HOW A REDEVELOPMENT PROJECT IS FINANCED WITHOUT A TAX INCREASE

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A) Before a redevelopment project area is formed all tax revenue goes to the county, city, schools and special districts. In a blighted area the tax revenue is usually stagnant or lags behind the increases in land values of ares without blight. B) When the redevelopment project area is formed, all tax agencies continue to receive the tax revenue they received before redevelopment plus a 2 percent increase per year provided by law. C) The redevelopment agency may enter into a tax sharing agreement with any taxing agency (schools, etc.) to prevent significant fiscal impact due to redevelopment. The redevelopment agency passes these tax revenues through to the taxing agency each year. D) Twenty percent of the "Tax Increment" must be set aside into a special fund for low- nand moderate-income housing programs administered by the redevelopment agency. E) As property is sold and as new construction (private and public) occurs in the redevelopment area, the assessed value of the property goes up. This causes tax revenue to increase even though the tax rate does not change. The increased tax money is known as "Tax Increment". It is used by the redevelopment agency to pay for the expenses of improving the area and eliminating blight. F) At the end of the redevelopment project (typically 30 to 40 years), after all agency debts are paid, the redevelopment project is terminated and all tax revenue from the increased assessed value created by redevelopment of the area goes to all other tax agencies in the project area in proportion to their tax rates.

Source: “Citizen Guide to Redevelopment” published by the California Redevelopment Association


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