Santa Monica Spends Earthquake Plum on Ritzy Projects

Santa Monica Mayor Richard Bloom at Palisades Park

One month before California Gov. Jerry Brown signed a law abolishing the state's nearly 400 redevelopment agencies to use their public money for cash-strapped schools, social services and other obligations, the Santa Monica City Council went on a $147 million spending spree.

By the time the May 24, 2011, council meeting was gaveled to a close, the city, dubbed "Beverly Hills by the Sea" by some, had locked in nearly $100 million for new capital projects — a Palisades Garden Walk park, a library on Pico Boulevard, a downtown fire station, an "esplanade" at the proposed Expo Light Rail station downtown, new affordable housing and improvements for the Santa Monica Pier.

Still there was $46.8 million left before the state grabbed the cash. The Santa Monica City Council spent that money two days later, with what Councilman Bobby Shriver would call "intensity' and "fear" — to renovate the Santa Monica Civic Auditorium.

Shriver described the bill as "fantastic," "spectacular" and "dynastic" and criticized the money spent on the auditorium as "extravagant." "This isn't exactly what redevelopment was intended for," he said.

Councilman Bob Holbrook said, "It's an enormous amount of money. We could build a public building or a museum or something when you start talking about $48 million."

The big spending era ended on Dec. 29. That day, the California Supreme Court upheld Brown's move to dissolve redevelopment agencies (RDAs) and use their billions of dollars in tax money to help bridge California's $9.2 billion deficit in 2012-2013.

By Feb. 1, RDAs statewide had been dissolved and replaced with successor agencies that will determine which redevelopment projects could legally be completed — in essence, how much tax money each city could keep from the governor. This sent cities scrambling to explain their great needs to the Brown administration.

But perhaps no city has more explaining to do than Santa Monica.

Santa Monica set up a redevelopment agency weeks after the 1994 Northridge earthquake rocked the beachside city and left more than 500 buildings with mild to severe damage. Within two years, the vast majority of vacant buildings had been repaired or replaced with private, federal, state and local funds. Yet Santa Monica continued to divert to its RDA tens of millions of dollars a year in property taxes that normally would have flowed to the state general fund for schools, colleges and social services. The City Council has used the money almost entirely to bankroll projects having nothing to do the earthquake.

Last year's take alone was $74 million. These property taxes flow from an "earthquake zone" encompassing most of the city, from Pico Boulevard to Montana Avenue and from the ocean to 26th Street.

In 1995, the legislature realized that Santa Monica's generous definition of earthquake redevelopment could be copied by other cities. So lawmakers restricted such funds solely to "acquiring, demolishing, removing, relocating, repairing, restoring, rehabilitating or replacing" damaged structures.

Meanwhile, the Santa Monica City Council and Mayor Richard Bloom have all but ignored two potential time bombs — pre-1970s multistory concrete buildings with insufficient rebar, known to engineers as "non–ductile concrete" structures; and buildings constructed between 1964 and 1994 with "welded-steel moment-frames," which were believed to be sturdy until the '94 Northridge and '95 Kobe, Japan, quakes.

As L.A. Weekly reported in November ("The First 15 Minutes After the Big One: Who Dies in Los Angeles, and Why?"), engineers generally don't know which buildings are "WSMF," or welded-steel moment-frame construction. A fairly limited survey, funded by the state, found 1,317 such buildings within the city of L.A. alone.

Property values have skyrocketed inside Santa Monica's huge "earthquake zone," with the extra taxes generated now far exceeding property taxes rolling in from homes, businesses, apartments and commercial developments outside Santa Monica's "earthquake zone."

That extra revenue — all property taxes generated above the pre-RDA 1994 levels — kept flowing to the city's earthquake redevelopment agency.

Until Jerry Brown came along, Santa Monica officials were projecting that as much as $5.2 billion would flow into their Earthquake Recovery Redevelopment Agency by 2043.

Bloom and other Santa Monica officials argue that the economic stimulus and jobs spurred by redevelopment projects will help Brown more than pumping those property tax dollars into state coffers.

Bloom notes the city recently provided $56 million for athletic facilities at Santa Monica High School. "The state is not in the position to do that," boasts Bloom, who is running for state Assembly. Per capita, he says, "Santa Monica is giving more to the local schools than Sacramento ever will."

That Santa Monica's spending had nothing to do with earthquakes became clear in 2000 with the City Council's first big-ticket expenditure — its $53 million purchase of 13 acres of prime real estate on Ocean Boulevard from RAND Corporation. Last month, city officials and megadeveloper Related California broke ground on a $350 million, 3.7-acre complex of luxury condos and affordable rentals.

Santa Monica played a cat-and-mouse game with Sacramento, which began eyeing the city's unusually rich earthquake-redevelopment windfall. In 2003, Santa Monica leaders sold six downtown public parking structures and shifted several other big projects to the earthquake redevelopment agency. It was an aggressive maneuver in response to a plan by Gov. Gray Davis to stop redevelopment agencies from incurring further debt.

The city's move locked up $100 million, which Santa Monica later used to rehab the six city parking structures; assist in building a new main library and new Civic Center parking structure; and shore up the Palisades Park bluffs.

Despite what Gov. Brown wants, Santa Monica has one more chance to keep its RDA riches. Just like Los Angeles and other cities, by March 1 the city had to submit to the state a list of its former RDA's "enforceable obligations payment schedules" — redevelopment projects that, if not honored, would create legal ramifications.

The City Council slashed about half of the $267.7 million it had earlier tried to protect from Brown. City leaders pulled from the list the plush Colorado Esplanade project idea, among others.

"We're only putting things on the schedule that we're confident we can defend," said Nia Tang, of the Santa Monica Housing and Economic Development Department.

But it's not at all clear what constitutes a defensible financial "obligation."

When asked, Kathy Fairbanks, a partner with Sacramento-based public affairs firm Bicker, Castillo & Fairbanks, responded, "That is a very big problem."

Jim Kennedy, president of the California Redevelopment Association, agreed, saying it involves "a lot of gray area." Agreeing on the definition of a financial commitment "depends on who you talk to" and which projects municipalities will "go to the mat for," he says.

In Santa Monica, deciding which developments meet the definition is up to an oversight committee made up of seven political appointees chosen by Mayor Bloom, the Los Angeles County Board of Supervisors, special districts in the former RDA, the L.A. County school superintendent and the Santa Monica Community College chancellor. Final say rests with the California Department of Finance.

If Jerry Brown is banking on Santa Monica to pump tens or hundreds of millions of dollars generated by its redevelopment zone into the general fund for schools and social programs, he's likely to be disappointed. If the list of projects Santa Monica wants to complete is OK'd, "not only will there not be enough, there will be no residual," says Arlene Barrera, chief of L.A. County's Auditor-Controller's property tax division.

It could be years before Santa Monica's former earthquake redevelopment agency starts putting money back into county coffers, finally freeing up its public funds for the cash-strapped state, public schools and social services.

Jason Islas contributed to this report.

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