Redevelopment was a tool created by state law to assist local governments in eliminating blight from a designated area, as well as to achieve the goals of development, reconstruction and rehabilitation of residential, commercial, industrial and retail districts.
Redevelopment was one of the most effective ways to breathe new life into deteriorated areas plagued by blighted conditions which act as a barrier to new investment by private enterprise. Redevelopment activities included the rehabilitation and reconstruction of existing structures, the redesign/replanning of areas with inefficient site layout, the demolition and clearance of existing structures, the construction/rehabilitation of affordable housing and the construction of public facilities including, but not limited to, public buildings, streets, sidewalks, sewers, storm drains, water systems and street lights. All of this contributed to general economic revitalization of an area, making it more attractive for additional investors.
The most common source of financing used by redevelopment agencies is called a tax allocation bond. These bonds, which are a loan of money to an agency, are not a debt of the community or the general taxpayer. Rather, they are repaid solely from tax increment revenue generated within the project area. In other words, increased tax revenues generated through redevelopment activities are funneled back into the project area to stimulate more development as well as to pay the costs involved.
The redevelopment agency has no power to set tax rates or levy property taxes. Property tax on properties within a redevelopment project area are governed by the same laws as properties outside redevelopment project areas.
Taxing entities such as the county, school districts, and special districts that serve the project area, continued to receive all the tax revenues they were receiving the year the redevelopment project was formed (the base year). In addition, taxing entities received a portion of the incremental increase in property tax revenues from a redevelopment project area.