CRA/LA Redevelopment Transition

1. CRA/LA
Redevelopment
Transition
Source: http://la.curbed.com/tags/budget
USC Sol Price School of Public Policy
PPD 619: Smart Growth & Urban Sprawl
Group 1: Joy-Alonica Bautista, Jeff Khau,
Marisol Maciel, & Thomas Wong

2. CRA/LA Redevelopment Transition
•••
Executive Summary
With the California Supreme Court decision to end Redevelopment recently, many local
governments, as well as the state, are scrambling through the fog to determine exactly how
the operations and obligations of the 400 Redevelopment agencies in the state will be
winding down. A question on the minds of many local officials should also be what tools
local governments can use to continue to spur local economic development in their
jurisdictions.
While Los Angeles is rather unique, given its size and other factors, the city can still take
lessons from other cities throughout the country to begin developing a game plan for
continuing its economic development efforts. We examine specific cities (Alhambra, CA;
Phoenix, AZ; Chicago, IL; and New York, NY) as models Los Angeles could look to moving
economic development functions from its Redevelopment Agency to the City.
Recommendations we suggest include:
Implement Limited Transition Ordinance to incorporate language that addresses
Municipal Code references related to redevelopment in offering a smoother
transition between CRA/LA and City of LA’s Planning Department
Create a streamlined and focused process for developers and businesses to do work
in the City and establish long term relationships with the City
Offer an array of commercial and tax incentives, tax rebates/credits in addition to
re-visiting traditional resources such as Community Development Block Grants,
Section 108 loans, tax- exempt bond financing, and New Market Tax Credits
Background Context
1

3. CRA/LA Redevelopment Transition
•••
Background Context
For decades, Redevelopment Agencies have been a primary tool for cities to spur
development and revitalization of neighborhoods and to promote economic development
in California. Redevelopment agencies basically worked by taking a portion of future
property tax revenue increases (also known as tax increment financing), identifying blight
in a project area, and redeveloping that area to finance and support current projects.
Governor Jerry Brown and the State Legislature, seeking to plug the state’s large structural
budget deficit, identified nearly $2 billion dollars in funds it could take away from local
redevelopment agencies. The state passed two bills, ABX1-26 and ABX1-27. The former
called for the elimination of the agencies and the latter allowed them to continue operating
if they paid back a requisite amount of their property tax revenue. After cities challenged
the legislation, the State Supreme Court ultimately decided that the first legislation could
stand, while the second could not. This past February, California’s 400 redevelopment
agencies were essentially eliminated.
The process of transitioning to a post-Redevelopment climate in California will continue for
the forseeable future, with much still to sort out. As the state and local governments
determine how to wind down the obligations and operations of redevelopment agencies,
communities have to begin to reimagine how they will spur economic development
without the tools they once had through Redevelopment. Some cities in California have
already begun to think proactively about what new tools they may be able to use. The City
of Los Angeles can and should learn from these other cities and also look to cities in other
states, which may provide good examples of non tax-increment financing options to
promote economic development.
Case Study for California Cities
The aftermath of the elimination of redevelopment left cities to develop a resolution to
either take over the obligations of redevelopment agencies through a “successor agency” or
Background Context
2

4. CRA/LA Redevelopment Transition
•••
to opt out and have another entity form a “local designated authority”. Most cities such as
San Francisco, San Diego, Ventura and Long Beach have decided to be the successor agency
while about a dozen have chosen to opt out: one of them being City of Los Angelesi. This
creates a unique challenge for City of Los Angeles because the redevelopment structure is a
separate entity from the City’s duties, which includes land use restrictions and zoning.
As cities across the state are contemplating how they can spur economic and real estate
development, City of Alhambra has been at the forefront of devising a plan that might be
helpful to City of Los Angeles.
Alhambra, California
Figure 1 City of Alhambra highlighted in red.
The City of Alhambra, as
a smaller charter law
city, has been able to
create a very
streamlined and flexible
structure to guide and
move development
projects forward. While
the city has separate
divisions for housing,
building, planning,
engineering/public
Source: http://en.wikipedia.org works, and even
economic development,
the City Manager takes a hands-on approach in moving projects through the requisite
processes. The City’s economic development efforts have been recognized by the California
Redevelopment Association and other regional organizations; including being named by
the LA County Economic Development Corporation as the 2010 “Most Business Friendly
City.”
Case Study for California Cities 3

5. CRA/LA Redevelopment Transition
•••
In the wake of Redevelopment’s demise, the city moved quickly to establish a means for
conducting economic development activities. The City Council approved and finalized an
economic development ordinance at its meeting on April 9, 2012. The ordinance
enumerates the right of the city to continue to use many of the economic development
powers and tools that it held through its Redevelopment Agency, including (but not limited
to):
• Purchase and dispose of property
• Acquire property by eminent domain, when necessary
• Provide for site preparation work, i.e., demolition, clearing and remediation
• Rent, manage, operate and repair city-owned property for economic development
• Rehabilitate, alter, construct or improve property
• Pursue public and private financial assistance
• Provide grants, loans, insurance payments, tax rebates or other assistance related to
commercial and industrial activities, as well as market-rate and affordable multi-
family housing
• Issue bonds or other forms of debt
Please see Figure 2 for an explanation of potential financing tools. Alhambra intends to
continue its aggressive economic development efforts with any and every tool available.
While some of the tools mentioned may ultimately hit hurdles (financially or legally), the
City is committed to creating one of the most business and economic development- friendly
environments in the state.
Currently the City is working on a 400,000 square foot retail center in which it may rebate
a combination of new sales and property tax along with a reduction in its planning and
inspection fees to underwrite the project’s proposed public parking structure. Also,
negotiations are set to begin on a new downtown mixed-use center which may include
140,000 square feet of retail space with 260 units of for-sale housing and public parking.
The city may elect to use CDBG Program Income from the sale of a former asset along with
a portion of new net assessed property tax generated from the project to underwrite this
proposal. Finally, Alhambra will be considering the construction of a 295-space downtown
parking structure and may elect to borrow from its reserves to underwrite its construction
cost.
Case Study for California Cities 4

6. CRA/LA Redevelopment Transition
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Figure 2 Alhambra's Economic Development Tools
Potential Tools for Financing Economic Development
long-term loans secured by some form of collateral and revenues generated from a project or paid from a
Section 108 loans
portion of the city’s annual CDBG allocation
ideal for infill development projects and tenant improvements under the category of job creation or
Annual CDBG allocation
elimination of blight
CDBG Program Income net proceeds from any project made possible through the use of CDBG funds
New project-generated sales tax
new net sales taxes from a development that can be rebated to offset project costs
rebates
New project-generated property tax
new net property taxes from a development that can be rebated to offset project costs
rebates
Short term lines of credit secured and repaid by new net project generated property or sales taxes
Federal/State Grants or Economic increases access to capital for small businesses–a key component of job creation, and helps provide
Development Initiatives additional security for a Section 108 loan
Loans from General Fund or
may require a loan agreement as well as an interest component to do some types of projects
Enterprise Reserve Funds
Sale of city assets set aside funds from sale of city assets
City fees that are discounted, waived
negotiated incentives to make it easier to attract new businesses and investments
or deferred
assistance to assess and remediate abandoned or underused industrial and commercial property (possible
Brownfields assistance
funding available via the EPA or Federal/State agencies)
bonds through IFDs can be used to help pay for infrastructure-type projects by diverting property tax
Infrastructure Financing Districts
revenues to pay debt service from other local governments, except schools (requires two-thirds voter
(IFDs)
approval)
bonds backed by revenue generated from a project funded with bond proceeds and repaid by earnings
Revenue bonds
from the operations of a revenue producing enterprise
tax-exempt bonds issued by chartered cities for economic development or multi-family housing. The bond
Conduit revenue bonds is payable from loan payments received from the non-governmental developer on the condition of a
public benefit, and presents no liability for the governmental entity
bonds used mainly to finance public works improvements and services or to pay for specific, limited
Community Facilities Districts improvements related to privately-owned or real property (requires two-thirds voter approval to establish
the parcel tax, i.e., Mello-Roos)
a charge assessed against real property whereby there is a benefit from a particular public works or public
Assessment Districts services project or activity undertaken by the city. The special weighted voter-approved assessment
becomes a part of the funding mechanism to defray the cost of the project
Case Study for California Cities 5

7. CRA/LA Redevelopment Transition
•••
Best Practices: How Other Jurisdictions Accomplish Economic
Development
Best practices are regarded as the most effective and efficient method to accomplish a
particular objective. In this report, we have researched elements of current best practices
in economic development by providing three case studies of cities/jurisdictions that have
been successful at inciting local economic development. The cities we have chosen are
ranked to be the top 6 cities in the nation for the largest population and are
demographically similar to City of Los Angeles. These cities include: Chicago, Phoenix, and
New York.
Chicago, Illinois
The City of Chicago collaborates with different actors to carry out development and
redevelopment projects. Two of these are the Community Development Commission (CDC)
and the Department of Housing and Economic Development (HED). The HED, is comprised
of the Commissioner’s Office and the Bureaus of Housing, Economic Development, and
Planning, and Zoning to bring such activities into fruitionii. Other partnerships of the HED
include elected officials, community and business groups, delegate agencies, and
community stakeholdersiii.
The Department of Housing and Economic Development is responsible for implementing
economic development projects by assisting current businesses grow and attracting new
entrepreneurship endeavors in the area. HED is also in charge of assistance programs
related to affordable housing, housing preservation, and community-based homebuyeriv. It
must be noted that the bulk of the work is done by one of the three Bureaus. In addition,
the department implements the city’s initiatives as they pertain to historic preservation,
land use planning, sustainability, tax increment financing (TIF), workforce solutions, and
zoningv.
Best Practices: How Other Jurisdictions Accomplish Economic Development 6

8. CRA/LA Redevelopment Transition
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Such undertakings are possible through different financing mechanisms that the City of
Chicago currently has access to. For instance, the City provides tax incentives for projects
that will generate revenue and/or jobs to the City. In return, the investor is given a “tax
break” for a certain period of time. Chicago also obtains funding by selling land that it
currently owns. Usually the land is sold to parties whose investment will benefit the
community—whether it be monetarily, jobs, goods and/or services. Other sources of
financing include:
Finance Source Description
Housing Revenue This is a bond that is given to finance multi-family housing projects or
Bond single-family home mortgages.
Low Income This is a federal tax credit that is offered by the Internal Revenue Service
Housing Tax (IRS) as an incentive to develop affordable housing.
Credit
Private Loans Such loans may be used to assist in the costs (or cover them) of the
construction of affordable housing.
Fee Waivers Currently the City of Chicago uses fee waivers to finance affordable housing
projects.
Chicago The CCLT was created in 2006 as a means to preserve the long-term
Community Land affordability of homes. The Land Trust operates throughout the city and is
Trust (CCLT) administered and staffed by the Chicago Department of Housing and
Economic Development. The homeowners enter a 99-year Deed Covenant
with CCLT.
Affordable The City of Chicago provides a zoning bonus for developers who build
Housing Zoning affordable housing OR contribute to the City’s Affordable Housing
Bonus Opportunity Fund. In exchange, the City allows for additional square
footage.
Multi-year MAUI furnishes interest-free forgivable loans to replace up to fifty percent
Affordability of a developer’s private first mortgage. The money saved is used to reduce
through Upfront the rents of very low-income tenants that earn no more than thirty percent of
Investment the area median income.
(MAUI)
Affordable Under this ordinance, residential development that obtain financial assistance
Requirements or involve city-owned land to have a certain percentage of units at affordable
Ordinance prices. The ordinance is applicable to developments that are 10 or more units
and it requires that the developers provide 10 percent of their units at
affordable prices. The units that are under this ordinance must remain
affordable over time.
Best Practices: How Other Jurisdictions Accomplish Economic Development 7

9. CRA/LA Redevelopment Transition
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Phoenix, Arizona
Figure 3 City of Phoenix's City Hall
Unlike those in California, Arizona
cities do not operate
redevelopment agencies. Rather,
each city is tasked to fund and
create redevelopment projects. The
City of Phoenix is the hub of several
interesting programs designed to
help incite local economic
Source: http://blog.ecycler.com
development. These local programs,
managed by the Community and Economic Development Department, connect business
owners with the entrepreneurial resources, such as labor, land-use permits, and funding. A
recent presentation from the department states their strategic visionvi:
To position Phoenix as a globally competitive and sustainable city by cultivating the
world’s best talent, leading businesses, technologies and outstanding quality of life for its
residents.
The implementation of the strategic vision is broken down into smaller objectives. These
objectives are to align initiatives around Phoenix’s core strengthsvii, to focus on targeted
markets with greatest opportunity for sustained growth, to expand the pipeline of business
formation, enhance the Phoenix business climate, and improve Phoenix’s competitive
position in the new economic environment. Other collaborative projects between the
department and small business owners include developing a pilot business loan program,
providing outreach and programs to small and mid-sized businesses. Potential
communities include the Arizona Commerce Authority, the Phoenix Area Chambers and the
Service Core of Retired Executives (SCORE).
The Office of Customer Advocacy (OCA) was created to provide development assistance
and case management for new businesses in the land development and building permit
Best Practices: How Other Jurisdictions Accomplish Economic Development 8

10. CRA/LA Redevelopment Transition
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processes. For many new business owners, the permit process can be lengthy and
discouraging, especially since there is no guidance along the way. The OCA hopes to change
this by walking the business owner through the process step by step to ensure the
application or permit request gets filled out completely and correctly. Adaptive reuse
permits are also available from this apartment. OCA's specializes in remodeling existing
commercial buildings, renovating historic buildings, converting residential structures to
business use, and revitalizing neighborhood retail centersviii.
Aside from the economic and community development department, the city council is also
taking action to boost economic activity. Within the first one hundred days of taking office,
Mayor Greg Stanton has “developed a partnership with Arizona State University and the
Mayo Clinic to create the Arizona Biomedical Corridor to create a new jobs and education
hub in northeast Phoenix near Desert Ridge”. Additionally, he has “pushed for a new
procurement policy that gives local businesses preference for city contracts under $50,000
to boost the small-business community and keep city dollars local”ix.
New York City, New York
New York City Economic Development Corporation (NYCEDC) provides the main engine for
economic development and growth within the City. NYCEDC creates affordable housing,
public parks and open space, retail development, and community and cultural centers by
leveraging partnerships between the public and private sectorsx. NYCEDC also manages
City properties and assets, which generate revenue and helps create jobs and new business
opportunitiesxi. With a mix of bond financing, new market tax credits, and incentives,
NYCEDC has been the leading economic development financing mechanism that helps
stabilize and expand the growth of NYC. Their variety in funding mechanisms from tax
abatements, incentives, and bond programs gives them more leverage to create public
private partnerships which in turn produce successful development projects. Listed below
are just a few successful programs they administer:
Best Practices: How Other Jurisdictions Accomplish Economic Development 9

11. CRA/LA Redevelopment Transition
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Exempt Facilities Bond Program: Private companies developing on public- owned
facilities near docks, wharves or solid waste recycling facilities can take advantage of triple
tax- exempt bonds to finance the construction and renovation of development projects.
These triple tax- exempt bonds include reduced interest rates, extended financing terms,
lower equity contributions, and the option to obtain construction and permanent financing
in a single loan.
New Market Tax Credit Program: The New Market Tax Credit Program (NMTC) allows
taxpaying investors to obtain credit against their federal income tax liability by
contributing to equitable investments in Community Development Entities (CDEs).
According to NYCEDC, “Substantially all of the qualified equity investment must in turn be
used by the CDE to provide investments to projects and businesses in low-income
communities”xii. Community Development Financial Institutions Fund administers the
program and ensures that credit total 39 percent of the original investment amount and is
claimed within the duration of seven yearsxiii.
Business/Commercial Tax Incentives: NYCEDC provides an array of tax incentives and
tax abatement options to stimulate business and commercial development. Commercial tax
incentives encourage companies to carry out large capital investments that result to
significant job creation and retention by providing sales and use tax exemptions, mortgage
recording tax waivers, and real estate exemptions.
The New York State Economic Development Council also plays a great role in driving
economic development within the various geographical areas in New York. The Council
offers a variety of economic incentives for corporations and businesses that are interested
in redeveloping New York such as Brownfield Clean Up Tax Credits, Excelsior Program that
promotes businesses in growth industries such as clean tech, information systems,
renewable energy and biotechnology, Industrial Development Agencies, Investment Tax
Credits, and Recharge New York Programxiv. Of the many programs they administer, IDA
program is more compatible to City of LA’s needs.
Best Practices: How Other Jurisdictions Accomplish Economic Development 10

12. CRA/LA Redevelopment Transition
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Industrial Development Agencies, similar to redevelopment agencies, are created “to
promote, develop, encourage and assist in the acquiring, constructing, reconstructing,
improving, maintaining, equipping and furnishing industrial, manufacturing, (civic
facilities), warehousing, commercial, research and recreation facilities”. IDA’s accomplish
their mission by issuing tax exempt and taxable bonds for projects, conveying real property
tax abatements through PILOT (payment in lieu of taxes) or through lease transactions,
abating sales taxes for construction materials, abating mortgage recording taxes, and
through eminent domain.
Recommendations
Based on our research findings, we recommend that the Department of City Planning of the
City of Los Angeles implement a limited transition ordinance in which it incorporates
language that addresses Municipal Code references to redevelopment and zoning code
references to allow for the transition of decision making authority from CRA/LA to the
Director of Planning and the Planning Commission. This implementation will allow for a
more consolidated effort for future development projects by eliminating duplicity within
zoning codes. We also suggest that it considers exploring alternative financing tools aside
from the traditional financing mechanisms. The City of Alhambra recently enacted an
economic development ordinance that gives the city the flexibility to pursue alternative
means to reactivate redevelopment and tools for this purpose. The NYCEDC of New York
City currently makes use of exempt facilities bond program, new market tax credit
program, and business/commercial tax incentives as funding mechanisms to stabilize and
expand the growth of the City. These are economic options that the Department of City
Planning might want to examine for its future redevelopment projects. In addition, we
recommend for the City to look into the re-structuring and streamlining processes that can
combine economic development and planning fields in one entity. The City of Chicago’s
Department of Housing and Economic Development (HED) current organizational
structure may serve as a model for the City of Los Angeles. At present, HED has a staff of
more than 220 people that work within the Commissioner’s Office and the bureaus of
Housing, Economic Development, and Planning and Zoning to carry out projects related to
Recommendations 11

13. CRA/LA Redevelopment Transition
•••
housing, economic development, planning, and zoning. Lastly, the City of Phoenix has
proven to be successful in its strategic vision approach. It has decided to make the permit
process less complex to affected parties by creating the OCA. The OCA was assigned the
responsibility of assisting business owners with the application or permit request. While
we realize that the City of Los Angeles is a large and dynamic city whose needs may require
additional choices, taking a closer look at these case studies, and the options they offer may
serve as a starting point to reforming the City’s economic development and planning
structures.
i http://www.pe.com/local-news/politics/politics-headlines-index/20120115-region-cities-naming-redevelopment-successors-but-
many-details-nebulous.ece
ii City of Chicago. “Our Structure.” City of Chicago. 2010-2012. Web. 11 Apr. 2012.
<http://www.cityofchicago.org/content/city/en/depts/dcd/auto_generated/dcd_our_structure.html>.
iii City of Chicago. “Department of Housing and Economic Development.” City of Chicago. 2010-2012. Web. 11 Apr. 2012. <
http://www.cityofchicago.org/content/city/en/depts/dcd.html>.
iv City of Chicago. “Department of Housing and Economic Development.” City of Chicago. 2010-2012. Web. 11 Apr. 2012. <
http://www.cityofchicago.org/content/city/en/depts/dcd.html>.
v City of Chicago. “Department of Housing and Economic Development.” City of Chicago. 2010-2012. Web. 11 Apr. 2012. <
http://www.cityofchicago.org/content/city/en/depts/dcd.html>.
vi http://phoenix.gov/webcms/groups/internet/@inter/@dept/@ced/documents/web_content/072436.pdf
vii PHOENIX’S CORE STRENGTHS: Visionary City Leadership; Welcoming, Diverse City/Outstanding Quality of Life; Top Ranked Higher
Education Institutions; Talented Labor Force/Strong Demographic Future; Strong Economic Pillars Across a Broad Spectrum of Sectors;
Large Base of Employers/Corporate and Regional Headquarters; Strong Entrepreneurial Spirit; Enduring Relationships with Private and
Nonprofit Sectors; Strategic Location in the Western United States; Modern Infrastructure and Multi-Modal; Transportation Systems;
Abundant Community, Recreational, Arts and Cultural Amenities; Top Tier Convention and Tourism Destination
viii http://phoenix.gov/development/aboutdsd/servicesandprograms/oca.html
ix http://www.azcentral.com/community/phoenix/articles/2012/04/07/20120407phoenix-mayor-stanton-highlights.html
x http://www.nycedc.com/service/financing-incentives. Web. 12 April. 2012.
xi http://www.nycedc.com/about-nycedc. Web. 12 April. 2012.
xii http://www.nycedc.com/service/financing-incentives. Web. 12 April. 2012.
xiii http://cdfifund.gov/what_we_do/programs_id.asp?programID=5. Web. 12 April. 2012.
xiv http://www.nysedc.org/index.php?option=com_content&view=section&layout=blog&id=9&Itemid=53. Web. 13 April. 2012.
Recommendations 12