Hamstrung by a court ruling, Los Angeles redevelopment officials say they will increasingly rely on the private sector to complete improvements to the city’s downtown core.

The state Supreme Court refused last month to lift a 20-year-old, $750 million tax cap on the CRA’s Central Business District redevelopment area. That ruling has placed a number of projects in limbo including the conversion of abandoned office buildings to low-cost housing, the restoration of historic theaters along Broadway and the creation of a promenade near the Los Angeles Central Library.

Don Spivack, the CRA’s deputy administrator, said the best possibility is to find other sources of funding private industry investment, federal funds, state funds, public-private partnerships and local, non-CRA funds.

“What I see playing out is us trying to get a lot more aggressive in finding alternative funding sources to fund the collateral activities,” Spivack said.

City Councilwoman Rita Walters, whose district includes most of the Central Business District, agreed that it will now be on the shoulders of the private sector to spur redevelopment downtown.

“I think from this point on it’s really going to take a lot more private investment,” she said.

Downtown boosters say the improvements go hand-in-hand with such high-profile downtown projects as Disney Concert Hall, the Lakers-Kings sports arena and the new Catholic cathedral complex.

“I think the big problem will be that there will not be a public entity like the CRA, which has broad-based public support and accountability,” said Darryl Holter, chief administrative officer of The Shammas Group, which owns the Petroleum Building in the Central Business District.

“An agency like that won’t really be there to provide that kind of financial and strategic planning for the central district,” he said.

Last month, the state Supreme Court refused to hear an appeal by the CRA of a lower court decision maintaining a $750 million cap for the 1,549-acre Central Business District, which is generally bounded by the Hollywood (101) Freeway, the Harbor (110) Freeway, the Santa Monica (10) Freeway and Alameda Street.

When the redevelopment area was founded in 1975, the city agreed to end the project once it generated $750 million in property tax improvements, known as the increment. But city officials changed their mind when the cap was reached and wanted it raised to as much as $7.1 billion.

That brought a lawsuit by former City Councilman Ernani Bernardi, who generally opposes redevelopment because the increment takes money away from police and other services.

In the case of the downtown CBD, Bernardi maintained that the fight to lift the cap was one of bureaucratic self-preservation.

“It’s nothing more than a self-serving enterprise for the CRA bureaucracy paid for by taxpayers as a whole ,” Bernardi said. “And it’s about time it stops.”

CRA officials say they have no plans to appeal the ruling.

The CRA reached its $750 million spending limit in 1995, and the remaining tax revenue from the district must be used to pay outstanding debt, with a small amount about $700,000 used for financial administration.

But CRA administrator John Molloy said no projects will be discontinued midway, and that the agency for years has operated under the possibility that the spending cap would not be removed.

“We have been living with the cap as currently validated by the courts for many years now, so we’ve already structured our entire budget with the fact that we have a cap to live with downtown,” Molloy said. “If we had the cap lifted, there are many things we could do downtown.”

Carol Schatz, president and chief executive officer of the Central City Association, said she is relying primarily on the private sector to develop the projects the CRA would have done had the cap been lifted.

“Yes, housing has been a great focal point of the CRA and those dollars won’t be available in that area,” Schatz said, “but we’re hoping the market will take care of that.”

Schatz said the downtown business community like CRA officials has been aware for years that there was a good chance money from the agency would dry up.

That, she said, is why downtown business owners have recently turned to other sources for funding, such as the formation of a downtown business improvement district.

In the downtown BID, local property owners would agree to tax themselves in order to pay for area improvements, such as planting trees, installing street lights and re-paving sidewalks. The tax is based on how much street frontage the property owner has.

“The BID does tell you a lot about the conditions downtown,” Schatz said. “I’m happy to say that, in moving it forward, there really is a strong sense of optimism among the property owners about it.”

Not all downtown business owners are mourning the end of the CRA.

“The CRA has been a blessing and also has been a problem for L.A. in one sense,” said Tom Gilmore, president of the Hertz Group, which owns three buildings downtown. “As good as they were in funding projects, in a lot of ways it’s really got to be the building owners themselves. And the BID is a response to that. The CRA is something we don’t count on financially.”

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