Larry Kosmont is founder and CEO of Kosmont Companies, a Los Angeles-based real estate and economic development firm which has worked on numerous redevelopment projects. He’s also a former commissioner on the California Economic Development Commission.
Why is abolishing redevelopment agencies a bad idea?
Redevelopment is the most compelling and successful economic development tool for California, at least in local cities. The state has few economic development tools to leverage private investment with public investment. Other states are more attractive to businesses because they are less expensive and easier to deal with – no CEQA, less taxes, streamlines or shorter government processes for permits and certifications. Through Propositions 13, 62, 218 and the most recently approved Prop. 26, the citizens of our great state over a 30-year period have clipped the wings of their local elected representatives and state legislators by disallowing any tax increases without either two-thirds or 50.1 percent majority public vote, depending on the type of tax increase.
This means that California’s 495 or so cities, which for the most part are small to medium-sized service business with very demanding customers called voters, must seek new sources of revenue necessary to support their basic operations cost increases, which every business has, through real estate transactions. It’s the only consistent vehicle available. In many ways, RDAs are public agency real estate companies. with a public policy perspective, and as such they are the most potent tool for cities to implement projects that generate new jobs and taxes without having to go to a vote.
What is one key thing that most people don’t understand about RDAs?
Since 1993, redevelopment agencies have built or rehabilitated nearly 100,000 affordable housing units, which makes redevelopment the largest producer of affordable housing for a state where housing affordability has been a significant and stubborn issue.
RDAs are diverse. What are the key things that all RDAs have in common? What are key differentiators?
All redevelopment agencies use property tax increments to fund projects that are for infrastructure improvements, commercial and industrial projects that create jobs, as well as affordable housing projects. All RDAs must approve a redevelopment plan and project area map before they are eligible to receive tax increments.
Project areas rely on meeting a complex definition of blight and blight eradication to achieve project area eligibility. Redevelopment project areas are creatures of debt … in order to have available tax increments, they must borrow against tax increments, to be eligible to receive it.
Not all project areas use or rely on eminent domain for projects. Some project areas voluntarily relinquish eminent domain powers. Project areas all have different program priorities as stated in their locally adopted redevelopment plans, so it is not one-size-fits all, and no one can treat or brand all agencies at the same time. Certain agencies have been very effective and successful – Pasadena, Long Beach, Burbank, Cerritos, and many others.
Are there individual RDAs that abuse their power? If so, are there better ways to deal with them.
Some RDAs are negligent or simply not well-run. Others step over the line in their interpretations of the health and safety code, which is the state code that governs RDA activities. An oversight agency with authority to impose severe penalties could reconcile this behavior and bring errant RDAs into line.
What are the steps that would make getting rid of RDAs unnecessary?
One: Appoint a state oversight agency. If redevelopment abuse is found, an agency can ultimately be disbanded with steps – penalties – short of that in increments, such as loss of tax increment, loss of a project area, etc.
Two: Broaden the redevelopment blight definition to enable project areas to qualify for tax increment by adopting a comprehensive local sustainability charter – in essence, converting RDAs into “Green RDAs.” The state has no funding source or staff to implement AB 32 and SB 375. RDAs have trained staff and already know how to set up public/private transactions, which from this point on could be required as “green” or sustainable transactions in pursuit of the goals and objectives of AB 32 and SB 375. Also, expand housing implementation programs – this state will never have too much quality affordable housing!
Three: Set up a state-authorized, voter-approved “Office of Constituent Advocate” to keep a watchful eye on redevelopment for the taxpayers. The voters/citizens of Los Angeles just voted in charter amendment “I” – “DWP Ratepayer Advocate.” Since our citizens want and need jobs, and redevelopment supports over 300,000 jobs annually, including many construction jobs, these same taxpayers should be able to peer into redevelopment and keep it on track to deliver quality jobs and housing. Like my two kids, they are basically good, but much better with adult supervision.
Four: The rest of the measures necessary, from my perspective, consist of technical clean-ups that are important, but a bit too technical to list. Items one through three above should go a long way to repurposing redevelopment productively, much better than wholesale extermination on a rushed basis, as has been proposed.