Artesia is a small town of some 14,000 people and about 1.6 square miles. They have one major business street, Pioneer Blvd., and one major cross street, South St. Because of the gerrymandered city boundary and the railroad bisecting the town, land development has taken an uneven course. Their largest problem, however, is being surrounded by the retail powerhouse, Cerritos, which as you know has two major shopping malls.
Artesia is an old city, legitimately getting its name from the water that flowed to the surface when a pipe was drilled into the ground. It was the support city for all the surrounding farm land and thus was built out many years ago. The surrounding dairy farms in the 1960s became the basis for the City of Cerritos, which some people say had to be built as shopping centers so the barnyards could be paved over to contain the smell. Cerritos had the privilege of developing raw land which led to its Redevelopment success.
Now Artesia is stuck with an old downtown. The city would like to have new building as well as more income. Income is usually generated through more taxation, both from newly assessed property tax values when land is sold (or leased longer than 35 years) and by increased sales tax revenue from new retail uses. So how is this revitalization started? It is usually attempted through a process called “Redevelopment” which is sanctioned under California Health and Safety Code and that’s when the trouble starts.
The cities can buy land appraised at its current use, not “highest and best use”, and are supposed to sell it to the new private developer at market value. However, in real life there is some amount of writedown plus additional incentives that may be needed to make the deal. The city can do infrastructure improvements for the project at no cost to the developer, they can waive city fees and do a number of other things. But the ultimate gift is the use of eminent domain to force a sale of private property from one individual to another. Because the City Council usually sits as the Redevelopment Agency Commission as well, there is no one to appeal to and any court action is only over the amount of money to be paid and not the propriety of the deal. This use of eminent domain is the most offensive part of the process. It is a most grevious act to use the power of government to take private property from one citizen and sell it to another, all through the use of public funds, all without recourse.
The city claims they will get their money back by having a new tax base on the land which results in higher property taxes plus any new sales taxes generated from new retail stores. On the surface this sounds like having your cake and eating it too, but it’s not really that way.
There is a concept called the payback period. In other words, how long does it take for the new increased taxes to equal the amount of writedown on the land and the other improvements done for the developer.
On even a small amount of giveaway the acceptable payback period is still in the six to eight year range. At 10 to 12 years the project is questionable and over 14 years most prudent city staff would turn down a project unless there is some overriding consideration such as being a keystone building. Downey has one very prominent such building where the payback period is 18 years; it’s very attractive but it’s not a keystone anything—just another building that was going to revitalize downtown.
Each new project is claimed to jump-start this process, but never does. Along with “redevelopment,” “revitalization” is one of the most overused and underachieved words used by city governments.
Next week we will see how Artesia started off on the wrong foot.