
commercial-retail projects that had the potential of generating substantial levels of new,
non-capped, sales tax revenues. Third, redevelopment quickly became, according to
Chapman (1998), “…used as a weapon in the interjurisdictional fight for economic
growth.” (pg. 13). Retailers could be successfully lured from one jurisdiction to a
neighboring one with the promise of property tax increment financing through the local
redevelopment agency. After the passage of Proposition 13, it was not long until
redevelopment had lost its focus on local economic development and quickly became a
public revenue generator for both municipal and county governments across the State of
California.
Lewis and Barbour (1999) explore the possibility that redevelopment eventually
lost its focus on local economic development as it become a public revenue generator for
both municipal and county governments in California after the 1978 passage of
Proposition 13. In a survey of city managers, assistant city managers, city administrators,

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economic and community development directors, and planning directors located in
various cities throughout the State of California, Lewis and Barbour (1999) found
disturbing evidence in support of this suspicion. According to Lewis and Barbour
(1999), the reliance on sales tax revenue after the passage of Proposition 13 in 1978,
“…has motivated planning and economic development decisions that sacrifice the long-
term fiscal and environmental health of communities for short-term gains in sales tax
producing land uses.” (pg. 69). According to Lewis and Barbour (1999), the
fiscalization of land use, coupled by the powers of local redevelopment agencies to
encourage big-box retail development and mega-auto mall development through property
tax increment financing, has the added disadvantage of encouraging massive urban
sprawl which leads to further local fiscal stress (the demand to extend municipal services
to growing, predominantly retail, suburbs) and to further environmental harm (the
expanded suburbs create additional automobile traffic on area highways and surface
streets and eventually produces additional air pollution).
In their survey of 471 California cities, Lewis and Barbour (1999) found strong
evidence that local municipal governments in California systematically favor retail
development over other land uses when it comes to new real estate development on
vacant land and the redevelopment of designated blighted areas largely because of the
potential for new sales tax revenue generation. Survey respondents were asked to rate, on
a scale of 1 (being least important) to ten (being most important), different considerations
or motivations behind the selection of different new development and redevelopment real

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estate projects. Table 5-1 reproduces the original results, averaged over all survey
respondents, first presented by Lewis and Barbour (1999).
Table 5-1
Factors Influencing New Development and Redevelopment Project Decisions
1998

Consideration/Motivation
Average Importance Score
New Development
Projects
Redevelopment
Projects
New Sales Tax Revenue 6.5 6.4
City Council Support 6.3 6.4
Eradication of Blight n/a 6.2
Adequacy of Infrastructure 6.1 5.8
Likelihood of Job Creation 6.0 5.9
Cost of Municipal Services 5.9 5.5
Traffic/Other Spillovers 5.8 5.8
Conformity with General Plan 5.7 5.7
Neighborhood Acceptability of Project 5.7 5.7
Project Aesthetics/Design Issues 5.6 5.9
New Property Tax Revenue 5.4 6.1
Environmental Considerations 5.4 5.4
New Fee/Assessment/Enterprise Revenue 5.0 4.9
Contribution to Sound Regional Economy 4.8 4.8
Support from Business Interests 4.7 4.8
Meeting Affordable Housing Needs 4.3 4.8
Competition from Nearby Cities 4.3 4.1
Preservation of Agricultural Land 3.7 n/a
Views of Nearby Cities 3.0 n/a
Views of Other Local Governments n/a 4.0
Source: Lewis and Barbour (1999), “California Cities and the Local Sales Tax”, Public
Policy Institute of California, pg. 89, PPIC City Managers Survey, 1998. Note: “n/a”
indicates that the question was not asked.

Lewis and Barbour (1999) found that approximately 75 percent of cities surveyed
ranked retail development as their highest preference for new development on vacant
land. The percent of cities that ranked retail development as their highest preference for
redevelopment projects increased to 80 percent. For both new development and

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redevelopment projects, Lewis and Barbour (1999) found that multifamily residential and
heavy industrial development were the least favored forms of real estate development.
This is not surprising given that residential and industrial development generates very
little in terms of retail sales and subsequent sales tax revenue. Lewis and Barbour’s
(1998) survey results support the conclusion that retail development is favored because of
the new sales tax revenue that a local municipal government can capture.
According to Lewis and Barbour (1999), new sales tax revenue generation was
the most important consideration or motivation behind project choice for redevelopment
agencies surveyed. Out of the 18 considerations or motivations behind project selection
by local redevelopment agencies, the eradication of blight was the third most important
consideration, new property tax revenue generation was the fourth most important
consideration, the likelihood of new job creation was the fifth most important
consideration, and the meeting of affordable housing needs was the sixteenth most
important consideration. This is surprising considering that local redevelopment agencies
do not receive any incremental sales tax revenue. These results are even more surprising
considering redevelopment agencies are primarily funded through new property tax
revenue generation and that the goal of eradicating blight, the goal of new job creation,
and the development of new affordable housing, are all stated goals of local
redevelopment agencies codified in California’s Community Redevelopment Law. These
results provide some additional evidence to support the conclusion that local
redevelopment agencies, even after the 1993 California redevelopment reforms passed by
the state legislature in Assembly Bill 1290, have been turned into municipal revenue

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generators at the expense of pursuing and achieving the stated goals of local urban
economic development.
In an earlier study, Lewis (1998) found that the 1978 passage of Proposition 13 in
California did not lead to the fragmentation of local municipal governments, but instead
led to a change in the types of policies, programs, and services local municipal
governments and local redevelopment agencies developed, implemented and delivered.
One of the primary fears of Proposition 13 before its passage was that fiscal stress placed
on existing municipal governments because of the property tax cap in Proposition 13
would lead to wide-spread political fragmentation throughout California in the form of
new municipalities being created. Lewis (1998) found no evidence of increased political
fragmentation, but did find evidence to suggest that Proposition 13 did change their
actions and public policy decisions. Lewis (1998) found a statistically significant
increase in the number of “special districts” and “special taxing entities”, like local
redevelopment agencies and local redevelopment project areas, created after the passage
of Proposition 13. Lewis (1998) also found that many local municipal and county
governments began to use redevelopment as a financial tool to encourage new businesses,
primarily retailers, to open stores within their jurisdictions in the hopes of increasing
locally generated sales tax revenue.
In 1993, aware of the trend in which local municipal governments were using
redevelopment to either fiscalize existing land uses in the hopes of maximizing local
sales tax revenue and other non-property tax revenue generation or to capture incremental
property tax revenues from other public taxing jurisdictions, the California state

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legislature significantly amended existing California Community Redevelopment Law.
According to Fulton and Shigley (2005), the California state legislature significantly
tightened the definition of blight so that, “…redevelopment agencies could better target
their actions to truly blighted areas….Without a strong and clear definition of blight,
redevelopment can be used for a range of purposes far beyond those originally envisioned
by the drafters of California’s redevelopment law.” (pg. 267). The 1993 amendments to
the California Community Redevelopment Law in Assembly Bill 1290 significantly
tightened the definition of blight in three important ways: 1) the blighted area must be
predominantly urbanized, 2) blight conditions must be prevalent and substantial, and 3)
the blight conditions must cause both a physical and an economic burden on the
community. Through these amendments, the California state legislature hoped to ensure
that cities would not be able to place entire tracks of undeveloped land within a
redevelopment project area. These amendments were an attempt to prevent the use of
redevelopment powers for the purposes of attracting large commercial-retail
developments such as big-box retailers and car dealerships. Local city governments
would also not be able to use redevelopment for the sole purpose of capturing new
property tax revenue that would have been generated by already expected development or
use redevelopment to generate excessive non-property tax revenue such as hotel room
and transient lodging tax revenue or sales tax revenue.
A second major impetus for AB 1290 was a finding by the California State
Department of Finance, according to Fulton and Shigley (2005), that redevelopment
agencies state-wide cost the State of California approximately $400 million per year. The

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California state legislature had previously passed legislation assuring local school
districts that property tax increment paid to local redevelopment agencies, which would
have potentially been paid to local school districts, would be “made whole” by the state
government’s own general fund. In seeking to reduce the burden on the state
government’s general revenues, the California state legislature through AB 1290 required
local redevelopment agencies in California to pay a significant portion of their property
tax increment revenues to local school districts.
AB 1290 also placed additional restrictions on the types of real estate projects
local redevelopment agencies could pursue and finance. Fulton and Shigley (2005)
confirm, “A major impetus for the passage of AB 1290 was the perception that cities used
redevelopment mostly for financial gamesmanship rather than urban revitalization…In an
attempt to discourage sales tax wars, the legislation prohibits redevelopment agencies
from funding auto dealerships and other large projects that will generate primarily sales
tax revenues.” (pg. 275). AB 1290 also imposed strict time limits on the duration of a
local redevelopment project area as a means of further minimizing the amount of
property tax increment a local redevelopment agency could capture and the amount of
property tax increment generated from a local redevelopment project area a local
municipal or county government could control.
In Nevada, the Nevada State Assembly had considered, as part of the 2009
legislative session, several pieces of legislation that would have placed severe restrictions
on the use of redevelopment similar to the legislation passed by the California state
legislature in 1993. Nevada Assembly Bill 422, which passed at the end of the 2009

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legislative session, now requires local municipal and county governments and local
redevelopment agencies to “pass through” a significant portion of incremental sales tax
revenue generated through existing Sales Tax Anticipated Revenue (STAR) bond
financing. STAR bond financing in Nevada has allowed local municipalities and
counties to control up to 75 percent of new sales tax revenue generated from new
commercial-retail projects. Although it eventually failed to pass in the 2009 legislative
session, Nevada Assembly Bill 458 would have effectively required local redevelopment
agencies to “pass through” a significant portion of their annual incremental property tax
revenue collected from local redevelopment project areas to the locally impacted school
district. Generally speaking, local redevelopment agencies in Nevada currently can
control up to 100 percent of incremental property tax revenue generated from new project
areas.
Prior to the 2009 legislative session, the Nevada State Assembly in 2005 required
that new redevelopment project areas contain at least four of the blighting conditions
listed in NRS Chapter 279, Section 388. Also in 2005, the Nevada state assembly
required that at least 80 percent of any proposed redevelopment project area be
developed. The changes made in 2005 to existing Nevada Community Redevelopment
Law significantly restricted the ability of local redevelopment agencies to place
undeveloped land in new redevelopment project areas, thereby restricting the amount of
potential new property tax revenue that could be controlled by a local municipal or
county government. The legislation that had been considered by the Nevada State
Assembly in 2009 would have also further restricted the ability of local municipal and

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county governments to use redevelopment as a municipal or county revenue generator
and reduce the amount of new incremental property tax revenue a redevelopment agency
could collect and control.
Clearly, there has been a growing suspicion by the Nevada and California state
governments that redevelopment has moved too far away from its original local urban
economic development purpose and has been used in ways that both state governments
originally did not intend for. There is growing evidence to suggest that local
redevelopment agencies have increasingly become institutions of local government
finance and have increasingly failed to be used in ways that could support and achieve
the goals of local urban economic development. Although local redevelopment agencies
continue to be used in ways that neither state government originally had intended, it is
unclear whether or not current or future legislation can effectively move redevelopment
back to its intended use. New local institutional forms may be needed in order to
effectively promote and pursue the goals of urban economic development in both Nevada
and California.

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Chapter 6 – Criticisms Pertaining to Urban Revitalization

6.a – Introduction
The two criticisms outlined in this chapter pertain specifically to the goals of
urban revitalization. The fourth primary criticism of local redevelopment agencies in
Nevada and California presented in this chapter focuses primarily on the use of eminent
domain by local redevelopment agencies. Ongoing scholarly research suggests that the
use of eminent domain fails to redistribute much of the economic benefit of using
eminent domain back to the neighborhoods or individuals most impacted by its use. The
fifth primary criticism of local redevelopment agencies presented in this chapter focuses
primarily on how contemporary redevelopment agencies in Nevada and California have
grown increasingly susceptible to a form of principal-agency corruption where
knowledge and power is distributed in ways that prohibit meaningful public input.
Combined, both criticisms argue that contemporary local redevelopment agencies in both
Nevada and California, in their current form and through their current practices, are no
longer able to adequately meet the goals of urban revitalization.

6.b – Criticism No. 4: The Use of Eminent Domain by Local Redevelopment
Agencies has Limited their Ability and Authority to Revitalize Neighborhoods
No other power of contemporary local redevelopment agencies has received more
recent criticism than the use of eminent domain. Since the 1990’s, redevelopment

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agencies in Nevada and California have had to endure numerous legislative attempts by
their state legislatures to significantly curtail redevelopment agency use of eminent
domain as a means of acquiring and assembling land for private real estate and economic
development purposes.
A growing body of scholarly work also suggests that poor urban minority and/or
elderly populations are most likely to bear the costs of eminent domain through loss of
privately held property, or the cost associated with forced relocation, or the cost
associated with dismantling functioning, if not gentrified, neighborhoods that provide
urban minority poor and/or elderly populations with important social networks. If the
usage of eminent domain creates a negative burden on the populations that
redevelopment agencies are attempting to help, than it is highly unlikely that these
agencies will successfully meet their primary goal of revitalizing physically,
economically, and socially maladjusted neighborhoods. All that these agencies will have
accomplished is the gentrification of physically blighted neighborhoods and the
displacement of vulnerable populations to other parts of the city or county that these
redevelopment agencies are located in without providing material economic or social
improvements in the lives of the people displaced through the usage of eminent domain.
The use of eminent domain to successfully revitalize physically declining and
economically depressed neighborhoods in the urban environment has been well
documented. Fulton and Shigley (2005) clearly demonstrate how a local redevelopment
agency’s authority to use eminent domain is vital to the efforts of stimulating new private
real estate development. Eminent domain, according to Fulton and Shigley (2005), is

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largely used as a strategy by local redevelopment agencies to overcome “hold-outs”, or
individual property owners who “hold out” on selling their property to a developer or to
the local redevelopment agency in the hopes of securing a sales price for their property
that is well above market levels after a significant number of other property owners have
already voluntarily sold their property to the developer or local redevelopment agency.
According to Fulton and Shigley (2005), “…the redevelopment of an older area will
almost always require assembling land into large parcels under ‘single ownership’. Thus
redevelopment agencies have unusual power to use eminent domain in assembling land,
even if the ultimate landowner will be a private entity.” (pg. 267).
According to Fulton and Shigley (2005), “…a redevelopment agency will use
eminent domain to assemble land and then sell it at a much lower price – a land ‘write-
down’ – to a private developer who will build a project that fits the redevelopment plan.”
(pg. 267). A simple example can better illustrate this point. Suppose the city or the
redevelopment agency will eventually decide to acquire privately held property through
its powers of eminent domain and condemnation. A municipality or local redevelopment
agency could spend upwards of $30 million in an eminent domain proceeding as the city
or agency would likely be required to compensate the private property owner at the
current market value of the property. The city or agency would also likely be required to
pay relocation costs, legal expenses and the salary of staff assigned to the project. The
city or redevelopment agency might then sell the property to the private developer for
$20 million, $1 million, or even $1 to ensure that the developer’s own project costs are
kept low enough to ensure the successful completion of the project. The city or

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redevelopment agency justifies this “write-down” with the long-term return on
investment the city or agency anticipates it will receive from the project in the form of
new jobs created, new property tax revenue generated, new sales tax revenue generated,
and even in the prevention of other costs that a municipal government could potentially
incur due to the continued presence of blight.
The process and example illustrated here has been validated by numerous state
and federal courts, and local redevelopment agencies have, for at least the past half
century, continued to use eminent domain in order to achieve the long-term public benefit
goals of successful urban revitalization. As alluded to previously in Part I, numerous
state courts and the U.S. Supreme Court have continually expanded the use of eminent
domain by local governments and local redevelopment agencies to include the use of
eminent domain for urban revitalization and economic development purposes.
Cullingworth and Caves (2003) point to several U.S. Supreme Court decisions that have
increasingly expanded the definition of “public use” to include slum clearance and the
acquisition of physical property by a government agency for the purposes of economic
development and urban revitalization. As a result, redevelopment agencies have
employed the use of eminent domain to acquire privately owned property in order to
successfully complete proposed real estate projects.
The use of eminent domain by local governments and local redevelopment
agencies has long been upheld by various state courts and the U.S. Supreme Court in
cases like Poletown Neighborhood Council v. Detroit (1981) and Hawaii Housing
Authority v. Midkiff (1984). But even though public sentiment towards the use of

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eminent domain for urban revitalization purposes remained largely neutral for nearly a
half century, public sentiment did begin to shift in the mid to late 1990’s. Even before
the Kelo v. City of New London, Connecticut (2005) U.S. Supreme Court decision, state
governments, given increased public outcry against the use of eminent domain for the
purposes of urban revitalization and economic development, had already begun to
significantly curtail the use of eminent domain by local governments and local
redevelopment agencies.
Emerson and Wise (1997) document a total of 43 individual state governments by
1997 had already instituted some form of eminent domain reform. The eminent domain
reforms of the mid to late 1990’s largely curbed state and/or local government use of
“regulatory takings” and eminent domain. Emerson and Wise (1997) identified four
primary types of eminent domain reform being implemented or considered: 1)
preliminary measures which would prohibit local governments and local redevelopment
agencies from using eminent domain, 2) procedural changes that would make the eminent
domain process so difficult and so time consuming that local governments and local
redevelopment agencies would choose not to employ the use of eminent domain, 3)
assessment provisions which would make almost any property ineligible for a taking by a
local government or a local redevelopment agency via eminent domain, and 4)
compensation measures that would so significantly increase the amount of compensation
a local government or local redevelopment agency would have to pay a property owner
impacted by eminent domain that the use of eminent domain would be financially
prohibitive.

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Preliminary measures, according to Emerson and Wise (1997), include both
symbolic declarations of the importance of property rights by joint resolution of a state’s
legislature, the establishment of joint legislative study commissions, and even continuing
education requirements for local public administrators of the impact local government
policies can have on private property values. Emerson and Wise (1997) identified seven
states pursing preliminary measure legislation aimed at curbing regulatory and physical
taking impacts as of 1997. Procedural modifications, according to Emerson and Wise
(1997), incorporate the consideration of private property rights into the purview of the
public administrator’s daily responsibilities and provide specific rule-making provisions
which limit state and local government liability under certain conditions. As of 1997,
Emerson and Wise (1997) identified 13 separate states pursuing procedural modification
legislation aimed at curbing the use of regulatory takings and physical takings by state
and local governments.
Assessment laws, according to Emerson and Wise (1997), require state and local
public administrators to respect federal and state constitutional protections for private
property rights and to ensure that state and local public administrators ensure that their
agencies do not undertake new programs or implement new policies without first
considering the full impact and cost associated with either a regulatory or physical taking.
As of 1997, Emerson and Wise (1997) identified 17 states pursing assessment law
legislation. Finally, compensation statutes provide post hoc remedies for reductions in
private property values due to governmental action such as the implementation of new
zoning laws or the creation of new redevelopment project areas which make public

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declarations of physical and economic blight that may reduce affected property values.
Emerson and Wise (1997) identified six states that were pursuing compensation statutes
as a means of curing regulatory and physical property takings as of 1997.
Emerson and Wise (1997) identify a new wave of citizen activism committed to a
prohibition of eminent domain, which emphasizes a belief that eminent domain is not
socially just and unfairly targets impoverished minorities living within depressed urban
neighborhoods. According to Emerson and Wise (1997), “Researchers and
commentators are presenting rationales for why property rights legislation is occurring as
well as predictions for which states are likely to entertain if not adopt such measures.
The various factors at play range from natural resource endowments, to land management
practices, to political culture, and institutional explanations.” (pg. 413). Although the
particular rationale for the eminent domain reforms of the mid to late 1990’s differed
widely across different regions of the United States, Emerson and Wise (1997) do trace
the origin of these reforms to a better organized and highly vocal and visible form of
citizen activism. Emerson and Wise (1997) find that western and eastern states, with
highly regulated coastlines or state planning acts, have increasingly become subject to
new political pressures to protect individual private property rights, regardless of the
impact the reform(s) might have on the ability of a local municipal or county government
or local redevelopment agency to effectively revitalize a physically and economically
blighted neighborhood or community.
Public sentiment opposing the use of eminent domain for urban revitalization
purposes, and legislative support for reducing the ability of local governments and local

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redevelopment agencies, was already high when, in 2005, the U.S. Supreme Court ruled
in Susette Kelo et al. v. City of New London, Connecticut, et al. (2005), that the city of
New London, Connecticut had properly executed its powers of eminent domain in taking
15 separate privately owned pieces of land and then transferred the land to the city’s
lawfully created “New London Development Corporation” to support the development of
a much larger and broader urban revitalization plan. The court, in a five to four decision,
found that the city of New London’s actions did not violate the Fifth Amendment’s
public use clause. Despite wide public belief that the court had acted inappropriately, the
decision of the court, as Goodin (2007) and Barkacs and Barkacs (2007) point out, was
not a case of judicial activism. Both authors conclude that the court simply upheld
existing precedent that the court had first established in prior cases, including Berman v.
Parker (1954), Poletown Neighborhood Council v. Detroit (1981), and Hawaii Housing
Authority v. Midkiff (1984). Barkacs and Barkacs (2007) go so far as to conclude that the
court’s decision in Kelo was a reaffirmation of existing U.S. federalism and an
affirmation of a local government’s right to pursue economic development and urban
revitalization in ways best suited to meet the needs of the local community.
Although the result of the court’s ruling in Kelo v. City of New London (2005)
may not necessarily come as a surprise to legal scholars and redevelopment professionals,
the resulting public response, and the resulting response by state governments, to the
court’s ruling has been somewhat of a surprise. Goodin (2007) argues that the, “…public
disapproval of Kelo has provoked a wave of state statutory reform proposals. Some of
the proposed state legislation prohibits the use of eminent domain for economic

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development, but continues to allow the use of eminent domain to redevelop ‘blighted’
areas, effectively overriding Kelo but leaving the Court’s earlier holding in Berman v.
Parker intact.” (pg. 1).
Goodin (2007) identified three primary ways in which state governments have
restricted the use of eminent domain as it applies to its use in local economic
development efforts: 1) a narrowing of the definition of public use so as to restrict the
areas in which eminent domain can be used by local governments and local
redevelopment agencies, 2) increases in the statutory compensation requirements of
properties taken via eminent domain as to make the total cost of eminent domain so
expensive that local governments and local redevelopment agencies will not employ it,
and 3) requiring more extensive procedures, including additional state legislative and
judicial oversight, and approval on a case-by-case basis which would ultimately make the
eminent domain process so cumbersome and tedious as to discourage its use by local
governments and local redevelopment agencies.
Goodin (2007) identifies three additional state government responses to the Kelo
v. City of New London (2005) case. Each of these additional state government responses
have attempted to restrict and curtail, and have successfully reduced, the efforts of local
governments and local redevelopment agencies to use eminent domain as a tool and
strategy in pursuing the goals of urban revitalization. These three additional state
government legislative attempts can be classified as: 1) legislation that outright prohibits
the use of eminent domain for economic development and urban revitalization purposes,
2) legislation that does not meaningfully limit the use of eminent domain for urban

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revitalization purposes, but ties such use to a broad definition of blight as to create
judicial confusion on when eminent domain is justifiable or not, and 3) legislation that
effectively restricts the use of eminent domain for urban revitalization purposes by
defining blight so narrowly that no property could ever qualify for a taking via eminent
domain.
In Nevada, the Nevada State Assembly passed eminent domain reforms as part of
the 2005 legislative session. The eminent domain reforms in Nevada seem to fit
Goodin’s (2007) second and third legislative classifications. First, the Nevada eminent
domain reforms of 2005 required that any property being considered as eligible for a
taking via eminent domain by a local municipal government or local redevelopment
agency would first have to meet a minimum of four of the codified blighting conditions
listed in Nevada Revised Statutes, Chapter 279, Section 388. Second, the Nevada
legislature required that all individual parcels of land, as determined by their unique
assessor parcel number, must also meet at least four of the blighting conditions listed in
Nevada Revised Statutes, Chapter 279, Section 388, for the local municipal government
or local redevelopment agency to be justified in taking a single property through eminent
domain. These reforms have made the application of eminent domain to a single
property almost impossible as many individual properties within a specific
redevelopment project area rarely meet a minimum of four separate blighting
characteristics. The 2005 reforms in Nevada have also created a degree of judicial
confusion by requiring that all properties comprising the individual real estate project
being pursued must meet at least four separate blighting conditions.

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Barkacs and Barkacs (2007) trace the public outcry to ban the usage of eminent
domain, and the subsequent rush to legislate away the ability of local municipal
governments and local redevelopment agencies to use eminent domain as part of their
urban revitalization efforts, to Justice O’Connor’s dissenting opinion in the Kelo v. City
of New London (2005) case. Referencing Justice O’Connor’s dissenting opinion, Barkacs
and Barkacs (2007), state, “Justice O’Connor wrote the principle dissent in Kelo, a
stinging rebuke of the majority opinion that ignited public indignation. She suggested
that the majority’s interpretation of eminent domain would spawn a reverse Robin Hood
effect – i.e. take from the poor, give to the rich.” (pg. 37). Justice O’Connor wrote,
according to Barkacs and Barkacs (2007), “‘Any property may now be taken for the
benefit of another private party, but the fallout from this decision will not be random.
The beneficiaries are likely to be those citizens with disproportionate influence and
power in the political process, including large corporations and development firms.’” (pg.
37).
Although Barkacs and Barkacs (2007) suggest that Justice O’Connor’s dissenting
opinion signals a possible shift in the court’s attitude and behavior, essentially
determining whom among the public are either rich enough not to be harmed by the
usage of eminent domain or poor enough to be immune from the possibility of having
their property taken via eminent domain, it does indicate that more and more scholars and
practitioners are beginning to wonder whether or not eminent domain is an effective tool
for revitalizing physically and economically blighted neighborhoods or whether eminent
domain unfairly burdens poor minority or elderly urban populations. Goodin (2007)

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confirms that the rush to legislate away eminent domain as a tool of urban revitalization
and urban economic development has been largely driven by new political pressures
placed upon state and federal legislative representatives by large anti-government, pro-
property rights, strong libertarian citizen groups and by other citizen activist groups that
support legislative protection of poor minority and elderly urban residential populations.
Table 6-1 reproduces a table originally produced by Somin (2007) that traces the
percentage of people who either agreed, disagreed or strongly disagreed with the Kelo
decision as a function of household income.
Table 6-1
Public Opinion on Kelo by Household Income
Household Income % Agree with Kelo
Decision
% Disagree with
Kelo Decision
% Strongly
Disagree with Kelo
Decision
Under $10,000 25% 70% 58%
$10,000 – $24,999 20% 80% 61%
$25,000 - $34,999 18% 80% 62%
$35,000 - $49,999 11% 89% 68%
$50,000 - $74,999 15% 85% 67%
$75,000 - $150,000 25% 73% 57%
Over $150,000 32% 68% 48%

All Groups Total 18% 81% 63%
Source: Somin (2007), “Is Post-Kelo Eminent Domain Reform Bad for the Poor?”, pg.
1939; November 2005 Saint Index.

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Somin (2007) documents the public reaction to the Kelo decision by examining
the results of a November 2005 Saint Index Survey on the public’s opinion of the Kelo
decision. Somin (2007) found a strong correlation between disagreement in the U.S.
Supreme Court’s 2005 decision and individual household income. In general, individuals
with lower or middle levels of household income either disagreed or strongly disagreed
with the court’s ruling. In contrast, individuals with higher levels of household income
had higher levels of support for the court’s decision then their lower or middle household
income counterparts.
Somin (2007) traces these results back to the history of eminent domain usage by
the federal, state and local governments during the urban renewal era. During the urban
renewal era, various government agencies had used eminent domain to clear entire
minority communities to make way for new freeways, shopping centers, and even new
housing that was beyond the income range of many of the existing, but nevertheless
impacted, residents. Largely minority and elderly communities had historically been,
according to Somin (2007), widely targeted for wide-spread clearance. Somin (2007)
also found that many of these targeted minority and elderly communities had a high and
disproportionate number of households with incomes far less than national averages.
Although there is strong evidence to suggest that various vulnerable populations,
like poor minority and elderly urban residential populations, have historically had to bear
a disproportionate share of the costs imposed on the community by eminent domain and
share in an equally disproportionate smaller amount of the benefits eminent domain and
urban revitalization can transfer to the community, the Kelo decision served as a flash

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point for community activist groups and groups supporting limited government and
private property rights. In the years leading up to the Kelo decision, and in the years after
it, the California state legislature has continued to aggressively curtail the use of eminent
domain by local governments and local redevelopment agencies. But the anti-eminent
domain legislation that the California state legislature has considered is not necessarily an
attempt to limit the use of eminent domain. By using the Kelo decision as a rallying cry,
the California state legislature has effectively rallied community activist groups, anti-
government and pro-property rights groups, and urban poor minority and elderly
populations against redevelopment. These various legislative efforts have effectively
become, according to Meyers (2005), an attempt to severely reduce the scope of
redevelopment activities and the spread of redevelopment in the State of California.
Slowly, the dominance of redevelopment as the primary institutional form
through which local governments in California pursue the process and goals of urban
revitalization is being threatened by new state legislation. Meyers (2005) has identified
several anti-eminent domain pieces of legislation that have either been considered or are
currently being considered by the California state legislature that would significantly
curtail local redevelopment authority. By curtailing local redevelopment agency
authority, the California state legislature hopes to indirectly curtail the use of eminent
domain for urban revitalization purposes.
As of 2005, Meyers (2005) singles out five separate pieces of California state
legislation that would have so eroded the authority and ability of local redevelopment
agencies to engage in urban revitalization efforts, that it is likely the state could have seen

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an end to redevelopment as the dominant institutional form through which local
municipal and county governments attempt to revitalize physically and economically
blighted urban neighborhoods and communities. Although each one of the five pieces of
California state legislation outlined here failed to garner enough support to pass, the state
legislature continues to consider similar pieces of legislation. The first piece of
California state legislation that Meyers (2005) identifies was California Senate
Constitutional Amendment (SCA) 15, commonly referred to as the “McClintock
Amendment”. SCA 15 would have effectively prohibited the use of eminent domain by a
local municipal or county government, or any public agency under the supervision and
control of a local municipal or county government, to take any privately owned property
that would not be owned and occupied by a governmental agency. This amendment
would have effectively terminated the ability of local redevelopment agencies in
California to use the powers of eminent domain. SCA 15 would have only allowed local
municipal and county governments to use eminent domain for the purposes of building
community centers, court houses, public roads, bridges, and even schools. But municipal
and county governments do not use eminent domain to support private real estate
development. The power to use eminent domain to acquire privately held property and
then transfer the property to another private real estate interest is a power that only
redevelopment agencies in California have. That is one of the primary reasons why local
municipal and county governments have formed local redevelopment agencies. SCA 15
would not have significantly curtailed the powers of eminent domain; SCA 15 would
have, however, significantly curtailed the powers of local redevelopment agencies.

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Two additional pieces of legislation that Meyers (2005) identified were California
Assembly Bill 1162 (Mullin) and Senate Bill 1026 (Kehoe). Both AB 1162 and SB 1026
called for a moratorium on the use of eminent domain by local municipal and county
governments and local redevelopment agencies to acquire owner-occupied housing units.
AB 1162 and SB 1026 were the most direct response to the Kelo v. City of New London
(2005) U.S. Supreme Court decision. In Kelo the plaintiff, Suzette Kelo, had her owner-
occupied home seized by the city’s New London Development Corporation through an
eminent domain proceeding. Eventually, New London city officials and the New London
Development Corporation agreed to move Suzette Kelo’s home and the homes of the
other nine private property owners who had joined Kelo in her suit against the city to a
new location at no charge. As part of the original eminent domain proceedings, the New
London Development Corporation also compensated Kelo and the nine other private
property owners impacted by the New London Development Corporation’s
redevelopment plans for their property at full market values. But in California, state
legislative representatives used the Kelo decision to propose legislation that would have
further restricted the legal authority of local redevelopment agencies to relocate home
owners as part of the agency’s redevelopment plans. Meyers (2005) views both pieces of
legislation as largely unnecessary as a significant number of local redevelopment
agencies in California have already, as part of their legally required redevelopment plans,
excluded owner-occupied housing from the possibility of physical property taking via
eminent domain.

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The fourth piece of legislation that Meyers (2005) identified is AB 590. AB 590
would have allowed the condemnation of private property and the subsequent taking of
private property through eminent domain only for a stated public purpose. AB 590
would have also further defined “public use” to exclude either the taking or damaging of
privately owned property for other private uses, such as the transferring of privately held
land through a redevelopment agency to a private real estate developer via eminent
domain. AB 590 would have also prohibited the taking or damaging of privately owned
property for economic development purposes. Similar to AB 1162 and SB 1026, AB 590
would have allowed local municipal and county governments to use eminent domain for
certain public uses, like building community centers, court houses, public roads, bridges,
and even schools. Also like AB 1162 and SB 1026, the true intent behind AB 590 was
the further constriction of local redevelopment agency power to acquire privately held
property through eminent domain proceedings and then transfer the land to a private real
estate developer under the guise of creating new jobs or generating additional revenues
for the controlling municipal or county government. As already stated, local municipal
and county governments do not have the power to condemn and acquire privately held
land and then transfer it to another private interest; only local redevelopment agencies
have that specific power. Again, the intent of AB 590 was not necessarily the reform of
eminent domain; the true intent behind AB 590 was the further restriction of local
redevelopment agency power and authority.
The final piece of legislation that Meyers (2005) identified was California
Assembly Constitutional Amendment (ACA) 22, commonly known as the “LaMalfa

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Amendment”. Similar to AB 590, AB 1162 and SB 1026, ACA 22 would have further
limited the definition of “public use” and required that any private property either
condemned or taken via eminent domain be done only for a stated public purpose. ACA
22 would have added the additional requirement that any condemnation or physical
property taking procedure be reviewed by an independent judiciary. ACA 22 would have
also placed an additional burden on local municipal and county governments and local
redevelopment agencies to prove to the independent judicial review that no other
reasonable alternative to the condemnation or eminent domain proceeding exists. The
main purpose of ACA 22 was to simply make the condemnation and eminent domain
process so cumbersome and so difficult that local municipal and county governments and
local redevelopment agencies would have simply avoided using condemnation and
eminent domain as part of their larger urban revitalization efforts.
Meyers (2005) argues that all of these recent legislative efforts of the California
state legislature to curtail redevelopment authority and the use of eminent domain is a
strong signal that redevelopment, as the primary institution through which local
governments have historically pursued the revitalization of physically and economically
blighted neighborhoods and communities, has lost its way. Redevelopment, as a
historical institution of local urban revitalization, has become too focused on supporting
private real estate development projects and has become far less focused on improving
the actual physical conditions of deteriorating neighborhoods and even less focused on
improving the socio-economic conditions of people living in economically depressed
communities. Part of the reason behind why redevelopment has lost both its way and its

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ability and authority to revitalize deteriorating and depressed neighborhoods through real
estate based development projects can be traced to the possible principal-agency
corruption of this institution. The dissenting opinion of the U.S. Supreme Court in the
Kelo decision authored by Justice O’Connor suggests that local institutions of urban
revitalization now serve the primary purpose of advancing the narrow interests of large
private developers at the expense of the poor minority and elderly populations of the
urban environment. This is part of the fifth criticism of redevelopment presented in the
next section.

6.c – Criticism No. 5: Redevelopment is Subject to Principal-Agent Corruption,
Thereby Retarding True Local Urban Revitalization Efforts
The line separating true urban revitalization and simple urban gentrification is not
as clear as many would suspect. Without question, those professionals in the field of
redevelopment sincerely believe that their daily efforts return a true social and economic
benefit to the communities and neighborhoods they are attempting to revitalize through
the powers of redevelopment. When Nevada and California first passed their authorizing
state redevelopment statutes, there was a general recognition that something had to be
done to reverse decades of growing physical and economic blight. Over time, the urban
inner central core of America’s largest cities soon became overwhelmed by rising
unemployment, a dwindling stock of quality affordable housing, declining personal and
household incomes, rising crime, and a general decline in opportunities for general
upward mobility. Redevelopment, which quickly became the dominant institutional form

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through which local municipal and county governments pursued the noble goals of urban
revitalization, seemed to be the logical way local governments could intervene in the
urban environment and attempt to reverse the physical, economic, and social problems
plaguing the inner city. But over time, redevelopment has lost both its way and its
purpose. Over time, the institution of redevelopment has gradually become susceptible to
the problems of principal-agent corruption, and has gradually come to favor the narrow
interests of a very select group of private real estate and other industry development
interests instead of putting the needs of the general public at the head of public policy
consideration.
Any attempt to simply state why redevelopment has lost its way, or how this
institution of local urban revitalization could be modified to better consider the interests
of the entire public, would ignore the many complexities of the environmental, political,
social, economic, and even legal realities and issues that comprise the American urban
environment. The American urban environment is a complex system that comprises
many different political, social, economic, legal, and environmental relationships. These
relationships form vast networks and webs of social interaction, and when one
relationship runs up against another, the result is not always positive. Given the limited
space in the urban environment, and the needs of municipal and county governments to
maintain law and order while ensuring a stable source of public revenues, conflict is
almost inevitable. Multiple claims to the land and multiple demands for different land
uses within the urban environment can complicate the decision making process for public
policy makers in the field of redevelopment. When such conflicts arise, the right solution

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rarely presents itself. Instead, policy makers and the bureaucracy that is charged with the
responsibility for implementing the policy must struggle over the political, social,
economic, legal, and environmental consequences of their decisions and actions. A
growing and uncomfortably familiar consequence has been the apparent failure of local
redevelopment agencies to advance the interests of vulnerable populations from the
demands of private real estate developers, and the sacrificing of true urban revitalization
for simple urban gentrification.
Irazabal and Punja (2008) document one such example in which a local
redevelopment agency and its authorizing local municipal government failed to protect
the interests of a vulnerable population in favor of the interests of a single real estate
developer. From about 1992 to 2006, a fairly significant number of Latino-American
residents living in one of the City of Los Angeles’ redevelopment project areas fought to
protect a 14-acre urban farm that had been divided into over 350 family-maintained plots
from the plans of the City of Los Angeles, the Community Redevelopment Agency of the
City of Los Angeles (CRA/LA), and private real estate developer Ralph Horowitz to
redevelop the land upon which the South Central Farm (SCF) had existed since 1994.
Originally, before the creation of the 14-acre urban SCF, the City of Los Angeles
had acquired the property from then Alameda-Barbara Investment Company (ABIC), a
company in which Ralph Horowitz was a majority partner, through the city’s eminent
domain powers. Originally, the City of Los Angeles compensated the ABIC and majority
partner Ralph Horowitz for the amount of approximately $4.8 million. The City of Los
Angeles had hoped to build a “waste-to-energy incinerator” on the site, but had canceled

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its plans after strong community opposition to the project. In 1994, the City of Los
Angeles sold the 14-acre site to the Los Angeles Harbor Department, which then issued a
revocable permit to the Los Angeles Regional Food Bank. The Los Angeles Regional
Food Bank then, also in 1994 and working with local neighborhood citizens, granted the
development of “survival gardens” on the site. According to Irazabal and Punja (2008),
“The families, mainly Latina/o; many unauthorized immigrants, were originally allowed
these ‘survival gardens’ by the Los Angeles Regional Food Bank, and had incomes no
greater than 150 percent of the poverty level in the region. Most used the food and
medicinal plants to augment their dietary and health care needs, and it is estimated that
some 2,000 people directly benefited from the farm, as each plot was managed by a
family of four members or more.” (pg. 2).
The SCF functioned as an important social and economic stabilizing force in an
otherwise physically and economically blighted neighborhood of the City of Los Angeles
until 2001 when the former property owner Ralph Horowitz sued the City of Los Angeles
for breaching the original terms of the eminent domain agreement reached between
Horowitz’s former firm, ABIC, and the city itself. After the City of Los Angeles decided
not to use the land it had acquired through eminent domain from ABIC for a waste-to-
energy incinerator, the court overseeing the original eminent domain proceeding required
that a resale provision be put into the final agreement between Horowitz, ABIC, and the
City of Los Angeles. The resale provision permitted Horowitz to buy the land back from
the City of Los Angeles and the CRA/LA if either the city or the CRA/LA failed to sell
the land for non-public, non-housing purposes within 10 years.

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Both the City of Los Angeles and the CRA/LA felt that the sale of the property to
the Los Angeles Harbor Department in 1994 fulfilled the court’s ruling that a non-public,
non-housing use for the land had to be met within 10 years of executing the final eminent
domain agreement. Horowitz felt differently. In 2001, Horowitz filed suit against the
City of Los Angeles and the CRA/LA for breach of the resale agreement. In 2003, both
the city and the CRA/LA settled with Horowitz, allowing him to repurchase the 14-acre
site for approximately $5.1 million. On January 8, 2004, Horowitz, who was now the
legal owner of the 14-acre site, received a court order demanding that the SCF be
vacated. On June 13, 2006, the Los Angeles County Sheriff’s Office evicted the
remaining farmers from the SCF and then, on July 5, 2006, Horowitz had the SCF
bulldozed. Since then, Horowitz has dedicated approximately 2 acres of the former 14-
acre urban farm for a community soccer field. Horowitz developed the remaining 12
acres of the 14-acre site with a variety of light industrial and warehouse uses.
Although Horowitz was within his legal right to repurchase the land from both the
City of Los Angeles and the CRA/LA after the supervising court determined that both the
city and the agency had violated the terms of the original eminent domain proceeding, the
case of the South Central Farm represents a flash point in which two opposing sides each
had a legitimate and legal claim to the use of the land. The SCF had properly worked
through both the Los Angeles Regional Food Bank and the Los Angeles Harbor
Department to get the necessary permits needed to develop and operate an urban
“survival garden” farm within the City of Los Angeles’ jurisdiction. Horowitz also had
every legal right to repurchase the land under the terms of the original eminent domain

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proceedings. Once Horowitz was successful in repurchasing the land from the city and
the agency, he also had every legal right to remove, by force if necessary, any trespasser
on his property. Horowitz also had every right to develop the 14-acre site, after his
successful bid to repurchase the land, as he saw fit while being in compliance with all
applicable zoning and building code regulations.
But the conflict over the fate of the SCF, and the long lasting impacts from the
conflict, revolve around more than who was legally justified or who was not. According
to Irazabal and Punja (2008), the SCF case is an important case for its contribution to
issues regarding race, poverty, power, knowledge, and the Neoliberal city. It presents an
opportunity for both scholars and practitioners in the fields of public administration, the
law, environmental justice, economic development, urban planning, and urban
revitalization to assess whether or not the institutions developed by society adequately
balances the needs of individual neighborhood residents with the needs of private real
estate developers and the interests of government and government agencies to revitalize
declining neighborhoods while pursuing development that contributes positively to the
entire community through increased public revenues.
Irazabal and Punja (2008) divide their study of the SCF along three separate
ideas: 1) a planning ethics conundrum that presents the creation and maintenance of the
SCF as an issue of environmental justice, examining the community gardens impact on
neighborhood improvements in physical and quality of life conditions that alleviate
poverty, 2) the rise and fall of an urban farm elaborates on the legal arguments and
procedural circumstances in favor and against the farmers throughout the struggle for the

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“survival garden” and analyzes them in light of structural biases against minorities and
the poor, the tensions between use and exchange values, and the right to the just city, and
3) the future of resistance discusses the significance of the SCF to the future of
environmental justice and urban gardening movements and ultimately, the city itself.
(pg. 3). More importantly, according to Irazabal and Punja (2008), “…the SCF case
demonstrates that while white middle-class suburbanites should strive to expand
inclusion of non-white lower-income urbanites in smart growth or regionalist coalitions,
they should also understand and respond to the latter’s own initiated calls for solidarity
and leadership towards different conceptions of fairer regional growth models.” (pg. 3-
4).
The brief summary of the SCF presented betrays the complexity of the SCF case.
For instance, one of the sub-plots of the SCF story was the observation, by Irazabal and
Punja (2008), that the SCF case also represented a collision of interests among different
vulnerable populations; on one hand poor African Americans desperately needed, and
still do, the jobs offered through Horowitz’s plan, but, on the other hand, the SCF was a
vital source of food and community pride for the growing poor Latina/o American
residential population of south central Los Angeles. One of the largest supporters of
Horowitz’s plan to redevelop the 14-acre site with light industrial and warehousing uses
was City of Los Angeles Councilwomen Jan Perry, city council representative for the
City of Los Angeles’ 9
th
District that includes both the 14-acre SCF site and a large
portion of the largely African American populated area of south central Los Angeles.
Councilwoman Perry, who is African American, according to Irazabal and Punja (2008),

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actively supported Horowitz’s plan because it provided jobs deemed needed to support
the predominately African American residential population of south central Los Angeles.
According to Irazabal and Punja (2008), “Councilwoman Perry also happens to be
African American, and while publicly supportive of looking into relocation possibilities
for the mainly Latino farmers, several of our (Irazabal and Punja) informants outside City
Hall considered that she was more responsive to the expectations of her African
American constituents in South Los Angeles.” (pg. 21). Not only does the SCF case
represent a failure of current approaches to urban revitalization by local redevelopment
agencies to consider the interests of the urban poor over the needs of wealthy private real
estate developers, the SCF case also represents a failure of current approaches to urban
revitalization by local redevelopment agencies to balance the needs of different and
competing groups within the urban poor residential population.
Irazabal and Punja (2008) conclude with several important observations regarding
the failure of contemporary approaches to urban revitalization through local institutions
like redevelopment, as it relates to power and knowledge imbalances between the poor
and the wealthy. First, Irazabal and Punja (2008) conclude that the vast structural flaws
in contemporary local redevelopment programs fail to provide the most vulnerable
populations within the urban environment a meaningful opportunity for true upward
mobility. Irazabal and Punja (2008), quoting a passage from Tranel and Handlin’s 2006
article, Metamorphosis: Documenting Change, state, “Community development through
community gardening appears to address the structural flaws in redevelopment programs
noted over twenty years ago. It is not a ‘trickle-down’ investment strategy in expensive

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‘bricks and mortar’ projects but a direct investment in neighborhoods, and the investment
is as much in the development of the residents as it is in the physical improvements.”
(pg. 14-15). Clearly, current urban revitalization strategies and programs of local
redevelopment agencies fail, in large part, to truly revitalize physically and economically
blighted neighborhoods. The partnership between a local redevelopment agency and a
private real estate developer is too focused on the successful completion of a private real
estate project. More focus must be given to actually improving the lives of residents
within a local redevelopment project area so that true revitalization can occur, and simple
gentrification of entire neighborhoods and the displacement of existing poor minority and
elderly urban populations are avoided.
Second, Irazabal and Punja (2008) point out that, “Anybody interested in this
agenda needs to aggressively forge multi-class and multi-racial coalitions. By creating
such coalitions, poor people of color may overcome the built-in biases of the constrictive
socio-legal system and garner greater political support for their goals.” (pg. 26). Irazabal
and Punja (2008) hint at the observation that contemporary public institutions of urban
revitalization, like local redevelopment agencies, fail to provide a meaningful opportunity
for vulnerable populations, like poor minority and elderly urban residential populations,
to participate equally in the urban revitalization process. One way to overcome the
power and knowledge disadvantages that these vulnerable populations currently face in
the urban revitalization process is to form coalitions and demand equal participation. The
forming of coalitions can provide large groups of vulnerable individuals with both the

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political and social capital needed to fairly compete for equal attention and treatment of
their perceived needs.
Third, Irazabal and Punja (2008) argue that, “…there is an urgent need for
political leadership and will, and social mobilization, for enacting both the repudiation of
the ‘post-justice city’ and explorations of alternative models of development and
conviviality in Los Angeles.” (pg. 26). Although Irazabal and Punja’s (2008)
recommendations pertain specifically to vulnerable populations in the Los Angeles area,
their recommendations do pertain to the wider institution of redevelopment because all
redevelopment agencies in California operate under the same state-wide legal system and
the legal rules governing local redevelopment agencies are set at the state level. Irazabal
and Punja (2008) point out that there is both a need and an opportunity for society to
restructure existing urban revitalization methods and approaches and the formal
institutions that implement and govern them. While reshaping these approaches and
institutions, a new approach, coupled with new political leadership and social
mobilization, is needed to better address the needs of vulnerable urban populations while
also balancing power and knowledge discrepancies between these same vulnerable urban
populations and private real estate and other business interests.
For many critics of contemporary local government, redevelopment represents an
institutional arrangement that has considerably divorced the public from what was once a
fairly democratic urban revitalization process. Instead of being a democratic process, the
building and rebuilding of the urban environment has become a largely economic issue.
Although cities, according to writers like Jacobs (1961, 1969), have always been centers

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of commerce, banking, industry, and employment, this historical context has become
insufficient to address the social needs of a growing vulnerable urban population. A
reconsideration of how specialists and practitioners in the fields of urban revitalization
and urban planning approach the “city” in revitalizing physically and economically
blighted neighborhoods is needed in order to provide for more than just economic
opportunities in contemporary times. The model of urban revitalization that was
developed during the urban renewal era of the 1950’s through 1970’s, and before during
the development of such planning movements like the City Beautiful Movement or the
Garden City Movement of the late 19
th
Century and early 20
th
Century that tended to
favor a type of “environmental determinism”, must be reconsidered to include other
elements of urban revitalization that go beyond the interests of private real estate
developers and other private-sector entities. This criticism of redevelopment extends
beyond urban revitalization and cuts across the entire field of urban planning.
Cuthbert (2003) suggests that, “Urban designers are charged with the
custodianship of a complex archeology that contains the memories, reflections and
dreams of their culture, materializing as the architecture of the public realm.” (pg. 79-
80). Over time, individual private-sector interests have viewed the “right to the city” by
the larger public as a barrier to capital accumulation and individual private-sector wealth
creation. The fields of urban planning and urban revitalization have been used in the past
to overcome this barrier to capital accumulation by concentrating more and more of the
“public realm” of the city into the hands of select and individual corporate and business
interests.

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Although Cuthbert (2003) maintains that many practitioners within the fields of
urban planning and urban revitalization have become increasingly concerned with the
inherent contradictions of the capitalist state, urban planning and urban revitalization both
remain products of power relationships designed to further the capitalistic agendas of
Neoliberal regimes which remain captured and manipulated by self-serving corporate and
other private-sector interests. Ultimately, the public realm and the public’s “right to the
city” is sacrificed in favor of greater capital accumulation for an increasingly select
number of individual business and corporate interests. Although urban planning and
urban revitalization once pursued the goals of equally distributing the benefits of the
urban environment among varying interests, vulnerable poor minority and elderly
populations in the urban environment are increasingly made to bear a disproportionate
level of the costs associated with contemporary approaches to urban planning and urban
revitalization while a select group of private corporate interests are able to capture a
disproportionate share of the benefits associated with contemporary approaches to urban
planning and urban revitalization. The ability of private corporate interests to skew the
balance of costs and benefits between themselves and the wider general public, according
to Cuthbert (2003), can be found in the ability of private corporate interests to shape the
institutions and develop the self-serving public policies of local government that
maximize corporate interests in their favor.
Although redevelopment has largely morphed into an institution of local public
finance, local urban revitalization, and local urban economic development, Cuthbert’s
criticism of urban planning is applicable to many contemporary local redevelopment

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agencies. Local redevelopment agencies, because of the way they are financed and
because of the way they are structured, have a strong incentive to pursue public-private
partnerships with private real estate developers that ensure the highest and best use of the
available land located within their redevelopment project areas in order to generate the
maximum level of possible property tax increment revenue. Redevelopment agencies
pursue real estate projects that contribute to developing new property tax increment
revenues typically through partnerships with private real estate developers who, in turn,
seek to use the powers of the local redevelopment agency, specifically the powers of
eminent domain and property tax increment financing, to lower the costs of in-fill real
estate development. As a result, redevelopment agencies are willing to use their powers
of condemnation, eminent domain, and property tax increment financing to aggressively
transfer land from many individual property owners to a single private developer in order
to ensure that the in-fill real estate projects that are built generate the highest possible
level of future property tax increment revenue. A private land developer is also eager to
partner with a local redevelopment agency because the agency’s powers can help enhance
the developer’s profitability by reducing costs.
The existence of property tax increment financing and the local redevelopment
agency’s extreme dependence on new property tax revenue provides the agency with
little incentive to pursue other non-property based approaches to urban revitalization. For
example, the local redevelopment agency could invest its resources in developing
employment opportunities for the existing residents living within the agency’s local
redevelopment project area. But because the creation of new jobs would only impact net

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levels of income tax revenue, business license revenue, or payroll tax revenue, and
because new job creation would not likely generate significant levels of new property tax
revenue at least in the short-term, the redevelopment agency has little financial incentive
to pursue these types of projects. However, by not focusing on new job creation that
offers meaningful opportunity for individual income growth and general upward
mobility, redevelopment agencies generally pursue projects that result in simple
gentrification of urban neighborhoods while typically not pursuing projects that would
result in true urban revitalization.
The activities of the City of Los Angeles and the Community Redevelopment
Agency of the City of Los Angeles (CRA/LA) have been used by both scholars and
practitioners as a prototypical example of how different capitalistic institutions are used
to promote Neoliberal ideology. As Davis (1992) argues, “…the defense of luxury has
given birth to an arsenal of security systems and an obsession with the policing of social
boundaries through architecture.” (pg. 154). Davis (1992) zeros in on how the current
financing structure of local redevelopment agencies allow private corporate interests to
corrupt the urban revitalization process in order to tilt the benefits of urban revitalization
away from disenfranchised vulnerable populations, like poor minority and elderly urban
residential populations, and tilt these benefits of urban revitalization in the favor of the
private corporate interests. According to Davis (1992), “Taxes previously targeted for
traditional public spaces and recreational facilities have been redirected to support
corporate redevelopment projects. A pliant city government – in the case of Los Angeles,
one ironically professing to represent a liberal biracial coalition – has collaborated in

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privatizing public space and subsidizing new exclusive enclaves benignly called urban
villages.” (pg. 156). Davis (1992) further concludes that the City of Los Angeles’ and
the CRA/LA’s funding and use of “bumproof benches” and “outdoor sprinklers” has
resulted in the criminalization of poverty as the homeless and other undesirable
populations are chased away from public spaces to make room for additional private
development.
In the case of the City of Los Angeles and the CRA/LA, Davis (1992) focuses on
the city’s and the agency’s activities in the Bunker Hill area of downtown Los Angeles.
The Bunker Hill area of downtown Los Angeles was once a thriving, but lower-income,
neighborhood for several minority populations. Beginning in the 1980’s however, the
City of Los Angeles and the CRA/LA began to use its arsenal of public financial and
urban revitalization powers to eventually displace the existing residential population and
finance vast corporate real estate development projects including new high-income
luxury condominium developments and large office building developments. The City of
Los Angeles and the CRA/LA also began to finance and support new tourism-oriented
and destination entertainment development in the Bunker Hill area. The development of
several facilities, including a new state-of-the-art convention center and the recently
completed Staples Center and L.A. Live projects, provide high-income individuals with
new entertainment and tourism-oriented destinations that are priced well above what a
low-income family or individual could afford.
The “urban village” that has become downtown Los Angeles, according to Davis
(1992), has displaced a low-income, but thriving, residential population to make way for

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real estate development that now supports more corporate and high-income interests. In
this way, the City of Los Angeles and the CRA/LA have both failed to equally divide the
benefits of new private in-fill real estate development located in the Bunker Hill area
among both the interests of low-income populations and high-income individual and
corporate interests. Evidence of this disproportionate balance of the benefits created by
the policies and practices of both the City of Los Angeles and the CRA/LA can be seen in
the surrounding neighborhoods just outside the Bunker Hill area in areas like “Skid Row”
and other neighborhoods to the west. In conclusion, Davis (1992) finds that this effect
was not unintentional, but instead was a direct goal of public policy makers that had been
corrupted by private-sector real estate development interests. According to Davis (1992),
“For when Downtown’s new ‘Gold Coast’ is seen in relation to other social landscapes,
in the central city, the ‘fortress effect’ emerges, not as an inadvertent failure of design,
but as an explicit – and, in its own terms, successful – socio-spatial strategy.” (pg. 158).
Forester (1989) traces the failure of many contemporary bureaucratic institutions,
like local redevelopment agencies and other local institutions of local urban revitalization
and local urban economic development, to ensure an equitable distribution of the benefits
and costs of public investment into the urban environment to the hyper-technical
orientation of many contemporary public agencies. Forester (1998) argues that the
erroneous belief in the effectiveness of technical specialization found in the fields of
planning and public administration today have grossly eroded the capabilities of the
public to participate in the physical planning and shaping of their own physical
environment, a criticism of contemporary local redevelopment agencies that Fulton and

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Shigley (2005) also make. The dependence on hyper-technical specialization has led to a
precariously democratic, but strongly capitalistic society in which there exists few
meaningful, but many token opportunities for the general public to participate in the
revitalization of physically and economically blighted neighborhoods and communities.
It has become increasingly frequent that top level policy makers and bureaucrats
in the field of redevelopment have already decided the fate of certain proposed real estate
in-fill development projects which are proposed and planned for areas within a local
redevelopment project area well before the general public has had the opportunity to
scrutinize them. Forester (1989) does not deny the need to bring an enhanced level of
specialization to the fields of urban planning, public administration and other fields like
urban revitalization and urban economic development. In fact, Forester (1989) points out
that a high degree of technical specialization is greatly needed to ensure that government
functions both efficiently and effectively in the execution of public policies that affect the
urban environment. But Forester (1989) cautions practitioners that over-reliance on
technical specialization, to the extent that it results in a hyper-technical orientation, can
unwittingly create and further entrench the problems of the urban environment that the
practitioner is seeking to solve. Without meaningful public participation in the planning
and revitalization of the urban environment, public agencies, like local redevelopment
agencies, can find themselves hostage to the interests of a narrow group of private
interests by not considering the impact that public policy decisions and methods of
implementation can have on the wider public.

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Forester (1989) concludes that a balanced approach, which includes both
technical specialization of public policy makers and public administrators and
opportunities for meaningful public input into the planning and revitalization process, can
help ensure that neither the negative consequences of the hyper-specialization of public
administrators nor the chaos that can come from unchecked and unstructured public input
can occur. An approach to urban planning and urban revitalization that embraces both
technical specialization and meaningful public input is needed to ensure that the true
goals of urban revitalization are eventually met. An overt and unbalanced focus on
technical proficiency can undermine the potential benefit of urban planning and urban
revitalization. Alternatively, an overt and unbalanced focus on citizen participation can
disrupt the urban planning and urban revitalization process, leading to massive and costly
delays that can also undermine the potential benefit of urban planning and urban
revitalization. In the middle of this debate is a need to balance public accountability and
responsibility with functional efficiency, effectiveness, and economy. But as long as
local institutions of urban revitalization, like local redevelopment agencies, remain solely
focused on functional efficiency, effectiveness, and economy, there is little hope that
redevelopment can meet the original goals and purposes of local urban revitalization.

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Chapter 7 – Part II Conclusion and Propositions

7.a - Introduction
Part II has sought to explore the various criticisms of contemporary local
redevelopment agencies in Nevada and California. This section began by providing some
useful definitions of the goals of local urban revitalization and local urban economic
development, pertaining to the original intentions of redevelopment. These definitions
also help to explain why redevelopment was originally designed to be the primary
institutional form through which local municipal and county governments pursued the
processes and goals of urban revitalization and urban economic development.
But, like many institutions formed to do the public’s business, redevelopment
slowly moved away from these original goals and designs. Over time, redevelopment in
Nevada and California has been criticized for the over use of property-based approaches
to both urban revitalization and urban economic development. Local redevelopment
agencies have also been criticized for their overly local orientation to urban economic
development and the observation that redevelopment has increasingly become a financial
tool for the authorizing local government to further fiscalize existing land uses in the
hopes of generating new municipal revenues at the expense of true local urban economic
development. The final two criticisms explored in Chapter 6 both suggest that
redevelopment has moved too far away from its original goals of urban revitalization.
The use of eminent domain by local redevelopment agencies and the possibility that the

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institution of redevelopment is now overly subject to principal-agent corruption suggests
that redevelopment forces vulnerable urban populations to accept a disproportionate share
of the financial and social costs of redevelopment while imparting little of the benefit of
urban revitalization on the same vulnerable populations.
A unique historical opportunity exists in both Nevada and California to address
these problems head-on. Redevelopment, as an institution of local public finance, local
urban revitalization, and local urban economic development, has considerable power to
shape and develop the most physically and economically blighted parts of America’s
largest cities. Redevelopment also has considerable power to shape the purposes that
cities serve. In the next 15 to 20 years, the majority of existing local redevelopment
project areas in Nevada and California are set to expire. Given that the social and
economic problems of urban inner central city core areas are unlikely to be adequately
resolved in the next 15 to 20 years, a unique opportunity has presented itself. The next
generation of institutions dedicated to local urban revitalization and urban economic
development can be purposefully structured in ways that extend the benefits of urban
revitalization to a much larger portion of the general public.
Gordon (2009) argues that many of the problems facing contemporary American
cities today are the result of a “vicious cycle” caused and perpetuated by ineffective
government policy. In Gordon’s (2009) vicious cycle, ineffective policies lead to
undesirable times which lead to more bad policies that lead to even more bad times. To
stop this vicious cycle, society must take a more critical look at the many public policies
that routinely impact people’s economic, social, and political lives. This critical look

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must take into consideration the advantages and disadvantages of public policy decisions,
how they are implemented, and the long-term impacts.
Each of the criticisms explored in this section also questions whether or not
government, at any level and through any institutional form, should have a direct and
purposeful role in the shaping, building, and rebuilding of the urban American
environment. Gordon’s (2009) vicious cycle suggests that government might
unintentionally create many of the problems within the urban environment that it seeks to
control and solve. If government is responsible for “bad policies”, perhaps government
should take a less active and direct role in the shaping, building, and rebuilding of the
urban environment. But there is also an equally powerful argument for an active and
direct role for government in revitalizing the urban environment. Many scholars have
suggested that government exists, in no small part, to bring stability to the chaos of
competitive markets. Society has learned that it is not enough simply to rely on the self-
interests of individuals to fully ensure the public’s long-term general good or the long-
term economic prosperity and development of cities.
Over time, American society has increasingly supported an expanded role for
government in stimulating national, regional, and local economic activity. Within the
field of redevelopment, it is widely accepted that the high costs associated with urban in-
fill development requires the intervention of public resources to encourage new
investment and reinvestment of private dollars back into urban inner central city real
estate markets. The high costs of site acquisition, proper demolition, and environmental
remediation of contaminated sites in the urban environment provides the private real

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estate market with strong economic incentives to build in outlying suburban and
“greenfield” sites. Striking a balance between public-sector and private-sector action in
the urban in-fill real estate market is complex and difficult to obtain. The consideration
of the criticisms of contemporary redevelopment agencies presented in this chapter
provides policy makers with an important advantage when considering alternative, future
public institutional arrangements for local urban revitalization and local urban economic
development.

7.b – Propositions
The criticisms of contemporary local redevelopment agencies presented in this
section suggest five specific research propositions that can be tested through both
qualitative and quantitative analysis. Each proposition presented here builds upon the
three propositions already presented at the end of Chapter 3.

Proposition 4: Redevelopment has become overly dependent on the use of property-
based approaches to urban revitalization and urban economic development. The
dominance of property-based approaches in the way local redevelopment agencies pursue
the goals of urban revitalization and urban economic development stunt the ability of
local redevelopment agencies to successfully revitalize blighted urban neighborhoods and
stimulate long-term, stable, local economic growth.

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Proposition 4 can be tested by simply examining budgetary and expenditure data
for local redevelopment agencies. If Proposition 4 is true, then it is reasonable to assume
that a significant amount of a local redevelopment agency’s resources are used to
stimulate private real estate projects. The impact of real estate driven approaches to
urban revitalization and urban economic development can be measured using standard
measures of economic growth, including job creation and wage data. Additional insight
into this proposition can be gleamed from examining what relationships, if any, local
redevelopment agencies have with other local or regional economic development
organizations that employ largely non-property based approaches to urban revitalization
and urban economic development.

Proposition 5: Local redevelopment agencies have increasingly become “local players”
in efforts to stimulate regional economic growth. By ignoring regional economic
development considerations, redevelopment often works against its own efforts to
stimulate successful local economic growth.

Proposition 5 can be tested in ways similar to the tests for Proposition 4. First,
detailed case studies can be used to determine the level of interaction that local
redevelopment agencies have with more regionally focused economic development
institutions. If the degree of involvement is simply cosmetic and little actual partnership
occurs, then local redevelopment agencies might be working with little consideration for
larger regional economic forces. Second, the types of projects local redevelopment

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agencies pursue might also help shed some light on whether or not local redevelopment
agencies operate with a largely local oriented focus or with a largely regional focus. This
information can be teased from the budgetary and expenditure data of local
redevelopment agencies.

Proposition 6: Local redevelopment agencies have increasingly been used by the
authorizing local municipal or county government to “game” local systems of public
finance. Redevelopment agencies further fiscalize the land use of their local
redevelopment project areas to generate the maximum amount of municipal or county
revenues to such an extent that wider economic development considerations are
sacrificed.

Proposition 6 can be tested in ways similar to the tests for Proposition 4 and
Proposition 5. First, a simple examination of the budgetary and expenditure data for local
redevelopment agencies can shed useful insight into whether or not redevelopment
agencies were used to support private real estate development that generated high levels
of municipal and county non-property based revenue. Second, the potential for each of
these projects to support new job creation that offers area residents with opportunities for
meaningful income development and general upward mobility can be determined using
detailed case studies of various local redevelopment agencies. Third, individual
redevelopment agencies can be surveyed, using the framework provided by Lewis and

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Barbour (1999) to determine underlying motivations behind different redevelopment
projects.

Proposition 7: The use of eminent domain by local redevelopment agencies continues to
be used in ways that support private real estate development interests at the expense of
vulnerable populations, including poor minority and elderly urban residential
populations. If true, the use of eminent domain works counter to the original intent of
redevelopment legislation. If true, the use of eminent domain also signals the possibility
that local redevelopment agencies are working contrary to their urban revitalization goals
by forcing vulnerable populations to bear a disproportionate level of the costs associated
with eminent domain while transferring a disproportionate level of the benefits associated
with eminent domain to private real estate interests and developers.

Proposition 7 can be tested using a broad survey of local redevelopment agencies
to determine the level of eminent domain use by local redevelopment agencies. Detailed
case studies can help expand this analysis by providing context to the use of eminent
domain by local redevelopment agencies, while also providing a detailed synopsis of how
eminent domain was used, why it was used, and what the long-term impacts of its use
were.

Proposition 8: Local redevelopment agencies have increasingly become subject to
principal-agency corruption and do not provide the larger public with meaningful

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opportunities to participate in the wider activities of local redevelopment agencies. This
has created a power and knowledge imbalance through which private real estate
developers are able to set the project and policy agenda for local redevelopment agencies.
Without meaningful public input, it is likely that local redevelopment agencies are simply
gentrifying and not revitalizing physically and economically blighted neighborhoods and
communities.

Proposition 8 can be tested through both a wide survey approach of local
redevelopment agencies and the use of more detailed case studies. The goal of either the
survey approach or the use of detailed case studies would be to determine whether or not
local redevelopment agencies provide the public with meaningful opportunities for public
participation and whether or not redevelopment public policies are influenced by public
input. Public hearings, which typically limit individual public comment to a maximum of
two or three minutes, typically scheduled on a weekday between the hours of 9am and
5pm, provide little opportunity for meaningful public input. An examination of the
structure of citizen advisory boards and commissions would also provide useful insight
into whether or not there are meaningful opportunities for the public to provide input into
the redevelopment process. Redevelopment citizen advisory boards populated mostly by
private real estate or other private business interests might not necessarily support wider
public participation and could potentially be used by a narrow set of private interests to
unfairly manipulate whatever public input process might exist.

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Part III uses different ideas, theories, and approaches in the fields of public
administration, local public finance, and local economic development to suggest possible
new institutional approaches to urban revitalization and urban economic development.
These ideas, theories, and approaches are used to directly address the criticisms of
contemporary local redevelopment agencies examined in this section while also
suggesting alternative institutional forms and alternative public policy decisions to the
current institutional form of redevelopment as the dominant institutional form of urban
revitalization and local urban economic development.

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Part III – Contributions of Political Science, Political Economy, and Public
Administration to Local Urban Revitalization Efforts, Processes and Institutional
Arrangements, the Scholar’s Experience

III.a – Introduction
In Part I, the practitioner’s historical experience with urban revitalization and
urban economic development was presented. Over time, from the evidence presented
throughout Part I, it is clear that government’s role and responsibility in shaping,
building, and rebuilding the American urban environment has changed and evolved as
new political, legal, administrative, social, and economic ideas and realities changed. For
the first half of American history, the young nation struggled with defining government’s
role in the provision of urban related services and government’s role in altering the built
environment. Between the late 1800’s and early 1900’s, the socio-demographic
characteristic of the nation shifted. Prior to 1920, the United States was a largely
agrarian society with the majority of people living in rural, non-incorporated areas.
But in 1920, for the first time ever in an American census, the majority of people
were living in cities. As urban populations grew, a new role for government and a new
relationship between government and the public grew from rising problems of urban
poverty, environmental catastrophe, and insufficient urban economic growth. In the
years immediately following World War II, it was unclear whether or not the federal,
state or local governments would take on the primary responsibility for encouraging new

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economic development in the urban areas and for revitalizing neighborhoods and
communities that had increasingly become blighted.
In the mid 1950’s, following passage of the 1949 Federal Housing Act and the
1954 Federal Housing Act, it was clear that the U.S. federal government would become
the dominant provider of urban related services and would assume the primary
responsibility for encouraging new urban economic development and for revitalizing
blighted neighborhoods and communities through federal urban renewal policies. But by
the mid 1970’s, it was clear that the federal government could not deliver on the promises
it had made relating to ensuring long-term, stable, local urban economic growth or the
promises federal urban renewal policies made to successfully revitalize physically and
economically blighted neighborhoods and communities. Eventually, policy makers,
practitioners, and the administrators responsible for urban economic development and
urban revitalization turned their attention to the powers of state governments to authorize
the creation of local redevelopment agencies and the powers of local municipal and
county governments through their local redevelopment agencies.
The period between the mid 1970’s and the late 1980’s saw the rise of
redevelopment as the dominant institutional form through which local municipal and
county governments sought to achieve the goals of local urban revitalization and local
urban economic development. In Nevada and California, redevelopment quickly became
the primary way in which local municipal and county governments sought to eliminate
various forms of physical and economic blight, while also creating quality new local jobs
and retaining existing local ones. Practitioners in the new field of redevelopment also

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sought out a whole series of new local urban revitalization and local urban economic
development approaches and strategies in the decades after the end of the federal urban
renewal era. Beginning as early as President Carter’s administration, there was a
growing belief that local urban revitalization and local urban economic development
could, and quite possibly should, be achieved through the use of public-private
partnerships in which a local redevelopment agency provided private-sector developers
with the financing and capital needed to jump start private real estate development in
physically and blighted urban neighborhoods and communities.
The shift from federal leadership to local government leadership was the result of
changes in various political, legal, administrative, organizational, social, and economic
theories and realities. In the fields of political science and public administration,
movements such as the New Public Management emphasized a greater role for the
private-sector in the delivery of public services as well as greater emphasis on achieving
higher levels of public efficiency, effectiveness, and economy in the delivery of public
services. These different movements and ideas led to new organizational approaches in
the way in which public bureaucracies were organized. Over time, new governance and
organizational approaches, like regulatory-based governance models, network-based
governance models, and market-based governance models, began to replace traditional
hierarchical approaches to public governance and public-sector service provision.
Although these new governance and organizational approaches are largely based on a
series of management and organizational theories that have had a long history in
academic and scholarly thought, these new alternative methods and approaches to

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governance and public-sector service provision gained renewed attention during the
1970’s, 1980’s, and 1990’s.
Socially, the United States was also experiencing a shift in the beliefs about how
government should function and what services government should provide. In
California, passage in 1978 of Proposition 13 signaled a nationwide belief that
government should provide publicly demanded services more efficiently and at a lower
cost. The public still demanded that government should provide a wide range of public
services and, over time, the demand for new public services has grown. At the same
time, however, there was a growing public concern that government was not providing
these existing and new services in the most cost-efficient way. The public was also
growing concerned government tax revenues were growing at a rate greater than what
was reasonable. As the public was becoming increasingly frustrated with government
inefficiency and rising levels of taxes, new theories and ideas from the fields of private-
sector management and economics helped shape how local municipal and county
governments, through their local redevelopment agencies, pursued the revitalization of
physically and economically blighted neighborhoods and communities and how these
local governments sought to achieve long-term, stable, local urban economic growth.
By the mid 1970’s, Neo-Classical economic thought, born out of the Monetarists
revolution of the 1950’s and 1960’s, had grown to replace the Keynesian economic
theory that had dominated much of public-sector service provision ideology. Although
Neo-Classical economic theory can be traced as far back as 1871 in William Stanley
Jevon’s Theory of Political Economy, Carl Menger’s Principles of Economics, and Leon

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Walra’s 1874 Elements of Pure Economics, Neo-Classical economic theories of
macroeconomic stabilization and economic growth experienced a resurgence after the
Monetarists, led by Milton Friedman and the Chicago School of Economics, began to
criticize the Keynesian economic justification for government intervention into failing
private markets. The reemergence of Neo-Classical economic theory and the changing
social beliefs of the public, coupled by new and emerging beliefs in political science,
public administration, and organizational theory, led to a significant shift in how
practitioners in the field of redevelopment approached the processes of urban
revitalization and urban economic development.
A new wave of highly-technically oriented individuals, with training in public and
private finance, urban planning, real estate development, the law, and administration,
replaced the federal urban renewal practitioners who had focused their efforts on crime
prevention, substance abuse rehabilitation, job training, and publicly funded and
developed affordable housing. Local redevelopment agencies would seek to enter into
public-private partnerships with private real estate developers. This new role de-
emphasized direct public service provision of urban oriented services and de-emphasized
the role of a government agency in the successful revitalization of physically and
economically blighted neighborhoods. It would also lead to the creation of new public-
private networks, designed to enhance the ability of local municipal and county
governments through the efforts and activities of private-sector actors to ensure long-
term, stable, local economic growth.

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Despite the development of this new relationship between government and the
private-sector, the successful revitalization of physically and economically blighted
neighborhoods has been anything but fully realized. Many local jurisdictions still have
nagging problems of urban physical and economic blight that threaten the long-term,
stable, economic growth of their community. Redevelopment has certainly made
significant strides in successfully revitalizing aging and deteriorated neighborhoods. In
California alone, the efforts of local redevelopment agencies state-wide have made
redevelopment the largest provider of quality affordable housing, second only to the
federal government. California redevelopment agencies have helped to create and retain
a massive number of new and existing jobs that local municipal and county governments
depend on in order to generate the sources of public revenue they need to fund expanding
levels of public services. But as Part II illustrated, redevelopment is not free from severe
criticism.
The criticisms outlined in Part II support the hypothesis that redevelopment has
drifted too far from its original purposes and that redevelopment, because of the ways it is
financed and organized and because of the public policies it pursues and implements, is
no longer fully capable of meeting the goals of urban revitalization and urban economic
development. First, redevelopment is overly reliant on property-based approaches to
urban revitalization and urban economic development. But because many of the
problems found within the urban environment originate and are perpetuated by non-
property based forces, it is highly unlikely that property based approaches can solve
them. Also, because many aspects of economic growth are non-property based, it is

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unlikely that property based approaches to urban economic development alone can ensure
long-term, stable, local urban economic growth.
Second, current redevelopment policies and their implementation ignore larger
regional economic concerns. As Chapter 5 illustrated, in contemporary America, many
industries and private businesses operate regionally, with little meaningful regard for
local municipal and county political boundaries. For the private-sector, one goal is to
expand market share beyond the confines of a single jurisdiction. Individuals living and
working in urban areas like a large metropolitan statistical area like the Los Angeles-
Long Beach MSA are also largely indifferent to the existence of municipal or county
political boundaries when it comes to employment opportunities or opportunities for
entertainment, recreation, and commercial-retail shopping. If local redevelopment
agencies are supposed to support and stimulate economic growth, why then are local
redevelopment agencies so focused on revitalizing physically and economically blighted
neighborhoods within the narrow confines of a municipal or county jurisdiction? Much
of the reason why local redevelopment agencies are forced to think locally instead of
regionally is because the law narrowly restricts the use of redevelopment funds outside of
the established redevelopment project area. Although the law makes a distinction
between local and regional when it comes to redevelopment, private-sector markets do
not. In order to ensure long-term, stable, local urban economic growth, policy makers
must first consider how to ensure long-term, stable, regional economic growth. The
current institution of redevelopment is currently incapable of this because many of the

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policies and practices of existing local redevelopment agencies work counter to regional
economic forces.
Whereas the second criticism focuses on redevelopment’s largely local, non-
regional orientation to urban economic development, the third criticism points out that
redevelopment, because of the way in which local municipal and county governments are
financed in Nevada and California, has been controlled and used by the local authorizing
government in ways that generate the maximum level of municipal or county revenues.
This criticism centers around two interdependent points. First, due to the restrictions on
local property-based public revenue sources, the local authorizing government of a local
redevelopment agency uses redevelopment powers, in the 21
st
Century equivalent of
smoke-stack chasing industrial policy, to attract new retailers, hotels, and other like-
businesses to their jurisdiction that generate the highest possible level of sales tax
revenue, hotel room and transient lodging tax revenue, and other non-property based
public revenue sources. This usually pits one local jurisdiction against a neighboring
jurisdiction in a type of financial gamesmanship that is counterproductive to regional
economic and local urban economic development interests. Second, redevelopment has
become increasingly used to further fiscalize the land use of existing local jurisdictions.
New local redevelopment project areas can be created and formed to include hundreds, if
not thousands, of acres of underdeveloped or undeveloped land. The controlling local
municipal and county government can then use the powers of redevelopment, specifically
the ability to use property tax increment financing, to support the development of new
retailers, hotels, and other businesses that maximize local municipal and county

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governments. Both points show that redevelopment has been increasingly used to meet
the objective of generating the maximum level of municipal and county revenues, even if
that objective conflicts with the objectives of ensuring long-term, stable, local urban
economic growth.
The last two criticisms of contemporary local redevelopment agencies presented
in Chapter 6 argue that redevelopment, because of the use of eminent domain and the
possible presence of principal-agency corruption, makes true urban revitalization
impossible. Criticisms of contemporary local redevelopment agencies that stem from the
use of eminent domain suggest that redevelopment now forces vulnerable populations,
like poor minority and elderly urban residential populations, to bear a disproportionate
level of the costs of urban revitalization without imparting at least an equal share of the
benefits of urban revitalization to the same vulnerable populations. In her dissenting
opinion in the 2005 U.S. Supreme Court case, Kelo v. City of New London, Justice
O’Connor wrote that the continued use of eminent domain by local economic
development agencies, like a local redevelopment agency, will continue to advance the
interests of private-sector corporations, businesses, and real estate developers while
forcing those individuals that could most benefit from urban revitalization to bear a
significantly higher level of the costs.
The next criticism charges that local redevelopment agencies in Nevada and
California do not provide any meaningful way for the larger public to participate in the
redevelopment processes. Because of the highly technical nature of contemporary
redevelopment, and because private-sector corporations, businesses, and real estate

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developers enjoy higher levels of technical expertise than the general public, private-
sector interests can manipulate the redevelopment process so that it benefits them and
disadvantages vulnerable populations like poor minority or elderly urban residential
populations. The criticisms of eminent domain and principal-agent corruption suggest
that redevelopment can no longer meet the actual goals of urban revitalization. Instead,
successful urban revitalization is now measured in-terms of the number of aging and
deteriorating structures demolished and the number of new commercial-retail square
footage constructed, or by the number of new market-rate or luxury condominiums built,
or by the number of new hotel rooms opened within a local redevelopment agency’s
redevelopment project area. Over time, urban gentrification has replaced actual urban
revitalization as the primary objective of local redevelopment agencies.
Each of these five criticisms suggest that redevelopment has drifted too far from
its original purposes and is now not able to fully meet the goals of urban revitalization
and urban economic development. There is, however, a unique historical opportunity in
Nevada and California. Over the next 15 to 20 years, the majority of existing local
redevelopment project areas in Nevada and California will expire. Given probable needs
to continue urban revitalization and urban economic development efforts within urban
communities, there is a unique opportunity to reconsider the public policy decisions,
implementation strategies and approaches, and the organizational structure of these
institutions to better achieve the goals of urban revitalization and urban economic
development.

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Part III surveys the existing literature in the fields of political science, political
economy and public administration, local public finance, and local economic
development and urban economics in order to develop possible institutional alternatives
to contemporary local redevelopment agencies. Chapter 8 examines two common issues
in the fields of political science, political economy, and public administration. The first
explores the issue of political and economic independence and dependence of public
agencies charged with the responsibility of promoting long-term, stable, economic
development, economic growth, and economic activity. The second explores the need for
balancing public accountability and responsibility with functional efficiency,
effectiveness, and economy.
Chapter 9 explores several specific contributions of local public finance to local
government redevelopment. This chapter covers the financial pressures that local
governments face and the evolving struggle between regional economic cooperation and
local financial gamesmanship. As already alluded to, local municipal and county
governments now find themselves in a difficult situation. On one hand, local municipal
and county governments find themselves in need of providing routinely higher levels of
public services. On the other hand, local municipal and county governments find
themselves forced to confront the dilemma of rising service costs and greater restrictions
on their ability to raise the revenue needed to support increased service demand. Because
current systems of local public finance do not consider the relationship between a local
jurisdiction’s tax base and economic base, local governments must increasingly employ
new creative ways to raise the revenue needed to support increased public-sector service

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provision. Local governments also find themselves caught between regional economic
realities and legal constraints that acknowledge only the local economic landscape. If
local economies are largely driven by regional economic forces, local governments
should pursue urban revitalization and urban economic development strategies and
approaches that stimulate regional economic activity. But because public revenues for
local governments are collected only locally, local governments have increasingly
ignored regional urban revitalization and urban economic development approaches in
favor of policies, programs, and strategies that seek to maximize local sources of public
revenues.
Chapter 10 explores the many new urban revitalization and urban economic
development approaches and strategies that have gained considerable traction in the
fields of economic development and urban economics. First, an expanded discussion on
various local economic development strategies is included. The use of various
approaches, including technology-led development, small business and entrepreneurial
led development, workforce development, business retention and expansion,
neighborhood led development, and real estate development and reuse is presented to
show that local economic development encompasses a wide range of property-based and
non-property based strategies. All of these are needed in a more holistic and
comprehensive economic development strategy. A discussion on industry clustering and
regional-oriented economic development is also provided. Finally, the importance of
regional organizations to long-term, stable, local economic growth is presented as a way

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of introducing new organizational structures for alternative institutions of local urban
revitalization and local urban economic development.
Chapter 11 concludes with some final observations and summarizes several of the
lessons learned from the fields of political science, political economy, public
administration, public finance, and economic development. These lessons are used to
form a rudimentary blueprint for the formation of new, alternative institutional
approaches through which local municipal and county governments can continue to
pursue the processes and goals of local urban revitalization and local urban economic
development.

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Chapter 8 – Contributions of Political Science, Political Economy, and Public
Administration

8.a – Introduction
In considering what alternative new institutional forms might take the place of
contemporary local redevelopment agencies in Nevada and California, two important
questions must be addressed. First: What degree of political autonomy should
institutions charged with the responsibility of urban revitalization and urban economic
development be given? This question is at the heart of many of the criticisms of
contemporary redevelopment agencies presented in Part II. Redevelopment agencies are
highly technical and are granted significant authority and power to reshape the physical
landscape of the urban built environment. Because of these powers, local municipal and
county elected officials may have a powerful incentive to manipulate and use local
redevelopment to further individual political gains or the needs of the local municipality
or county to generate new sources of public revenues. Given this temptation, it would
make sense to provide some type of formal boundary between the locally elected officials
of a municipality or county and the local redevelopment agency. But redevelopment can
be as easily manipulated by private corporations, businesses, and real estate developers.
Given this possibility, it would make sense to provide some degree of official and
political oversight of the local redevelopment agency. The degree of political autonomy
that a local redevelopment agency should enjoy is a difficult question to answer and is

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explored further in this chapter using cues from central banking theory in economics and
political economy.
Second: How can public accountability and responsibility be balanced with
functional efficiency, effectiveness, and economy in urban revitalization and urban
economic development processes and through new institutional arrangements for local
redevelopment agencies? The need to balance public accountability and responsibility
with functional efficiency, effectiveness, and economy is a central question that has
preoccupied the fields of public administration and organizational theory for decades. On
one hand, high levels of public accountability and responsibility mean little if the agency
is unable to either deliver the services it was designed to provide or meet the goals that is
was created to achieve. On the other hand, high levels of functional efficiency,
effectiveness, and economy mean equally less if the agency tramples the rights of the
people it was designed to serve. But different organizational structures and models of
governance tend to have varying degrees of public accountability and responsibility
versus functional efficiency, effectiveness, and economy. This struggle to balance these
two opposing forces in new alternative institutional forms of local urban revitalization
and local urban economic development is also explored in this chapter.

8.b – Political Independence vs. Dependence in the Provision of Local Urban
Economic Development Services
It is a truism to argue that government exists to conduct the public’s business. In
order to conduct the public’s business, government has created a wide variety of different

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agencies, organizations, and institutions, each of which has considerable authority and
power. Some government agencies have the power to regulate private commerce, such as
the U.S. Food and Drug Administration. Other government agencies have the power to
investigate and prosecute criminal activity, such as a county’s District Attorney’s Office.
And even more government agencies have the ability to raise capital to support specific
public and private developments like roads, schools, convention centers, and sewer
systems. But no other agency of government in the United States is perhaps as powerful
as the United States Federal Reserve Bank. Seemingly out of thin air, the U.S. Federal
Reserve (Fed) has the power to create money. Not even the United States Department of
the Treasury has the power to create vast sums of money. Although the U.S. Department
of Treasury has the power to make coins and issue debt, only the Fed has the power to
print money and set interest rates. This power, to create money out of thin air, is so vital
to the United States national economy, that when it was first created, the Fed was given a
unique degree of political independence.
Although the sitting U.S. President has the power to nominate the Federal
Reserve’s Chairman and other subsequent branch presidents, and the U.S. Senate has the
power to confirm or deny the nomination and even the power to impeach a sitting Fed
Chairman, the U.S. Federal Reserve alone, through its governing rules and procedures,
has the power to set interest rates and set money supply targets. These incredible powers
of the Fed were determined to be so powerful and so important that, when the Fed was
first created, it was decided that the Fed should be granted significant political autonomy
from both the President and the Congress. Beginning with the 1913 Federal Reserve Act,

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it was decided that monetary policy and fiscal policy should be separated. The Fed
would be given authority over setting, implementing, regulating, and maintaining the
nation’s monetary policy while the Executive and Legislative branches of the federal
government would be given authority over the nation’s fiscal policy. In effect, the 1913
Federal Reserve Act attempted to separate the proverbial key of monetary policy from the
proverbial lock of fiscal policy. Both monetary policy and fiscal policy are considered to
be equally important to the long-term economic health of the nation. But because of their
equal importance, it was believed that a formal degree of political separation between the
two policies should be institutionalized.
Although this system of high political independence in the setting, implementing,
regulating, and maintaining of the nation’s monetary policy through the Fed has endured
criticism from almost everyone along the entire political spectrum, many attribute the
relatively stable growth in the United States national economy since 1913 through the
present day to the Fed’s political independence. Certainly, the Fed has made serious
mistakes in the past that have contributed to wide spread economic suffering. Walton
and Rockoff (1998) argue that the Fed’s pursuit of a constrictive monetary supply in the
late 1920’s and early 1930’s greatly contributed to the extent of the American Great
Depression. Walton and Rockoff (1998) also point out that the Fed made a serious
mistake during the mid 1970’s by refusing to target inflation. It was not until the
appointment of a new Fed Chairman, Paul Volcker in 1979 by President Carter, did the
Fed make the decision to focus its monetary instruments on tackling the hyperinflationary
cycle the nation had been caught in during the late 1970’s and early 1980’s.

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Despite these obvious and serious policy blunders, the Fed has been able to retain
its political independence from the politics of Washington, D.C. According to Walton
and Rockoff (1998), the temptation to use monetary policy to over stimulate the national
economy is so great that politicians, regardless of their best of intentions, should never be
given the authority to print money. This conundrum of monetary policy is the result of a
simple relationship in monetary economics. Walton and Rockoff (1998) point out that
increasing the supply of money has both a short-term and a long-term economic effect.
In the short-term, reducing interest rates, or increasing the total money supply, adds
liquidity to the financial system. As liquidity increases, there is a short-term spike in
economic activity. But in the long-term, an increase in the money supply can lead to
inflation and the eventual decrease in the value of money.
Politicians, according to Walton and Rockoff (1998), have a strong political
incentive to “pump” the economy full of liquidity, especially in the months leading up to
their re-election bid. This is a phenomenon that Woodward (2000) documents. In the
mid-election year of President Reagan’s first term, then Fed Chairman Paul Volcker,
according to Woodward (2000), was pressured by both the President and Chief of Staff
James Baker to lower the Fed’s prime rate of interest in the hopes of stimulating short-
term economic activity in the United States. Republicans could then use the short-term
economic growth to campaign on against rival Democrats. Ultimately, neither the
President nor the Chief of Staff was successful in convincing Chairman Volcker to lower
interest rates. As this simple story illustrates, the power of the U.S. Federal Reserve
Bank is so great that it can tempt Republicans or Democrats, liberals or conservatives,

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into sacrificing long-term economic growth for short-term political advantages. That is
why, according to both Walton and Rockoff (1998) and Woodward (2000), the Fed has
maintained its political autonomy from the rest of the U.S. federal government.
In a seminal piece on monetary policy and political economy, Cargill, Hutchison,
and Ito (1997) find a strong correlation between the political autonomy of a nation’s
central bank, for example the U.S. Federal Reserve, and the success of the central bank in
hedging inflationary pressures in the national economy. In conducting their own study of
central bank independence in many industrialized countries, and from examining the past
work done by other economists and scholars of political economy and central banking
theory, Cargill, Hutchison, and Ito (1997) generally find that the rate of measured
Consumer Price Index (CPI) Inflation tends to be statistically lower in industrialized
countries that have largely politically autonomous central banks. A lower annual rate of
CPI inflation contributes greatly to long-term national economic prosperity and growth.
A reasonably balanced monetary policy, which allows for some growth but does not
allow the national economy to become overheated due to uncontrolled growth in
liquidity, is critical in ensuring long-term price stability which, in turn, contributes to
reasonable levels of annual economic growth.
In turning their attention to Japanese monetary policy and the Bank of Japan (the
Bank of Japan is the central bank for Japan, or the equivalent of the U.S. Federal Reserve
in the United States), Cargill, Hutchison, and Ito (1997) find that a gradual erosion of the
Bank of Japan’s political autonomy significantly contributed to the near complete
collapse of the Japanese financial system during the early to mid 1990’s. Over time, the

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Japanese Ministry of Finance (Japan’s equivalent to the U.S. Department of the Treasury)
was able to reign in the Bank of Japan and significantly reduce the Bank of Japan’s
political autonomy to set, implement, regulate, and maintain Japan’s national monetary
policy. As major Japanese financial institutions were beginning to fail by the end of the
1980’s, they were able to put enormous political pressure on the Ministry of Finance
which, in turn, placed enormous pressure on the Bank of Japan to provide these insolvent
financial institutions with cash and other monetary relief. Many contemporary scholars,
including Cargill, Hutchison, and Ito (1997), contribute the behavior of the Japanese
Ministry of Finance to what many refer to as Japan’s “lost decade”. The political
corruption of the Bank of Japan by the Ministry of Finance, allowed because the Bank of
Japan’s political autonomy had been so severely eroded, led to monetary policy that kept
insolvent financial institutions functioning while the rest of the Japanese national
economy continued to experience periods of severe economic decline for much of the
1990’s.
In general, it is widely accepted among contemporary scholars in the fields of
economics and political economy that a largely politically independent and autonomous
central bank is a precursor for stable, long-term, economic growth. These same scholars
also note that central banks should not necessarily have complete and total autonomy
from the political institutions of government. There should be some degree of political
oversight to ensure that the central bank is not using its powers in a way that is contrary
to overall public good. As Walton and Rockoff (1998) point out, one of the leading
reasons as to why previous attempts to create independent national banks in the United

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States failed prior to the Federal Reserve Act of 1913 was that the national banks created
suffered from a high degree of external corruption. Without some degree of meaningful
public and political oversight, a central bank can be as susceptible to corruption as any
other institution of government.
This apparent contradiction – the need for a central bank that is largely
autonomous from political influence and the need for a central bank that can be properly
monitored, supervised, and regulated by the public – is the same exact paradox that
currently confronts contemporary redevelopment agencies in Nevada and California. In
many ways, local redevelopment agencies are not unlike central banks. One of the
largest and sometimes most controversial power of local redevelopment is the power to
collect incremental property taxes from the local redevelopment project area and then
provide those funds to a private real estate developer through property tax increment
financing. Like a central bank, a local redevelopment agency has the apparent power to
create money, seemingly out of thin air. As the second and third criticisms of
contemporary local redevelopment agencies presented in Chapter 5 point out, the power
of property tax increment financing is a temptation that many local municipal and county
elected officials have a difficult time avoiding.
As Fulton and Shigley (2005) point out, redevelopment has been used by
countless elected municipal and county officials to build roads, sidewalks, churches,
schools, and even city halls. All of which, according to Fulton and Shigley (2005), are
either against the law or fail to really promote local urban economic development. All of
these types of projects do serve important public interests. But that is why local

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municipal and county governments have public works departments, local school districts,
and other departments designed for the purposes of building other types of civic
infrastructure. But redevelopment is also a potential pool of valuable property tax
revenue that can be manipulated by locally elected officials to pursue non-redevelopment
objectives.
The failure to ensure some degree of political autonomy for local redevelopment
agencies also rears itself in the observation that many local redevelopment agencies are
used, because of their unique and special powers, in ways that have nothing to do with
local urban economic development. As Chapman (1998), Lewis (1998), and Lewis and
Barbour (1999) all point out, redevelopment has become a way in which local
governments further fiscalize their land uses to ensure the maximum creation of new
sources of non-property based public revenues. Unfortunately, the jobs produced by
projects that generate large amounts of either sales tax revenue or hotel room and
transient lodging tax revenue offer little opportunity for individual income growth or
general upward mobility. Local municipal and county governments, because of the
political pressures they face to increase overall public-sector service demand, are
constantly using the non-politically autonomous nature of redevelopment to their benefit.
In sacrificing redevelopment’s ability, when used properly, to stimulate long-term, stable,
local urban economic growth, local municipal and county governments can use the
powers of redevelopment to generate the revenue needed to support increased public-
sector service demand.

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Authors, scholars, and practitioners like Woodrow Wilson, Leonard White, W.F.
Willoughby, Luther Gulick, Dwight Waldo, and John M. Pfiffner were some of the first
writers in the field of public administration to warn against the influence of political
incentives and pressures in the execution of public policy. Woodrow Wilson, in his 1887
essay The Study of Administration, was one of the important early scholars to define a
politics-administration dichotomy. He argued that the political process of creating public
policy, and the administrative process of implementing public policy, should be kept
relatively separate from each other and that a trained, highly-professional, and highly-
technical bureaucracy should be created in order to effectively and efficiently conduct the
public’s business. Many other scholars in the field of public administration have
advocated for a more egalitarian approach to the administration and implementation of
public policy where the public, through its elected officials, has more direct control of the
bureaucracy. There has been a growing voice of concern that the highly-technical
orientation of contemporary public administration fails to take into consideration the
overall needs of the public. Scholars like Fainstein and Fainstein (1996), Flyvbjerg
(1998), Friedman (2002), and Sites (2007) all hint that the politics-administration
dichotomy first advocated by Wilson has corrupted the political process and has created a
technocratic state ruled by the bureaucrats and not governed by duly elected public
officials and the public in general.
It can be argued, however, that Wilson understood that the actual business of
government is too important to leave solely in the hands of relatively short-term thinking
politicians. Wilson was not afraid that the bureaucracy would corrupt the political

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system. Wilson was afraid that, without a modestly independent civil service, the
political system would eventually corrupt the professionally expert bureaucracy. This
fear is a fear echoed by both Newland (1987) and Frederickson (1997). According to
Newland (1987):

…experience since the late 1960’s suggests that concerns
for governmental excellence in the contemporary
presidency are matched by a concern for political loyalty
and the prizes of high-level spoils. In contrast with spoils
practices of the earlier era, today’s appointees generally
lack long-standing ties to Congress; they owe their
loyalties and access to the special interests which comprise
the president’s sources of support and funding. Playing
this new form of spoils may be required of a president to
sustain support in this era of weak political parties,
powerful but fluid interest groups, and image projection
through mass media. (pg. 50).

Newland (1987) points out that there is a trade-off between the degree of political
intrusion into a bureaucracy like the U.S. federal government and the ability of
government agencies to efficiently and effectively discharge their duties and
responsibilities. Newland (1987) further points out that the federal bureaucracy, by the
mid to late 1980’s, had been overrun by a number of political appointees who owed their
appointment to the president and a host of other special interests. This trend in the
number of political appointees is further elaborated on by Frederickson (1997). As
Frederickson (1997) points out, “…there has been a sharp increase in incompetence,
graft, economic advantage-taking, and lawlessness throughout the politically appointed
levels of the national government.” (pg. 65). Frederickson (1997) points out the cost of

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this trend by declaring, “…many recently elected executives have campaigned against
waste, fraud, and corruption, yet there has been a marked increase in waste, fraud, and
corruption.” (pg. 65). Simply stated, the various powers that individual agencies of
government are granted through legislative efforts have become so great that elected
officials are often tempted to use them in ways that were never originally intended.
Local redevelopment agencies in Nevada and California are not immune to the
possibility of political corruption that has slowly grown throughout the U.S. federal
bureaucracy. It has already been well documented in this study that locally elected
municipal and county officials have a strong political incentive to use the powers of their
local redevelopment agency in ways that best serve their own political interests, not the
economic interests of a local community. The lessons learned from the Bank of Japan’s
experience during much of the 1990’s, and the warnings presented by Newland (1987)
and Frederickson (1997), all hint at a possible new relationship between a new alternative
institutional approach to existing local redevelopment agencies and the locally
authorizing municipal or county government that is interested in pursuing the processes
and goals of urban revitalization and urban economic development. A central feature of
any new alternative institutional form must have some degree of political autonomy.
Political oversight is important in the redevelopment process. But to believe that current
types of political oversight of local redevelopment agencies exist solely to protect the
public’s interests are naïve at best and dangerous to the goals of urban revitalization and
urban economic development at worst.

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A largely politically autonomous redevelopment agency does not mean that
political oversight will not exist. Again, consider the U.S. Federal Reserve. There is
currently a high degree of congressional oversight to ensure that the Fed is properly using
its powers to make and implement monetary policy. As Cargill, Hutchison, and Ito
(1997) point out, “Broadly, political independence is the ability of the central bank to
select its policy objectives without excessive influence from the government.” (pg. 182).
The key phrase here is the “excessive influence from the government”, not its’ complete
and total absence. Cargill, Hutchison, and Ito (1997) remind us that even a central bank,
with its broad powers to set interest rates and create money, still requires some degree of
political supervision. Effective national economic policy is the proper development and
combination of both monetary and fiscal policy. Without proper political oversight of a
central bank, monetary policy could be used in ways that do not promote long-term,
stable, national economic growth and potentially work contrary to the public policy
decisions that are made evident in presidential or congressional fiscal policy.
Again, local redevelopment agencies are no different. Without proper political
and legislative supervision, a local redevelopment agency can, as the last criticism
presented in Chapter 6 points out, become just as politically corrupt as any other
institution of government. Without a formal way to incorporate meaningful public input
and oversight into the redevelopment process, redevelopment can be used by private-
sector interests to pursue policy objectives that disproportionately distribute the costs and
benefits of the redevelopment process between vulnerable populations, like poor minority
and elderly urban residential populations, and the well-funded, highly-technical private

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corporate and business sector. Justice O’Connor’s warning, in her dissent opinion to the
U.S. Supreme Court’s ruling in Kelo v. City of New London (2005), is one that should be
taken seriously as policy makers in Nevada and California begin to consider alternative
institutional models through which local municipal and county governments will continue
to pursue the goals and processes of local urban revitalization and local urban economic
development.
The tension between a high degree of political autonomy and a high degree of
public oversight and input leads to the second question pondered in this section: How
can public accountability and responsibility be balanced with functional efficiency,
effectiveness, and economy in urban revitalization and urban economic development
processes and through new institutional arrangements for local redevelopment agencies?
Balancing public accountability and responsibility with functional efficiency,
effectiveness, and economy is explored in greater detail by examining four different
governance models and approaches: 1) traditional bureaucratic hierarchies, 2)
regulatory-based governance approaches, 3) network-based governance approaches, and
4) market-based governance approaches.

8.c – Balancing Public Accountability and Responsibility with Functional Economy,
Efficiency, and Effectiveness
The organization of local public agencies, including local redevelopment
agencies, is predicated on two important underlying considerations. First, the type(s) of
services the local public agency provides has considerable influence into how the

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organization is structured and how it chooses to deliver those services to the public, other
public agencies, and to private-sector interests. Second, different organizational
structures assume different levels of accountability and responsibility and different levels
of functional efficiency, effectiveness, and economy.
All public agencies are faced with constraints on the available resources they can
use. In general, this resource constraint requires public agencies to trade-off between
levels of public accountability and responsibility and levels of functional efficiency,
effectiveness, and economy. If more resources are spent on ensuring structural and
procedural accountability to the public, fewer resources can be spent on achieving
functional efficiency and effectiveness. For example, a local redevelopment agency often
engages in negotiations with private developers. The agency offers the developer certain
goods and services such as cash loans, cash subsidies, land, and even the shortening of
the bureaucratic process involved in issuing building permits. In exchange, the developer
promises to build a certain type of project and have it completed by a certain date.
Emphasis on public accountability and responsibility demands that these negotiations be
conducted with at least some oversight and transparency. But the requirement for greater
transparency in the negotiations may force the redevelopment agency staff to be more
“conservative” in their negotiations, resulting in less resources being provided to the
developer. This might make the “deal” between the developer and the agency
unacceptable to the developer and the project, as a result, may not be pursued. Hence, the
functional efficiency and effectiveness in reaching a deal is lost, but accountability and
responsibility has been achieved.

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The opposite case is also possible; too much of an emphasis on efficiency and
effectiveness in the provision and delivery of public services may ultimately lead to a
decrease in the accountability of the public agency. Eventually, there is a trade-off
between procedures (accountability and responsibility) and performance (efficiency and
effectiveness). The literature of public administration has yet to fully reconcile how
much accountability and responsibility should either be sacrificed or ensured when
considering the imperative for a significant amount of functional efficiency and
effectiveness in how public agencies are structured and the specific actions they take. A
reasonable approach suggests that the elements of this quandary be embraced as a
paradox. Theoretically, the public demands both high levels of accountability and
responsibility and high levels of functional efficiency and effectiveness. Over time, the
public has increasingly demanded that public agencies execute their functions with
minimal levels of waste while also demonstrating the full transparency of their actions.
In practice, however, public agencies are constantly struggling to meet the public’s
demand for highly, if not completely, efficient and effective service delivery while also
providing high levels, if not complete levels, of transparency. In studying the levels of
transparency and functional efficiency and effectiveness in public agencies, case-by-case
approaches should be employed and an effort made to restrain from generalizing to all
public agencies the experiences of a single public agency in its attempt to reconcile the
need for public accountability and responsibility with functional efficiency and
effectiveness.

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The different organizational behaviors and structures of local redevelopment
agencies in Nevada and California raises questions regarding accountability,
responsibility, economy, efficiency, and effectiveness. These questions are common
throughout the literature and practices of public administration. The use of publicly
collected revenues and their use through property tax increment financing require local
redevelopment agencies to be accountable and responsible to the general public. The use
of performance measures developed through the legislative practices of local municipal
and county governments and through meaningful citizen participation, and the ways in
which they are measured over time, are important first-steps in assuring a modicum of
public accountability and responsibility. But because local redevelopment agencies only
receive incremental property tax revenues from a very specific and narrowly defined
geographic area, commonly referred to as a local redevelopment project area, it is unclear
whom and what a local redevelopment agency is necessarily accountable to and
responsible for. It can be argued that local redevelopment agencies, because of the
relatively unique way in which they are financed, should be accountable and responsible
to the entire general public of the local jurisdiction. But because local redevelopment
agencies are legally only allowed to collect revenues and to conduct revitalization efforts
within their narrowly defined project areas, it could also be argued that they should only
be accountable to the property owners within their designated redevelopment project
area.
Redevelopment agencies also have a requirement, like any other public agency or
organization, to be economical, efficient, and effective in delivering their urban

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revitalization and urban economic development services. The need to be structurally and
procedurally accountable and responsible often conflicts with the requirement to be
purposefully and functionally economical, efficient, and effective in the use and
management of their scarce resources. The tension and paradox in reconciling
accountability and responsibility with functional efficiency and effectiveness continues to
be at the heart of a larger theoretical and practical debate centering on the uses of
traditional hierarchies, networks, regulatory frameworks, and market-based governance
frameworks in the organization of public-sector agencies. The purpose of this section is
not to solve this particular paradox as it relates to new, alternative institutional forms for
urban revitalization and urban economic development. Instead, this section examines
each of these four governance and organizational structures and weighs the pros and cons
of each structure to provide future policy makers with a blueprint for new, alternative
institutional forms through which local governments in the future will continue to pursue
the goals and processes of local urban revitalization and local urban economic
development.
There is a tension between ensuring certain levels of public accountability and
responsibility while maintaining a high level of functional efficiency and effectiveness.
As seen below in Illustration 8-1, traditional bureaucratic hierarchies tend to have high
levels of accountability and responsibility but may have relatively low levels of
efficiency and effectiveness. At the other end of the spectrum, market-based approaches
to governance and organizational structure tend to have, in general, relatively high levels
of functional efficiency and effectiveness but lower levels of public accountability and

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responsibility when compared to other models of governance and organizational
structure.
Illustration 8-1
Continuum of Accountability and Responsibility versus Efficiency and Effectiveness
by Governance and Organizational Structure

The above illustration does not argue that, for example, traditional bureaucratic
hierarchies always have high levels of accountability and responsibility, or that market-
based approaches to governance and organizational structure and behavior are always
highly efficient and effective. Extensive scholarly and practical evidence suggests that it
is not always possible to hold a hierarchy accountable and responsible for public policy
failures. Conversely, a large body of evidence also suggests that markets can be as non-
economical, inefficient, and ineffective as the other governance models and
organizational structures presented in Illustration 8-1.
Illustration 8-1 is presented only to suggest that the emphasis on economy,
efficiency, and effectiveness is greater than accountability and responsibility as different
levels of government and different government agencies move away from the use of
traditional bureaucratic hierarchies to more market-based approaches to governance and

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organizational structure and behavior. Illustration 8-1 also does not suggest that the four
governance approaches and classifications of organizational structure and behavior are
mutually exclusive. In fact, a traditional bureaucratic hierarchy can set rules within a
regulatory governance framework or act as a single partner within a larger network or
even use franchising, contracting, and public-private partnerships common within a
market-based governance framework. Illustration 8-1 simply illustrates that there is
usually some type of trade-off between organizational accountability and responsibility
and functional economy, efficiency, and effectiveness. Society, public policy makers,
public administrators, and other interested parties need to determine, on a case-by-case
basis, which emphasis is reasonable and appropriate given the public policy goals of the
agency.
This section examines four different approaches to governance and organizational
structure: 1) traditional bureaucratic hierarchies, 2) regulatory-based governance
approaches, 3) network-based governance approaches, and 4) market-based governance
approaches. Each governance model and organizational structure is probed, in the
context of possible future alternative institutional approaches to existing local
redevelopment agencies, to provide policy makers with an outline of how different
governance models and organizational structures can impact levels of public
accountability and responsibility relative to levels of functional economy, efficiency, and
effectiveness.

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8.c.1 – Traditional Bureaucratic Hierarchies
According to Davis (1974) and Nigro and Nigro (1980), the use of traditional
bureaucratic hierarchies in the organization of public agencies is the pinnacle result of
scientific management’s influence in public administration. At its heart, the traditional
bureaucratic hierarchy is designed to take full advantage of a division of labor where the
specific tasks of an individual public agency are divided into their fundamental and
atomistic characteristics. Consider a pyramid where the top structural part is the agency
manager who is responsible for the organization or agency as a whole. At the very base
of the pyramid is the lowest level worker within the public agency who is responsible for
only the smallest part of a single task a public agency is charged with carrying out. It is
common in the traditional bureaucratic hierarchy that even larger, more complex tasks,
which can span several different public agencies within a single unit of government (for
example a city government), are commonly divided into their atomistic components.
In practice, however, no actual bureaucratic structure is ever really this simple-
minded. But this simple description of a traditional bureaucratic hierarchy is useful in
helping to shed light on the differences between traditional bureaucratic hierarchies and
other organizational and structural models. For example, the overall improvement of a
downtown area may be divided into several tasks. The responsibility for the zoning of
the downtown area may be given to the city’s planning department. The responsibility
for the building and maintenance of streets and sidewalks within the same downtown area
may be given to the city’s public works department. The responsibility for building and
maintaining public parks and plazas may be given to the city’s parks and recreation

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department. And the responsibility for encouraging new private real estate development
in the downtown area may be given to the city’s local redevelopment agency.
Supporters of the traditional bureaucratic hierarchy argue that the advantage of
these hierarchies is that they provide very clear and very high levels of public
accountability and responsibility. In the example of a single task, such as the
responsibility of building and maintaining streets and sidewalks in a downtown area of a
local city, the individual tasks of building and maintaining them are broken down into
their component parts and assigned to individual members of a municipal public works
department. One member of the public works department may be responsible for
ordering the necessary asphalt, concrete and other materials. Another member of the
public works department might be responsible for maintaining the equipment needed to
build and maintain the streets and sidewalks. And another member of the public works
department might be responsible for assigning a work crew on a certain day to build a
specific section of the street or sidewalk. In any case, if the sidewalk or street is not built
on time and on budget, or if the sidewalk or street is not adequately maintained, it should
be relatively easy to determine who is responsible for not getting the needed materials,
not getting the correct equipment, or not assigning the proper work crew to work on the
right section of the street or sidewalk. A hierarchy allows for high levels of oversight
because individual tasks are assigned to individual departments and/or individuals within
a public agency or entity of government. A possible break-down or failure in the
agency’s ability to achieve the desired results is generally easy to trace to the point within
the hierarchy that failed to meet its specific responsibilities.

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But hierarchies also have their downsides. Some contemporary writers in the
field of public administration have argued that an extensive division of labor can create
large inefficiencies. As the complexity of the problem a specific agency or entity of
government is forced to confront and solve increases, and as the complexity of the good
or service that the public agency or entity of government is required to provide increases,
the hierarchy tends to breakdown. Kettl (2006) argues that the growing complexity of the
problems government faces today requires new organizational forms that are capable of
looking at a problem holistically without separating the problem into atomistic and
disconnected parts.
The challenges facing different levels of government and varied governmental
agencies and organizations today, especially in the inner central core of America’s largest
cities, have created problems of dissociation between government and the realities of the
contemporary world. Kettl (2006) argues that the, “…core of the problem(s) lies in three
puzzles: wicked problems, messy boundaries, and depleted intellectual capital.” (pg.
275). Kettl (2006) further points out that because of these three puzzles, the most
important problems facing government, and challenging its abilities to solve them,
become wicked problems which present a definite disadvantage for hierarchies. The
traditional bureaucratic hierarchy is ideal for addressing routine and relatively simple
problems. But as the complexity of the problem increases, the problem can eventually
overwhelm the ability of those public agencies designed as traditional bureaucratic
hierarchies.

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The traditional bureaucratic hierarchy is reliant on the establishment and respect
for jurisdictional boundaries. In the example above concerning the revitalization of a
downtown area, only the public works department of a municipal government is
responsible for building and maintaining streets and sidewalks while the parks and
recreation department is responsible for building and maintaining parks and plazas. Kettl
(2006) finds that the wicked problems of the 21
st
Century, such as natural disasters and
terrorism, do not respect these boundaries, and hierarchies are generally unable to
effectively communicate and work well enough with other hierarchies to solve the
problems at hand.
Finally, the infinite division of labor within a hierarchy, by definition, means that
the skills and knowledge of a particular public agency are also infinitely divided. In the
example of building and maintaining a street or sidewalk, only one person in the public
works department needs to know how to order the needed materials. Only one other
person needs to know what equipment should be used, and only one other person needs to
know how to assign a work detail. But as Kettl (2006) concludes, the wicked problems
of the 21
st
Century require a massive amount of intellectual capital in order to be solved
or managed effectively. By dividing a public agency’s stock of intellectual capital among
individuals who may or may not even communicate with each other, the agency’s sum
total stock of intellectual capital is depleted and the wicked problem remains unsolved.
For simple tasks, the assignment of individual responsibilities to either individual
departments within a government entity such as a city government or to an individual
department or worker within a department or public agency allows for highly defined and

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transparent management. If a service is not delivered or if a specific task is not carried
out, it is usually possible to find out which point in the agency’s system failed to deliver
on its responsibilities. Action can then be promptly taken to correct the failure and the
service can be provided or the task can be completed. This division of labor also
increases the transparency of the organization as such clarity is needed in order to
evaluate the effectiveness of the hierarchy’s individual components. As a result,
oversight of the hierarchy is possible, and the accountability and responsibility of the
public agency can be easily communicated to the public, other public agencies, or even
private-sector interests.
Despite the general ability of hierarchies to provide relatively high levels of
public accountability and responsibility, a growing pool of evidence now suggests that
hierarchies are increasingly failing to tackle the more pressing problems that government
routinely finds itself dealing with today. Hierarchies generally find it difficult to work
outside their respective silos, although networking has been increasingly encouraged and
adopted. Problems such as international terrorism and natural disasters require the
combined efforts of various levels of government and the combined networked efforts of
different agencies and entities within varied levels and units of government. Although a
more combined and holistic effort is needed to solve and manage the growing number of
wicked problems, the traditional bureaucratic hierarchy sometimes finds itself trapped
within its respective silo, unable to efficiently interact with other levels and units of
government and with other agencies and entities of government. The effectiveness and
efficiency of government is threatened as wicked problems challenge and strain the

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resources of government. As a result, the problem tends to persist and costs grow.
Ultimately, the problem can overwhelm government, leaving it ineffective in dealing
with the growing complexity in the provision of key services and in the solving of
important and difficult problems.

8.c.2 – Regulatory-Based Governance Approaches
Regulatory governance is commonly a rule/law-based form of governance and it
was closely associated for decades with organizational structures and behaviors of the
traditional bureaucratic hierarchy. Regulatory governance is the full extensive use of
government authority, shaping the size, form, and even behavior of the private-sector and
private-sector markets. The use of regulatory approaches to governance and
organizational structure still emphasizes a command-and-control philosophy where
government sets rules that must be followed by market participants and imposes
sanctions and penalties on those that fail to comply with the established rules. In the
regulatory governance framework, government is not necessarily the sole provider of
public services or the sole problem solver. In the regulatory governance framework, a
government agency or entity may indeed be a partner in a network-based form of
governance or a participant in a market-based form of governance. But the government
agency or entity uses its regulatory authority to either entice or coerce network members
or market participants to behave and decide in certain collaboratively agreed upon ways.
Although government may be a participant in a market or a member of a network, it still

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has considerable influence in how services are provided and how problems are solved
through its vast regulatory authority.
A good example of how government employs a regulatory governance framework
has been the creation of the 1970 Clean Air Act and the approach the State of California
took in implementing it. Mazmanian (1999) examines the shift from the command-and-
control environmental policy that the California state government took immediately after
the passage of the 1970 Clean Air Act to a market-based approach which included a
regulatory framework. In Southern California, the heart of this new market-based
regulatory framework approach was the creation of the South Coast Air Quality
Management District (AQMD) which was established in 1977 by the California state
legislature. According to Mazmanian (1999), the purpose of the AQMD was to,
“…manage in a single agency, with greater coordination and comprehensiveness than
ever before, the quality of air in the 12,000 square miles of the four-county Los Angeles
air basin.” (pg. 82-83).
Since the creation of the AQMD, the California state legislature has created
literally hundreds of different air emission controls and placed them on business,
industry, local communities, and even different government agencies. The AQMD was
originally given the power to create a market for pollution. New businesses and potential
polluters that entered the AQMD in Southern California were required to employ the use
of new technologies that were proven to reduce site pollution levels. The off-setting
carbon credits created by these new businesses could then be sold to existing businesses
that were unable to afford the implementation or adoption of new air pollution reducing

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technologies. Over time, Mazmanian (1999) found that the net levels of air pollution
declined in the AQMD area as older businesses were phased out with newer, less
polluting ones.
The effectiveness of the AQMD approach and the decades-long shift from a
traditional command-and-control environmental policy to a more market-based approach
led to a more efficient and effective, and perhaps more economical, means of controlling
hazardous air pollutants. The creation of a market for carbon credits allowed for the
efficient pricing of pollution. Polluters within the AQMD could easily and effectively
determine whether or not it was more efficient and cost-effective to switch from older,
more polluting technologies to newer, less polluting technologies, or whether it was more
efficient and cost-effective to simply pay a tax for continued polluting. The regulatory
framework, however, allowed government to establish price ceilings and price floors and
insisted upon upper limits on total levels of air pollution generated within the AQMD air
basin. As a result, total air pollution levels in the AQMD area declined over time. Newer
businesses entering the AQMD area found it more cost-effective and efficient to adopt
new technologies. The use of carbon credits also provided a strong incentive for newer
businesses, firms, and other sources of possible air pollution to adopt new technologies as
the net savings in air pollution created through the cap-and-trade program created a new
asset, in the form of a carbon credit, that could be sold to older, higher polluting
businesses.
The negotiated regulatory framework, developed as early as the 1960’s, is
regarded by many practitioners and scholars in the field of public administration as

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having greater flexibility than traditional, notice and comment, bureaucratic and
hierarchical structures. Although the argument is not necessarily new, contemporary
scholars, like Koski and May (2006) and Weimar (2006), argue that the increased
flexibility in a regulatory governance framework can lead to greater efficiency and
effectiveness in the formulation and implementation of public policy. The true costs of
participative and collaborative public policy, in terms of both the immediate tangible
financial costs and the longer-term social costs, can be more properly priced, and public
policy can be appropriately modified and adjusted to meet changing levels of what
society determines to be an acceptable cost. Weimar (2006) argues that private
rulemaking and other types of regulatory governance frameworks work best when the
situation requires constant adjustment and immediate technical expertise is needed in
creating and modifying new and existing public policy.
Weimar (2006) argues that because regulatory governance is largely dependent
upon technical expertise, there is a real and credible loss of public accountability in how
new regulations are created and implemented. Weimar (2006) finds strong evidence to
suggest that “blame avoidance” becomes increasingly likely in a regulatory governance
failure. If the desired public policy goal is not realized, it becomes increasingly difficult
to determine why the policy objective was not achieved. Government may blame the
private-sector participants while private-sector participants may blame government for
perceived overregulation. As government moves farther away from more traditional
bureaucratic hierarchical frameworks of governance and organizational structure and
closer and closer to a more market-based approached through a regulatory framework, it

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becomes increasingly difficult to determine the failure points in the implementation of
contemporary public policy.
The ability to ascertain the failure points in the implementation of collaborative
policy practices have become even more difficult as voluntary regulatory actions have
been increasingly encouraged by government. Voluntary regulatory actions could be
considered the most market-like approach to governance while still employing a
regulatory governance framework. Koski and May (2006) argue that, “Voluntary
regulatory programs are part of a new era of regulation that seeks to lessen the heavy
hand of government in seeking to meet broad regulatory objectives.” (pg. 331). In the
use of voluntary regulatory actions, government encourages market and private-sector
actors to develop internal sectoral regulations and guidelines that participating members
agree to follow. In exchange, government usually provides some type of incentive like
tax breaks or relaxed direct regulatory oversight by a government agency.
Although Koski and May (2006) find that a voluntary regulatory action approach
provides the highest degree of flexibility within a regulatory governance framework and
has the greatest potential for high levels of functional efficiency and effectiveness, the
voluntary regulatory action approach also has the highest “…degrees of uncertainty about
appropriate actions and rest to a greater degree on the willingness of affected entities to
take appropriate actions.” (pg. 344). Again, Koski and May (2006) find strong evidence
to support the conclusion that as levels of functional efficiency and effectiveness under a
regulatory framework increase, the levels of actual accountability and responsibility tend
to decrease due to informational failures. Unlike a traditional bureaucratic hierarchy,

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where individual responsibilities are explicitly defined and assigned, a regulatory
framework, using a voluntary regulatory approach, creates a high degree of uncertainty
because individual responsibilities may not be as clearly and explicitly identified. As a
result, if policy objectives are not realized and met, it becomes increasingly difficult to
determine “who” or “what” is responsible for the implementation failure and “why” the
policy objectives were not realized and met.

8.c.3 – Network-Based Governance Approaches
Due to the increased complexity of the contemporary problems facing society and
government today, many scholars in the field of public administration have argued that
government should take on a less dominant role in either direct public-sector service
provision or in solving important problems. These scholars also argue that a network of
providers, formed around a central desire to either accomplish a particular task, solve or
manage a certain problem, or provide a particular service to the public, is needed and that
these quasi public and private networks can include multiple levels of government, other
agencies and entities of government, private for-profit businesses, and even non-profit
private-sector organizations.
Within a public service provider network, a government entity typically provides
some resource(s) needed to support the activity the network is formed to do. As a
performer of a particular service within a public service network, a government entity
will typically do the actual work involved in the service delivery. Sometimes
government assumes only one role; the role of either a provider of resources needed to

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support the service or the role of performer of the actual service delivery. In other cases,
government can assume the role of both the provider and performer of a particular
service. When operating in larger, more complex service provision networks, the
member unit of government within the service network may shed the role of provider
(relying on non-public resources) but retain its role as a performer. In other cases, the
individual member unit of government within the service network can retain some degree
of responsibility for both service provision and service performance. In any case, the
individual member unit of government within the service provision network can remain
organized as a traditional bureaucratic hierarchy but with the emphasis usually shifted
away from the unit of government as the sole provider and/or performer of public
services and toward the emphasis on the network becoming a coalition of service
providers and performers. In the network-based form of governance, the emphasis is
clearly on increasing the efficiency and the effectiveness of service delivery or problem
solving. As a result, the network-based form of governance may result in a diminished
level of public accountability and responsibility as some of the network participants may
choose to not share information that would be relevant to public scrutiny and oversight.
Goldsmith and Eggers (2004) and Agranoff (2007) each examine the use of
network-based governance by different public entities in the provision of various types of
services. They find that the use of traditional bureaucratic hierarchies in organizing
government action is, “…ill-suited to addressing problems that often transcend
organizational boundaries.” (pg. 7), and that government agencies and entities, “…need
communications systems to capture, analyze, transform, and act upon information across

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public and private organizations at a speed, cost, and level that were previously
impossible.” (pg. 7). Both Goldsmith and Eggers (2004) and Agranoff (2007) conclude
that a network-based approach to the delivery of increasingly complex public services is
needed to ensure that government can effectively provide these services and overcome
the increasingly difficult challenges posed by contemporary problems. Goldsmith and
Eggers (2004) identify four specific advantages of networks that contribute to increases
in the functional efficiency and effectiveness of government service provision and
problem solving: 1) increased specialization, 2) increased levels of innovation, 3)
increased speed and flexibility, and 4) increased reach. As all four advantages are
realized through a networked organization, the network becomes more capable of
delivering the services and solving problems at a greater speed and at a lower cost than a
traditional bureaucratic hierarchy.
But with increased efficiency and effectiveness comes the possibility of a
decrease in the overall level of public accountability and responsibility. It is possible that
as government agencies and entities further engage in network-based governance, it may
become increasingly difficult to monitor and oversee the activities of the network
member government agencies and entities. The very nature of a network means that as
the network grows and becomes increasingly complex, it also becomes increasingly
difficult to determine where the public-sector ends and the private-sector begins.
Because of the blurring in jurisdictional and functional boundaries within the network, it
becomes increasingly difficult to trace the expenditure and use of public resources as the

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overall influence and scope of the network grows and as more and more participants enter
the network.
Despite the increased efficiency and effectiveness in public service provision, the
service provider network can lead to a decrease in the ability to oversee and mange the
network. Goldsmith and Eggers (2004) argue that this accountability problem,
“…presents networked government with its most difficult challenge…who is to blame
when something goes wrong? How does government relinquish some control and still
ensure results? How do network managers balance the need for accountability against
the benefits of flexibility?” (pg. 121-122). Although a network-based governance model
can lead to increased specialization, increased innovation, and increased speed and
flexibility in the reaction of government agencies to demanded levels of service provision
or to the emergence of new and challenging problems, there are also certain distinct
disadvantages of the network-based governance model and form of government service
provision.
Goldsmith and Eggers (2004) identify seven distinct disadvantages that threaten
overall levels of public accountability and responsibility within the network-based
framework: 1) the failure to achieve some degree of goal congruence as the goals of
different network members begin to drift apart, 2) contorted oversight due to the use of
outsourcing and public-private partnerships developed within the network, 3)
communication meltdown between the various network members, 4) fragmented
coordination in the delivery of services, the development of solutions to problems, or the
development of policy and network objectives, 5) data deficits and benchmarks which

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make it increasingly difficult to measure the effectiveness of the network, 6) capacity
shortages as resources are poorly managed, squandered, or even hoarded by network
members, and 7) growing instability in the relationships between network members. To
avoid these disadvantages, the network must be properly managed. According to
Goldsmith and Eggers (2004), a network manager must align goals, provide for
appropriate levels of public oversight and transparency, avert communication meltdowns
between different network members, coordinate the efforts of multiple network members,
manage the possible tension that might develop between possible internal competition
and needed internal collaboration, and finally overcome the possible data deficits and
capacity shortages by developing a series of reasonable benchmarks for the network as a
whole and for each individual member of the network.
Although networks can increase the functional economy, efficiency, and
effectiveness of some government agencies and entities, scholars such as Jeffe (1995) and
Graddy and Chen (2006) suggest that public accountability and responsibility are more
needed in network-based forms of governance than in traditional bureaucratic hierarchies
because the different government agency and entity participants of the network can
become more susceptible to outside and improper influence that can become detrimental
to the network’s original goals. In a network-based framework of governance, it is
possible that public resources may be spent and used in ways within the network that do
not provide a direct public benefit, but are instead used by the private-sector participants,
for-profit and non-profit alike, to advance their own specific interests without returning
benefits of substance and value to the public-sector. Jeffe (1995) and Graddy and Chen

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(2006) conclude that government agencies and entities that do participate as partners in a
larger service provision network need to ensure that private-sector interests are not put
ahead of the original public-sector goals that provided the original motivation for forming
the network in the first place. This is the most difficult challenge in the network-based
form of governance and organizational behavior.
Network-based governance, and related organizational structures and behaviors,
can significantly improve the effectiveness, efficiency, and economy of traditional
bureaucratic hierarchies and more formal command-and-control, or voluntary, regulatory
approaches. Because networks encourage collaboration and communication among
different network members, greater specialization, greater levels of innovation, greater
speed and flexibility, and greater reach in the provision of public services, the solution for
increasingly complex problems can potentially be achieved with greater efficiency and at
less cost by public agencies and entities that face significant resource constraints.
It is also important to consider the challenges and limitations of the network-
based form of governance. The problem of goal congruence among network members
can be difficult to achieve as the network grows in size. Contorted oversight of the
network is very possible as the participating government agency or entity may tend to
devolve back into a single-party dominant role, forcing other network participants to
pursue courses of action that conflict with the network’s own actions and goals.
Communication can breakdown within the network, and as communication among the
different network members breaks down, the coordination of the network’s actions may
become fragmented and difficult to oversee. Finally, a failure to ensure adequate public

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oversight of the network may lead to increased data deficiencies and improper
benchmarks that can lead to network capacity shortages, a decline in network member
relationship stability, and the possible failure of the network itself to perform the tasks,
provide the services, and meet the public policy goals that the network was first created
to accomplish. All these potential threats to a network’s success stems from the
diminished level of public accountability and responsibility common to network-based
forms of governance.

8.c.4 – Market-Based Governance Approaches
Market-based governance is the least like the traditional bureaucratic hierarchical
approach to governance and organizational structure and behavior. Market-based
governance encourages the use of franchising, contracting, and public-private
partnerships. In this form of governance, the participating government agency or entity is
simply a participant in a larger market and can behave as both a supplier and consumer of
goods and services. The participating government agency or entity in a market-based
approach can provide cash in exchange for a service, or can charge for different services
as a way to produce revenue for the government agency or entity.
In the earlier example of building and maintaining streets and sidewalks in a
downtown area, the public works department of a city government, through a market-
based approach, may decide to contract out all or a portion of the responsibility for
actually building and maintaining the desired length of street or sidewalk. Private-sector
contractors are responsible for securing and providing the necessary material, equipment,

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and manpower needed to satisfy the specified needs of the public works department. In
exchange, the public works department pays the private-sector contractor(s) for the
services provided using collected public tax revenues. Usually, this type of contracting
can lead to greater efficiency and effectiveness in total cost savings as the public works
department no longer has to pay the overhead for storing the purchased materials,
purchasing and maintaining the needed equipment, or paying the overhead costs
associated with labor such as health and retirement benefits.
Markets have traditionally been viewed as a highly efficient and effective way to
determine and allocate price. Hummel (1987), Yankelovich (1991), Frederickson (1997),
and Nelson (2005) all conclude that the U.S. federal, state and local governments have
increasingly been forced to make do with less. As public demand for increased levels of
government service provision and performance has increased over time, government has
had to contend with increased limitations on the amount of public revenue it collects. At
all levels of government today, government agencies find themselves in need of
providing increased levels of public services while operating at lower costs. Government
agencies have increasingly turned to the use of market-based approaches through
franchising, contracting, public-choice protocols, fees-for-services, and public-private
partnerships in the attempt to reduce costs while increasing the efficiency and
effectiveness of service provision and performance.
In many ways, local redevelopment agencies in Nevada and California were first
formed, and have grown in their use, because of their unique abilities to work through
public-private partnerships with the private real estate market to revitalize historically

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depressed inner city urban neighborhoods. Fulton and Shigley (2005) point out that local
redevelopment agencies are most successful in revitalizing physically and economically
blighted neighborhoods and communities when they use public-private partnerships to
encourage new private real estate development and leverage their own existing resources.
Through public-private partnerships, local redevelopment agencies usually provide
private real estate developers with some type of public assistance in the form of a cash
loan, cash grant, or through the transferring of physical property to encourage specific
types of real estate projects. In exchange, the private developer agrees to build a certain
real estate project and have it completed by a certain date. The project itself can range
from market-rate to affordable housing, from retail-commercial to new industrial
development, or even new office development. It can even include the building of new
public facilities such as athletic and sporting venues and convention and visitor centers.
Given the high costs associated with urban in-fill development, a local
redevelopment agency would likely never have enough available resources to properly
rehabilitate and revitalize a physically and economically blighted area by itself. The local
municipal or county government, through its local redevelopment agency, needs the
assistance of the private-sector and private real estate developers to meet the stated public
policy goals of local urban revitalization and local urban economic development. By
entering into public-private partnerships with private real estate developers, the local
redevelopment agency can leverage its own resources with the resources of the private-
sector to accomplish the public policy goals of revitalizing physically and economically
blighted neighborhoods and communities and stimulating local urban economic

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development through new job creation. Private real estate developers likewise need the
assistance of a local redevelopment agency because they usually cannot pursue private
real estate development projects in the urban inner central city core without some level of
public assistance. Considering just the high costs associated with land acquisition,
demolition, and environmental remediation and abatement, it becomes increasingly
unlikely that any urban in-fill project would be profitable without some level of public
assistance and investment. The private developer simply needs the resources available
through the public-private partnership to drive down project costs in order for the in-fill
development project to be profitable. Fulton and Shigley (2005) conclude that public-
private partnerships between local redevelopment agencies and private real estate
developers are critical to achieving the larger public policy goals of local urban
revitalization and local urban economic development.
A market-based approach to governance and organizational structure and
behavior has a much higher probability of producing highly efficient and effective results
as compared to the other approaches of governance and organizational structure and
behavior presented earlier in this section. But as already alluded to, as government
increasingly moves away from the use of traditional command-and-control bureaucratic
hierarchies, government gradually loses the ability to ensure a high degree of public
accountability and responsibility in the way public services are either performed or
provided. But markets alone cannot ensure continued functional efficiency and
effectiveness without disruption. Even the most robust market is subject to failure, and
the consequence of market failure can be significant and result in real and tangible

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negative effects. Public agency overreliance on markets as a form of governance and as a
form of organizational structure and behavior leaves public-sector agencies and entities
exposed to the consequences of market failure.
It is also difficult to ascertain the causes of market failure, especially when a
market failure is occurring. Ascertaining the failure of a market usually comes after the
fact, once the negative effects of a market failure are evident and measurable. In fact,
market failures are rarely, if ever, truly measured. Only the impacts of the market failure
are measurable. For example, consider a common economic recession. A commonly
used definition of a recession of a national economy is the observation of two quarters of
negative Gross Domestic Product (GDP) growth. The market failure that caused the
recession in the first place is often left unknown for a considerable amount of time. Even
the negative effects produced by the market failure are measured using lagging variables
such as GDP growth, unemployment rates, and declines in personal income. Although
individual market failures are difficult to identify and measure, there are some general
conditions that many economists believe must be present in order for markets to be
competitive, efficient, and effective and relatively free from market failures.
Buchholz (1989) argues that, in order for markets to be competitive, efficient, and
effective, three conditions must be met: 1) the existence of many buyers and sellers, 2)
relatively no or few barriers to entry into or exit from a market, and 3) relatively high
levels of perfect or near-perfect information. In reality, however, it is rare to perfectively
predict the impact new buyers or sellers in a market will have on overall market
conditions. It is also rarely possible to determine how much access to or egress out of a

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market is needed in order for the market to be competitive, efficient, and effective. It is
also highly unlikely for an individual, or an individual agency or entity, to have levels of
perfect or near-perfect information. As a result, markets are inherently unstable and
market failure can frequently occur with little to no prior warning. Despite their
limitations and tendency to fail, markets remain one of the most effective and efficient
means of pricing and distributing goods and services when they do function properly.
Nelson (2005) concludes that, “Market organization has shown itself to be a
valuable and flexible component of the way we govern a wide range of human activities.”
(pg. 371). But Nelson (2005) also warns that, “…there are certain activities and sectors
where market organization is problematic as a basic governing mode, and by and large
society has stayed clear of heavy reliance on market organization in these areas.” (pg.
371). In recent years especially, Nelson (2005) points out that, “…the American polity
has tended to forget what it once understood about the complexities and limits of market
organization and to push simple market organization as a general-purpose governing
mode. The results in many cases have not been happy ones.” (pg. 371). It is the
complexity of markets that make them susceptible to failure, and it is the complexity of
markets that make accountability and responsibility increasingly difficult to ensure.
Market-based approaches to governance and organizational structure and behavior are
inappropriate when the need for public accountability and responsibility exceeds the need
for functional efficiency and effectiveness in the provision of public goods and services.

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This chapter has explored contemporary academic and scholarly contributions to
how local municipal and county governments pursue the larger goals of local urban
revitalization and local urban economic development through the institution of local
government redevelopment. In exploring these contributions, two important questions
have been raised. First: What degree of political autonomy should local government
institutions, charged with the responsibility of urban revitalization and urban economic
development, be given? Second: How can public accountability and responsibility be
balanced with functional efficiency, effectiveness, and economy, in urban revitalization
and urban economic development processes, and through new institutional arrangements
for local redevelopment agencies? The answer to each question is neither readily
forthcoming nor easy to ignore. As Nelson (2005) points out, the term “governing
structure” is used to, “…highlight what is at stake in choosing a mode of organization for
an activity or an industry – who is to get what, who pays, who is responsible for
provision, mechanisms of control – and to call attention to the fact that society can and
does have a choice about the matter, a choice that is ultimately political.” (pg. 3)
In the next 15 to 20 years, state and local public policy makers will have to decide
whether or not to continue the efforts local redevelopment agencies in Nevada and
California have already started. State and local public policy makers do have the option
to simply let redevelopment, as an institution through which local municipal and county
governments in Nevada and California have pursued the processes and goals of local
urban revitalization and local urban economic development since the mid 1970’s, expire
permanently.

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Or, state and local public policy makers have the option to continue these efforts
through a new institutional form that addresses the many criticisms introduced in Part II.
If state and local public policy makers decide to continue the efforts of existing local
redevelopment agencies, it will be important to consider the degree of political autonomy
and the degree of meaningful public oversight and input into the redevelopment process
built into the new institutional form of urban revitalization and urban economic
development. It will also be important for policy makers to make the largely political
decision regarding what type of organizational structure and governance approach will be
used. The four governance methods and organizational structures presented in this
section suggest that, in general, a better effort to balance public accountability and
responsibility with functional efficiency, effectiveness, and economy needs to be
explicitly made. Trade-offs may have to be made in order to ensure some degree of
functional efficiency and effectiveness. But these trade-offs should not completely
prohibit meaningful public participation in the redevelopment process. Meaningful
public participation and appropriate levels of political oversight must be built into any
new institutional form of urban revitalization and urban economic development to ensure
that the criticisms of existing local redevelopment agencies do not reappear.

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Chapter 9 – Contributions of Local Public Finance

9.a – Introduction
It is quite possible that the ways in which government funds its activities, policies,
and programs remain one of the least publicly understood aspects of government. The
public budgeting function of public finance, at any level of government, is a mysterious
black-box into which public revenues flow and public goods and services flow out of. At
the local level, public finance is complicated by the myriad of enterprise funds, special
districts, municipal and county debt issuances, and the many other techniques that local
municipal and county governments use to regularly provide a constantly changing and
evolving level of public goods and services.
To complicate the understanding and functioning of local public finance even
further, local municipal and county governments, especially in Nevada and California,
are subject to the allowances, decrees, and limitations that are placed on them by their
respective state legislatures. In Nevada and California, there is, quite possibly, no such
thing as a truly local tax. In Nevada and California, a series of state regulations,
constitutional articles and amendments, legislative acts, and citizen-sponsored
propositions and ballot initiatives now prevent local municipal and county governments
to assess properties for purposes of property tax revenue collection by themselves, to set
their own property tax rates, set their own sales tax rates, or even set their own business
license and developer impact fee rates.

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Not only are local municipal and county governments in Nevada and California
prohibited through pre-emptive state law in the amount of public revenue they can
generate, and prohibited in how they can generate it, growing public demand for
increased public service provision forces these same municipal and county governments
to adopt increasingly creative ways to fund new and expanded public-sector service
provision. This demand for new and expanded public service provision has been
magnified by a growing trend in federal and state government policy making which has
required municipal and county governments to expand their levels and variety of service
provision through a series of federal and state unfunded mandates. Despite these
challenges, municipal and county governments continue to find the way to deal with
increased demand for public services and increase their local share of public revenues
through either the discovery of new revenue sources or the use of publicly issued debt.
The vast and inherent contradictions in how local governments are financed and
how they spend their scarce financial resources are too complex to be adequately
addressed in the limited amount of space available in this study. The criticisms presented
in Part II, that local redevelopment agencies are used, in large part, as financial tools by
local governments to enhance municipal and county revenues, and that local
redevelopment has moved too far away from its original goals of urban revitalization and
urban economic development and too far into the fiscalization of land use, suggests that a
new approach to local public finance in Nevada and California is needed. Evaluating
potential new approaches to local government finance, however, is beyond the scope of

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the current study. Substantial further work would be required to adequately address the
topic.
However, there are two important messages found in the literature of local public
finance that can assist public policy makers in determining what new institutional
arrangements for local urban revitalization and local urban economic development can be
developed to replace redevelopment in Nevada and California once local redevelopment
project areas begin to permanently expire in the next 15 to 20 years. Like the previous
section, these two messages are presented in the form of a question. First: What makes a
system of local public finance efficient? Second: How are public tax revenues actually
estimated? At first glance, each of these questions appears to be relatively easy to
answer. But the answers presented in this chapter to each question indicate that, although
the answers might be simple, the impact of the answers on the development of new
alternative institutional approaches to local urban revitalization and local urban economic
development are fairly complex and poorly understood.

9.b – Defining an Efficient System of Local Public Finance and the Impact it has on
Local Urban Revitalization and Economic Development Efforts
There is a strong relationship between the policies of local government, the
characteristics of a local jurisdiction’s economic base, and the revenue that local
governments collect through the collection of taxes and fees. Public policy decisions
made by a group of locally elected officials simultaneously encourage and discourage
different types of economic activities. Because local government tax revenue is

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generated from the economic activities of the private-sector, the public policy decisions
made by locally elected officials have wide-spread and unforeseen consequences for the
amount of tax revenue a local municipal or county collects. According to Gianakis and
McCue (1999), “The local government organization derives its resources from the
economic base of its jurisdiction, and a basic function of professional public management
is to maintain the organization’s flow of resources.” (pg. 5). Inherent in this statement is
the idea that a primary organizational purpose of the budgetary process of local
governments, and of professional local public management, is to enhance the capacity of
the local government’s public policy decision makers and mangers to make optimal
resource allocation decisions.
Gianakis and McCue (1999) argue that optimal resource allocation decisions can
be measured one of two ways. The first criterion for budgetary and fiscal optimality in
local government is that the local municipal and county government is able and
responsive to the service demand needs of the public, and that the services provided by
the local government are provided as efficiently, effectively, and economically as
possible in the short-term. The second criterion for budgetary and fiscal optimality in
local government is the overall preservation and development of the local municipal and
county government’s own economic base over the long-term. In the field of local public
finance, there is recognition that local municipal and county governments, especially in
Nevada and California, face two opposing forces: 1) the need to provide and fund
publicly provided services in the short-term, and 2) the need to promote and develop the
economic base of the local jurisdiction in the long-term. Local governments, through

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their budgetary processes, are forced to make trade-offs between short-term service
provision objectives and long-term public policy goals.
In making the trade-off between short-term service provision objectives and long-
term public policy goals, local governments routinely must consider both the revenue
side and the expenditure side of the budget equation because local governments must
balance their budgets every fiscal year. As Gianakis and McCue (1999) point out,
“…local budgets must balance, and local government policy makers cannot consider
expenditures apart from revenues. Local government budgeting is thus revenue driven, in
that the revenue constraint generally dominates decision-making.” (pg. 4). In the actual
local government budgeting process, policy makers typically sacrifice the long-term
public policy goals of promoting and developing the local jurisdiction’s economic base in
favor of promoting and developing the local jurisdiction’s short-term objective to fund
existing and new public service levels demanded by the public.
The trade-offs made between short-term service provision objectives and long-
term public policy goals to promote and expand the local jurisdiction’s economic base
can be expressed as a conflict between political motivations and economic incentives.
Because the budgetary decision making process is dominated by consideration of revenue
constraints, Gianakis and McCue (1999) point out that the local government budgetary
process has become almost completely political. Locally elected politicians, who are the
final decision makers in the local government budgetary process, must make political
decisions that impact both the types of services government provides and the level that
local governments will provide them at. In contrast, the promotion and development of a

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local jurisdiction’s economic base is an economic question. A local jurisdiction’s
economic base is the sum total of a local jurisdiction’s total economic resources,
including labor, natural resources, manufacturing and industrial capacity, financial and
other capital resource levels, and the level of technological sophistication and innovation
present.
Through the public policy decision making process, local governments have a
considerable ability to either encourage or discourage certain aspects of the local
jurisdiction’s local economic base. But conflict between these political and economic
choices is almost inevitable as local governments must choose between the long-term
support of developing the local economic base or providing services in the short-term that
are demanded by a voting constituency. These two forces do not necessarily have to
conflict, but the presence of a resource constraint on the amount of revenues local
governments can collect usually requires some political trade-off. In the end, it is more
likely that locally elected city or county officials will choose to support short-term
service provision objectives over the long-term public policy goals of promoting and
developing the local economic base.
Local redevelopment agencies in Nevada and California find themselves caught
between these two forces. On one hand, local redevelopment agencies have become the
dominant institutional form through which local governments pursue the long-term goals
of promoting and developing the local jurisdiction’s overall economic base. Over time,
redevelopment agencies, according to Fulton and Shigley (2005), have been given
considerable powers to alter land use patterns and subsidize private-sector interests

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through the use of eminent domain and property tax increment financing. But, as Fulton
and Shigley (2005) also point out, local municipal and county governments have used the
powers of eminent domain and property tax increment financing to further the politically-
driven and short-term service provision objectives of the local municipal or county
government’s public budgetary process.
As an instrument of local economic development, and because of the political
manipulations of local redevelopment agencies by local municipal and county
government officials through the public budgetary process, local redevelopment agencies
have unintentionally been used to distort different parts of the local economic base. This
distortion is unintentional largely because the locally elected policy makers who control
the local redevelopment agency are simply responding to the pressures of existing
revenue constraints. Because the need to meet short-term service provision objectives
tends to overshadow the long-term public policy goals of promoting and developing the
local economic base in the budgetary process, the unique powers of redevelopment can
be used as a way to both fund existing and new public services, such as roads, sidewalks,
parks, plazas, and schools. Redevelopment has also become a way for local governments
to overcome the resource constraint by financing certain types of real estate development,
like big-box retailers and car dealerships, through the use of redevelopment’s tax
increment financing.
But because redevelopment is widely used by local governments to meet the
short-term service provision objectives of the local government, wide-spread
inefficiencies begin to occur in the way in which redevelopment functions. According to

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Dr. Glen Atkinson (Steinmann, 2009a), an efficient system of local public finance has
two important characteristics: 1) the system of local public finance does not
unnecessarily disrupt normal market functions and actions, and 2) the system of local
public finance does not abnormally alter local government functions, policies, and
actions. Although any system of local public finance will have some affect on both
normal market functions and actions, and on the functions, policies, and actions of local
government, a reasonable interpretation of this definition of an efficient system of local
public finance is that any system of public finance should not provide too much of an
incentive to pursue short-term service provision objectives over the long-term public
policy goals of promoting and developing a local jurisdiction’s economic base.
Historically, local redevelopment agencies were designed to be the primary
institutional approach through which local municipal and county governments could
pursue the processes and goals of urban revitalization. However, the tax base of many
local governments began to shrink over time. The 1978 passage of Proposition 13 in
California, and the 1981 tax shift from property taxes to sales taxes in Nevada, has
resulted in a system of local public finance in both states where local governments are
routinely forced to find creative ways to increase locally collected public revenues in
order to fund increasing levels of public services demanded by the public. The current
system of local public finance in both Nevada and California has led to the use of
redevelopment, by the authorizing and controlling local government, to significantly alter
private market functions and actions, as well as the actions, functions, and policies of
local governments.

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Redevelopment is used today in ways that have significantly altered private
market functions and actions in three specific ways. First, because of the way in which
local redevelopment agencies are themselves financed, through the collection of
incremental property tax revenues collected from local redevelopment project areas, local
redevelopment agencies focus most of their efforts on real estate development. Second,
because local governments have considerable authority to control the expenditure and
investment patterns of their local redevelopment agency, a vast amount of the real estate
development projects that contemporary redevelopment agencies pursue are designed to
produce a minimal level of incremental property tax revenue while maximizing other,
non-property based public revenues like sales tax revenue and hotel room or transient
lodging tax revenue. Third, other private-sector industries, like technology research and
development or health care, are discouraged because redevelopment tends to fund only
those private-sector industries, such as retail, that can generate the highest possible level
of public revenues for the controlling local municipal or county government.
For the same reasons that redevelopment, because of the current system of local
public finance in Nevada and California, distorts private market functions and actions,
local government functions, policies, and actions are also distorted. These distortions can
be seen through two different phenomenons. First, local redevelopment agencies have
increasingly moved away from an institutional form that supports true urban economic
development through standing public policy objectives. Local redevelopment agencies
increasingly ignore projects that could enhance elements of a local jurisdiction’s
economic base such as local personal income levels or the development and

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implementation of new technologies through research and development, but have
increasingly pursued projects that, as a primary impact, provide expanded levels of sales
tax revenue, hotel room and transient lodging tax revenue, and other sources of non-
property based income to the local authorizing and controlling government. Second, the
public policy decisions, expressed through the public budgetary process, of local
jurisdictions have also been severely distorted by the existing system of local public
finance in Nevada and California. The dependence on the use of long-term debt to fund
current public service levels, and the policy controls of local redevelopment agencies,
indicate that local governments have increasingly become focused on short-term service
provision objectives and have increasingly ignored the long-term public policy goals of
promoting and developing the local economic base.
With specific regard to the policy controls of local redevelopment agencies,
community redevelopment law in Nevada and California allows the local government to
create fairly autonomous redevelopment agencies by appointing independent
redevelopment agency board members that are not sitting city council members or county
commissioners or supervisors. Instead, the vast majority of local redevelopment agency
boards in Nevada and California are now occupied by sitting city council members or
county commissioners or supervisors. As Chapman (1998) and Lewis and Barbour
(1999) point out through their own research, the motivation behind specific
redevelopment agency policies, and the types of projects supported by local
redevelopment agencies, overwhelmingly favor the consideration of how much new
municipal or county revenue the specific local redevelopment agency or specific local

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redevelopment agency project can generate. This observation indicates that the existing
system of public finance has significantly distorted both the public policies of the locally
authorizing and controlling government, and has also significantly distorted the specific
public policies and investment actions of the local redevelopment agency.

9.c – Examining the Actual Financing of Contemporary American Local
Government
Local governments are subject to the same types of economic and political
incentives that individuals and businesses in private-sector markets are subject to. In
particular, local governments are very sensitive to the level of tax revenue they can
collect and use to fund the provision and performance of public goods and services. As
the previous section alluded to, local governments receive a majority of their total
revenue from taxes levied on the local economic base of their jurisdiction. Total local
taxes collected by a local government, minus government transfers from the state and
federal government, can be expressed using the following equation presented by
Atkinson et al (2008): (pg. 1)
Tax Revenues = Tax Rate x Tax Base
This equation shows that total tax revenues are estimated by applying a tax rate to
a specific tax base. For example, total property tax revenues are estimated by applying a
property tax rate on the total level of assessed value of a specific piece of physical
property owned by an individual property owner. If the property tax rate is 1.0 percent

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and the total assessed value of a particular piece of property is $100,000, then the total
amount of property tax revenue collected by the local government is $1,000.
In a broad tax system, according to Atkinson et al (2008), four important
principles or objectives can be met: 1) revenue adequacy and stability, 2) perceived
fairness, 3) ease in the administration of the tax, and 4) perfect, or near-perfect, economic
efficiency. A broad tax system is only possible when the tax base is equal to the
economic base of the public taxing entity; for example, a broad municipal tax system
would have a tax base that is equal to the municipality’s economic base, defined as the
sum total of all the municipality’s existing economic resources. Setting the taxing
entity’s tax base equal to the same taxing entity’s economic base would provide little
incentive for public policy decisions that support economic growth in one part of the
taxing entity’s economic base, while not supporting economic growth in another part of
the taxing entity’s economic base. In a narrow tax base, the taxing entity’s tax base is
smaller than the taxing entity’s overall economic base. Legislative acts, like Proposition
13 in California in 1978 and the tax shift from property tax revenue to sales tax revenue
in Nevada in 1981, significantly shrank the tax base of local governments to a level
where the local tax base in Nevada and California is significantly smaller than the
economic base of local jurisdictions. The narrowing of the local tax base in Nevada and
California has led to local public policy decisions and behaviors of local redevelopment
agencies that distort both private-sector and public-sector functions as local governments
currently have a powerful incentive to encourage specific types of development projects

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that increase municipal or county revenues at the expense of overall local economic
development.
Atkinson et al (2008) examines each of the four important principles of a broad
tax system separately. First, a broad tax system provides a level of stability and adequacy
not possible in a narrow tax base. According to Atkinson et al (2008), “A broad base will
capture all of the economic activity in the state (or local jurisdiction) to provide adequate
and stable revenue over time. Hence, if one sector of the economy is sluggish other
sectors might be relatively strong.” (pg. 1). Second, a long-standing principle of
American government and federalism is a belief that all people, regardless of economic
or socio-demographic differences, are treated equally under the law, including the
taxation policies and laws of local governments. According to Atkinson et al (2008),
“There are two elements of fair tax policy. (a) Horizontal equity means that people in
similar economic circumstances are taxed equally. (b) Vertical equity means that
taxpayers with more ability to pay should pay more.” (pg. 1). A fair system of public
finance and taxation, one that uses a broad tax system, would not provide government
with any incentive to pursue tax or spending policies that violate the elements of either
horizontal or vertical equity.
Third, any system of public finance and taxation, or any individual tax, should be
both understandable to the individual taxpayer and cost-effective for government to
administer. According to Atkinson et al (2008), “Narrow based taxes do not generate
much revenue and complicate the work of tax administrators, primarily in dealing with
the effects of the loopholes that narrow the base. Tax administration should be

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accountable to people and businesses. This requires an open and transparent tax policy.”
(pg. 1). Fourth, any system of public finance and taxation should strive for economic
efficiency. As already mentioned, an inefficient system of public finance and taxation
distorts the functions of both government and the private-sector. A narrow tax base
penalizes the specific economic activity or industry that is taxed and rewards the specific
activity or industry that is not taxed under a narrow tax base system. Government
behavior is also distorted. For example, according to Atkinson et al (2008), “…high sales
tax rates encourage governments to actively pursue retail expansion and pay less attention
to economic diversification policies. We see the proliferation of malls on county
boundaries in Nevada and city limits in California.” (pg. 2).

This chapter has explored a few central ideas in the field and practice of local
public finance. Each idea presented here, that an efficient system of local public finance
should not distort either private-sector or public-sector functions, policies, or actions and
that collected public tax revenues are generated by applying a tax rate to a tax base, can
provide policy makers with two separate lessons that should be considered as policy
makers begin to consider new alternative institutional forms for local urban revitalization
and local urban economic development as existing redevelopment project areas begin to
expire. First, any new alternative institutional form of local urban revitalization and
economic development will require a meaningful degree of political autonomy from the
authorizing local municipal or county government. The current system of local public
finance, a system that is not likely to receive any significant modification or improvement

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within the next 15 to 20 years, provides local governments too powerful an incentive to
use redevelopment to enhance municipal or county revenues at the expense of the long-
term promotion and development of the local community’s economic base.
Second, some consideration should be given to how the tax base of any new
alternative institution can be expanded. Currently, local redevelopment agencies only
collect, as a significant majority of their total revenues, incremental property tax
revenues. This current funding scheme of contemporary local redevelopment provides
local redevelopment agencies little incentive to pursue wider economic development
projects and policies that expand their efforts beyond simple property-based approaches
to local urban economic development. The economic base of a complex and dynamic
inner central city core cannot be fully measured by focusing on either the area’s total
assessed value or the amount of property tax revenue it can generate. In order to
encourage either existing local redevelopment agencies or new alternative institutions of
local urban economic development to pursue policies and programs that enhance
employment opportunities, provide meaningful opportunities for personal income growth
and general upward mobility, or the development and implementation of new
technologies, the tax base should be expanded to include incremental tax revenues
collected from a variety of economic activities.

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Chapter 10 – Contributions of Local Economic Development

10.a – Introduction
As already alluded to in the previous discussion on local public finance in Chapter
9, the total economic activity of an urban inner central city neighborhood or community
goes well beyond the ebbs and flows of commercial and residential real estate markets.
Jacobs (1961) argues that, “A city’s very wholeness in bringing together people with
communities of interest is one of its greatest assets, possibly the greatest. And, in turn,
one of the assets a city district needs is people with access to the political, the
administrative, and the special-interest communities of the city as a whole.” (pg. 119).
In examining what makes one city prosper and another fail, Jacobs (1961) argues that one
of the largest failings of contemporary urban economic development public policy is its
failing to consider the vast diversity of a city’s economic, social, and political activities.
Cities, according to Jacobs (1961), derive a large portion of their wealth and prosperity
from the diversity of activities that occur within the city and from the diversity of the
people that live, work, and socialize within it.
A city’s prosperity and wealth are not solely generated by the mass development
of aesthetically pleasing structures. For cities to prosper, the local government must
pursue a wider range of public policies that expand government support of local urban
economic development beyond the simple support and subsidization of commercial and
residential development. Scholars, like Jacobs (1961), have long criticized the

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narrowness of local government urban economic development policy. Scholars in the
field of urban economic development have also been critical of the individual local
economic development practitioner’s apparent disregard for the wider complexity of the
urban economic landscape. If economic development is of meaningful interest to local
municipal and county governments, new institutional forms of urban revitalization and
urban economic development will be needed. These new institutional forms should
attempt to embrace and balance wider economic development strategies that go beyond
simple property-based approaches. These new institutional forms should also strive to
develop policies and strategies that appreciate the holistic nature of industry clustering
and regional economic activity. This chapter outlines some basic principles in the field
of economic development in order to provide policy makers who will have the
opportunity to develop and create new alternative institutional forms to replace existing
local redevelopment agencies and project areas as they begin to expire over the next 15 to
20 years.

10.b – Local Economic Development Strategies: Property-Based and Non-Property
Based Approaches to Urban Economic Development
The International Economic Development Council (2006) has identified seven
interdependent components of what they consider to be a comprehensive approach to
local economic development. These seven components include: 1) economic
development marketing and attraction, 2) business retention and expansion, 3) real estate
development and reuse, 4) entrepreneurial and small business development, 5)

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technology-led development, 6) neighborhood economic development, and 7) workforce
development. Real estate development and reuse, the closest of the seven components of
a comprehensive local economic development strategy to contemporary local
redevelopment, is only one component. The remaining six components cover a much
wider variety of non-property based approaches to economic development that are
covered in this chapter.
Economic development marketing and attraction is, according to the IEDC
(2006), “…a useful tool for economic development practitioners. Marketing can be used
to help attract, retain, and expand businesses, improve a community’s image both inside
and outside the community and promote policies and programs.” (pg. 31). Through
economic development marketing and retention, the local community should, as a first
step, assess various elements of the local community’s existing economic base. This
assessment usually begins by examining the local community’s existing economic base in
order to identify the community’s competitive advantages. SWOT Analysis has become
increasingly popular among local economic development organizations to ascertain a
local community’s existing strengths, weaknesses, opportunities, and potential threats.
After completing an assessment of the community’s existing competitive advantages, the
second step involves selecting and identifying target industries and identifying potential
prospects that the local economic development organization can pursue at a reasonable
level of cost, but have the potential for significant economic gains. The third step of
economic development marketing and retention is the application of six different
techniques: 1) advertising, through print media like magazines or newspapers or through

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electronic media such as television or the Internet, 2) publicity, through formal press
releases of the local economic development organization or the leading local municipal or
county government, 3) promotional material, including brochures, videos, and
newsletters, 4) website development, 5) direct mailing to targeted businesses in selected
industries, and 6) personal selling of the community to targeted businesses in selected
industries through trade shows, special events, and prospecting. In short, economic
development marketing and retention is about positioning a community to potential
private-sector interests in a way that enhances existing opportunities for employment and
job creation.
A business retention and expansion (BRE) program is, according to the IEDC
(2006), “…a core component of any economic development program, in addition to
efforts to attract new businesses and encourage the creation of new businesses.” (pg. 47).
A BRE program should be designed to achieve four specific goals: 1) keep existing
businesses from relocating to other areas, 2) help existing businesses survive economic
difficulties, 3) assist existing businesses with expansion efforts that add new, quality jobs,
and 4) increase the competitiveness of existing businesses in the wider, regional
marketplace. According to the IEDC (2006), “Business retention and expansion
programs typically involve partnerships of the public, business, and community
leadership that continuously assess the existing economic base and the physical,
geographical, financial, technological, and human resource needs of individual
companies within the community.” (pg. 47).

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Very little of a local economic development organization’s BRE program is
property-based. Much of the local business and retention and expansion program
involves creating networks of various private-sector and public-sector organizations and
agencies to support businesses with a growing local industry that can provide stable
quality job growth. Many of the same techniques used to support new business
development can be used to support a local BRE program. Some of these techniques
include marketing, assistance with land and buildings, infrastructure, financial assistance
through either direct support or linking companies with other private or public sources of
capital, support of workforce development through either direct or indirect workforce
training and retraining, technical assistance and assessments, providing technological
resources, product export assistance, energy cost reduction programs, assistance with
local permitting and licensing, and the development of a clearing-house that centralizes
various forms of tax and non-tax incentives. Although a successful BRE program
contains some property-based approaches, much of a successful local BRE program
contains non-property based strategies as well.
Real estate development and reuse, according to the IEDC (2006), “…whether it
is brand new development on a vacant parcel of land, the redevelopment of previously
occupied parcels, and/or the reuse of previously occupied buildings, is complicated
business.” (pg. 65). Real estate development and reuse, as this study has indicated
already, is a highly political process as well as a highly technical process that uses many
controversial strategies. Although much of this study is dedicated to studying real estate
development and reuse, it is important to note that even the IEDC (2006) considers it one

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of the central parts of any comprehensive local economic development strategy. As the
IEDC (2006) points out, “Most economic development professionals spend part or all of
their time working on one type of real estate development project or another. Real estate
development is in many ways, central to the practice of economic development.” (pg.
65). But the IEDC (2006) also points out that real estate development and reuse should
be viewed through a much wider lens than the current focus of eliminating physical and
economic blight, or the obsession of local governments to use real estate development
and reuse to generate municipal or county revenues.
Although industrial, office, commercial-retail, residential, and hotel development
are all major parts of a local real estate development and reuse strategy, the IEDC (2006)
also points out that this particular part of a comprehensive local economic development
strategy should also consider the impact local government land use planning has on the
promotion and development of a local community’s overall economic base.
Environmental remediation and the cleanup of contaminated “brownfields” should both
be woven into a comprehensive real estate development and reuse plan along with plans
to reuse older, possibly historical, structures. The incorporation of older and historical
structures, according to the IEDC (2006), can help differentiate the physical identity of
one local community from others. The reuse of existing structures can also help existing
and new businesses in expanding their existing operations, or in relocating to the local
community, by reducing monthly rental charges or lease rates.
Like a local BRE program, entrepreneurial and small business development
programs are cornerstone practices for the economic development practitioner.

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According to the IEDC (2006), “Local economies are driven by small businesses. The
vast majority of existing local businesses, regardless of the place, are small. A vital and
robust local economy will also have a dynamic and growing small business sector.” (pg.
93). Any local community relies on its small business sector to create quality local jobs,
increase the local jurisdiction’s tax base, and generally improve the overall quality of life
for its local residents by helping to create a unique identity for the local community that
is different from others. In addition to these benefits, small businesses help contribute to
overall levels of local and regional economic stability. According to the IEDC (2006),
“Small, homegrown firms are, by definition, owned and operated by people who have a
personal stake in the community, and are thus more likely to remain there.” (pg. 94).
Three general strategies, in addition to the many approaches presented earlier for
BRE programs, comprise the typical small business and entrepreneurial economic
development program: 1) technical assistance, 2) providing business space, and 3)
financial assistance. Technical assistance can include helping the small business develop
its business plan, help in training and managing staff, and help in accounting and other
record-keeping functions. Providing business space can include providing the small
business with low rent, providing network opportunities, and providing shared support
services with other businesses in the area. Although the small business and
entrepreneurial economic development strategy includes property-based approaches, it
uses many non-property based approaches as well in order to provide growing small
businesses and small business start-ups with the resources they need to be successful.

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Technology-led development is probably the one local economic development
program that is farthest from traditional property-based approaches to local urban
economic development. As the IEDC (2006) points out, “In this knowledge-driven
economy, competitive communities develop, transfer, commercialize, and deploy
advanced technologies.” (pg. 109). In a technology-led development program, the goal
of the local economic development organization is to encourage the formation of
technology-oriented networks that combine private-sector firms in manufacturing,
telecommunications, and industry with the creative powers of technology research
organizations and individuals. The IEDC (2006) argues that technology-based economic
development is dependent on four main factors: 1) the community’s capacity to create a
physical and social environment that attracts and retains technology industries and
highly-skilled technologically-oriented individuals to and within the local area, 2) the
community’s set of policies and programs that help promote the development of
technology into marketable goods and services, 3) the community’s ability to deploy and
transfer new technology developed by research institutions and individuals to commercial
and industrial sectors of the local and regional economy, and 4) the ability of the
community to support overall technologically-oriented entrepreneurial efforts.
Technology oriented businesses tend to share many similar characteristics. These
businesses heavily invest in research and development. Technology businesses tend to
cluster regionally around similar businesses in similar or related industries. They prefer
collaboration whenever possible with similar businesses and tend to operate globally.
Additionally, they tend to employ non-traditional business structures and a non-

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traditional workforce, meaning that the local economic development organization must
work with existing educational institutions to produce the workforce that these types of
businesses require. As a result of these characteristics, a local economic development
organization must also operate with a non-traditional structure and pursue non-traditional,
non-property based strategies. Because many technologically-oriented businesses
operate regionally and prefer to collaborate with similar businesses and industries, the
local economic development organization must also operate regionally and strive to
collaborate, but not compete with other neighboring local economic development
organizations. This approach is largely antithetical to the approaches and structure of
contemporary local redevelopment agencies in Nevada and California. But the
investment in a technology-led economic development program, as part of a much wider
economic development strategy, can lead to tremendous economic growth within the
region and at the local level through the expansion of existing businesses, the creation of
new business, and the attraction of new businesses to the area as technologically-oriented
high-tech firms tend to provide significant opportunities for personal income growth and
general upward mobility.
Neighborhood economic development covers the second part of the original
purposes of local redevelopment. Whereas real estate development and reuse focuses on
actual economic development goals and objectives, neighborhood economic development
focuses on revitalizing deteriorating and distressed local urban neighborhoods, but
through a combination of both property-based and non-property based approaches.
Interestingly, the IEDC (2006) lists five separate factors that it found to be key to the

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successful revitalization of physically and economically troubled urban neighborhoods:
1) strong public leadership from locally elected officials, 2) well-focused planning
concepts designed to both identify and direct strategies in a way that maximizes the local
economic development organization’s overall revitalization efforts, 3) the ability to
respond to traumatic events, including natural disasters, 4) the preservation of positive
existing community characteristics over the tendency of contemporary urban
revitalization efforts to simply gentrify physically unattractive neighborhoods, and 5) a
strong and positive relationship between different levels of government.
As the IEDC (2006) points out, “Neighborhood economic development requires
that groups from both the public and private-sector, at both the local and regional level,
get involved with those efforts. They must work cooperatively, yet independently, to
assist troubled neighborhoods and make the changes to create a safe and healthy
community.” (pg. 129). Like the IEDC’s definition of a strong and meaningful real
estate development and reuse program for local economic development, the IEDC’s
definition of a strong and meaningful neighborhood economic development program goes
well beyond simple property-based approaches and includes many non-property based
approaches. In addition to real estate driven projects that eliminate physical blight, non-
property based approaches are needed to eliminate economic and social blight. Without
the proper balance and combination of property-based and non-property based
approaches to local urban revitalization, it is likely that any comprehensive approach to
overall local economic development will fail.

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Workforce development, the final component of a comprehensive economic
development strategy, is far from the more conventional and popular property-based
approaches to local economic development that local redevelopment agencies regularly
employ. Workforce development, also like technology-led development, requires that the
local economic development organization strive to development a broad-based network
of different public and private-sector entities and organizations to support the educational
and training development of a local community’s workforce and the workforce of the
wider regional economy. According to the IEDC (2006), “The basic component to
workforce development initially entails examining the potential employees and existing
employers of a community to assess how to best bring them together. Providing the skills
needed to obtain a job and addressing additional, often overlooked, issues such as
childcare, language training, transportation, and housing, can increase the chances of the
workforce of a community in seeking and retaining good jobs.” (pg. 155).
As workforce development programs become a more prominent feature of a more
comprehensive local and regional economic development strategy, local economic
development organizations will have to consider network-based approaches in order to
achieve the various aspects of workforce development. A single local economic
development organization, like a contemporary local redevelopment agency, simply does
not have the internal capacity to successfully develop and implement a meaningful
workforce development program. A workforce development network, in addition to the
local economic development organization, must include other regionally located
economic development organizations, local business and industry associations,

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community colleges and other institutions of higher education, training and vocational
centers, and various other community based organizations in order to be successful.
This section has explored the seven interdependent components of a
comprehensive economic development strategy that, according to the IEDC (2006), is
necessary in order to successfully achieve the long-term public policy goals of economic
development. The current dominant institutional form of local redevelopment, through
which many local municipal and county governments in Nevada and California currently
pursue the goals of both urban revitalization and urban economic development, are
simply insufficient to properly execute this complex and very broad comprehensive
economic development strategy. The incentives that currently drive the public policy
decisions and actual actions of local redevelopment agencies work contrary to the
required actions needed in order to ensure true long-term, stable, local economic growth.
The way in which local redevelopment agencies are currently organized and structured
also ignores the new realities of a 21
st
Century global economy in which local economies
have become less important than regional economies.
Policy makers in Nevada and California should consider three important lessons
taken from the IEDC’s presentation of a comprehensive economic development strategy.
First, a new alternative institutional form should consider a regional approach to
economic development policy decision making, economic development policy
implementation, and partnership with public-sector and private-sector organizations,
agencies, entities, and firms. Second, a new alternative institutional form should also
consider emphasizing a network-based approach to the governance of a region-wide

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economic development strategy and the implementation of regionally-oriented economic
development programs. A single local economic development organization, like an
existing local redevelopment agency, simply does not have the internal organizational
capacity to properly develop, support, and implement the much broader economic
development strategy outlined by the IEDC (2006) and presented in this section. Third,
any new institutional form, through which local municipal and county governments will
continue to pursue the goals and objectives of urban economic development, must
embrace a balanced combination of both property-based and non-property based
economic development approaches and programs. Economic development is much more
than just the physical improvement of the built environment. Without the wider embrace
of non-property based approaches and programs, it is unlikely that any new alternative
institutional form can successfully achieve the long-term goals of stable economic
growth.

10.c – Industry Clustering: How Industry Clusters Operate Regionally, not Locally
Contemporary private-sector businesses have increasingly organized many
aspects of their operations around the formation of regional industry clusters. According
to Porter (1998), “…clusters represent a new way of thinking about location, challenging
much of the conventional wisdom about how companies should be configured, how
institutions such as universities can contribute to competitive success, and how
governments can promote economic development and prosperity.” (pg. 78). With the
majority of local redevelopment project areas in Nevada and California set to expire

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within the next 15 to 20 years, a unique opportunity exists for policy makers to re-
examine how local governments promote economic development and prosperity. The
long held belief that local governments should focus on economic development programs
and policies which encouraged local economic growth and prosperity is being replaced
with the growing realization that businesses no longer function just locally. Increased
global competition, and the increased pressures on private businesses and industry to
reduce costs and maximize production efficiency, has led to wide spread private-sector
embracement of regional industry clustering. As Porter (1998) points out, “Although
location remains fundamental to competition, its role today differs vastly from a
generation ago. In an era when competition was driven heavily by input costs, locations
with some important endowment – a natural harbor, for example, or a supply of cheap
labor – often enjoyed a comparative advantage that was both competitively decisive and
persistent over time.” (pg. 78). In order to remain competitive today, Porter (1998)
argues that firms must continually innovate in order to make ongoing productive use of
scarce physical and human capital resources.
To better understand the characteristics of regional industry clustering, Porter
(1998) examines several existing regional industry clusters, including the wine industry
in California, the Italian leather fashion industry, and the pharmaceutical cluster that
straddles New Jersey and Pennsylvania near Philadelphia. In each case study, Porter
(1998) identified four common characteristics, functions, and activities of regional
industry clusters. First, “A cluster’s boundaries are defined by the linkages and
complementaries across industries and institutions that are most important to

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competition.” (pg. 79). In the California wine industry cluster, Porter (1998) found
multiple interdependent linkages between suppliers of grape stock, irrigation and
harvesting equipment, barrels, and even labeling services. Outside the linkages within
the actual wine industry, Porter (1998) also found multiple secondary linkages including
several specialized public relations and advertising firms that had tailored their functions
to support the California wine industry including numerous wine productions targeted at
specific consumers and trade audiences. In the California wine industry cluster, there are
also numerous linkages between the industry and several local and regional institutions
including the viticulture and enology program at UC Davis, the Wine Institute, and
several special legislative state senate and assembly sub-committees of the California
state legislature. Each of these linkages with related clusters in agriculture, the food and
restaurant industry, and the wine-country tourism industry, provides the California wine
industry with a unique set of competitive advantages that individual wine producers in
California could not capture had they been operating independently from the wider wine
industry cluster.
Second, according to Porter (1998), “Clusters rarely conform to standard
industrial classification systems, which fail to capture many important actors and
relationships in competition.” (pg. 79). Even a large and robust cluster may go
unrecognized by individual local jurisdictions because a wider examination of how
different firms interact is usually not possible at the local level. In Massachusetts, Porter
(1998) identified a cluster of nearly 400 companies specializing in the research and
development of medical devices. The cluster of medical device manufacturers in

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Massachusetts was ignored for years because the cluster had remained buried within
several overlapping industry categories including electronic equipment and manufactured
plastic products. Eventually, once the medical device manufacturing cluster in
Massachusetts was identified, Porter (1998) estimated that the cluster provided nearly
39,000 high-paying, high-skill jobs across multiple local jurisdictions. Over time, both
public-sector and private-sector agencies and organizations have begun to develop a
series of public and private-sector policies designed to work on issues that have regional
benefit for the entire cluster. Prior to the identification of the medical device
manufacturing cluster in Massachusetts, public and private-sector policies tended to
introduce unnecessarily levels of competition across complementary firms. New efforts
are now being made to ensure a reasonable degree of collaboration exists between
various manufacturers, suppliers, and public institutions of education, research, and
development to ensure long-term economic growth for the entire industry cluster.
Third, Porter (1998) points out that, “Clusters promote both competition and
cooperation. Rivals compete intensely to win and retain customers. Without vigorous
competition, a cluster will fail. Yet there is also cooperation, much of it vertical,
involving companies in related industries and local institutions.” (pg. 79). As individual
firms within the regional cluster compete for highly-skilled workers, individual
employees benefit from a general increase in personal wages. But competing firms also
have an incentive to partner and support local institutions that provide both high-skilled
workers and a continued source of innovation through research and development efforts
that would be too costly for any one firm to afford. In examining the California wine

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industry cluster, Porter (1998) found that several competing wineries had partnered to
help support the UC Davis viticulture and enology program. UC Davis benefits from the
financial support provided by the competing wineries while the competing wineries
benefit from the continued development and training of potential workers and the
research and development efforts of UC Davis that continues to provide the regional wine
industry cluster with improved methods for manufacturing, storage, and transportation,
which contributes to overall lower costs of production and distribution for the entire
cluster.
Fourth, Porter (1998) argues that, “Clusters represent a kind of new spatial
organizational form in between arm’s-length markets on the one hand and hierarchies, or
vertical integration, on the other.” (pg. 79). Historically, mega-producers like Ford,
Chrysler, and General Motors attempted to vertically integrate all parts of the automobile
manufacturing process, including the acquisition of raw materials (i.e. steel, plastics, etc.)
to even the financing of end automobile purchasers. Porter (1998) points out that one of
the problems with arm’s-length market organizational approaches for individual firms is
the inherent inability of the individual firm to control costs and ensure a stable and
reliable stream of the needed physical and human capital inputs. But full vertical
integration of the entire manufacturing process can increase the degree of inflexibility
within the industry and eventually lead to a reduction in the level of possible innovation.
Fully integrated industries can suffer from the myopic institutional momentum that mega-
producers often suffer from. Top-down hierarchical control discourages lower-level risk
taking through either the employment of new manufacturing processes or the use of new

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technologies. Just the time it can take from proposing a new approach or product at the
bottom of the vertically integrated hierarchy, to having it approved by top management,
and then have the new approach or product actually used by the lower levels of the
vertically integrated industry, can create missed opportunities vital to effective
competition. Other alternative organizational approaches, including the creation and
maintenance of formal networks, alliances, and partnerships, also create managerial
problems that an individual firm might not be able to overcome. The use of an industry
cluster allows secondary firms to develop new technologies, new methods of production,
or even new products that, if proven successful, can be adopted by the larger firms within
the industry cluster without overexposing the larger firms to unnecessary levels of risk.
As new and emerging regional clusters have been identified and studied, a
growing level of evidence has begun to suggest that regional industry clusters can
provide individual member firms with several important advantages, including increased
efficiency, effectiveness, and flexibility. Private-sector firms are increasingly looking for
new ways to take advantage of the competitive advantages of regional clusters as a way
of reducing costs and increasing the profitability of their own operations. Many public-
sector organizations are also finding new roles in the development and expansion of new
and existing regional industry clusters. Universities, research and development
institutions, and trade colleges are only a few examples of the many public-sector
institutions that are finding that it is increasingly valuable to them to form strategic
linkages to a vast array of firms and businesses within existing and emerging regional
industry clusters. An individual firm might not be able to support the development of

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new lab space or the hiring of new faculty to train individual workers. However, linking
themselves to wider regional industry clusters, like the aerospace industry cluster that
dominated Southern California during the 1980’s and 1990’s, provided many public and
private universities with opportunities to expand internal research and development
efforts by tapping the larger pools of available resources at the regional level.
Unfortunately, redevelopment, as the dominant institutional arrangement through
which local municipal and county governments in Nevada and California continue to
pursue the goals of urban economic development, is still stuck in policy making, program
development, and project selection paradigms that ignore how more and more of the
private-sector is organizing itself through regional industry clusters. New institutional
forms, designed to replace redevelopment once local redevelopment project areas begin
to expire in the next 15 to 20 years, must take into account the new approach private-
sector firms are taking to both global competition and regional collaboration. These new
institutional forms will also require new policies and approaches that can effectively
promote wider regional economic development goals, and ensure that those efforts
translate into local economic growth and prosperity.

10.d – Regional-Oriented vs. Local-Oriented Economic Development in Economic
Development Policy Making
Over the past few decades, private-sector firms have increasingly found it in their
individual interests to embrace the use of regional industry clustering in the organization
of their firm and their firm’s activities. As the private-sector, due to increased global

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pressures of competition and the need to reduce costs and improve internal methods of
production, continues to reorganize itself along the principles of regional industry
clustering, many public-sector institutions, including universities, research and
development institutions and trade colleges, have also begun to reorganize their efforts to
match the new demands of emerging regional industry clusters. While most of the
private-sector and public-sector has embraced these 21
st
Century approaches to economic
growth and development, much of formal public local economic development policy
remains firmly grounded in the approaches and principles of the late 19
th
Century and
early 20
th
Century. In order to effectively align public economic development efforts to
encourage local and regional economic growth and prosperity with the emerging realities
of the contemporary private-sector, new public economic development policy must be
developed in addition to new institutional forms that can effectively implement it. New
local urban economic development policy, grounded in the principles of regional
economic development, must be used to replace, or at least augment, the still largely
dominant local economic development orientation that still exists.
According to Shaffer, Deller, and Marcouiller (2006), “…community economic
development occurs when people in a community analyze the economic conditions of
that community, determine its economic needs and unfulfilled opportunities, decide what
can and should be done to improve the economic conditions in that community, and then
move to achieve agreed-upon economic goals and objectives.” (pg. 61). A new
paradigm of community economic development requires that individual communities
give up their natural tendency to hold on to long-held beliefs that emphasize the status

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quo. Economic and community development involves making hard policy decisions
regarding the future economic and community identity of a particular place. It requires
the understanding that the private-sector is a dynamic force that cannot remain
competitive and efficient if it remains isolated from global change. New paradigms of
community and economic development must take into consideration the pressures of
global competition and the competitive advantages that regional industry clusters provide
to both local communities and the private-sector as well.
Shaffer, Deller, and Marcouiller (2006) outline a new approach for local
community economic development. This new approach emphasizes both a regional
orientation and a more interdisciplinary approach to community economic development.
This alternative paradigm builds on six interdependent elements: 1) space, 2) resources,
3) markets, 4) institutions, 5) society, and 6) decision making. When properly balanced,
each of these six elements can, according to Shaffer, Deller, and Marcouiller (2006), help
local communities better interact with emerging regional industry clusters while also
providing local communities with a better chance of taking advantage of the competitive
economic advantages that regional industry clusters offer.
Throughout the entire discussion on regional industry clustering and regional-
oriented economic development is an underlying realization that “space” is becoming an
increasingly complex idea as it pertains to local urban economic development policies
and approaches. According to Shaffer, Deller, and Marcouiller (2006), “In our modern
society, the notion of space and community is becoming more complex. Today, people
are increasingly active members in several unique communities from a spatial sense.

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They live in one community, commute to work in another, go shopping in yet a third, and
receive the daily newspaper from a fourth.” (pg. 62). Dominant contemporary local
economic development policies and approaches tend to largely ignore these complex
realities.
Redevelopment continues to pit neighboring jurisdictions against each other as
competing local jurisdictions fight over scarce public revenues. Shaffer, Deller, and
Marcouiller (2006) point out that, “…traditional approaches to economic development
have tended to pit spatially defined communities against each other.” (pg. 63). The
alternative approach encourages and forces traditionally competing local jurisdictions to
think beyond their limited spatial boundaries. As regional industry clusters tend to draw
communities into different partnerships and collaborative efforts, the very notion of
economic development must also be thought of as including a wider regional landscape.
Alternative economic development institutional arrangements and policies must make the
wider economic development and growth of the region the primary objective over the
narrow objectives of simply stimulating local economic growth.
Resources, the second element of a new approach to economic development
policy, is a vast concept that includes several primary factors of production, including
land, labor, capital, and the technology used to produce output while also including the
amenities and public goods available and offered from a particular community. The
existing dominant approaches and polices of community economic development,
according to Shaffer, Deller, and Marcouiller (2006), tend to focus on how public policy
could be used to attract labor and capital into a specific, usually narrowly defined,

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geographic location. Furthermore, these existing dominant approaches and policies of
community economic development have also, Shaffer, Deller, and Marcouiller (2006),
“…tended to focus narrowly on the traditional factors of production and how they are
best allocated in a spatial world. We argue that community economic development must
be broader than simply worrying about land, labor, and capital. This broader dimension
includes amenities, public capital, technology and innovation, society and culture,
institutions, and the decision-making capacity of the community.” (pg. 64). But there
still must be some degree of consideration of the more traditional factors of production
within this broader understanding. Where more traditional community economic
development policies and approaches go wrong is their over focus on narrow spatial and
geographic locations. Consideration of the methods of production, including land, labor,
and capital, must be made at both the regional and local level in order to ensure long-
term, stable, economic growth at both the regional and local level.
The way in which contemporary economic development policy considers and
defines markets, the third element identified by Shaffer, Deller, and Marcouiller (2006),
also requires significant rethinking. According to Shaffer, Deller, and Marcouiller
(2006), “Today, the popular idea surrounding the notion of clusters focuses on tightening
interindustry linkages within and across sectors as well as social markets. In practice at
the community or regional level, the development of clusters often flows from the
concerted efforts to better network existing businesses.” (pg. 66). So much of
contemporary public economic development policy, pursued by dominant institutional
forms like local redevelopment, ignore the community-wide or regional-wide markets

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that tend to have a significant impact on the economic and social well-being of a local
jurisdiction. Local jurisdictions, and their locally elected policy makers, tend to overly
focus on only the local market for various goods and services and how certain local
economic development policies can be developed and implemented that maximizes the
economic return from these local markets. For example, local redevelopment agencies
pursue projects like big-box retailers and auto dealerships that can increase the amount of
commercial-retail spending within their local jurisdiction or local redevelopment project
area. Even when local redevelopment agencies pursue projects like hotels or convention
centers, the primary goal of the economic development policy or project is, again, to
stimulate local economic activity. A broader consideration of community-wide and
region-wide markets is needed to help steer local community economic development
policy in directions that support wider regional economic activity.
According to Shaffer, Deller, and Marcouiller (2006), “Institutions are basic to
any form of social interaction, although their importance is not usually recognized except
when changes are proposed or when they are not performing satisfactorily.” (pg. 66).
Our local and regional institutions require much more attention by policy makers and
society if more effective community economic development policy is to be made and
implemented. Institutions help set the basic rules and norms by which communities and
markets function. Institutions, because they are also responsible for enforcement of these
basic rules and norms, also have enormous power to affect economic markets because
they set the general framework for economic activity. Institutions can affect income
distribution by defining minimum wages, the ownership patterns of resources, and how

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economic returns from production are used and distributed. Simply put, Shaffer, Deller,
and Marcouiller (2006) conclude that, “Institutions related to the ownership of resources
and capital accumulation affect community economic development by defining the
mechanisms to acquire and control capital.” (pg. 67).
As many of the criticisms of contemporary local redevelopment agencies
presented in Part II suggest, the current institution of local redevelopment is no longer
functioning well enough to ensure that the goals of either urban revitalization or urban
economic development are properly met. According to Shaffer, Deller, and Marcouiller
(2006), these existing contemporary institutions must be better designed to ensure that
economic growth and prosperity is encouraged at the regional and local level. New
institutional arrangements and processes must be considered that both enhance
meaningful public participation and consider the wider regional impacts local economic
development public policy can potentially have.
Like our institutions of economic development, society, the fifth element
identified by Shaffer, Deller, and Marcouiller (2006), requires greater attention in the
development of new community economic development public policy and its
implementation. According to Shaffer, Deller, and Marcouiller (2006), “Economic
development practitioners often speak of a community’s underlying social structure and
culture as the community’s business climate. In its narrowest sense, business climate is
equated with the formal rules relating to taxes and regulatory burden…In the broadest
sense, a community’s business climate speaks to the attitudes of the community toward
change, experimentation, entrepreneurship, institutional capacity, and communication

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levels.” (pg. 67). Shaffer, Deller, and Marcouiller (2006) argue that too much of
contemporary public economic development policy focuses on just the narrow sense of
business climate and community culture. Contemporary approaches to economic
development focus on either tinkering with a local jurisdiction’s tax structure or the
regulatory standards of a local jurisdiction. Future policies must embrace the elements of
community culture and business climate found in the broadest conception of community
economic development. The building of social capital and infrastructure, according to
Shaffer, Deller, and Marcouiller (2006), must be given much higher priority in new
community economic development policies and approaches.
According to Shaffer, Deller, and Marcouiller (2006), “The decision-making
capacity of the community centers on the ability to distinguish between problems and
symptoms and then to identify and implement solutions. A symptom is a visible sign that
there is an underlying problem, but treating the symptom does not correct the problem.”
(pg. 68). Contemporary local redevelopment agencies in Nevada and California often
target only the physical symptoms of urban decay and physical and economic blight.
Property-based approaches are widely employed to remove and replace aging and
dilapidated structures or enhance property values within the redevelopment agency’s
local redevelopment project area. Even the very definitions of physical and economic
blight codified by Nevada and California state law identify only the affects of social and
economic maladjustment. Very little of what a contemporary local redevelopment
agency actually does helps to alleviate the urban problems that Netzer (1970) first
identified. Problems pertaining to a growing urban minority poor, or a general decline in

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the stock of social capital in the urban inner central city core, or the growing ecological
and health problems associated with air and water pollution, are rarely addressed head-on
by the policies, practices, and actions of existing local redevelopment agencies.
Shaffer, Deller, and Marcouiller (2006) argue that if new institutions of
community economic development and new community economic development policies
are to successfully tackle the many and varied problems of the urban environment, the
decision-making capacity of these institutions and policies must be expanded through the
use of new collaborative economic development decision-making processes. As Shaffer,
Deller, and Marcouiller (2006) conclude, “Success of community-based development is
the result of political entrepreneurs who are skilled at creating the political environment
in which communities can succeed. It is political attitude, will, and activism that find
ways to create change in a community. Successful community economic development,
then, involves a partnership between nonprofit community groups, local government, and
the private-sectors.” (pg. 69).

10.e – The Importance of Regional Organizations and Institutions
In addition to embracing new economic development policies, practices, and
approaches that embrace the realities of regional industry clustering, new institutions of
urban economic development that are organized to operate regionally will be needed to
continue the current economic development efforts of existing local redevelopment
agencies. Redevelopment, as the dominant contemporary institutional form through
which local municipal and county governments in Nevada and California currently

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pursue the goals of urban economic development, is largely incapable of operating and
functioning regionally. Not only do existing state statutes largely prohibit local
redevelopment agencies from operating regionally, current fiscal pressures placed upon
local municipal and county governments by a largely inefficient system of public finance
provides little incentive for the authorizing local jurisdiction to modify current local
redevelopment agency policy and practice to consider wider regional economic concerns.
In studying various types of organizational and institutional approaches for
creating capacity for economic development in Kentucky, Hall (2008) found that regional
organizations have several distinct advantages over the use of predominantly locally
created and operating organizations. Hall (2008) defines capacity for economic
development as, “…a stock of resources – a measure of organizational potential;
furthermore, it can be defined as the ability to anticipate and influence change, to make
intelligent policy decisions, to develop and implement programs and policy, to attract and
absorb resources, or to evaluate current activities and plan for the future.” (pg. 110).
Hall (2008) identifies six types of resources that constitute capacity for economic
development: 1) staffing and spending factors, 2) leadership and vision, 3) management
and planning, 4) fiscal planning and practice, 5) operational support, and 6) the ability to
attract, absorb, and manage resources and funds (i.e. federal economic development
grants like Community Development Block Grants). As each type of resource increases,
Hall (2008) argues that a community’s own capacity for economic development
increases. Although Hall (2008) largely focuses on the capacity of regional organizations
to attract and secure federal economic development grants, he found that regional

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organizations, or organizations that have the ability to operate regionally through
interlinking economic development networks, tend to have the ability to make and
implement economic development policy regionally and have a significantly greater
ability to attract the necessary resources needed to enhance overall levels of economic
activity when compared to economic development organizations that are predominantly
local in their scope, range, and authority.
One issue that is central to the role regional organizations play in economic
development is the issue of governance. Callahan (2007) examined the governance
issues pertaining to several regional transportation agencies that were created in Los
Angeles County between 1978 and 2002 to build and maintain regional rail projects. The
experiences of the Los Angeles County Transportation Commission (LACTC), the Los
Angeles Metropolitan Transportation Authority (MTA), and of the Alameda Corridor
Transportation Authority (ACTA), show that, according to Callahan (2007), “…regional
governance is not a flight from politics but an evolution of mechanisms that respond to
competing interests.” (pg. 298). Callahan’ s (2007) study of the LACTC, the MTA, and
the ACTA suggests that one important consideration that policy makers must take into
account when developing regional organizations is the degree and type of conflict that is
built into the regional organization and institution.
In the specific case of the LACTC, the MTA, and eventually the ACTA, these
regional transportation authorities in Southern California were given considerable
autonomy over the collection and distribution of vast public resources, including the
proceeds from several state and local bond issuances to support the development of

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passenger and freight railway lines throughout the Southern California region. Conflict
between competing local jurisdictions, each of which felt that it was entitled to a certain
portion of the public resources, eventually eclipsed the actual goals of the first two
regional rail transportation organizations – the LACTC and the MTA. With the failure of
both the LACTC and MTA, due to irresolvable levels of conflict between competing
local jurisdictions, policy makers moved to create the ACTA, which was intentionally
designed to incorporate the conflict that had taken down both the LACTC and MTA in
the past.
One of Callahan’s (2007) primary findings is that each of the three case studies
involved the creation and inclusion of different local adaptation mechanisms. According
to Callahan (2007), “Each case study exhibits specific solutions that were unique to the
context of the newly created public agency. In addition, each agency developed
mechanisms specific to the region and different from similar agencies in the State of
California.” (pg. 297). This conclusion suggests that new institutional approaches to
economic development must also consider developing and using various adaptation
mechanisms in order to resolve the potential conflict between competing local
jurisdictions within the region that are very likely to occur. In addition to developing
future economic development policies, practices, and approaches that are better aligned
with regional economic activities, these new institutional forms of economic
development must also build in ways in which conflict can be overcome and solved for.
Regional transportation agencies and organizations also provide some insight into
how new alternative institutions of economic development can be structured. Sanchez

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and Wolf (2007) argue that, “…metropolitan regions face increasing demands for greater
competitiveness in the global economy and that transportation systems cannot be treated
separately from other policy concerns, such as air quality, sprawl, housing, and social
equity…current institutional arrangements are too fragmented. Metropolitan regions are
burdened with institutional legacies that make comprehensive approaches to tackling
metropolitan problems quite vexing.” (pg. 172). Sanchez and Wolf (2007) find that, at
least in the field of urban transportation, metropolitan planning organizations (MPO’s)
have considerable capacity, when organized properly, to effectively govern and manage
complex and integrated urban problems like public transportation. Like Callahan (2007),
Sanchez and Wolf (2007) argue that governance remains a central question regarding the
development of regional organizations and institutions designed to carry out some public
task. In examining the impact various federal transportation legislation has had on the
organization of MPO’s and their governance structures and systems, such as the
Intermodal Surface Transportation Efficiency Act (ISTEA) 1991, the Transportation
Equity Act of the Twenty-First Century (TEA-21) 1998, and the Safe, Accountable,
Flexible, Efficient Transportation Act (SAFETEA) 2005, Sanchez and Wolf (2007) found
that, “These pieces of legislation have created opportunities and challenges for those
directly involved in planning for surface transportation. Primarily, they have enhanced
the role of metropolitan planning organizations – often regional councils of governments
– by giving them responsibility for integrating transportation planning across
metropolitan areas.” (pg. 172).

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Extending this conclusion to the formation of new regional economic
development institutions and organizations is fairly straightforward. The fragmented
nature of the metropolitan area, burdened by the failure of past institutional legacies,
makes comprehensive solutions and approaches both impossible and impractical under
existing locally-oriented institutional forms. The current problems facing the urban
metropolitan area are integrated, be it the problems of efficient and effective
transportation or the problems of a growing number of urban minority poor. Separating
poverty from transportation, or environmental problems from housing problems, ignores
the interrelation and interdependence of these problems. In addition to being interrelated
and interdependent, each of these problems stems from regional economic and social
dislocation and ignores municipal and county political boundaries. A regional approach,
as well as a regional governance model, similar to the approaches identified by both
Callahan (2007) and Sanchez and Wolf (2007) for regional transportation authorities and
agencies, is needed for the future alternative institutional arrangements through which
local municipal and county governments can continue to pursue the goals of economic
development.
The use of interlocal agreements by various local municipal and county
governments could serve as a possible blueprint for the new alternative institutional
forms that could potentially replace redevelopment in Nevada and California once the
majority of local redevelopment project areas begin to expire. In examining the use of
interlocal agreements in the Kansas City Metropolitan Statistical Area (MSA), an area
that includes multiple municipal governments, county governments, school districts, and

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several special districts, Thurmaier and Wood (2002) find that the use of interlocal
agreements (ILA’s) has been successfully employed to reduce interjurisdictional conflict
over the provision of various services. In the Kansas City MSA, Thurmaier and Wood
(2002) found that these ILA’s, or joint public service networks, have been used to
successfully provide a wide variety of public services, including fire and police
protection, public works services, regional utility service, various urban and MSA related
planning services, public health services, and even used in the issuance of public bonds.
According to Sanchez and Wolf (2007), “ILA’s are long-established service-
delivery instruments for local governments…Economies of scale and other economizing
benefits tend to be the most frequently mentioned reasons why governments enter into
interlocal contracts.” (pg. 585-586). Although ILA’s and other types of
transjurisdictional service provider networks have become increasingly popular ways for
various local governments to provide and perform a wide variety of different public
services, local urban economic development policy, through the institution of local
redevelopment, still remains firmly grounded in the principles of interjurisdictional
competition, despite overwhelming evidence to suggest that regional economic growth
and prosperity is more likely to drive local economic growth and activity than
interjurisdictional competition for new firms and businesses.
In addition to operating and creating collaborative processes among local
jurisdictions regionally, regional governance models for economic development will also
be needed due to the growing complexity of the problems present in the urban
environment. As Sanchez and Wolf (2007) conclude, “Modern governance is

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challenging traditional, hierarchical modes of public-service delivery. Public policies
addressing complex issues require transjurisdictional solutions. Jurisdictional borders
and sovereignty are declining in importance and there is a corresponding decline in the
capacity of jurisdictions to manage some public policy issues.” (pg. 586). When it
comes to the importance of stimulating economic activity at the regional level, the current
dominant institutional form of urban economic development that exists in Nevada and
California, primarily local redevelopment, has neither the proper regional focus for either
developing or implementing meaningful economic development policy nor the necessary
capacity to resolve transjurisdictional conflict among competing local jurisdictions nor
the capacity to leverage enough resources to adequately address the many interrelated
problems of the urban environment.

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Chapter 11 – Part III Conclusions and Lessons

11.a – Introduction
By reviewing the current literature from the fields of political science, political
economy, public administration, public finance, and economic development, a blueprint
for future alternative institutional arrangements, through which local municipal and
county governments can continue the revitalization and economic development policies,
programs, and actions of contemporary local redevelopment agencies in Nevada and
California, begins to emerge. Each academic discipline shows that better thought out and
incentivized public institutions of urban revitalization and urban economic development
are needed to implement future policies. As local contemporary redevelopment project
areas begin to expire in the next 15 to 20 years in Nevada and California, local municipal
and county governments have an opportunity to align their institutions and public policies
to better meet the political, social, and economic realities of the 21
st
Century.

11.b - Lessons
Four general lessons can be learned from the literature summarized in this
chapter. When taken together, each lesson can be used to help develop a blueprint for
policy makers in Nevada and California who will begin to consider new alternative
institutional forms and the new policies, programs and approaches of urban revitalization
and urban economic development.

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Lesson 1: New institutional forms through which local municipal and county
governments pursue the processes and goals of urban revitalization and urban economic
development will require a level of meaningful political autonomy. Such autonomy,
designed to enhance organizational and functional efficiency, effectiveness, and
economy, must also be balanced with meaningful opportunities for public participation in
the redevelopment process to ensure adequate levels of public accountability and
responsibility.

A degree of meaningful political autonomy from municipal and county
governments is needed for several reasons. First, autonomy can adequately ensure that
urban revitalization and urban economic development processes are free from political
corruption. Second, a meaningful degree of political autonomy also allows new
alternative institutions of urban revitalization and urban economic development to better
function at the regional level. In addition to a meaningful degree of political autonomy,
any new alternative institutional form of urban revitalization and urban economic
development will require a meaningful degree of public participation and input. The use
of performance measures, citizen advisory boards with the power to meaningfully impact
public policy making, and the use of independent and fully public accounting and
financial reporting can ensure that new alternative institutional forms of urban

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revitalization and urban economic development focus on the regional economic
development interests of the entire community.

Lesson 2: New alternative institutional forms of urban revitalization and urban economic
development require better incentives in order to steer policy development and
implementation, and project selection and completion, toward consideration of the larger
issues of urban revitalization and urban economic development that are regional and
embrace both property-based and non-property based approaches.

Contemporary local redevelopment agencies in Nevada and California are too
focused on the use of property-based approaches to urban revitalization and urban
economic development. To ensure true long-term, stable, economic growth at both the
local and regional levels, financial incentives that encourage adoption of broader, non-
property based approaches must be intentionally designed and implemented. For
example, allowing new alternative institutional forms of urban revitalization and urban
economic development to collect patent revenue from new technologies developed could
potentially encourage these new forms to invest in technology research and development.
Or, the ability of a new alternative institutional form to collect incremental business
license revenue or incremental income tax revenue can also help incentivize new forms
of urban revitalization and urban economic development to pursue projects and programs

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that encourage meaningful business development and job development within their
jurisdictions.

Lesson 3: These new institutional forms of urban revitalization and urban economic
development must also think, organize, and act regionally to support existing and
emerging regional industry clusters.

Much of contemporary economic activity is organized regionally, not locally.
Yet, the majority of public-sector efforts to stimulate economic activity is organized
locally, not regionally. One of the major criticisms of contemporary local redevelopment
agencies is the failure of this institution to effectively operate at the regional economic
level. A new paradigm in the development of public economic development policy is
needed to support regional economic growth, while also minimizing unnecessary conflict
between competing local jurisdictions for scarce public resources. A network-based
approach, similar to governance models developed by regional councils of governments
(COG’s), transportation authorities, and other regional institutions, can help a new
alternative institutional form of urban revitalization and urban economic development to
better leverage its own resources, while also helping the institution operate regionally
through various collaborative efforts with other public and private-sector agencies and
organizations.

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Part III has attempted to synthesize the many and varied theories and ideas in the
scholarly fields of political science, political economy, public administration, public
finance, and economic development in order to develop a few central positions useful to
policy makers considering alternative institutional arrangements as the majority of local
redevelopment project areas in Nevada and California begin to expire. The work of
revitalizing the urban environment and stimulating long-term, stable, local and regional
economic growth and activity remains a central responsibility of local municipal and
county governments. Instead of using precious public resources to compete against
neighboring local municipal and county governments, these resources must be more
efficiently, effectively, and economically used to better tackle the complex problems still
present in the American urban environment. At the same time, policy makers must also
consider how to better enhance the levels of public accountability and responsibility in
the development and delivery of public urban services.
Much of the material presented thus far has focused on the current shortcomings
of contemporary redevelopment policies, programs, and practices. However, the
shortcomings and criticisms of contemporary local redevelopment agencies presented
thus far fail to show how important local redevelopment agencies are for local
jurisdictions interested in eliminating physical and economic blight in their communities.
Redevelopment, despite its shortcomings and criticisms, has been very successful in
removing blight and stimulating local economic activity. The remainder of this study
focuses on the many success stories of local redevelopment. These success stories can

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provide policy makers considering new alternative institutional forms of urban
revitalization and urban economic development with the key insights needed in order to
ensure that the work of contemporary local redevelopment agencies is both
acknowledged and maintained while moving forward.

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Part IV – Introduction of the Methodology

IV.a – Introduction
Up to this point, much of this study has relied upon the contributions of scholars,
researchers, and practitioners in the fields of history, political science, public
administration, economics, economic development, and the law to outline both the
historical evolution of redevelopment in Nevada and California and how redevelopment
has been used by local municipal and county governments to revitalize urban centers and
stimulate local urban economic development. The remainder of this study presents both
quantitative and qualitative original research on how local redevelopment agencies
operate, are structured, and how they have been both successful and unsuccessful in their
attempts to revitalize urban centers and stimulate local urban economic activity.
Chapter 12 outlines two approaches taken in examining the operations of local
redevelopment agencies in Nevada and California. First, three separate levels of
quantitative analysis are outlined including: 1) Analysis of Variance (ANOVA), 2)
Factor Analysis, and 3) a series of multiple regression models using budgetary data.
Second, Chapter 12 outlines the use of case studies. The case studies are used to examine
the activities of individual redevelopment agencies in both Nevada and California.
Combined, both the quantitative and qualitative types of analysis are used to answer the
primary research question introduced in Chapter 12. Chapter 12 also represents the eight
separate research propositions originally presented in Chapter 3 and Chapter 7.

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Chapter 12 – Research Methodology

12.a – Introduction
This chapter outlines the primary quantitative and qualitative research methods
developed in order to test the central research question and the eight individual research
propositions presented separately in Chapter 3 and Chapter 7. The first part of this
chapter begins with a restatement of the central research question and of the eight
individual research propositions. The second part identifies the primary data sets used
including their sources, the advantages of each data set, and the limitations of each data
set. The third section concludes by identifying the primary quantitative and qualitative
research methods used, including the use of one-way Analysis of Variance (ANOVA),
Factor Analysis, multiple regression, and the use of several case studies.

12.b – Central Research Question and Individual Research Propositions
Recall from the Foreword section that the central research question of this study
is: How have local redevelopment agencies in Nevada and California successfully
contributed to long-term, stable, local urban economic growth? The first three parts of
this study have examined the historical development of local redevelopment agencies in
Nevada and California, the primary criticisms of local redevelopment, and the various
contributions from the fields of political science, public administration, economics, and
economic development in an attempt to provide some insight into why redevelopment is

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now the primary institutional form through which local municipal and county
governments in Nevada and California now pursue the processes and goals of local urban
revitalization and local urban economic development. The first three parts of this study
have also been used to provide some general insight into whether or not redevelopment,
in its contemporary form, has generally succeeded in achieving both the goals of local
urban revitalization and local urban economic development. In general, both the
practitioner’s and scholar’s experience with local redevelopment suggests that, despite
certain specific drawbacks of how local redevelopment agencies are organized, function,
and are used by their local municipal and/or county governments, redevelopment in
Nevada and California continues to be a very important tool of urban revitalization and
urban economic development for local municipal and county governments. The
experience with redevelopment also suggests that redevelopment has been, for the most
part, a very reliable and successful tool or local urban revitalization and local urban
economic development.
The Foreword section of this study also asked: With many local redevelopment
project areas set to expire over the next 15 to 20 years in Nevada and California, what
will be the new institutional arrangement(s) of local urban economic development
efforts? This question raised specific concerns over the importance of both
organizational structure and the different organizational policies and projects used to
pursue local urban economic growth. The importance of organizational structure
suggests that the specific way in which local municipal and county governments have
organized and structured their local redevelopment agency has a significant impact on the

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“success” of the local redevelopment agency to combat physical and economic blight
while stimulating urban economic activity. In this case, whether or not the local city
council serves as the local redevelopment agency board of directors, or whether or not the
authorizing local city council allows for the appointment of an independent board, should
have some measurable impact on how the agency functions. Furthermore, how the
agency’s activities and relationship to the larger public and private-sector is structured
and organized should also have a measurable impact on the “success” of the agency to
combat physical and economic blight while also stimulating urban economic activity.
For example, the local redevelopment agency may act as a single member of a larger
local urban revitalization and local urban economic development network of various
other organizations, entities and agencies. Or, the agency’s activities may be organized
through the use of a traditional bureaucratic hierarchy in which all the local
municipality’s urban revitalization and economic development efforts are centrally
organized within the hierarchy.
The second part of the central research question identified in the Foreword section
of this study helped guide the development of eight individual research propositions.
These eight individual research propositions, developed from examining both the
practitioner’s and scholar’s experience with local redevelopment in Nevada and
California, were originally presented in Chapter 3 and Chapter 7. Each individual
research proposition is restated here.

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Proposition 1: Over time, redevelopment in Nevada and California has become the
dominant institutional arrangement by which local municipal and county governments
have pursued the processes of local urban revitalization and the goals of local urban
economic development.

Proposition 2: The mid 1970’s to early 21
st
Century saw the rise of redevelopment as the
dominant institutional form, in both Nevada and California, through which local city and
county governments pursue the processes and goals of local urban revitalization and local
urban economic development. Changing political, administrative, organizational, social,
and economic paradigms and realities of the mid 1970’s led to an expansion of local
redevelopment agencies in the 1980’s.

Proposition 3: Because contemporary redevelopment agencies are the dominant
institutional form that local municipal and county governments in Nevada and California
use to pursue the processes of urban revitalization and the goals of local urban economic
development, it stands to reason that local municipal and county governments have
strong incentives to retain direct control of their local redevelopment agency.

Proposition 4: Redevelopment has become overly dependent on the use of property-
based approaches to urban revitalization and urban economic development. The

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dominance of property-based approaches in the way local redevelopment agencies pursue
the goals of urban revitalization and urban economic development stunt the ability of
local redevelopment agencies to successfully revitalize blighted urban neighborhoods and
stimulate long-term, stable, local economic growth.

Proposition 5: Local redevelopment agencies have increasingly become “local players”
in efforts to stimulate regional economic growth. By ignoring regional economic
development considerations, redevelopment often works against its own efforts to
stimulate successful local economic growth.

Proposition 6: Local redevelopment agencies have increasingly been used by the
authorizing local municipal or county government to “game” local systems of public
finance. Redevelopment agencies further fiscalize the land use of their local
redevelopment project areas to generate the maximum amount of municipal or county
revenues to such an extent that wider economic development considerations are
sacrificed.

Proposition 7: The use of eminent domain by local redevelopment agencies continues to
be used in ways that support private real estate development interests at the expense of
vulnerable populations, including poor minority and elderly urban residential
populations. If true, the use of eminent domain works counter to the original intent of

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redevelopment legislation. If true, the use of eminent domain also signals the possibility
that local redevelopment agencies are working contrary to their urban revitalization goals
by forcing vulnerable populations to bear a disproportionate level of the costs associated
with eminent domain while transferring a disproportionate level of the benefits associated
with eminent domain to private real estate interests and developers.

Proposition 8: Local redevelopment agencies have increasingly become subject to
principal-agency corruption and do not provide the larger public with meaningful
opportunities to participate in the wider activities of local redevelopment agencies. This
has created a power and knowledge imbalance through which private real estate
developers are able to set the project and policy agenda for local redevelopment agencies.
Without meaningful public input, it is likely that local redevelopment agencies are simply
gentrifying and not revitalizing physically and economically blighted neighborhoods and
communities.

Although enough evidence has already been presented to provide a reasonable
discussion and answer to each of these eight separate research propositions, a concluding
statement for each proposition is reserved for the final part, Part VI, of this study.
However, the central research question of this study, reintroduced above, and these eight
separate research propositions are used to help guide both the quantitative analysis of
available budgetary data for local redevelopment agencies in Nevada and California and
the qualitative analysis of individual local redevelopment agencies through the use of

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case studies. The first three research propositions presented above largely focus on the
dominant role redevelopment serves in a local municipality’s and/or county’s effort to
revitalize physically and economically blighted parts of their community. The final five
research propositions presented above largely focus on the actual activities of local
redevelopment agencies in both Nevada and California.
The use of one-way ANOVA testing, Factor Analysis, and multiple regression to
examine the trends in existing local redevelopment agency budgetary data is used to
explore the first three research propositions that largely focus on how redevelopment has
become the dominant institutional form through which local municipal and county
governments pursue the goals of urban revitalization and economic development. Recall
from the introductory section of Part II that the definition of blight, provided by both
Nevada and California state statutes, was used as the foundation for defining the goals of
urban revitalization. In short, it is argued that the successful eradication, elimination, or
mitigation of both physical and economic blight within defined redevelopment project
areas would physically manifest itself in the overall increase in total incremental assessed
valuation of the entire redevelopment project area and in the overall increase in
incremental property tax revenue collected by the local redevelopment agency from the
locally defined project area. Hence, a local redevelopment agency that has seen
consistent and high level increases in both the total incremental assessed valuation of
their own local redevelopment project area and in the total amount of incremental
property tax revenue collected by the local redevelopment agency should be an agency

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that has, to some measurable degree, met the goal(s) of urban revitalization by
eradicating, eliminating, or mitigating physical and economic blight.
Although the goal(s) of local urban revitalization are somewhat straightforward,
also recall from the introductory section of Part III that the goal(s) of local urban
economic development are far less clear and far less easy to measure. Using the
International Economic Development Council’s (2006) definition of economic
development, the successful stimulation of local urban economic activity is predicated on
a variety of influences and conditions that any one entity or agency of government simply
cannot control for. For example, when looking at the larger quality of life issues that are
tied directly to the successful stimulation of local economic activity, individuals and
individual firms may consider things like a moderate climate as a defining characteristic
of a community that has a generally high level of quality of life and a high potential for
increased economic activity. No single government agency has ever been publicly
identified as capable of creating and sustaining a moderate climate that could both
enhance quality of life levels or the attractiveness of the community to potential
residents/workers or potential firms.
Although practitioners and scholars in the many fields of the social sciences have
proposed many quantitative techniques to measure quality of life and the subsequent
“success” of local urban economic development programs, there has yet to be a
universally accepted way to quantitatively test whether or not government in general, or
any individual unit or agency of government, has successfully met the goal(s) of local
economic development. Although no real generalization for all local municipal and

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county jurisdictions can be made from the results of this study, this study relies on
qualitative case studies to probe the individual ways in which local redevelopment
agencies have been used to stimulate local urban economic activity and enhance the
individual jurisdiction’s overall quality of life level.
The final five individual research propositions stated above are designed to probe
the actual activities of local redevelopment agencies in both Nevada and California.
Because each individual jurisdiction faces unique challenges and is endowed with a
certain basket of individual endowments and advantages, every local redevelopment
agency throughout Nevada and California tends to pursue projects, implement policies,
and develop programs that meet the individual and unique needs of their respective
jurisdictions and individual redevelopment project areas.
Although there are similarities among the “general” types of project, policies, and
programs that seem to be common across all redevelopment agencies (for example a
desire to increase the level of affordable housing, increase the number of jobs), the
important specifics of how these projects, policies, and programs are developed and
implemented vary greatly between different redevelopment agencies in different
jurisdictions. In order to probe each of the final five individual research propositions
represented here, the use of individual case studies is relied upon to provide some general
answer into what makes a local redevelopment agency successful and how the institution
of local redevelopment might be improved upon as local redevelopment project areas in
Nevada and California begin to expire over the next several years.

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12.c – Identification of the Primary Data Sets Used
This section introduces and identifies the primary data sets used in the
quantitative analysis presented in this chapter. This section also identifies what data is
available from each data set and a comparison of each data set, the advantages and
limitations of each data set, and the eventual “data cleaning” that was required.

12.c.1 – Introduction, Identification and Comparison of the Primary Data Sets
The use of local redevelopment agency budgetary data collected and reported by
the Nevada Department of Taxation in Nevada and the California State Controller’s
Office in California offers the best way to measure quantitative changes in the levels of
total incremental assessed value and total incremental property tax revenue. In Nevada,
various budgetary details for all local redevelopment agencies operating and located in
the State of Nevada are published in the Nevada Department of Taxation, Division of
Assessment Standards’ “Local Government Finance Redbook” for each fiscal year. In
California, various budgetary details for all local redevelopment agencies operating and
located in the State of California are published by the California State Controller’s
Offices’ “Redevelopment Agencies Annual Report” for each fiscal year. For the
purposes of the one-way ANOVA testing, Factor Analysis, and multiple regression
analysis, data is used from both the “Local Government Finance Redbook” in Nevada
and the “Redevelopment Agencies Annual Report” in California.

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The “Local Government Finance Redbook” in Nevada is divided into four
primary sections. Each section, with its corresponding title, is presented below in Table
12-1.
Table 12-1
Primary Sections – “Local Government Finance Redbook”
FY 2008-2009
Section Section Title

Section A Total Property Tax Rates by Taxing Unit

Section B Combined Property Tax Rates by
Component; by Taxing Unit
Section C Property Tax Overrides and Tax Impact

Section D Overlapping Districts

Source: State of Nevada, Nevada Department of Taxation, Division of Assessment
Standards, “Local Government Finance Redbook” FY 2008-2009 Pg. I.

In the “Local Government Finance Redbook”, budgetary data for all local
redevelopment agencies operating and located in the State of Nevada is presented in only
Section A and Section B. In both Section A and Section B, the various budgetary data
for local redevelopment agencies in Nevada is reported first by county and then
subdivided by jurisdiction. For example, in the FY 2008-2009 “Local Government
Finance Redbook”, relevant and reported budgetary data for the Reno Redevelopment
Agency, located in the City of Reno, NV, is published under the subsection “Washoe
County” and then in the subcategory for special taxing districts within the City of Reno,
NV in Section A on page A-13 and then again in Section B on page B-12. Table 12-2
lists all the various budget categories for which budgetary data is published for all local

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redevelopment agencies operating and located in the State of Nevada for both Section A
and Section B.
Table 12-2
Budgetary Data for Local Redevelopment Agencies by Section – “Local
Government Finance Redbook”
FY 2008-2009
Section A Section B

Assessed Value (Incremental) Maximum Allowed Tax Rate
Estimated Net Proceeds of Minerals Actual Rate Imposed
Total Assessed Value (Incremental) Voter Allowed Tax Rate
Combined Tax Rate (Col. 9, Part B) Imposed Voter Tax Rate
County Tax Rate Legislative Allowed Tax Rate
Combined Special District Tax Rate Imposed Legislative Tax Rate
School Tax Rate Debt Service Tax Rate
State Tax Rate # Combined Tax Rate (Col. 5, Part A)
Total Property Tax Rate
Source: State of Nevada, Nevada Department of Taxation, Division of Assessment
Standards, “Local Government Finance Redbook” FY 2008-2009.

In addition to various local redevelopment agency budgetary data published by
the Nevada Department of Taxation in the fiscal year “Local Government Finance
Redbook”, the Nevada Department of Taxation also publishes various data pertaining to
individual local redevelopment agency debt levels for each fiscal year in the Nevada
Department of Taxation, Division of Assessment Standards’ “Annual Local Government
Indebtedness” report. The “Annual Local Government Indebtedness” report in Nevada is
divided into three primary parts. Each part, with its corresponding title, is presented
below in Table 12-3.

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Table 12-3
Primary Sections – “Annual Local Government Indebtedness” Report
FY 2008-2009
Section Section Title

Part A Debt Limit by Entity Type

Part B Overlapping Debt

Part C Five Year Debt Requirement

Source: State of Nevada, Nevada Department of Taxation, Division of Assessment
Standards, “Annual Local Government Indebtedness” Report FY 2008-2009 Table of
Contents.

Debt related data for each individual local redevelopment agency operating and
located in the State of Nevada is reported in each of the three primary parts listed above
in Table 12-3. Like the “Local Government Finance Redbook”, debt related data for
individual local redevelopment agencies are organized by county and then by the
individual jurisdiction if the agency happens to be located within an incorporated city.
Part A of the “Annual Local Government Indebtedness” Report provides data for each
local redevelopment agency operating within the State of Nevada for the following
categories: “Assessed Value”, “Debt Limit”, “Outstanding General Obligation Bonds”,
“Other Outstanding General Obligation Debt”, “Legal Debt Margin”, and “Authorized
but Unsold General Obligation Bonds”. Part B provides data for each local
redevelopment agency in the State of Nevada for the following categories: “General
Obligation”, “General Obligation/Revenue Supported”, “General Obligation/Special
Assessments”, “Medium-Term Financing”, Percent Debt Limit Debt to A.V.”,
“Revenue”, “Special Assessments”, “Federal Program Loans”, “Interim and Other Debt”,

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“Percent Other Debt to A.V.”, “Total (Debt)”, and “Percent Total Debt to A.V.”. Part C
provides estimates of debt requirement financing levels for each year projected five years
from the current fiscal year.
Unlike the Nevada Department of Taxation, the California State Controller’s
Office has, since FY 1991, published a fully separate report which details various
budgetary elements of all local redevelopment agencies and local redevelopment project
areas operating and located in the State of California. The report, “Community
Redevelopment Agencies Annual Report”, is published by the California State
Controller’s Office for each year. The California State Controller’s Office was able to
provide each fiscal year’s annual report in Microsoft Excel format and a separate data
dictionary for the existing redevelopment agency database for each fiscal year between
FY 1991 and FY 2007. The “Community Redevelopment Agencies Annual Report” and
the provided electronic database divides the various budgetary data for every
redevelopment agency and project area in the State of California into 10 primary
categories, including: 1) “Entities”, 2) “Long-Term Debt”, 3) “Assessed Valuation”, 4)
“Assets”, 5) “Liabilities”, 6) “Expenditures”, 7) “Other Financing”, 8) “Revenues”, 9)
“Pass Through”, and 10) “Project Areas”.
Table 12-4 lists the 10 primary categories provided in the fiscal year “Community
Redevelopment Agencies Annual Report” and the number of various sub-categories
provided in each of the 10 primary categories.

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Table 12-4
Listing of Primary Categories and Number of Sub-Categories – “Community
Redevelopment Agencies Annual Report
FY 1991 to FY 2007
Primary Category Number of Sub-Categories

Entities 6
Long Term Debt 21
Assessed Valuation 6
Assets 106
Liabilities 94
Expenditures 133
Other Financing 83
Revenues 78
Pass Through 38
Project Areas 23

TOTAL 588
Source: State of California, California State Controller’s Office, “Community
Redevelopment Agencies Annual Report” FY 1991 to FY 2007.

The data for each individual project area is coded by an “Entity ID” number
which is further coded to a specific redevelopment agency. For example, in FY 1991, the
City of Bell Gardens, CA Redevelopment Agency was given an “Entity ID” number of
741. Also in FY 1991, in the “Assessed Valuation” primary category, the Bell Gardens
Redevelopment Agency had two listed redevelopment project areas. Both project areas
were assigned the “Entity ID” number of 741. Across each of the 10 primary categories,
all data pertaining to the Bell Gardens Redevelopment Agency in the City of Bell
Gardens, CA was assigned the “Entity ID” number of 741. This allowed individual
project area analysis as well as a summing of all individual project area data up to the
agency level. In total, 588 various sub-categories of data were available across each of
the 10 primary categories and data in each sub-category was provided with an “Entity

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ID” number which allows summing up to the agency level and comparison across
individual redevelopment agencies.
A simple comparison of both data sets from the State of Nevada and the State of
California indicates that the budgetary data published by the California State Controller’s
Office is a far more robust and statistically diverse data set. In total, there are only 36
total sub-categories of various local redevelopment agency budgetary data published by
the Nevada Department of Taxation while there is a total of 588 total sub-categories of
various local redevelopment agency budgetary data published by the California State
Controller’s Office. In addition to the much more robust collection and reporting of
budgetary data by the California State Controller’s Office for local redevelopment
agencies in California, there are also far more local redevelopment agencies and local
redevelopment project areas in the State of California than in the State of Nevada. In FY
2007, there were only 10 local redevelopment agencies and 12 individual local
redevelopment project areas operating throughout the entire State of Nevada.
Comparatively, in FY 2007, there were 398 local redevelopment agencies and 841
individual local redevelopment project areas operating throughout the entire State of
California.

12.c.2 – Advantages and Limitations of Each Data Set
Given the much higher diversity of budgetary sub-categories available from the
California State Controller’s Office and the much higher number of operating local
redevelopment agencies and local redevelopment project areas in the State of California,

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the available data for California local redevelopment agencies is a statistically more
robust dataset. The available data from the California State Controller’s Office is robust
and large enough to conduct a series of quantitative tests including one-way ANOVA,
Factor Analysis, and multiple regression modeling. Given the very small amount of
available data for Nevada redevelopment agencies, similar quantitative tests are not
possible. Although the available budgetary data for local redevelopment agencies are
dropped from use in the quantitative analysis, several Nevada local redevelopment
agencies are used as part of the qualitative case study analysis presented later in Part V.
The actual one-way ANOVA, Factor Analysis, and multiple regression methods are only
applied to California redevelopment agencies. Similar techniques simply could not be
duplicated for Nevada redevelopment agencies.
Although the local redevelopment agency budgetary data collected, published,
and provided by the California State Controller’s Office is a fairly robust dataset, it is
also limited in two general ways. First, the sheer number of available sub-categories in
the budgetary data provided by the California State Controller’s Office requires extensive
“data cleaning” and increases the probability that important and statistically relevant data
will be excluded from subsequent multiple regression models. Additionally, the sheer
number of sub-categories can increase the likelihood of increased heteroscedasticity and
multicollinearity among the independent variables in subsequent regression models. The
increased likelihood of increased heteroscedasticity and multicollinearity stems from the
observation that the local redevelopment agency budgetary data provided by the
California State Controller’s Office provides extensive data on assets, liabilities, and

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general equity. According to Needles, Anderson, and Caldwell (1987), the general
accounting equation states that “Assets” are a function of “Liabilities” plus “Equity”.
This general equation of accounting is presented below in Equation (EQ) 12.1.

EQ 12.1: Assets = Liabilities + Equity

Because “Assets” must always equal the sum of “Liabilities” and “Equity”, any
change in either “Liabilities” or “Equity” must equal a similar change in “Assets” and
vice versa. From the standpoint of building a multiple regression model which predicts
variability in local redevelopment project area total incremental assessed value and local
redevelopment agency collected incremental property tax revenue, several multiple
regression models that use just “Assets”, “Liabilities”, and “Equity” must be built
independent of each other due to the obvious correlation between the changes in
“Assets”, “Liabilities”, and “Equity”. The obvious existence of both heteroscedasticity
and multicollinearity among just these three independent variables does not allow for the
building of a single multiple regression model that includes all three independent
variables.
The second major limitation of just the database provided by the California State
Controller’s Office is the potential lack of accuracy that exists in the database itself.
According to Koehler (2007), there are highly significant and critical differences in
identical key local redevelopment agency budgetary sub-categories for local
redevelopment agencies in the State for California in every fiscal year reported by the

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California State Controller’s Office and the California State Department of Housing and
Community Development. Table 12-5 highlights some of the major differences between
reported local redevelopment agency budgetary data for local redevelopment agencies in
the State of California reported by both the California State Controller’s Office (SCO)
and the California State Department of Housing and Community Development (HCD) for
just FY 2007.
Table 12-5
Major Differences and Discrepancies – California State Controller’s Office vs.
California State Department of Housing and Community Development
FY 2007
Budgetary Category SCO
Reported Figure
HCD
Reported Figure
Difference
HCD - SCO

Gross Tax Increment
Allocation
$4.5 Billion $4.5 Billion $0
Tax Increment
Deposit
$480 Million $922 Million $422 Million
Total Revenues

$747 Million $1.5 Billion $753 Million
Total Expenses

$787 Million $1.3 Billion $513 Million
Admin. to Planning
Expenditures Ratio
19.30% 13.00% -0.06%
Reserve/Encumbered Funds

$2.5 Billion $572 Million -$1.9 Billion
Unreserved Designated Funds

$835 Million $603 Million -$232 Million
Unreserved, Unencumbered,
Undesignated Funds
$350 Million $1.5 Billion $1.2 Billion
Ending Fiscal Year Equity

$4.6 Billion $4.0 Billion -$6 Million
Source: Gus Koehler, Chief Executive Officer “Time Structures Inc.”, CRA Board
Advance San Diego Presentation “Trends in Redevelopment” November 2007, Slide 6 of
17.

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The observation that there are significant differences between the two separate
datasets for local redevelopment agency budgetary data in California further complicates
and casts doubt on the validity of any statistical analysis. Given that both the California
State Controller’s Office and the California State Department of Housing and
Community Development are considered as highly reputable and highly reliable agencies
for state and local government budgeting and policy development and planning purposes,
it is simply not possible to determine which dataset is more likely to generate the most
accurate statistical results. Although this study uses only the data collected and provided
by the California State Controller’s Office, future research could test the validity of the
quantitative results presented later in Part V by using the same methodology but with the
data collected and provided by the California State Department of Housing and
Community Development. Although Koehler (2007) provides no reason as to why such
large and significant differences exist between both datasets, future research should also
strive to determine why these large discrepancies persist across multiple fiscal years.
Despite these many and significant limitations of the dataset provided by the
California State Controller’s Office, the dataset does have two primary advantages. First,
the local redevelopment agency budgetary dataset developed and provided by the
California State Controller’s Office is collected from the annual financial reports and
statements generated by all local municipal and county governments located throughout
the State of California. These annual financial reports and statements were prepared
and/or audited by Certified Public Accountants with appropriate government auditing

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standards. Given that the State Controller’s financial statements have been independently
audited, suggest that the data itself is highly robust and trustworthy.
Second, as previously mentioned, the data collected and reported by the
California State Controller’s Office has been and continues to be used by both the
California state legislature and by all local municipal and county governments in the
State of California for the development and implementation of new public policy
pertaining to the activities of local redevelopment agencies operating and located
throughout the state. Because much of the central research question of this study centers
around what alternative institutional forms of local urban revitalization and local urban
economic development the state legislature might consider as local redevelopment project
areas begin to expire within the next several years, it makes sense to use the same data
the state legislature has depended on in the past to make similar public policy decisions.

12.c.3 – Required Data Cleaning of the Primary Data Sets
The following outlines the various steps used in cleaning the primary data set
used for the quantitative analysis used in this study. As already mentioned, data provided
by the Nevada Department of Taxation was not robust enough to be used in the one-way
ANOVA testing, Factor Analysis, or the multiple regression modeling. Only data
provided by the California State Controller’s Office is used. The cleaning of the
California state Controller’s Office dataset, largely generated from the annually published
“Community Redevelopment Agencies Annual Report”, is presented here.

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As previously mentioned, the California State Controller’s Office was able to
provide various local redevelopment agency budgetary data for all local redevelopment
agencies and redevelopment project areas operating and located in the State of California
for each year between FY 1991 and FY 2007, a total of 17 separate fiscal years. The
electronically provided dataset contains 10 separate primary categories, including: 1)
“Entities”, 2) “Long Term Debt”, 3) “Assessed Valuation”, 4) “Assets”, 5) “Liabilities”,
6) “Expenditures”, 7) “Other Financing”, 8) “Revenues”, 9) “Pass Through”, and 10)
“Project Areas”. Each primary category had several sub-categories, totaling 588 across
all primary budgetary categories.
The first step in cleaning this dataset involved summing individual data points up
to the agency level from the project area level. Using the “Entity ID” sub-category, it
was possible to link project area level data with separate individual local redevelopment
agencies. In addition to summing up the project area level data to the agency level, the
first step in cleaning this dataset involved adding two additional sub-categories, including
a dummy variable for “Governing Board” (Governing Board was transformed into a
dummy variable titled “Governing Board Dummy” where 1 represents an agency
governed by a city council, 2 represents an agency governed by a county board of
supervisors, and 3 represents an agency governed by any other form that is not a city
council or county board of elected supervisors). The second added sub-category was
“Year”. For example, if the relevant data was from FY 1991, then the individual row of
various data points was given a corresponding “Year” entry of 1991.

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The second step in cleaning the available dataset involved reducing the total
amount of sub-categories chosen for use in the different quantitative methods. Excluding
the “Entities”, “Long Term Debts”, “Assessed Valuation”, and “Project Areas” primary
categories, the first round of reduction involved deleting any sub-category that was not a
“total” sub-category. For example, in the “Assets” primary category, the first variable
chosen for inclusion was the variable titled “Cap_Assets_Debits_Tot”, or known as the
“Capital Project Funds, Total Assets and Other Debits, Total” variable. The
“Cap_Assets_Debits_Tot” variable is actually the sum total of 17 other variables
including “Cap_Cash_Imprest”, “Cap_Cash_Fiscal_Agent”, etc. For the purposes of the
one-way ANOVA testing, Factor Analysis, and multiple regression models, the
individual components of different funds, in this case the “Capital Project Funds, Total
Assets and Other Debits, Total” fund, can be simply removed from the final dataset.
Of the 588 original sub-categories/variables available, a total of 157 were selected
after the first round of data cleaning and 2 additional variables (“Year” and “Governing
Board Dummy”) were added. After the first round of data cleaning, a total of 159 sub-
categories/variables were left. Although the dataset was significantly reduced and made
more manageable after the first round of data cleaning, a second round of further deletion
of various sub-categories/variables was completed. After the second round of reduction,
just 46 separate sub-categories/variables were left for testing using one-way ANOVA
testing, Factor Analysis, and multiple regression modeling.
Table 12-6 lists the final sub-categories/variables left after the second and final
round of data cleaning for the “Entities” primary category.

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Table 12-6
Final Sub-Categories/Variables Used – “Entity” Primary Category
Actual “Coded” Sub-
Category/Variable
Explanation of “Coded” Sub-
Category/Variable

Entity_ID Entity ID Keyed to Redevelopment Agency

Entity_Name Name of Redevelopment Agency

Governing_Board_Dummy 1=City Council, 2=County Board, 3=Private,
Other
Source: State of California, California State Controller’s Office, “Community
Redevelopment Agencies Annual Report” FY 1991 to FY 2007.

Of the six original sub-categories/variables that appeared in the “Entities” primary
category, two were added and only one original was kept leaving a total of just three sub-
categories/variables left in the “Entities” primary category.
Table 12-7
Final Sub-Categories/Variables Used – “Long Term Debts” Primary Category
Actual “Coded” Sub-
Category/Variable
Explanation of “Coded” Sub-
Category/Variable

Amount_Authorized Principal Amount Authorized

Amount_Unmatured_Beg_Year Principal Amount Unmatured at Beginning of
Fiscal Year
Amount_Matured_During_Year Principal Amount Matured During Fiscal Year

Amount_Unmatured_End_Year Principal Amount Unmatured at End of Fiscal
Year
Principal_Default Principal Amount in Default

Interest_Default Interest Amount in Default

Source: State of California, California State Controller’s Office, “Community
Redevelopment Agencies Annual Report” FY 1991 to FY 2007.

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Table 12-7 lists the final sub-categories/variables left after the second and final
round of data cleaning for the “Long Term Debts” primary category. Of the 21 original
sub-categories/variables that appeared in the “Long Term Debts” primary category, just
six sub-categories/variables were left after the second and final round of data cleaning in
the “Long Term Debts” primary category. These sub-categories/variables were left
because they are primarily “total” variables that identify how much debt individual local
redevelopment agencies carried for each fiscal year between FY 1991 and FY 2007. The
final two sub-categories/variables left, “Principal_Default” and “Interest_Default” are
also kept because they measure the individual redevelopment agency’s ability to
successfully repay debt obligations from year to year.
Table 12-8 lists the final sub-categories/variables left after the second and final
round of data cleaning for the “Long Term Debts” primary category.
Table 12-8
Final Sub-Categories/Variables Used – “Assessed Valuation” Primary Category
Actual “Coded” Sub-
Category/Variable
Explanation of “Coded” Sub-
Category/Variable

Frozen_Base Frozen Base Assessed Value

Inc Increment Assessed Value

Source: State of California, California Controller’s Office, “Community Redevelopment
Agencies Annual Report” FY 1991 to FY 2007.

Of the six original sub-categories/variables that appeared in the “Assessed
Valuation” primary category, only two were selected. The “Inc” variable is used in the
following multiple regression models as one of the two dependent variables selected.

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Of the 106 original sub-categories/variables that appeared in the “Assets” primary
category, a total of 27 were selected after the second round of data cleaning and
reduction. Unlike many of the other primary categories, no summing from the project
area level up to the agency level was required as all data originally provided in the
“Assets” primary category were already keyed to the “Entity ID” number assigned to
individual redevelopment agencies. For the “Assets” primary category, the only type of
data cleaning involved was the removal of non-“Total” sub-categories/variables from the
dataset.
Table 12-9 lists the final sub-categories/variables left after the second and final
round of data cleaning for the “Assets” primary category.

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Table 12-9
Final Sub-Categories/Variables Used – “Assets” Primary Category
Actual “Coded” Sub-Category/Variable Explanation of “Coded” Sub-Category/Variable

Cap_Assets_Debits_Tot Capital Project Funds, Total Assets and Other Debits,
Total
Debt_Assets_Debits_Tot Debt Service Fund, Total Assets and Other Debits, Total

Low_Assets_Debits_Tot Low/Moderate Income Housing Funds, Total Assets and
Other Debits, Total
Sp_Assets_Debits_Tot Special Revenue/Other Funds, Total Assets and Other
Debits, Total
Genl_Assets_Debits_Tot General Long-Term Debt, Total Assets and Other
Debits, Total
Genf_Assets_Debits_Tot General Fixed Assets, Total Assets and Other Debits,
Total
Cash_Imprest_Tot Cash and Imprest Cash, Total
Cash_Fisal_Agent_Tot Cash with Fiscal Agent, Total
Tax_Inc_Receivable_Tot Tax Increments Receivable, Total
Account_Receivable_Tot Accounts Receivable, Total
Accru_Interest_Receivable_Tot Accrued Interest Receivable, Total
Loans_Receivable_Tot Loans Receivable, Total
Contracts_Receivable_Tot Contracts Receivable, Total
Lease_Payments_Receivable_Tot Lease Payments Receivable, Total
Unearned_Fin_Charge_Tot Unearned Finance Charge, Total
Due_Capital_Proj_Fund_Tot Due from Capital Projects Fund, Total
Due_Debt_Service_Fund_Tot Due from Debt Service Fund, Total
Due_Income_Housing_Fund_Tot Due from Low-Moderate Income Housing Fund, Total
Due_Special_Rev_Fund_Tot Due from Special Revenue/Other Funds, Total
Investments_Tot Investments, Total
Other_Assets_Tot Other Assets, Total
Invest_Land_Resale_Tot Investments: Land Held for Resale, Total
Fixed_Assets_Land_Struct_Tot Fixed Assets: Land, Structures, Improvements,
Equipment, Total
Equipment_Tot Equipment, Total
Amt_Debt_Serv_Fund_Tot Amount Available in Debt Service Fund, Total
Amt_Provided_Longterm_Debt_Tot Amount to be Provided for Payment of Long Term
Debt, Total
Assets_Debits_Tot_Tot Total Assets and Other Debits, Total
Source: State of California, California State Controller’s Office, “Community
Redevelopment Agencies Annual Report” FY 1991 to FY 2007.

Table 12-10 lists the final sub-categories/variables left after the second and final
round of data cleaning for the “Liabilities” primary category.

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Table 12-10
Final Sub-Categories/Variables Used – “Liabilities” Primary Category
Actual “Coded” Sub-Category/Variable Explanation of “Coded” Sub-Category/Variable

Cap_Liab_Tot Capital Project Funds, Total Liabilities Other Credits
Cap_Equ_Tot Capital Project Funds, Total Equities
Cap_Liab_Equ_Tot Capital Project Funds, Total Liabilities Other Credits
and Equities
Debt_Liab_Tot Debt Service Funds, Total Liabilities Other Credits
Debt_Equ_Tot Debt Service Funds, Total Equities
Debt_Liab_Equ_Tot Debt Service Funds, Total Liabilities Other Credits and
Equities
Low_Liab_Tot Low/Moderate Income Housing Funds, Total Liabilities
Other Credits
Low_Equ_Tot Low/Moderate Income Housing Funds, Total Equities
Low_Liab_Equ_Tot Low/Moderate Income Housing Funds, Total Liabilities
Other Credits and Equities
Sp_Liab_Tot Special Revenue/Other Funds, Total Liabilities Other
Credits
Sp_Equ_Tot Special Revenue/Other Funds, Total Equities
Sp_Liab_Equ_Tot Special Revenue/Other Funds, Total Liabilities Other
Credits and Equities
Genl_Liab_Tot General Long-Term Debt, Total Liabilities Other
Credits
Genl_Liab_Equ_Tot General Long-Term Debt, Total Liabilities Other
Credits and Equities
Genf_Equ_Tot General Fixed Assets, Total Equities
Genf_Liab_Equ_Tot General Fixed Assets, Total Liabilities Other Credits
and Equities
Liab_Accounts_Payable_Tot Accounts Payable, Total
Liab_Interest_Payable_Tot Interest Payable, Total
Liab_Notes_Payble_Tot Tax Anticipation Notes Payable, Total
Liab_Loans_Payable_Tot Loans Payable, Total
Liab_Othr_Tot Other Liabilities, Total
Liab_Due_Cap_Proj_Fund_Tot Due to Capital Project Funds, Total
Liab_Due_Debt_Serv_Fund_Tot Due to Debt Service Fund, Total
Liab_Due_Inc_Housing_Fund_Tot Due to Low/Moderate Income Housing Fund, Total
Liab_Due_Special_Rev_Tot Due to Special Revenue/Other Funds, Total
Liab_Tax_Bonds_Payable_Tot Tax Allocation Bonds Payable, Total
Liab_Lease_Rev_Bonds_Tot Lease Revenue, Certificates of Participation Payable,
Financing Authority Bonds, Total
Liab_Other_Longterm_Debts_Tot All Other Long Term Debt, Total
Liab_Tot_Tot Total Liabilities and Other Credits, Total
Equ_Invest_Fixed_Assets_Tot Investment in General Fixed Assets, Total
Equ_Fund_Bal_Res_Tot Funds in Balanced Reserve, Total
Equ_Fund_Bal_Unres_Des_Tot Fund Balance Unreserved Designated, Total
Equ_Fund_Bal_Unres_Undes_Tot Fund Balance Unreserved Undesignated, Total
Equ_Tot_Tot Total Equity, Total
Liab_Equ_Tot_Tot Total Liabilities Other Credits and Equity, Total
Source: State of California, California State Controller’s Office, “Community
Redevelopment Agencies Annual Report” FY 1991 to FY 2007.

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Of the 94 original sub-categories/variables that appeared in the “Liabilities”
primary category, a total of 35 were selected after the second round of data cleaning and
reduction. Unlike many of the other primary categories, no summing from the project
area level up to the agency level was required as all data originally provided in the
“Liabilities” primary category were already keyed to the “Entity ID” number assigned to
individual redevelopment agencies. For the “Liabilities” primary category, the only type
of data cleaning involved was the removal of non-“Total” sub-categories/variables from
the dataset.
Of the 133 original sub-categories/variables that appeared in the “Expenditures”
primary category, a total of 30 were selected after the second round of data cleaning and
reduction. Unlike the “Assets” and “Liabilities” primary categories, data from the
“Expenditures” primary category required summing from the project area level to the
agency level using the “Entity ID” number assigned to individual redevelopment
agencies.
For the four remaining primary categories, including “Other Financing”,
Revenues”, “Pass Through”, and “Project Areas”, data in these remaining primary
categories required summing from the project area level to the agency level using the
“Entity ID” number assigned to individual redevelopment agencies. The “Other
Financing” and “Revenues” primary categories measure the cash inflow of resources to
individual redevelopment agencies; “Pass Through” measures the amount of cash paid to
other taxing entities by local redevelopment agencies, and “Project Areas” contain

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information pertaining to the size and amount of land vacant/developed within individual
project areas.
Table 12-11
Final Sub-Categories/Variables Used – “Expenditures” Primary Category
Actual “Coded” Sub-Category/Variable Explanation of “Coded” Sub-Category/Variable

Cap_Exp_Tot Capital Project Funds, Total Expenditures
Debt_Exp_Tot Debt Service Funds, Total Expenditures
Low_Exp_Tot Low/Moderate Income Housing Funds, Total
Expenditures
Sp_Exp_Tot Special Revenue/Other Funds, Total Expenditures
Exp_Admin_Costs_Tot Administration Costs, Total
Exp_Professional_Serv_Tot Professional Services, Total
Exp_Planning_Survey_Design_Tot Planning, Survey and Design, Total
Exp_Real_Estate_Purchases_Tot Real Estate Purchases, Total
Exp_Acqui_Expenses_Tot Acquisitions, Total
Exp_Operation_Aqui_Prop_Tot Operation of Acquired Property, Total
Exp_Relocation_Costs_Tot Relocation Costs, Total
Exp_Relocation_Payments_Tot Relocation Payments, Total
Exp_Site_Clearance_Costs_Tot Site Clearance Costs, Total
Exp_Const_Costs_Tot Project Improvement/Construction Costs, Total
Exp_Disposal_Costs_Tot Disposal Costs, Total
Exp_Loss_Disp_Land_Resale_Tot Loss on Disposition of Land Held for Resale, Total
Exp_Decline_Land_Resale_Tot Decline in Value of Land Held for Resale, Total
Exp_Rehabilitation_Costs_Tot Rehabilitation Costs, Total
Exp_Rehabilitation_Grants_Tot Rehabilitation Grants, Total
Exp_Interest_Tot Interest Expense, Total
Exp_Fixed_Assets_Acqui_Tot Fixed Asset Acquisitions, Total
Exp_Subsidies_Low_Housing_Tot Subsidies to Low/Moderate Income Housing, Total
Exp_Debt_Issuance_Costs_Tot Debt Issuance Costs, Total
Exp_Other_Tot Other Expenditures including Pass Through Payment(s),
Total
Exp_Debt_Tax_Alloc_Bond_Tot Tax Allocation Bonds and Notes, Total
Exp_Debt_Rev_Bonds_Cert_Tot Revenues Bonds, Certificates of Participation, Financing
Authority Bonds, Total
Exp_Debt_City_County_Adv_Tot City/County Advances and Loans, Total
Exp_Debt_US_Other_Longdebt_Tot All Other Long Term Debt, Total
Exp_Tot_Tot Total Expenditures, Total
Excess Rev_Over_Exp_Tot_Tot Excess (Deficiency) Revenues over (under)
Expenditures, Total
Source: State of California, California State Controller’s Office, “Community
Redevelopment Agencies Annual Report” FY 1991 to FY 2007.

Table 12-11 lists the final sub-categories/variables left after the second and final
round of data cleaning for the “Expenditures” primary category. The remaining four

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tables presented after illustrate the data cleaning steps for the remaining four primary
categories, including “Other Financing”, “Revenues”, “Pass Through” and “Project
Areas”.
Table 12-12
Final Sub-Categories/Variables Used – “Other Financing” Primary Category
Actual “Coded” Sub-
Category/Variable
Explanation of “Coded” Sub-
Category/Variable

Cap_Othrfin_Tot Capital Project Funds, Other Financing
Sources (Uses), Total
Debt_Othrfin_Tot Debt Service Fund, Other Financing Sources
(Uses), Total
Low_Othrfin_Tot Low/Moderate Income Housing Funds, Other
Financing Sources (Uses), Total
Sp_Othrfin_Tot Special Revenue/Other Funds, Other Financing
Sources (Uses), Total
Othrfin_Proc_Longdebt_Tot Proceeds of Long Term Debt, Total
Ofthrfin_Proc_Refund_Bond_Tot Proceeds of Refunding Bonds, Total
Othrfin_Pay_Escrow_Agent_Tot Payment to Refunded Bond Escrow Agent,
Total
Othrfin_Adv_From_City_Tot Advances from City/County, Total
Othrfin_Sale_Fixed_Assets_Tot Sale of Fixed Assets, Total
Othrfin_Misc_Tot Miscellaneous Financing Sources (Uses), Total
Othrfin_Op_Trans_In_Tot Operating Transfers In, Total
Othrfin_Op_Trans_Out_Tot Operating Transfers Out, Total
Othrfin_Tax_Inc_Trans_Out_Tot Tax Increment Transfers Out, Total
Othrfin_Tot_Tot Total Other Financing Sources (Uses), Total
Excess Rev_Othr_Fin_Exp_Tot Excess (Deficiency) of Revenues and Other
Financing Sources over Expenditures and
Other Financing Uses, Total
Equ_Beg_Period_Tot Equity Beginning of Period, Total
Adjust_Prior_Period_Tot Prior Period Adjustments, Total
Adjust_Resi_Equ_Transfer_Tot Residual Equity Transfers, Total
Adjust_Other_Tot Other (Explain), Total
Equ_End_Period_Tot Equity End of Period, Total
Source: State of California, California State Controller’s Office, “Community
Redevelopment Agencies Annual Report” FY 1991 to FY 2007.

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Of the 83 original sub-categories/variables in the “Other Financing” primary
category, a total of 20 were chosen after the second and final round of data cleaning and
reduction. Table 12-12 lists the final sub-categories/variables left after the second and
final round of data cleaning for the “Other Financing” primary category.
Table 12-13
Final Sub-Categories/Variables Used – “Revenues” Primary Category
Actual “Coded” Sub-
Category/Variable
Explanation of “Coded” Sub-
Category/Variable

Cap_Rev_Tot Capital Project Funds, Total Revenues
Debt_Rev_Tot Debt Service Funds, Total Revenues
Low_Rev_Tot Low/Moderate Income Housing Funds, Total
Revenues
Sp_Rev_Tot Special Revenue/Other Funds, Total Revenues
Rev_Tax_Inc_Tot Tax Increment Gross, Total
Rev_Sp_Supp_Subven_Tot Special Supplemental Subvention, Total
Rev_Property_Assessments_Tot Property Assessments, Total
Rev_Sales_Use_Tax_Tot Sales and Use Tax, Total
Rev_Trans_Occupancy_Tax_Tot Transient Occupancy Tax, Total
Rev_Interest_Income_Tot Interest Income, Total
Rev_Rental_Income_Tot Rental Income, Total
Rev_Lease_Income_Tot Lease Income, Total
Rev_Sales_Real_Estate_Tot Sale of Real Estate, Total
Rev_Gain_Land_Resale_Tot Gain on Land Held for Resale, Total
Rev_Federal_Grants_Tot Federal Grants, Total
Rev_Grants_Othr_Agencies_Tot Grants from Other Agencies, Total
Rev_Bond_Admin_Fess_Tot Bond Administrative Fees, Total
Rev_Othr_Tot Other Revenues, Total
Rev_Tot_Tot Total Revenues, Total
Source: State of California, California State Controller’s Office, “Community
Redevelopment Agencies Annual Report” FY 1991 to FY 2007.

Of the 78 original sub-categories/variables in the “Revenues” primary category, a
total of 19 were chosen after the second and final round of data cleaning and reduction.
The “Rev_Tax_Inc_Tot” variable from the “Revenues” primary category is used in the

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following multiple regression models as one of the two dependent variables selected.
Table 12-13 lists the final sub-categories/variables left after the second and final round of
data cleaning for the “Revenues” primary category.
Table 12-14
Final Sub-Categories/Variables Used – “Pass Through” Primary Category
Actual “Coded” Sub-
Category/Variable
Explanation of “Coded” Sub-
Category/Variable

Code_33401_Tot H&S Code Section 33401, Total Paid to
Taxing Agencies
Code_33676_Tot H&S Code Section 33676, Total Paid to
Taxing Agencies
Code_33607_Tot H&S Code Section 33607, Total Paid to
Taxing Agencies
County_Tot County, Total
Cities_Tot Cities, Total
School_Dist_Tot School Districts, Total
Comm_College_Dist_Tot Community College Districts, Total
Special_Districts_Tot Special Districts, Total
Total_Paid_Tot Total Paid to Taxing Agencies, Total
Net_Amont_Tot Net Amount to Agency, Total
Gross_Tax_Inc_Tot Gross Tax Increment Generated, Total
Code_33445_Tot H&S Code Section 33445, Total Paid to
Taxing Agencies
Code_334455_Tot H&S Code Section 33445.5, Total Paid to
Taxing Agencies
Othr_Tot Other Pass Through, Total
Source: State of California, California State Controller’s Office, “Community
Redevelopment Agencies Annual Report” FY 1991 to FY 2007.

Of the 38 original sub-categories/variables in the “Pass Through” primary
category, only 14 were left after the second and final round of data cleaning and
reduction. The “Pass Through” primary variable measures the amount of cash local
redevelopment agencies were required by the State of California to pay to other taxing
entities impacted by the presence of a redevelopment project area. Table 12-14 lists the

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final sub-categories/variables left after the second and final round of data cleaning for the
“Pass Through” primary category.
Of the 23 original sub-categories/variables in the “Project Areas” primary
category, only 3 were left after the second and final round of data cleaning and reduction.
Table 12-15 lists the final sub-categories/variables left after the second and final round of
data cleaning for the “Project Areas” primary category.
Table 12-15
Final Sub-Categories/Variables Used – “Project Areas” Primary Category
Actual “Coded” Sub-
Category/Variable
Explanation of “Coded” Sub-
Category/Variable

Size_Project_Area Size of Project Area in Acres

Percent_Land_Vacant Percent of Land Vacant at the Inception of the
Project Area
Percent_Land_Developed Percent of Land Developed at the Inception of
the Project Area
Source: State of California, California State Controller’s Office, “Community
Redevelopment Agencies Annual Report” FY 1991 to FY 2007.

Although the “Size_Project_Area” sub-category/variable was summed up from
the project area level to the agency level, the “Percent_Land_Vacant” and
“Percent_Land_Developed” variables were averaged across all individual project areas to
provided an estimated average percentage of land vacant and developed for individual
redevelopment agencies.
The third and final step in cleaning the available dataset from the California State
Controller’s Office involved combining the data from each fiscal year into a single
unbalance panel. By combining the data from each fiscal year into a single datasheet, it

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is possible to build an unbalanced panel multivariate regression model using the various
sub-categories/variables listed above for each of the 10 primary local redevelopment
agency budgetary categories. Table 12-16 presents the number of individual local
redevelopment agencies left in each year between FY 1991 and FY 2007 that comprise
the final unbalanced panel datasheet used to build the final multiple regression models.
Table 12-16
Number of Local Redevelopment Agencies by Fiscal Year – Final Datasheet
FY 1991 to FY 2007
Fiscal Year Number of Individual Redevelopment Project Areas

1991 427
1992 427
1993 427
1994 427
1995 427
1996 427
1997 427
1998 427
1999 427
2000 427
2001 427
2002 414
2003 427
2004 431
2005 422
2006 436
2007 398

AVERAGE 425
Source: State of California, California State Controller’s Office, “Community
Redevelopment Agencies Annual Report” FY 1991 to FY 2007.

Despite some increased variation in the number of existing local redevelopment
agencies operating and located in the State of California after FY 2002, the average
number of local redevelopment agencies for each year between FY 1991 and FY 2007

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actually operating was 425. This is significantly large enough to perform various
quantitative analytical techniques using the available dataset.
Table 12-17 presents the number of individual local redevelopment agencies left
in each year between FY 1991 and FY 2007 sorted by the number of local redevelopment
agencies governed by an elected city council, county board of supervisors/commissioners
or governed by a board with some other organizational structure.
Table 12-17
Number of Local Redevelopment Agencies by Governing Board
FY 1991 to FY 2007

Fiscal Year

Agency Board Structure

Total Number of
Individual
Redevelopment
Project Areas City Council County Board Other

1991 381 27 19 427
1992 381 27 19 427
1993 381 27 19 427
1994 381 27 19 427
1995 381 27 19 427
1996 381 27 19 427
1997 381 27 19 427
1998 381 27 19 427
1999 381 27 19 427
2000 381 27 19 427
2001 381 27 19 427
2002 370 26 18 414
2003 381 27 19 427
2004 383 29 19 431
2005 375 29 18 422
2006 385 31 20 436
2007 355 25 18 398

Annual
Average
379 27 19 425
Annual Average
Percentage of Total
89.13% 6.42% 4.44% 100.00%
Source: State of California, California State Controller’s Office, “Community
Redevelopment Agencies Annual Report” FY 1991 to FY 2007.

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Although the use of the dataset provided by the California State Controller’s
Office allows statistical analysis of the entire population, thereby eliminating the
possibility of sampling errors, the observation that, on average, 89.13% of local
redevelopment agencies in California between FY 1991 and FY 2007 were governed by
an elected city council suggests that multiple regression modeling to determine variances
between governing board structure and the dependent variables incremental assessed
value and incremental property tax revenue is inappropriate. One-way ANOVA and
Factor Analysis testing will be used to examine variation between different governing
board structures.
The final section of this chapter outlines the three primary quantitative techniques
and one primary qualitative analytical technique used to examine trends in local
redevelopment agency budgetary data and the individual projects, policies, and practices
of individual local redevelopment agencies in Nevada and California.

12.d – Introduction of the Primary Analytical Techniques
This section outlines the primary analytical techniques used to probe the central
research question and the eight individual research propositions found in this study. The
use of one-way ANOVA testing, Factor Analysis, and multiple regression modeling are
used as the primary quantitative analytical techniques and the use of case studies is used
as the primary qualitative analytical technique.

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12.d.1 – One-Way Analysis of Variance (ANOVA)
According to Black (1996), the one-way ANOVA is a useful statistical tool to test
whether or not the population means for all treatment levels are equal. The null
hypothesis ( ) and alternative hypothesis ( ) for the one-way ANOVA provided by
Black (1996) is presented below in Equation 12.2 and Equation 12.3 below. (pg. 485).

EQ 12.2:
EQ 12.3: At least one of the means is different from the others.

Where:
, , , and are the population means for one, two, three and
populations.

According to Black (1996), “Testing these hypotheses by using the one-way
ANOVA is accomplished by partitioning the total variance of the data into two
variances.” (pg. 485). The first variance is the variance resulting from the treatment of
columns, and the second variance is the error variance or that portion of the total variance
that is unexplained by the treatment. By comparing each variance, the one-way ANOVA
test is used to determine whether or not the means of number of populations are equal.
A statistically significant one-way ANOVA confirmation of the alternative hypothesis, or
rejection of the null hypothesis, provides a high level of confidence that the means among
the number of populations are statistically different.

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The first quantitative analytical technique used in this study is a one-way
ANOVA test of the means for both the “Inc” and “Rev_Tax_Inc_Tot” variables
introduced above in the previous section using the “Governing Board Dummy” variable
as the treatment variable. The one-way ANOVA test will be used to determine whether
or not the mean values of “Inc” and “Rev_Tax_Inc_Tot” variables are statistically
significantly different between local redevelopment agencies in California that are either
governed by an elected city council, governed by an elected board of county supervisors
and/or commissioners, or governed by some other structure such as privately appointed
board. The null hypothesis and alternative hypothesis are listed below for both one-way
ANOVA tests in Equation 12.4, Equation 12.5, Equation 12.6, and Equation 12.7.

EQ 12.4:
EQ 12.5: At least one of the means is different from the others.

Where:
= the mean level of incremental assessed value (“Inc”
variable) for redevelopment agencies with a city council as its governing
board;
= the mean level of incremental assessed value (“Inc”
variable) for redevelopment agencies with a county board of
supervisors/commissioners as its government board;

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= the mean level of incremental assessed value (“Inc” variable)
for redevelopment agencies with some other structure such as a privately
appointed board.

EQ 12.6:

EQ 12.7: At least one of the means is different from the others.

Where:
= the mean level of incremental property tax
revenue (“Rev_Tax_Inc_Tot” variable) for redevelopment agencies with a
city council as its governing board;
= the mean level of incremental property
tax revenue (“Rev_Tax_Inc_Tot” variable) for redevelopment agencies
with a county board of supervisors/commissioners as its government
board;
= the mean level of incremental property tax
revenue (“Rev_Tax_Inc_Tot” variable) for redevelopment agencies with
some other structure such as a privately appointed board.

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If the null hypothesis for either one-way ANOVA model is rejected, for either the
“Inc” variable or “Rev_Tax_Inc_Tot”, then enough statistical evidence would exist to
support the conclusion that governing board structure does have some affect on either the
level of incremental assessed value or incremental property tax revenue local
redevelopment agencies in California are able to generate from their efforts. However,
the one-way ANOVA test is insufficient by itself to control for confounding or
concomitant variables. A confounding or concomitant variable is a variable or set of
multiple variables that cannot be adequately controlled for in the one-way ANOVA test
but can have an effect on the outcome of the treatment being studied. For example, the
level of incremental assessed value of a local redevelopment project area or the amount
of incremental property tax revenue collected by a local redevelopment agency could
potentially be impacted by sudden and severe “bubbles” in real estate prices. The
inflationary upward pressures on real estate prices within a redevelopment project area
may be driven by unforeseen market forces that the local redevelopment agency cannot
control for, but nevertheless benefits from in both increased incremental assessed value
and incremental property tax revenue levels. The use of a Factor Analysis model,
presented next, can be used to control for the effects of confounding or concomitant
variables.

12.d.2 – Factor Analysis
In the one-way ANOVA model identified above, the two variables being analyzed
(in the first case, the “Governing Board Dummy” and “Inc” variables are analyzed and in

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the second case, the “Governing Board Dummy” and “Rev_Tax_Inc_Tot” variables are
analyzed) are tested using a completely randomized design. According to Black (1996),
“…the effects of each variable are explored separately one per design. Thus, it takes two
completely randomized designs to analyze the effects of the two variables.” (pg. 516).
By using a factorial design, or Factor Analysis, both variables can be examined in one
design. The use of a single design not only saves time but also minimizes the
experimentwise error rate.
The Factor Analysis technique is a two-way ANOVA test that is designed for two
factors, or two independent variables. values are estimated in the two-way ANOVA
Factor Analysis to measure three effects: 1) row effects, 2) column effects, and 3)
Interaction Effects. Black (1996) points out that like the one-way ANOVA test, the two-
way ANOVA Factor Analysis is tested using a series of hypotheses that are listed in
Equations 12.8, 12.9, 12.10, 12.11, 12.12, and 12.13 below. (pg. 518).

Row Effects:
EQ 12.8: : Row means are all equal.
EQ 12.9: : At least one row mean is different from the others.

Column Effects:
EQ 12.10: : Column means are all equal.
EQ 12.11: : At least one column mean is different from the others.

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Interaction Effects:
EQ 12.12: : The interaction effects are zero.
EQ 12.13: : There is an interaction effect.

Using the “Governing Board Dummy” variable as the dependent variable, and by
using the “Inc” and “Rev_Tax_Inc_Tot” variables as the two independent variables, a
two-way ANOVA Factor Analysis can be executed using reliable statistical computer
software to estimate the row, column, and potential interaction effects between the
“Governing Board Dummy” dependent variable and the two “Inc” and
“Rev_Tax_Inc_Tot” independent variables.
If neither null hypothesis ( ) for either the row or column effects is rejected,
then it is statistically likely that governing board structure (i.e. city council, county
supervisor, or other) has any statistically significant effect on incremental assessed value
levels of local redevelopment project areas or on the amount of incremental property tax
revenue collected by local redevelopment agencies. However, if the null hypothesis for
either the row or column effects is rejected, than the type of governing board structure for
local redevelopment agencies in California does have a statistically significant effect on
either incremental assessed value or incremental property tax revenues.
If the null hypothesis ( ) for the interaction effect is not rejected, than
incremental assessed values and incremental property tax revenues have no interaction
effect. However, given that incremental property tax revenues are directly calculated
from levels of incremental assessed value, it is likely that the null hypothesis for the

427

interaction effect will be rejected. Given the likelihood that the null hypothesis for the
interaction effect will be rejected, a separate analytical technique is needed to measure
variances in both incremental assessed value and incremental property tax revenue levels.
The use of multiple regression models can help estimate and explain the variation in both
the “Inc” and “Rev_Tax_Inc_Tot” variables. In the multiple regression models
introduced in the next section, several different multiple regression models treat the “Inc”
and “Rev_Tax_Inc_Tot” variables as dependent variables.

12.d.3 – Multiple Regression Analysis
By using widely accepted statistical computer software, it is possible to use the
various sub-categories/variables presented earlier in this chapter to estimate predictive
values of both the “Inc” and “Rev_Tax_Inc_Tot” variables. The use of the one-way
ANOVA and two-way ANOVA Factor Analysis tests are designed to determine whether
or not organizational and governing board structure of local redevelopment agencies have
a statistically significant effect on the levels of incremental assessed value (“Inc”
variable) or on the levels of incremental property tax revenue (“Rev_Tax_Inc_Tot”
variable). The use of multiple regression modeling in this section is designed to
determine what effect various other variables have on both the level of incremental
assessed value and the level of incremental property tax revenues.
According to Black (1996), “In multiple regression analysis, the dependent
variable, , is sometimes referred to as the response variable. The partial regression
coefficient of an independent variable, , represents the increase that will occur in the

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value of from a 1-unit increase in that independent variable if all other variables are
held constant.” (pg. 621). Equation 12.14 below, according to Black (1996), is the
proper notation of the linear equation used to estimate predictive values of in a multiple
regression model. (pg. 621).

EQ 12.14:

Where:
= the value of the dependent variable;
= the regression constant;
= the partial regression coefficient for independent variable 1;
= the partial regression coefficient for independent variable 2;
= the partial regression coefficient for independent variable 3;
= the partial regression coefficient for independent variable ;
= the number of independent variables;
= the error of prediction.

Using the general framework provided by Equation 12.14 above, two separate
sets of multiple regression models can be developed. The first set uses the level of
incremental assessed value (“Inc” variable) as the dependent variable and the second set
uses the level of incremental property tax revenue (“Rev_Tax_Inc_Tot” variable) as the
other dependent variable. Nine separate multiple regression models are developed for
each dependent. The following series of tables define the various multiple regression
models used to estimate predictive values of both “Inc” and “Rev_Tax_Inc_Tot” as
separate dependent variables.

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Table 12-18 begins by identifying the sub-categories/variables chosen from the
“Long Term Debt” primary category. Of the six final sub-categories/variables chosen
from the “Long Term Debt” primary category, all six will be used as independent
variables to predict the values of both “Inc” and “Rev_Tax_Inc_Tot” in two separate
multiple regression models.
Table 12-18
Independent Variables Chosen from the “Long Term Debt” Primary Category
Variable Notation Variable Description

Amount_Authorized Principal Amount Authorized

Amount_Unmatured_Beg_Year Principal Amount Unmatured Beginning of Year

Amount_Matured_During_Year Principal Amount Matured During Fiscal Year

Amount_Unmatured_End_Year Principal Amount Unmatured End of Fiscal Year

Principal_Default Principal Amount in Default

Interest_Default Interest in Default

Table 12-19 identifies the sub-categories/variables chosen from the “Assets”
primary category. Of the 27 final sub-categories/variables chosen from the “Assets”
primary category, only six will be used as independent variables used to predict the
values of both “Inc” and “Rev_Tax_Inc_Tot” in two separate multiple regression models.

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Table 12-19
Independent Variables Chosen from the “Assets” Primary Category
Variable Notation Variable Description

Cap_Assets_Debits_Tot Capital Project Funds, Total Assets and Other
Debits
Debt_Assets_Debits_Tot Debt Service Fund, Total Assets and Other Debits

Low_Assets_Debits_Tot Low/Moderate Income Housing Funds, Total Assets
and Other Debits
Sp_Assets_Debits_Tot Special Revenue/Other Funds, Total Assets and
Other Debits
Genl_Assets_Debits_Tot General Long-Term Debt, Total Assets and Other
Debits
Genf_Assets_Debits_Tot General Fixed Assets, Total Assets and Other
Debits

Table 12-20 identifies the sub-categories/variables chosen from the “Liabilities”
primary category. Of the 35 final sub-categories/variables chosen from the “Liabilities”
primary category, only six will be used as independent variables used to predict the
values of both “Inc” and “Rev_Tax_Inc_Tot” in two separate multiple regression models.
Table 12-20
Independent Variables Chosen from the “Liabilities” Primary Category
Variable Notation Variable Description

Cap_Liab_Equ_Tot Capital Project Funds, Total Liabilities Other
Credits
Debt_Liab_Equ_Tot Debt Service Funds, Total Liabilities Other Credits

Low_Liab_Equ_Tot Low/Moderate Income Housing Funds, Total
Liabilities Other Credits
Sp_Liab_Equ_Tot Special Revenue/Other Funds, Total Liabilities
Other Credits
Genl_Liab_Equ_Tot General Long-Term Debt, Total Liabilities Other
Credits
Genf_Liab_Equ_Tot General Fixed Assets, Total Liabilities Other
Credits

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Table 12-21 identifies the sub-categories/variables chosen from the
“Expenditures” primary category. Of the 30 final sub-categories/variables chosen from
the “Expenditures” primary category, only four will be used as independent variables
used to predict the values of both “Inc” and “Rev_Tax_Inc_Tot” in two separate multiple
regression models.
Table 12-21
Independent Variables Chosen from the “Expenditures” Primary Category
Variable Notation Variable Description

Cap_Exp_Tot Capital Project Funds, Total Expenditures

Debt_Exp_Tot Debt Service Funds, Total Expenditures

Low_Exp_Tot Low/Moderate Income Housing Funds, Total
Expenditures
Sp_Exp_Tot Special Revenue/Other Funds, Total Expenditures

Table 12-22 identifies the sub-categories/variables chosen from the “Other
Financing” primary category. Of the 20 final sub-categories/variables chosen from the
“Other Financing” primary category, only four will be used as independent variables used
to predict the values of both “Inc” and “Rev_Tax_Inc_Tot” in two separate multiple
regression models.

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Table 12-22
Independent Variables Chosen from the “Other Financing” Primary Category
Variable Notation Variable Description

Cap_Othrfin_Tot Capital Project Funds, Total Other Financing
Sources (Uses)
Debt_Othrfin_Tot Debt Service Fund, Total Other Financing Sources
(Uses)
Low_Othrfin_Tot Low/Moderate Income Housing Funds, Total Other
Financing Sources (Uses)
Sp_Othrfin_Tot Special Revenue/Other Funds, Total Other
Financing Sources (Uses)

Table 12-23 identifies the sub-categories/variables chosen from the “Revenues”
primary category. Of the 19 final sub-categories/variables, only four will be used as
independent variables used to predict the values of both “Inc” and “Rev_Tax_Inc_Tot” in
two separate multiple regression models.
Table 12-23
Independent Variables Chosen from the “Revenues” Primary Category
Variable Notation Variable Description

Cap_Rev_Tot Capital Project Funds, Total Revenues

Debt_Rev_Tot Debt Service Funds, Total Revenues

Low_Rev_Tot Low/Moderate Income Housing Funds, Total
Revenues
Sp_Rev_Tot Special Revenue/Other Funds, Total Revenue

Table 12-24 identifies the sub-categories/variables chosen from the “Pass
Through” primary category. Of the 14 final sub-categories/variables chosen, only five
will be used as independent variables used to predict the values of both “Inc” and
“Rev_Tax_Inc_Tot” in two separate multiple regression models.

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Table 12-24
Independent Variables Chosen from the “Pass Through” Primary Category
Variable Notation Variable Description

County_Tot County, Total

Cities_Tot Cities, Total

School_Dist_Tot School Districts, Total

Comm_College_Dist_Tot Community College Districts, Total

Special_Districts_Tot Special Districts, Total

Table 12-25 identifies the sub-categories/variables chosen from the “Project
Area” primary category. Of the 3 final sub-categories/variables chosen, only one will be
used as independent variables used to predict the values of both “Inc” and
“Rev_Tax_Inc_Tot” in two separate multiple regression models.
Table 12-25
Independent Variables Chosen from the “Project Area” Primary Category
Variable Notation Variable Description

Size_Project_Area Size of Project Area in Acres

In addition to the various multiple regression models outlined above, one final set
of two multiple regression models will be used to test the predictive values of both “Inc”
and “Rev_Tax_Inc_Tot”. This set uses eight total independent variables chosen from
across all of the primary budgetary data categories provided by the California State
Controller’s Office. Unlike the previous eight multiple regression models detailed in
Table 12-18 through Table-25, the multiple regression model outlined below in Table 12-

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26 examines the combined total effect total assets, liabilities, equities, expenditures, other
financing, revenues, and total amount of pass through payments to other jurisdictions, in
addition to the physical size of local redevelopment project areas, have on both the level
of incremental assessed value of local redevelopment project areas and on the level of
incremental property tax revenues collected by local redevelopment agencies.
Table 12-26 identifies the sub-categories/variables chosen from the various
primary budgetary data categories used to predict values of both incremental assessed
value and incremental property tax revenues for local redevelopment project areas and
agencies located throughout the State of California.
Table 12-26
Independent Variables Chosen from Across All Primary Categories
Variable Notation Variable Description

Primary Category

Assets_Debits_Tot Total Assets and Other Debits,
Total
Assets
Liab_Tot_Tot Total Liabilities and Other Credits,
Total
Liabilities
Equ_Tot_Tot Total Equity, Total Liabilities

Exp_Tot_Tot Total Expenditures, Total Expenditures

Othrfin_Tot_Tot Total Other Financing Sources
(Uses), Total
Other Financing
Rev_Tot_Tot Total Revenues, Total Revenues

Total_Paid_Tot Total Paid to Taxing Agencies,
Total
Pass Through
Size_Project_Area Size of Project Area in Acres Project Area

A statistical software package, “Stata SE10”, is used to estimate the predictive
values of both “Inc” and “Rev_Tax_Inc_Tot”. In addition to reporting the results of the

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one-way ANOVA tests and the Factor Analysis, Chapter 13 in Part V presents the results
for both sets of the nine separate regression models outlined in this section. The
results are presented for each model in addition to the coefficients for each independent
variable and their corresponding values and values. Each model is tested at the 95
percent confidence interval. Corresponding correlation coefficients are also reported for
each of the nine separate multiple regression models in both sets. Using Stata SE10, the
likely presence of heteroscedasticity in each model is also corrected for using the
“vce(robust)” command.

12.d.4 – Case Studies
The final analytical tool used as part of the research presented in this study is the
use of case studies in examining the organizational structure, behavior, and activities of
various local redevelopment agencies in Nevada and California. Table 12-27 lists the
name of the local redevelopment agency, the city, county, and state the agency is located
in, and whether or not the agency’s board is comprised of the locally elected city council
or county board of supervisors/commissioners or whether the agency’s board is organized
using some other (i.e. private) structure. A more detailed summary of each agency and
its local jurisdiction is presented in Chapter 14 and the remaining case study findings are
presented in Chapter 15.

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Table 12-27
Jurisdictions Selected for Case Study Analysis – Nevada and California
Legal Name City
Location
County
Location
State
Location
Agency Board
Structure

Henderson Redevelopment
Agency
Henderson Clark Nevada City Council
North Las Vegas Redevelopment
Agency
North Las
Vegas
Clark Nevada City Council
Reno Redevelopment Agency

Reno Washoe Nevada City Council
Carson Redevelopment Agency

Carson Los Angeles California City Council
Chico Redevelopment Agency

Chico Butte California City Council
Redevelopment Agency of the
City of Long Beach
Long Beach Los Angeles California Other
Redevelopment Agency of the
City of Oakland
Oakland Alameda California City Council
Redevelopment Agency of the
City of Pittsburg
Pittsburg Contra Costa California City Council
Redevelopment Agency of the
City of Sacramento
Sacramento Sacramento California Other
Sonoma County Community
Development Commission
- Sonoma California County Board
of Sup./Comm.

A total of 10 local redevelopment agencies, three in Nevada and seven in
California, were chosen for a more detailed assessment in the case studies. The
individual local redevelopment agencies selected for inclusion into the case study section
of this study was not made randomly. Instead, each individual local redevelopment
agency was chosen based upon some existing knowledge of each agency and each
agency’s activities in the hope of highlighting different aspects of redevelopment and
how each agency uniquely pursues the goals of local urban revitalization and local urban
economic development in relation to the specifics of each individual community and
jurisdiction.

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Unlike the quantitative techniques presented above that are principally designed
to examine overall trends in incremental assessed value and incremental property tax
revenue levels based upon governing structure and budgetary decisions, the case studies
are designed to provide individual assessments of individual local redevelopment
agencies. By using individual level budgetary data, publically available documents, and
numerous interviews with agency, city, county, and private-sector parties, several unique
insights regarding the organizational behavior, policy development and implementation
decision-making process, project selection and execution activities, and management of
individual local redevelopment agencies can be more fully illustrated.

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Part V – Research Results

V.a – Introduction
Part V of this study presents the primary results and findings of the quantitative
and qualitative research outlined previously in Part IV. The use of one-way ANOVA
testing, Factor Analysis, and multiple regression modeling are interdependently used to
examine a portion of the central research question and the first three research
propositions summarized previously in Chapter 12. The use of individual case studies is
used to examine the remaining portion of the central research question and the final five
research propositions also summarized previously in Chapter 12.
Chapter 13 presents the results of the one-way ANOVA testing, two-way
ANOVA Factor Analysis, and multiple regression models first presented in Chapter 12.
Chapter 13 concludes with a summary of the primary findings of each the three
quantitative methods used to measure macro changes in both the levels of incremental
assessed value of individual redevelopment project areas and in the amount of
incremental property tax revenue collected by various local redevelopment agencies
located throughout the State of California.
Chapter 14 introduces summary data for each of the 10 individual local
redevelopment agencies selected for analysis using a case study approach. Examples of
the summary data for each local redevelopment agency include the total acreage of

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redevelopment project area land within each jurisdiction, the total number of project
areas, and jurisdiction-wide economic and demographic data pertaining to employment
levels, income levels, and educational attainment. Chapter 14 also provides some
information on the types of individual projects each individual local redevelopment
agency has pursued. This analysis focuses on why these projects were chosen, their
perceived impact and contribution to urban revitalization and urban economic
development efforts, and how each individual agency went about selecting,
implementing, and completing the project itself.
Chapter 15 concludes the case study analysis by summarizing several major
findings that seem common across each local redevelopment agency. These findings
center largely around organizational structure and managerial issues and on issues of
public accountability and responsibility and organizational efficiency and effectiveness.
Although caution should be taken in using the findings of this study to generalize to all
redevelopment agencies in Nevada and California, these findings could potentially be
used by policy makers in each state who might be considering new and alternative
institutional forms through which local municipal and county governments can continue
to pursue the goals and processes of local urban revitalization and urban economic
development once the majority of local redevelopment project areas begin to expire over
the next several years.

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Chapter 13 – Results of the Quantitative Analysis

13.a – Introduction
This chapter presents the primary quantitative results of the one-way ANOVA
testing, Factor Analysis, and multiple regression modeling using budgetary data provided
by the California State Controller’s Office for all local redevelopment agencies located
and operating state-wide between FY 1991 and FY 2007. The final section of this
chapter concludes with some general findings.

13.b – Results of the One-Way ANOVA Testing
One-way ANOVA testing is used to determine whether or not the mean level of
incremental total assessed value of local redevelopment project areas (“Inc” variable) and
the mean level of incremental property tax revenue collected by local redevelopment
agencies (“Rev_Tax_Inc_Tot” variable) are statistically significantly different between
redevelopment agencies in California that are governed either by a locally elected city
council or county board of supervisors/commissioners or by an alternative governing
board (i.e. privately appointed). If either the mean level of incremental assessed value or
incremental property tax revenue are significantly different among various governing
board structures, than it is reasonable to conclude that the type of governing board
structure has a statistically significant impact on the outcomes of local redevelopment
agency policies, programs, and projects.

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Table 13-1 presents the one-way ANOVA test results using “Inc” as the response
variable and “Governing_Board_Dummy” as the group variable. The actual one-way
ANOVA results using “Stata SE10” are provided in Appendix 1.
Table 13-1
One-Way ANOVA Results – “Inc” and “Governing_Board_Dummy”
California Redevelopment Agencies
Source Partial SS df MS F-Value P-Value > F-
Value
Model 4.0197e+20 2 2.0099+e20 137.27 0.0000
Governing_Board_Dummy 4.0197e+20 2 2.0099e+20 137.27 0.0000
Residual 8.6738e+21 5924 1.4642e+18 - -

TOTAL 9.0758+20 5926 1.5315e+18 - -

With a reported value of 137.27 and a reported value of 0.0000, there is
enough evidence to conclude that there is a statistically significant difference between the
mean level of incremental assessed value (“Inc”) for local redevelopment agencies with a
governing board comprised of the locally elected city council, county board of
supervisors/commissioners, or a local redevelopment agency with some other alternative
governing board structure. Unfortunately, the results in Table 13-1 do not indicate
whether a local redevelopment agency with a locally elected city council or county board
of supervisors/commissioners as its governing board is more or less likely to have higher
or lower mean levels of incremental assessed value than governing boards with other,
alternative structures.
Using “Stata SE10”, it is possible to use one-way ANOVA testing to determine
whether or not redevelopment agencies with either a city council or county board
governing board structure have either statistically significantly lower or higher mean

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levels of incremental assessed value. Table 13-2 presents the results of this test using
“Inc” as the response variable and “Governing_Board_Dummy” as the group variable.
The actual results of this ANOVA regression are available in Appendix 1.
Table 13-2
One-Way ANOVA Regression Results – “Inc” and “Governing_Board_Dummy”
California Redevelopment Agencies
Dependent Variable:
“Inc”
Coefficient Standard
Error
t-value P-Value >
|t-value|

Constant 1.79e+09 7.28e+07 24.61 0.0000
Governing_Board_Dummy
1 (City Council) -1.23e+09 7.47e+07 -16.53 0.0000
2 (County Board) -1.26e+09 1.04e+08 -12.09 0.0000
3 (Other) (Dropped) - - -

Based upon the one-way ANOVA regression results, both city council governing
boards and county boards of supervisors/commissioners governing boards have
statistically significantly lower levels of incremental assessed value than redevelopment
agencies with other, alternative governing boards. For all local redevelopment agency
governing boards comprised of an elected city council, the combined mean level of
incremental assessed value is approximately $1.23 billion less per year than the mean
level of incremental assessed value for all agencies with other, alternative governing
boards. For local redevelopment agencies comprised of elected county boards of
supervisors or commissioners, the combined mean level of incremental assessed value is
approximately $1.26 billion less per year than the mean level of incremental assessed
value for all agencies with other, alternative governing boards. The one-way ANOVA
results from Table 13-1 and Table 13-2 suggests that the governing board structure of a
local redevelopment agency does have a statistically significant impact on the level of

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incremental assessed value of local redevelopment project areas within the State of
California.
Table 13-3 presents the one-way ANOVA test results using “Rev_Tax_Inc_Tot”
as the response variable and “Governing_Board_Dummy” as the group variable. The
actual one-way ANOVA results using “Stata SE10” are provided in Appendix 1.
Table 13-3
One-Way ANOVA Results – “Rev_Tax_Inc_Tot” and “Governing_Board_Dummy”
California Redevelopment Agencies
Source Partial SS df MS F-Value P-Value > F-
Value

Model 2.7597e+16 2 1.3799e+16 91.59 0.0000
Governing_Board_Dummy 2.7597e+16 2 1.3799e+16 91.59 0.0000
Residual 9.1521e+17 6075 1.5065e+14 - -

TOTAL 9.4280e+17 6077 1.5514e+14 - -

With a reported value of 91.59 and a reported value of 0.0000, there is
enough evidence to conclude that there is a statistically significant difference between the
mean level of incremental property tax revenue (“Rev_Tax_Inc_Tot”) for local
redevelopment agencies with a governing board comprised of the locally elected city
council, county board of supervisors/commissioners, or a local redevelopment agency
with some other alternative governing board structure. However, the results in Table 13-
3 do not indicate whether or a local redevelopment agency with a locally elected city
council or county board of supervisors/commissioners as its governing board is more or
less likely to have higher or lower mean levels of incremental property tax revenue than
governing boards with other, alternative structures.

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Using “Stata SE10”, it is possible to use one-way ANOVA testing to determine
whether or not redevelopment agencies with either a city council or county board
governing board structure have either statistically significantly lower or higher mean
levels of incremental property tax revenue. Table 13-4 presents the results of this test
using “Rev_Tax_Inc_Tot” as the response variable and “Governing_Board_Dummy” as
the group variable. The actual results of this ANOVA regression are available in
Appendix 1.
Table 13-4
One-Way ANOVA Regression Results – “Rev_Tax_Inc_Total” and
“Governing_Board_Dummy”
California Redevelopment Agencies
Dependent Variable:
“Inc”
Coefficient Standard
Error
t-value P-Value >
|t-value|

Constant 1.59e+07 732205.5 21.63 0.0000
Governing_Board_Dummy
1 (City Council) -1.00e+07 750663.8 -13.39 0.0000
2 (County Board) -1.10e+07 1024838 -10.77 0.0000
3 (Other) (Dropped) - - -

Based upon the one-way ANOVA regression results, both city council and county
boards of supervisors/commissioners governing boards have statistically significantly
lower levels of incremental property tax revenue than redevelopment agencies with other,
alternative governing boards. For all local redevelopment agency governing boards
comprised of an elected city council, the combined mean level of incremental property
tax revenue is approximately $10.00 million less per year than the mean level of
incremental property tax revenue for all agencies with other, alternative governing
boards. For all local redevelopment agencies comprised of elected county boards of

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supervisors or commissioners, the combined mean level of incremental property tax
revenue is approximately $11.00 million less per year than the mean level of incremental
property tax revenue for all agencies with other, alternative governing boards. The one-
way ANOVA results from Table 13-3 and Table 13-4 suggests that governing board
structure does have a statistically significant impact on the level of incremental property
tax revenue collected by local redevelopment project areas within the State of California.

13.c – Results of the Factor Analysis
Due to the relatively small size of local redevelopment agencies operating
throughout the State of California, a principal-components factoring command using
“Stata SE10” was used. Table 13-5 presents the first set of final Factor Analysis results
using the “Governing_Board_Dummy”, “Inc”, and “Rev_Tax_Inc_Tot” variables. The
full results of the Factor Analysis are available in Appendix 2.
Table 13-5
Principal-Components Factoring Results – “Governing_Board_Dummy”, Inc”, and
“Rev_Tax_Inc_Total”
California Redevelopment Agencies
Factor Eigenvalue Difference Proportion Cumulative

Factor 1 1.98836 1.04499 0.6628 0.6628
Factor 2 0.94337 0.87511 0.3145 0.9118
Factor 3 0.06826 - 0.228 1.0000

Table 13-6 provides the corresponding Factor Loadings (Pattern Matrix) and
unique variances for the “Governing_Board_Dummy”, “Inc”, and “Rev_Tax_Inc_Tot”
variables.

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Table 13-6
Factor Loadings (Pattern Matrix) and Unique Variances –
“Governing_Board_Dummy”, Inc”, and “Rev_Tax_Inc_Total”
California Redevelopment Agencies
Variable Factor 1 Uniqueness

Governing_Board_Dummy 0.3302 0.8909
Inc 0.9724 0.0544
Rev_Tax_Inc_Tot 0.9663 0.0663

The reported uniqueness value of 0.8909 for the “Governing_Board_Dummy”
indicates that the structure of local redevelopment agency governing boards shares
approximately 89.09 percent of its uniqueness with both the “Inc” and
“Rev_Tax_Inc_Tot” variables. Like the one-way ANOVA tests presented previously,
this provides further statistical evidence that the type of governing board structure has a
statistically significant impact on the level of assessed value for local redevelopment
project areas and the amount of incremental property tax revenue a local redevelopment
agency collects. Only 5.44 percent of the variance in “Inc” and only 6.63 percent of the
variance in “Rev_Tax_Inc_Tot” are shared with the other parts of the factor model
presented above in Table 13-5. This suggests that there are no row, column, or
interaction effects between the three variables used in this model.

13.d – Results of the Multiple Regression Models
The purpose of the multiple regression models presented in this study is to
provide some insight into the overall variation in both the level of incremental assessed
value found in local redevelopment project areas (“Inc” variable) and in the level of
incremental property tax revenue collected by local redevelopment agencies

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(“Rev_Tax_Inc_Tot” variable) for local redevelopment agencies located and operating in
the State of California between FY 1991 and FY 2007. In both the one-way ANOVA
tests and Factor Analysis results reported above, there was strong statistical evidence to
suggest that governing board structure has a statistically significant impact on both the
levels of incremental assessed value and incremental property tax revenues collected.
Here, the multiple regression analysis probes the variation of both the “Inc” and
“Rev_Tax_Inc_Tot” variables based upon the policy making and project selection
decisions that are manifested in the long term debt, assets, liabilities, expenditures, other
financing, revenues, pass through, and project area budgeting data.

13.d.1 – Multiple Regression Results using “Long Term Debt” Independent Variables
Table 13-7 presents the multiple regression results for the two separate models
using “Inc” and “Rev_Tax_Inc_Tot” as dependent variables and various independent
variables form the “Long Term Debt” primary category introduced in Chapter 12. The
full results of both multiple regression models, with a corresponding correlation
coefficient table, are available in Appendix 3. Given that the for the “Inc” dependent
variable model was 0.6844 and that the for the “Rev_Tax_Inc_Tot” dependent
variable model was 0.8015, it is reasonable to conclude that the independent variables
chosen from the “Long Term Debt” primary category significantly explain the variation
in both the level of incremental assessed value for local redevelopment project areas and
the level of incremental property tax revenues collected by local redevelopment agencies
in California.

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Table 13-7
Multiple Regression Results – “Inc” and “Rev_Tax_Inc_Tot” Dependent Variables,
“Long Term Debt” Independent Variables
California Redevelopment Agencies
Notation Variable Name Coefficient t-value P-value

Inc

Constant Coefficient 1.41e+08 9.36 0.000

Amount_Authorized 3.679083 4.94 0.000

Amount_Unmatured_Beg_Year 4.195261 1.53 0.126

Amount_Matured_During_Year 1.373262 0.40 0.692

Amount_Unmatured_End_Year 0.649973 0.02 0.980

Principal_Deafult -33.27498 -4.11 0.000

Interest_Default -11.81492 -2.80 0.005

Rev_Tax_Inc_Tot

Constant Coefficient 1318658 10.28 0.000

Amount_Authorized 0.0474474 6.84 0.000

Amount_Unmatured_Beg_Year 0.0566938 2.67 0.008

Amount_Matured_During_Year 0.0002501 0.01 0.994

Amount_Unmatured_End_Year -0.0184355 -0.85 0.394

Principal_Deafult -0.3117582 -3.80 0.000

Interest_Default -0.0949272 -0.37 0.714

Furthermore, given that the independent variable “Amount_Authorized” was both
positive and statistically significant in both models, it is reasonable to conclude that the
use of tax increment financing by local redevelopment agencies, through the issuance of
long term debt backed by future incremental property tax revenues collected by local
redevelopment agencies, has been used successfully to remove and mediate the presence
of physical and economic blight. This observation also provides some evidence that the
use of long term debt by local redevelopment agencies in the State of California between
FY 1991 and FY 2007 has returned a positive and statistically significant return on
investment through the issuance of debt and the completion of assessed value-adding

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projects that also increase property tax revenues collected from the individual project
areas.
Finally, the “Principal_Default” independent variable was both negative and
statistically significant in both models. This result suggests that defaulting on the
principal amount of long term debt significantly reduces the level of inc