Testimony in OPPOSITION to CA Assembly Bill 417: “Local finance: enhanced infrastructure financing districts: community revitalization and investment authorities.”

Testimony from:
Steven Greenhut, Western Region Director, R Street Institute

Testimony in OPPOSITION to Assembly Bill 417: “Local finance: enhanced infrastructure financing districts: community revitalization and investment authorities.”

March 28, 2025

California Assembly Committee on Local Government

Dear Chair Carrillo,

My name is Steven Greenhut. I am Western region director for the R Street Institute, a free-market think tank that works on a variety of issues including ones related to housing and redevelopment. I am writing to oppose Assembly Bill 417, which would make a variety of changes to state law regarding Enhanced Infrastructure Financing Districts and Community Revitalization and Investment Authorities.

Our opposition centers on one crucial omission in the legislation: its failure to restrict these agencies from using eminent domain on behalf of private developers. I’ve written extensively about the misuse of eminent domain for non-public uses since before the U.S. Supreme Court’s 2005 Kelo decision, which gave the city of New London, Conn., the greenlight to bulldoze a settled working-class neighborhood to give the property to a pharmaceutical giant to build a headquarters. By changing the “takings” standard from “public use” to “public benefit,” the court gave localities expansive powers that go well beyond the ones detailed in the U.S. Constitution.

In her stinging dissent, Justice Sandra Day O’Connor argued that, “Any property may now be taken for the benefit of another private party, but the fallout from this decision will not be random. The beneficiaries are likely to be those citizens with disproportionate influence and power in the political process, including large corporations and development firms. As for the victims, the government now has license to transfer property from those with fewer resources to those with more.”

The court urged states to revamp their eminent-domain laws, but California’s reform didn’t meaningfully rein in local governmental abuses. We’re not arguing against governments’ ability to use eminent domain for traditional public-works projects—but against their misuse of the power to transfer property from one private owner to another in the name of economic development. Obviously, a major corporation will always provide greater tax benefits to a community than the owner of a home or a small business. Without a restriction on such misuses of this police power, we’re likely to see more injustices of the type that the Legislature has subsequently condemned.

For instance, the Legislature—to its credit—has recognized the degree to which Justice O’Connor’s words rang true. In 2021, Gov. Gavin Newsom signed Senate Bill 796 regarding beachfront property that the city of Manhattan Beach had wrongfully taken in the 1920s from the Black entrepreneurs who had owned it. It returned the property to the family’s descendants. California’s now-defunct redevelopment agencies frequently used—or threatened to use—eminent domain against middle- and lower-income property owners in order to transfer them to developers who promised some type of tax-generating development project. Fortunately, the Legislature has rejected multiple efforts since 2013 to fully recreate those agencies.

The bulk of AB 417 is unobjectionable, but it amends a section of 2015’s Assembly Bill 2. That law explicitly granted community revitalization authorities the power to “acquire real property by eminent domain, provided that authority is exercised within 12 years from the adoption of the plan.”

This new legislation is designed to, according to the author’s statement, improve “the functionality and usefulness” of Enhanced Infrastructure Financing Districts and Community Revitalization and Investment Authorities “by streamlining administrative processes, and providing other crucial clarification to existing law, while maintaining public participation and transparency.” That’s a reasonable goal, but that raises the risk of additional misuses of eminent domain in the process—unless you amend the measure to provide restrictions.

We would remove our opposition to AB 417 if it is amended to protect against the misuse of eminent domain.

Best regards,

Steven Greenhut

Steven Greenhut
Western Region Director
R Street Institute
(909) 260-9836
sgreenhut@rstreet.org