A drive north on the Santa Ana Freeway from Disneyland toward L.A. reveals the chaos redevelopment has wreaked. There is the Buena Park Auto Square, built around dealerships lured from nearby Fullerton. Just north is the old Gateway Chevrolet site. Where did it go? Just across the county line to La Mirada, which lured it from Buena Park with its own publicly-financed auto mall (on land conveniently designed as "blight").
Still further north is another auto mall in Santa Fe Springs, with numerous long-vacant parcels waiting for the dealerships that will never come. To the west is Cerritos, who's giant redevelopment-funded "Auto Square" became a pioneer in auto dealer piracy, draining off dealerships-and sales tax revenue-from its neighbors. Nearby Lakewood lost so many car dealers that its city manager labeled Cerritos the "Darth Vader of cities."
Drive any stretch of freeway in San Diego, Los Angeles, Santa Clara or other urban counties and you'll see redevelopment-funded auto malls, with their hopeful reader boards and carefully graded-and vacant-dealer sites. They're a product of a bitter fiscal free-for-all, as cities coax each other's dealerships away with ever-sweeter giveaways.
Car dealers, of course, are loving it. They no longer have to make a profit from mere customers. They can now play one city off against another for cheap land, tax rebates and free public improvements. You can't blame them. But you can blame the laws that encourage this shell game.
The same pattern is repeated with department stores, discount chains, home improvement centers and even sports franchises (the Los Angeles Redevelopment Agency has committed a $60 million bond to lure the Lakers and Kings from Inglewood). Corporate decisions once based on market forces are now determined by which city's redevelopment agency will cut the best deal.
The California Redevelopment Association encourages developers to expect public handouts. On June 11, 1998, the CRA and the International Council of Shopping Centers co-hosted a conference bringing city officials and developers together to promote "public-private partnerships," i.e., public subsidy of private development. The Long Beach confab ended with a "Meet the Cities Deal-Making Reception" where developers could feel out public officials for generous hand-outs.
Some cities are winners. Some are losers. Some are just able to stay even. Per-capita sales tax revenues vary widely among cities. Even for the winners, however, there are pitfalls. A major new retailer will, after all, draw many customers away from existing businesses within the same city. Later, it may hold the city hostage, threatening to move away unless even more subsidies are provided.
Is this good public policy? Is it good economics?
The problem is not limited to California. It is part of a troubling national trend by which states outbid each other to attract new industry. The "economic incentives" often bear little relation to the benefits realized. When considering plant location, foreign companies now routinely play one state against another for the biggest subsidy package. A Ford Foundation-sponsored conference on "The Economic War Among the States" was held in Washington, D.C., on May 21-22, 1996, on this problem, with an economic truce being proposed among the states. Such leadership is needed here to halt California's own redevelopment revenue wars.
It is ironic that, just as we encourage former Soviet-block countries to privatize their anemic state-run industries, we increasingly entangle our local and state governments in subsidizing private business, all in the name of "economic development" policies that have repeatedly failed elsewhere.
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