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MILLER & STARR
REAL ESTATE NEWSALERT
ARTICLE
DIVERTING TAX INCREMENT REVENUE TO
EDUCATIONAL FUNDS:
IS IT CONSTITUTIONAL OR WISE?
By Ethan Friedman and Scott Hernandez*
Main Article, Volume 20, Number 3
Reprinted in part from
Volume 20, Number 3, January 2010
(Article starting on page 177 in the actual issue)
Depending upon who you ask, California’s move to reallocate re-
development 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.1 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 Cali-
fornia’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 as-
sist 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.
WHAT IS TAX INCREMENT REVENUE?
To address problems such as unemployment, lack of low- and mod-
erate-income housing, and the need for safe space spaces in which
* Ethan Friedman is a shareholder specializing in eminent domain and inverse condemnation
and Scott Hernandez is an associate, both in the Walnut Creek office of Miller Starr Regalia.
