Tight Budget Impeding Redevelopment

By HOWARD FINE

Staff Reporter

Local redevelopment agencies are postponing projects as they scramble to deal with state budget cuts.

The building of new parks, museums, libraries, senior centers and other capital and infrastructure projects face delays of a year or more as local redevelopment agencies struggle to make millions of dollars in payments to the state as part of a budget deal reached with Gov. Arnold Schwarzenegger.

The agreement calls for redevelopment agencies to pay $250 million for the next two fiscal years into special county accounts earmarked for education. It is part of a larger agreement Schwarzenegger reached with local governments that totals $1.3 billion in cuts for each of the next two fiscal years. In exchange, the governor is supporting an initiative that bars any future state-ordered cuts in local government funds.

Redevelopment agencies are the only entities that must put up money as part of the deal; those payments to a special state education fund would range from $100,000 a year to $8.5 million, depending on the size of an agency’s redevelopment areas.

They come on top of two years of prior budget diversions that have already placed many redevelopment agencies under financial strain.

The deal, which has yet to win legislative approval, is under fire from Democratic state lawmakers who say that it does little to address longstanding inequities in local government finances. These legislators have proposed an alternative that would preserve the total level of spending on local governments but allow the state to reallocate cuts among different revenue streams.

But if the Schwarzenegger deal stands, it’s expected to hit local redevelopment agencies hard.

“We’re hearing that agencies are simply going to pull back on projects so that they can come up with the money to make these payments,” said John Shirey, executive director of the California Redevelopment Association. “It means less investment in underserved areas right at the time when we could use more investment.”

Delayed projects

When the budget deal was first announced, there was concern that many redevelopment agencies would have to seek money from the general funds of their parent cities or from special funds set aside for affordable housing.

As a result, Shirey said the state CRA was looking to set up a bonding authority that would issue loans to redevelopment agencies so that they could stretch out the payments and avoid having to go hat-in-hand to city councils.

But so far, that concern has yet to materialize in Los Angeles County, according to an informal survey of major redevelopment agencies.

As the area’s largest redevelopment body, the city of Los Angeles Community Redevelopment Agency stands to take the largest dollar hit from this agreement: about $8.5 million a year for the next two fiscal years.

The CRA’s chief financial officer, Randall Wilkins, said that $8.5 million would be spread among the agency’s 32 project areas, the two largest being Bunker Hill and Hollywood. How each project area would absorb the cut is expected to be determined by the end of the summer, he said.

Right behind the city of Los Angeles in terms of dollar hits is the City of Industry, which stands to lose $8 million a year for the next two fiscal years, starting July 1.

Other redevelopment agencies have chosen to postpone capital, cultural and infrastructure projects. The bread-and-butter commercial and residential projects would only be postponed or scaled back as a last resort.

In Long Beach, a number of street and park improvements have been left off next year’s redevelopment budget so that the agency can make its $2.5 million annual payment, according to Otis Ginoza, redevelopment administrator for the city of Long Beach.

“We looked at whether we should postpone commercial or residential projects but decided against that, since pushing those types of projects off a year or two would probably push the private developers away and kill the projects altogether,” Ginoza said.

While capital and infrastructure projects don’t depend on the whims of private sector developers, postponing them makes them more expensive.

In nearby Cerritos, construction of a museum and the expansion of a senior center and a gym have been put on hold so that the city can make its $2.6 million annual payment, according to City Manager Art Gallucci.

Initially, Gallucci had said the redevelopment agency was looking to tap into the city’s general fund. But in subsequent weeks, capital improvement projects were slowed down instead.

Meanwhile, in Burbank, which would pay $1.5 million a year into the state education fund under the agreement, officials say street improvement projects are likely to take the hardest hit.

“We have a lot of major thoroughfares that need upgrades, such as Burbank Boulevard, Magnolia Street, Victory Boulevard and South San Fernando Road. Some of these might be postponed,” said Sue Georgino, Burbank’s community development director.

Georgino said Burbank’s redevelopment agency has a considerable amount of bonded indebtedness, which further constrains the ability of the agency to absorb the cuts.

Paying Up – Agencies must now contribute to the state education fund.

Annual Payment

Agency (millions)

L.A. Community Redevelopment Agency $8.5

Industry Urban Development Agency 7.9

Santa Monica Redevelopment Agency 3

Long Beach Redevelopment Agency 2.6

Cerritos Redevelopment Agency 2.6

Culver City Redevelopment Agency 2.5

Glendale Redevelopment Agency 2.1

Source: California Redevelopment Association