Cities Scramble to Make Sense of End to Local CRAs

By Elizabeth Hsing-Huei Chou, EGP Staff Writer

The elimination of redevelopment agencies will not be an easy cut for cities that have become dependent on them over the years to create revenue for city services.

When redevelopment agencies all across California cease operation on Feb. 1, a successor agency, usually the city itself, will be in charge of winding down the agency’s debts and assets. City officials say they will be forced to sell off all of their assets including real estate purchased in preparation for specific projects.

Some of the first casualties in the weeks leading up to the elimination of redevelopment agencies will be city and redevelopment agency employees, as well as economic development projects that were put on hold while the state supreme court ruled on whether the law passed by Gov. Jerry Brown to eliminate redevelopment agencies was constitutional.

Just before the start of the new year, city officials learned that the state supreme court had not only ruled in favor of the elimination of the agencies, but also against a provision allowing cities to keep their agencies in exchange for a significant fee.

Cities that had agreed to pay the fee in order to keep their agencies are now scrambling to deal with what some officials have termed the “worst case scenario.”

They are now trying to convince state lawmakers to extend the deadline for eliminating redevelopment agencies. Senator Alex Padilla (D-San Fernando) is expected to introduce a bill this week.

In the meantime they are hoping the legislature comes up with a replacement for redevelopment, which has for the past sixty years given cities the ability to participate in public-private economic development, and to create affordable housing.

“Without immediate legislation to fix this court decision, this ruling is a major obstacle to local job creation, economic development and affordable housing. It was not the legislature’s original intention to totally abolish redevelopment agencies, but the court has forced us to wait with our hands tied behind our backs hoping for a positive response from Sacramento,” Bell Gardens City Manager Phil Wagner told EGP.

In many cities, budgets are being re-examined. The salaries of several employees, including top city officials such as city attorneys and city managers, are at least partially paid using redevelopment agency funds, which will no longer be available after Feb. 1.

Monterey Park officials say they may need to cut back as much as $1 million in labor costs – an equivalent of ten employees – while Montebello officials estimate they are looking at half a million dollars in cuts. In Bell Gardens, officials say 2.5 full-time jobs funded by the redevelopment agency may be cut.

“[The dissolution of redevelopment agencies] will result in significant job losses. Just about every city I know will be laying off employees very quickly,” said Montebello Interim City Administrator Larry Kosmont.

Cities have long used redevelopment funds to pay for projects that generate more sales tax revenue, which can be used to fund city services, but that could change if an alternate plan is not found.

Kosmont, who sits on the California Redevelopment Association board and heads a consulting firm specializing in economic development, said taking away redevelopment is like “taking away your kid’s allowance, and your kid’s job.” Redevelopment is a city’s “most important tool for economic development,” he said.

Among the projects at stake is Commerce’s urban entertainment center next to the I-5 Freeway. It was expected to anchor a retail-oriented strip on Telegraph Road that is currently book-ended by the Citadel shopping outlet and the Commerce Casino.

The agency has been working on the project since the late 1990s. Last April, officials acquired the last of the 27-acres needed for the project. Commerce officials say when the agency is dissolved they will be required to sell off all of its assets, including the land on Telegraph Road.

At a Jan. 3 meeting, Commerce City Attorney Eduardo Olivo said there is a chance they could keep the properties, but “at a cost to the city.”

Monterey Park City Manager Paul Talbot also says they will attempt to proceed with some of their projects without redevelopment agency funds. The agency has been working on a downtown mixed-use development and a retail center next to the Pomona 60-Freeway.

“I don’t know whether or not [the projects] will be able to succeed financially,” he told EGP last week.

In a past interview, Talbot said cities use redevelopment funds to attract potential developers who may not initially look at projects as profitable.

Without their redevelopment agency powers, city officials say they will find themselves less able to attract businesses to the city or to induce development.

Officials in Montebello, which leases property to Costco, had been in talks with the wholesale membership warehouse to move forward with the construction of a gas station, but negotiations between the two may no longer be possible, said Montebello Planning Director Michael Huntley.

Huntley credited redevelopment agency powers for smoothing the path for top revenue generators such as Costco and Montebello Towne Center.

He said there is no way of knowing whether these kind of projects would have occurred without the influence of redevelopment agencies, but said it was nevertheless due to the efforts by the redevelopment agency that projects like Costco and the Montebello Towne Center came into fruition.

Huntley added that a developer was very interested in bringing an affordable housing project into the city when the ruling came down. “Unfortunately we’ve had to put them on hold, as we cannot enter into legally binding agreements,” he said.

At least one affordable housing project will continue moving forward. According to Wagner, the Abode senior homes project in Bell Gardens will not be negatively impacted by the elimination of redevelopment agencies because the project will be funded using Bicycle Casino funds.

EGP reporter Gloria Angelina Castillo contributed to this story.

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January 12, 2012  Copyright © 2012 Eastern Group Publications, Inc.

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