Financial Innovation in Riverside

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The city of Riverside and the county of Riverside, like so many local governments, are desperate to get money for redevelopment on the books before the state takes action, as Gov. Jerry Brown has proposed, to eliminate redevelopment agencies.

But these two local governments, in their haste to do this, have performed what may be a bit of financial innovation. Instead of going to the bond market for the money, the city and county are issuing debt and selling it to each other, according to the Press Enterprise. They can get lower rates that way, and move faster.

All sounds good, except when you consider the larger budget context. Redevelopment money ultimately comes from property taxes that otherwise would go to schools. So the actions of Riverside city and county make the state budget worse and lead to cuts in other programs.

(Full disclosure: I've done separate, unpaid speeches for Riverside city and county officials in recent months as part of a tour of my book, California Crackup).

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