Lots of interesting debate on redevelopment agencies.
This website summarizes the arguments of redevelopment agencies and local governments. (See http://www.protectourlocaleconomy.com/get_the_facts)
Some economists interested in local economic development, including Chris Thornburg at Beacon whom I usually agree with, look for a middle way here.
The LAO (Legislative Analyst's Office) comes out in favor of the Governor's proposal to eliminate redevelopment here. http://www.lao.ca.gov/analysis/2011/realignment/redevelopment_020911.aspx
Based on an objective review of the facts and evidence, the LAO provides the most convincing argument.
However, in the context that it has been proposed for the 2010 budget, it is a bit of a Sacramento money grab and I would rather see it as part of a larger, more comprehensive tax package. One of the things I would most like to see in California is for local governments to do a sales/income tax swap with the state. We have too many shopping centers and not enough housing in California, and current tax policy causes local governments (who control land use) to favor retail development (which they see as profitable) over residential development (which they see as costs). I would also like to see changes to property taxes, although prop. 13 is a problem here. The dependence of local governments on sales tax is a highly negative influence in California, and many of the worst abuses of redevelopment funding are connected to the zero-sum game of local governments competing for each others retail sales.
I'm glad to see the redevelopment proposal out on the table. It will probably be killed by the lobbying pushback, but it is now seriously in the debate on California tax reform.