CONDUCTED BY: Time Structures, Inc., Sacramento, California

Need for an Economic Analysis

Redevelopment has been an effective tool for the financing and development of housing, infrastructure and commercial/industrial facilities in California for more than five decades. Redevelopment has also been a major source of employment, income, and tax revenue for local communities over this period. Most California cities and many counties have active redevelopment agencies that administer redevelopment programs in urban, rural, and suburban jurisdictions throughout the State.

Despite the important role of redevelopment in California, little data and information is regularly gathered on the economic impact of the program.

About this Economic Analysis

The California Redevelopment Association (CRA) contracted with Time Structures, Inc. in June 2009, to study the economic impact on the state of California of construction activity resulting from the actions of local redevelopment agencies. The impacts are estimated for new construction and structure rehabilitation activity within the project areas administered by the agencies, and for low- and moderate-income housing and associated infrastructure constructed outside the project areas with agency participation.

This is the third in a series of similar studies previously completed for fiscal years 2001-02 and 2002-03, and the current effort, for fiscal 2006-07. The primary purpose of repeating the study is to validate the results by determining if the quantitative impacts could be replicated by sampling different agencies. While the effort reinforces the significance of the economic role performed by Community Redevelopment Agency spending, the quantitative impacts are similar to those estimated in previous efforts.

Using a widely accepted economic computer model (IMPLAN), Time Structures, Inc. calculated the direct, indirect, and induced effects on economic output of redevelopment agency construction in order to determine the resulting statewide economic impacts. The study identifies the economic flows associated with the combination of construction in redevelopment project areas for housing, commercial, industrial, and infrastructure, and construction involving agency funds outside of project areas during FY 2006-07. Below is a summary of some of the key findings of this analysis:

Total State Economic Activity

? In the 2006-07 fiscal year, California redevelopment agencies generated $40.79 billion in

total economic activity. This includes the direct impact of RDA construction activities, as

well as the indirect and induced effects that RDA activities have on affected industry sectors.

Employment and Income Gains

? RDA-associated construction activity was responsible for the creation of 303,946 full and part time jobs in California in the 2006-07 fiscal year, through its direct, indirect and induced

impacts on the state’s various industry sectors.

? State income was increased by $22.74 billion because of RDA-associated construction in2006-07. (Total income is the sum of wages and salaries, proprietor income, corporate profits, property income, and indirect business taxes.)

State and Local Taxes

? RDA construction activity resulted in an increase of $2 billion in tax revenues for state

and local governments for 2006-07.

Impact on Construction industry

The impact of RDA activities on California’s construction sector was most pronounced.

In 2006-07:

? RDA activities were responsible for the creation of 170,600 construction sector jobs in

2006-07 (included in total jobs figure above). This represents 23.4% of all construction

industry jobs in California in 2006-07.

? RDA activities resulted in an increase in state construction sector output of $18.97 billion.

? Agency activities generated 24.1% of all construction industry income in 2006.

Return on Redevelopment Agency Investment

Impacts per dollar of RDA spending are an indicator of the effectiveness of redevelopment

programs and policies. While this study was not undertaken with the intention of completing a comprehensive cost-benefit analysis of redevelopment programs, the economic impacts of the programs provide ample justification for current levels of RDA funding and expenditures. The results of this study indicate that:

? Every one dollar of redevelopment agency spending generates nearly $13 in instate sales of goods and services.

? On average, every dollar of RDA spending increases state income by more than $7.

Effects of Reductions in Redevelopment Agency Funding on State and Local Government Budgets

The economic impact estimates presented in this report indicate that a reduction in state funding for agencies will have a significant adverse impact on the California economy, particularly on the construction industry.

  • Each dollar reduction in agency funding will cause state and local tax revenues to decline by $0.64.

  • A dollar in reduced funding levels will reduce the state budget deficit by only $0.36.

  • Furthermore, the impact on total assessed value and the resulting changes in property tax revenues, due to a reduction in agency funding, will have an impact on future state and local government revenues. This additional revenue impact is not included in the analysis since the tax impacts estimated in the IMPLAN model used in this study are for the project construction phase only.