California's Dying Redevelopment Program Isolates Cities
The goal of transforming blighted or run-down properties into picturesque landscapes is buried with a headstone inscribed: Community Redevelopment Agency (CRA).
Critics have accused the CRA of mismanagement and cronyism, but some cities have seen redevelopment projects leave their communities with a much needed facelift.
“It’s easier to build a big box and green field in the suburb and be sure you’re making money on it. As a private investor, it’s more risky to go downtown. They’re not as likely to do that,” said Lillian Henegar, director of policy, outreach and legislation with the California Redevelopment Association.
“Take a walk down your neighborhood, the areas where you don’t want to go,” Henegar said. “Think about if you were an investor and think about where you want to develop. You won’t want to deal with cleaning up a contaminated and dirty site.”
Cerritos Mayor Sandy Chen said in a statement that the benefits of redevelopment are not just increased revenue but a chance to create jobs and strengthen local economies.
Major commercial centers in the city like Cerritos Auto Square and the Cerritos mall were both developed as a result of redevelopment funds.
According to the city’s Chamber of Commerce, Cerritos generates over $2.6 billion a year in taxable retail sales. The two businesses that generated the most in sales tax revenue was Cerritos Auto Square pulling in roughly $1.8 million, and the Cerritos Mall with an estimate of $1.4 million, as stated in the city’s fall 2011 economic report.
Annie Hylton, theater marketing manager of Cerritos Center for the Performing Arts, said other projects such as the Cerritos Sheriff’s Station, Liberty Park, and the Cerritos Center for the Performing Arts owe their success to the Cerritos Redevelopment Agency. In addition to funding major commercial projects, redevelopment funds have allowed Cerritos to use that money for basic renovations like sidewalks.
Henegar said that redevelopment is about creating vibrant space in a community.
“You can have a Bart line coming into an area,” she said. “So the next stage will be a green area, and another stage of it might be retail and housing closer to the Bart station. There is a multi-layer of projects that creates a whole. If you take out that puzzle piece, you’re back at square one.”
While 425 redevelopment agencies throughout California have been dissolved, several cities in Los Angeles County have banded together to fight back.
Cerritos, along with nine other cities, filed a lawsuit challenging the constitutionality of ABx1 26, the Dissolution Bill, and ABx1 27, the Forced Payment Bill. The judge specified that their case can still move forward, but it would be difficult for them to win.
Both bills were signed into law by Gov. Jerry Brown in June 2011. The Dissolution Bill dissolves all existing redevelopment agencies, and the Forced Payment Bill gives cities the option of keeping a redevelopment agency as long as they pay $1.7 billion dollars this year and several more millions in future years to their local county controllers. These funds would be distributed to other public agencies, particularly public education, for non-redevelopment use.
The reasoning behind the Forced Payment Bill was to give the state access to a substantial amount of property tax increment revenues, which was the largest source of funding for redevelopment agencies, to help alleviate the budget crisis.
According to the lawsuit document filed by the city’s representation Rutan & Tucker, LLP, telling the cities they have the option of keeping their redevelopment agency under the condition of paying the county was likened to “a robber with a gun in a dark alley.”
However, State Controller John Chiang reported an outstanding debt of $29.8 billion in November 2011 left by the CRA. The report also showed total revenues decreased from $8.3 billion in 2008 to $8 billion in 2010. Yet, expenditures during the same fiscal period increased by $1.3 billion.
“It’s not the same as student loans. It’s different with municipal funding,” Henegar said.
She said the way the law is built around redevelopment agencies requires them to continue to pay off their loans. She said municipal funding is structured differently and the CRA debt is based on a long-term payment plan. In addition, 20 percent of property tax increment was required by agencies to spend on low to moderate income and another 20 to 30 percent towards public education. Dissolving the agencies is not going to solve the problem she said.
Alex Hamilton, assistant director of community development in Commerce, echoed Henegar’s thoughts. He said the state rid themselves of redevelopment agencies over accusations of wasteful spending and ineffectiveness instead of working with the agencies to find a solution.
“Mend it rather than end it,” Hamilton said. “The state could have come in and said, ‘look you guys have to get your act together, put in some benchmarks for performance and then we’ll take your money away.’”
Hamilton said there have been bad examples of excess and mistakes but many are focusing on those rather than areas that have benefitted.
Once home to Dodge and Ford factories, Commerce has more than a 50 year history of being an industrial city. But beginning in 1974, it was one of the first examples of the aftershocks when a factory leaves a city, said Hamilton. Now, he said, redevelopment project areas make up 60 percent of the city.
One example of a massive redevelopment project in Commerce was the construction of the Citadel Outlets. The former Samson Tire plant, and later Uniroyal, was a blighted and contaminated property that was redeveloped into a multi-use facility, about the size of 15 football fields, with retail shops, restaurants and office space. The original façade was also preserved in order to maintain its historical significance in the city.
Hamilton said that oftentimes, a redevelopment property is extremely inadequate and the land contaminated. Private investors don’t want the uncertainty of redeveloping blighted properties because they assume the responsibility for unexpected costs due to poor infrastructure. They take on the risk, which can translate into minimal profits. As in the case with the Citadel Outlets, the banks can also be hesitant to approve a sale if indemnification is a factor. The benefit of a redevelopment agency is that the city takes the risk. Now, in addition to having a willing investor, the city can come in and help with offsite improvements.
What concerns Hamilton as redevelopment agencies begin the process of shutting down or being absorbed by their respective city are the potential layoffs and loss of business. He said without the help of an agency, cash-strapped cities will find it hard to pursue redevelopment projects on their own.
In a city with only 13,000 permanent residents and a daytime traffic of 50,000 people due to the stacks of businesses lining Telegraph Road, Commerce is now looking to close their affordable housing fund. The city is also faced with cutting back services in the community.
According to Hamilton, everything is up in the air.
“Developers and financers hate uncertainty,” Hamilton said. “It’s creating uncertainty, and that’s horrible. How can you move anything forward?”
Reach staff reporter Subrina Hudson here.