Diverting Tax Increment Revenue to Educational Funds: Is it Constitutional or Wise?


Depending upon who you ask, California’s move to reallocate redevelopment funds is either a raid on constitutionally protected tax increment revenue or another example of fat-cat developers stealing precious local property taxes from school children. Neutral observers will note that any legislation entails a certain amount of backroom dealing.

But as is often the case in political debates that create more heat than light, the constitutional issues involved are more nuanced and complicated. Such is the case in recent litigation involving California’s redevelopment agencies and the Legislature, who in a frantic attempt to meet budgetary demands, created a statutory scheme which funnels tax increment revenue away from development projects to assist local schools. Perhaps this is understandable in light of the current financial crisis. Regardless, a second round of litigation between the State and California’s redevelopment agencies is headed toward an outcome which is anything but certain.

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