What is Redevelopment?

What is Redevelopment?

Redevelopment is a process to assist city and county governments to eliminate blight within designated project areas. It encompasses residential, commercial, industrial, and retail development. Redevelopment originally began in 1945. Its main emphasis at that time was to rebuild blighted and inadequate housing within cities. As the years have progressed, so to has redevelopment. Affordable housing is still a critical component, along with commercial, retail, and industrial development.

Who oversees Redevelopment in Merced?

Merced has established a Redevelopment Agency (RDA) that is separate from other city entities. The RDA Commission consists of the City Council members, which oversee the activities of the Agency. The RDA Board of Directors have established a Redevelopment Advisory Committee (RDAC) of residents, property and business owners within the two project areas to provide Redevelopment Agency staff direction and guidance.

Additionally, there are a number of laws that govern redevelopment agencies in the State of California, which can be found primarily, within the California Health and Safety Code beginning with 33000 et. seq., and Article XVI, Section 16 of the California Constitution adopted in 1952.

What is the Redevelopment Agency's Goal?

The goal of the redevelopment program is to stimulate economic investment by participating in real estate-based development projects and public improvements. These projects increase economic vitality and improve physical conditions in target redevelopment project areas for the benefit of the entire city and its residents in order to eliminate physical and economic blight as defined by the California Community Redevelopment Law (CRL), which provides the framework for carrying out redevelopment activities.

What is a Project Area?

A project area is a specific area within the Redevelopment Agency's jurisdiction that has been identified and adopted as a redevelopment project area. When the process of establishing the project area is complete, the project area will begin reaping the benefits of redevelopment. In Merced, there are two redevelopment project areas: Project Area 2 (Downtown) and Gateways Project Area (South Merced, Highway Communities).

Does a Project Area continue forever?

No, Project Area 2 will expire in 2015 and the Gateways Redevelopment Project Area will expire in 2027. Once a project Area expires, the Redevelopment Agency is no longer capable of constructing projects within that defined area.

How does Redevelopment work?

Redevelopment is based on the concept of increasing tax increment (TI). When a project area is established, the tax dollars that are currently collected establish a base amount. These dollars do not change in that they are still collected and allocated to the same entities as previously determined.

The difference occurs in taxes that are collected after the base amount is set. As property taxes naturally increase due to new sales of property and development, the increases are allocated as redevelopment funds. These funds are then used to entice development to occur. Not all the increased funds are given to the Redevelopment Agency however; some of the money is passed through to other entities such as the school districts, counties, etc. Redevelopment does not increase the amount of taxes people pay.

How are Funds Secured?

By law, redevelopment will receive tax increment only if the project area has created debt. Debt can be created by the sale of bonds, the receipt of loans, or advances of funds. Debt incurred by the agency is an obligation of the agency only and not the city. At the conclusion of the project area, and after all debt is repaid, tax increment funds then revert back to the taxing agencies.

Are Property Taxes Raised?

The tax increment that redevelopment receives comes from the increases in property values on subsequent sales, new construction and overall improved valuation. It does not cause taxes to be raised.

What is Eminent Domain?

Eminent domain is one of the tools of redevelopment. It allows the Agency to acquire property to assist in creating projects that are in the public interest. It is not used lightly and the agency is required to pay fair market value and relocation cost to the affected property owner, lessee and renter. If the fair market value cannot be agreed upon, evidence, including appraisals are submitted and a judge and jury will make the final determination regarding value. Sometimes, because of tax benefits, an owner will request a "friendly" eminent domain action.

What are Relocation Costs?

Relocation costs include, but are not limited to: assistance in finding a new location, payments to cover moving fees, and differential payments for rent increases.

How does the Revenue effect other Taxing Services?

When redevelopment establishes a project area, there are certain laws that govern the amount of money that is passed-through to the other taxing agencies such as schools and the county. Twenty-percent of all tax increment money is set aside for low and moderate-income housing.

How can a Redevelopment Area help me?

Redevelopment's main mission is to improve the quality of life in project areas by providing economic development, housing opportunities, and improving infrastructure such as streets, curbs and gutters, and sidewalks. As a resident in the project area, you may benefit with increased property values, expanded employment opportunities, better community services, affordable housing, elimination of poor health and safety conditions, more recreation and leisure opportunities, and improved traffic circulation patterns.

What are Housing Set-Asides and how do they affect me?

Twenty percent of all redevelopment tax increment is set aside for housing opportunities for families and individuals in the low to moderate income category. These housing options can include both homeowner and rental. The definition of low to moderate income level is less than 120% of the area’s Median income. In 2005 a family of four in Merced would qualify as having moderate income if their yearly income was $58,900 or less.

Homes built using these funds would need to be sold to a qualified family and at a price of $186,700 or less, or rented at a price of less than $944 per month.

Why do we need Redevelopment?

Neighborhoods and communities follow a cycle of birth, growth, stabilization, decline and rejuvenation. Redevelopment is the catalyst that can reduce the time an area is in decline and accelerate the process of rejuvenation. Redevelopment can provide incentives to a developer to build in a community that will benefit greatly from the improvements vs. building in an area that will greatly benefit the developer.

What is RDAC?

The Redevelopment Advisory Committee or RDAC is the advisory group that assists the Agency in establishing priorities within the Project Areas. The RDAC members are appointed by the Redevelopment Agency Commission (City Council) and serve a term of 4 years.

RDAC consists of representatives from local business, residential owner-occupants, residential tenants and community organizations in both project areas. All representatives must own property, live or own a business within one of the project areas. In addition, the public is invited and encouraged to attend RDAC meetings to provide additional input.

Why should I be involved in RDAC?

Decisions are constantly being made concerning improvements in your community. The Redevelopment Advisory Committee meetings allow an opportunity for you to see proposals for improvements in your area and to voice your opinion. Meetings are generally held the Third Tuesday of every month at 12:00 in the 3rd Floor Conference Room of the Civic Center (678 W. 18th Street, Merced). You may find out when the next meeting is by calling the Redevelopment Agency at (209) 385-6827.

If you are interested in more information, visit the California Redevelopment Association on the web at