Legislators in Sacramento are currently considering an assembly bill that, though it originated with the City of Los Angeles in mind, proposes some significant changes in California Redevelopment Law (CRL). AB 2531, sponsored by Felipe Fuentes (D-Los Angeles) is an important step forward for the state economy for a variety of reasons.
The bill's language would alter current law by allowing redevelopment agencies to focus their interest on both the physical removal of blight – through traditional brick-and-mortar redevelopment projects (already allowed in current redevelopment law) – and the more intangible economic development aspects of job creation and development. In other words, RDAs would be free not just to facilitate development but also to support businesses that would operate in redevelopment areas. Furthermore, RDAs could once again assist in economic development through the creation and facilitation of small business incubators.
This bill has received support from a broad range of interest groups, from the Los Angeles County Business Federation to the International Brotherhood of Electrical Workers. Its passage looks promising. However, opposing arguments should be properly addressed and placated.
The primary argument against AB 2531 is that of mission drift. Some bureaucrats believe that expanding the scope of RDAs beyond physical construction projects will amount to a fundamental change in the purpose of redevelopment law. But remember, RDAs were established to eliminate blight and all its effects. Some of the most apparent manifestations of blight are vacant, unused, or underutilized buildings. Neighborhoods with these types of characteristics often lack jobs or employment centers. Any economic development that improves these elements and fills these buildings also helps remove blight.
The second main concern about AB 2531 has been voiced by the Statewide Federation of Counties, who view this extended scope as a threat to county tax revenues. However, the California Legislature has deemed this a "nonfiscal" bill because it does not expand any agency's traditional fiscal toolbox (tax increment financing, debt extension, etc…). AB 2531 will simply broaden the scope of activities that RDAs can fund from their existing revenue sources – it would not increase those resources and it would not decrease counties' receipts.
Even if these explanations do not convince opponents of the bill, they should rest easy in knowing that AB 2531 has a built-in sunset clause. If the proposed amendments prove unsatisfactory to legislators and their constituents, the bill will repeal itself in 2018. Of course, Sacramento can always pass legislation to extend the bill if it is successful.
AB 2531 also includes a promising amendment for the City of Los Angeles. Currently, the Community Redevelopment Agency of Los Angeles (CRA/LA) is limited in its reach to redevelopment districts that are both non-contiguous – the city has over two dozen of them – and that of course do not encompass all areas that might be considered blighted or under-developed in the city. By contrast, most redevelopment authorities are part of the city government, and they can nimbly split their time between redevelopment areas and citywide projects (using tools other than those reserved for redevelopment areas). Because CRA/LA is an independent agency, it cannot focus any attention outside of project areas. The proposed amendments would allow CRA/LA, when directed by City Council, to apply for state or federal economic development grants and apply these monies to projects anywhere within city boundaries.
Obviously tax increments must and should remain within redevelopment project area boundaries, but that doesn't mean that the expertise of an organization like LA/CRA must as well. While AB 2531 is an attempt at fixing this acute problem in the City of Los Angeles, the bill will allow other RDAs across the state to focus their efforts on projects that may or may not need new construction. Currently, if Business Owner X is located in an economically disadvantaged redevelopment area and needs to purchase new equipment, a RDA cannot provide funds because X isn't proposing any new construction.
If AB 2531 passes, Business Owner X (along with owners A through Z) can turn to RDAs for a variety of project assistance, as long as it helps the economy through job creation and increased tax revenue. If the economy improves by 2018 (fingers crossed), and this expansion of an RDA's scope is no longer viewed as necessary, AB 2531 will fade into the sunset. Until then, given the current economic climate, legislators should be applauded for expanding these definitions.
CP&DR contributor Nat Gale is a planner in the Los Angeles Mayor's Office of Economic and Business Policy. The foregoing opinions are his alone.
