California Redevelopment Agencies' Demise
Until this week, Los Angeles' leaders had been on a mission that, due to attendant PR problems, unfolded behind closed doors: preventing California Gov. Jerry Brown and the Legislature from moving billions of dollars in taxpayer money out of the hands of developers and into state coffers to balance the budget and help schools.
On Tuesday, that all went up in smoke. Democratic legislators — panicked to action by having their pay docked for failing to pass a balanced budget on time — embraced a no-new-taxes plan with Brown that siphons $1.7 billion from redevelopment agencies. Under two "trailer" bills accompanying the budget, a big chunk of that money is to come from L.A. And if Los Angeles City Hall doesn't like it, it can choose option B and shutter the city's Community Redevelopment Agency altogether.
Update: Jerry Brown is expected to sign the deal shortly. It represents a stunning fall for CRA/L.A., which will be forced to close its doors or relinquish $97 million in public funds in the 2011-12 fiscal year, then about $25 million annually after that. The funds would flow to schools, public safety and other pressing needs.
The city's CRA has in recent weeks peddled the notion of Los Angeles exceptionalism — the idea that it does such a good job fighting blight that Brown and Democratic legislative leaders Darrell Steinberg and John Pérez must spare L.A. even if other redevelopment agencies face demise.
Last week, in a Capitol room so packed with developers' lobbyists that onlookers suggested the fire marshal might be needed, the Legislature shocked almost everyone by approving Assembly Bill 26x to dismantle the state's local redevelopment agencies and use their billions of dollars for basic public services.
John Casey, chief of staff for state Sen. Alan Lowenthal, tells the Weekly, "When we're facing this kind of fiscal crisis, how do we best spend taxpayer money? Should we focus more on schooling and policing or should we be using taxpayer money on development?"
The Legislature approved a companion law, Assembly Bill 27x, allowing CRAs to survive — if they helped balance the budget by releasing $1.7 billion in taxes that they have legally diverted into their coffers.
Amidst all that, an effort to "carve out" Los Angeles as a special case backfired, leaving local land barons and the city's redevelopment chief, Christine Essel, haplessly scrambling to come up with another plan to protect private developers' hefty public subsidies in L.A.
A special clause in AB 27x — inserted by Assembly Speaker Pérez, Mayor Antonio Villaraigosa's first cousin — would have let L.A. blow past a $750 million spending cap that limits downtown redevelopment, enacted in 1977 to assure that City Hall didn't divert unseemly amounts of public subsidies into private downtown projects.
An adviser to Gov. Brown notes, "They tried to carve out one exception already, and the reaction was: What are you folks up to?"
The Los Angeles exceptionalism clause died a quick death last week after an outcry in the Capitol. CRA critic and attorney Christopher Sutton says, "Seems like [Speaker] Pérez got caught trying to exempt Los Angeles."
CRA/L.A. also floated the idea that its survival is critical to building affordable housing.
That didn't fly with Brown or the Legislature, either. As Becky Dennison of Los Angeles Community Action Network notes: "When you look at where ... the political powers want [the money] to go, it generally doesn't go to affordable housing. It's not by accident that Eli Broad got $50 million in that scramble to get CRA money."
As L.A. Weekly reported on Jan. 27 ("Jerry Brown Redevelopment Alert: Wealthy Eli Broad Gets $52 Million for a Garage; the Entirety of South L.A. Gets $32 Million"), a CRA list of projects earmarked $52 million for a parking lot next to a museum that billionaire Broad is erecting for his private art collection near Frank Gehry's Disney Hall in downtown's Civic Center — an area without blight.
In February, Essel's chief deputy, Jim Dantona, could offer only a vague concept for fighting blight in South L.A., telling one newspaper that the CRA/L.A. was "looking at making the South Los Angeles area more efficient in its ability to accumulate funds and create more catalytic projects."
Asked a few days ago what progress CRA/L.A. has made since then, Essel's aide David Bloom blamed Gov. Brown for disrupting its focus.
A lot of people are cheering the prospect of CRA/L.A.'s destruction. But inside City Hall, elected officials — many of whom take money from developers — regard it as something akin to losing a rich uncle. Los Angeles city leaders have made it clear that they don't want developer subsidies shifted to support schools or other essential needs.
Arrogance may have hurt CRA/L.A.'s cause as much as the state budget squeeze. Essel, even amidst heightened scrutiny, recently hired as her assistant Ackley Padilla, younger brother of state Sen. Alex Padilla. She was immediately assailed for nepotism.
And last year, CRA/L.A. attempted via Assembly Bill 2531 to radically expand California's definition of blight to include sturdy neighborhoods where diabetes, weight problems or lung ailments are at higher levels.
AB 2531 was ghostwritten by CRA/L.A., introduced by state Assemblyman Felipe Fuentes and vetoed by then-governor Arnold Schwarzenegger.
Had that strange new definition of blight survived, CRA/L.A. would have gained far greater reach into city neighborhoods than it has today.
Instead, it's now scrambling to survive. Critics argue that redevelopment agencies spent billions but never bothered to develop a serious tracking method to show whether they create net jobs — or merely move jobs around.
The chief of the nonpartisan state Legislative Analyst's Office, Mac Taylor, has found there's "no reliable evidence that redevelopment agencies improve overall economic development in California."
Commenting on Taylor's findings, state Sen. Rod Wright, a CRA proponent, a few days ago sputtered: "He's an idiot!"
Wright, who has accepted $42,200 in campaign funds from developers and real estate interests, says CRAs "probably produce 30 to 40 percent of the low- to moderate-income housing."
But Catherine Rodman, supervising attorney for Affordable Housing Advocates in San Diego, says redevelopment subsidies feed "speculation," driving up land and housing costs.
If CRAs are suddenly wiped out, Rodman says, "Redevelopment will have been very lopsided, tearing down a tremendous amount of housing and replacing it with city halls, ballparks and higher-end housing."
As the Weekly reported in "L.A.'s Hidden Housing Disaster," the city suffered a net loss of 13,713 rent-controlled units from 2001 to 2007, a boom time when CRA/L.A. had its best chance to churn out affordable units.
Sutton, the CRA critic and attorney, says: "What we're doing with redevelopment is destroying pillars of society to subsidize rich people — this whole game of taking money away from basic services and things we depend on for civilized society: schools, police, fire, health."
He points to three billionaires who, before this week's budget deal in Sacramento, attracted millions in public subsidies from redevelopment agencies.
"How much is Glendale going to give [developer Rick] Caruso?" Sutton asks. "How much are we going to give [AEG owner Philip] Anschutz? Fifty-two mil to Eli Broad could have paid for 1,000 teachers. We subsidize billionaires instead of schoolchildren."
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