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Wind-Down of Redevelopment to Require High 'Social IQ'

Josh Stephens on
Feb 23, 2012

LOS ANGELES -- For the wind-down of redevelopment to be anything short of a train wreck, successor agencies and oversight boards are going to need a keen understanding of real estate, public policy, economic development, and, of course, accounting. They're also going to need a lot of coffee and patience. But, according to Timothy McOsker, a member of the three-person board serving as successor agency for the Los Angeles Community Redevelopment Agency, the successful completion of the wind-down process is going to require something more subtle. 

At this Tuesday's UrbanScape conference, presented by UCLA's Ziman Center for Real Estate and UCLA Lewis Center, McOsker posited that ultimate agreement on crucial matters such as what to do with agencies' assets and how to approve enforceable obligation will be as much a matter of negotiation and people skills as they are of bean-counting. This was just one of countless insights posited by a panel charged with the unenviable task of explaining what the next year or so will bring for cities, RDA staff, and the nebula of professionals who used to work on redevelopment projects. McOsker noted that the Los Angeles City Council chose not to serve as successor agency because "presumably because they thought the job was impossible." Los Angeles' list of potential enforceable obligations amounts to a reported $1.8 billion. 

The challenge McOsker and his colleges around the state face is one of many reasons why, if nothing else, Gov. Jerry Brown's decision to kill of redevelopment in California has led to a profusion of conferences, workshops, discussions, and task forces. Rather than the standard affair in which panelists discuss faraway plans or rehash information that is already well known, yesterday's conference took place in front of a rapt audience. And why shouldn't they be rapt? 

Among the small sample of attendees with whom I chatted, there was a landscape architect who is now seeing projects dry up. An executive from one of Los Angeles' biggest affordable housing developers who now doesn't know where much of his funding is going to come from. There were consultants, developers, and public officials all of whom came for real information and usable insight into one of the swiftest changes in the history of California public policy. 

CP&DR publisher Bill Fulton led a panel exploring the current state of affairs: the organized chaos that is the wind-down process and the immediate future in which newly formed agencies and oversight committees will try to figure out which pieces of the RDA pie get sold off and which can be kept by cities that are now starving for ways to stimulate their economies. Keep in mind, it's a pretty big pie: at the time of its demise, redevelopment's tax increment accounted for a full 12% of the state's property tax revenue. No wonder Gov. Brown was so eager to get his hands on it.  

For Fulton's part, he presented himself as "the only mayor in California who supported the governor." Recently stepped down from his post as mayor of Ventura, Fulton felt that redevelopment needed reform and that gridlock in Sacramento was unlikely to loosen without radical action. None of his panelists necessarily disagreed: it seems, indeed, that the argument over the wisdom of the governor's plan is long gone. Now cities are too busy figuring out what to do with the wreckage of redevelopment. 

But it's not just cities, of course. In the coming weeks and months, county auditor-controllers will be inundated by RDAs' books. They will help confirm the share of tax increment that used to go to different entities and the share that will now flow back to those entites in the absence of RDA. oversight boards, which have yet to be formed, will get to wrangle over which projects get to live and which get to die. The negotiations will be intense between those who want not another dime of tax incremnt to go to local projects and those who believe that it would be a waste to let projects die on the vine. 

Then there's the Department of Finance.

If the death of redevelopment had played out as the Legislature intended -- i.e. if it had been a voluntary culling rather than a massacre -- all of this might work might be taken in stride. The Legislature reasonably expected that a few agenices here and there -- a handful per county -- might have folded rather than agree to the "voluntary" transfer payments to the state. Instead, Finance has 400 dead agencies on its hands, and county auditor-controllers have to deal with every agency in their respective counties. 

This is why McOsker was so adamant about the need for "social IQ." Many of the decisions that will be made in the coming months will not necessarily be the result of careful deliberation but rather will take place in frenzy. The Department of Finance likely will not care to appreciate the nuance of every question that arises, and, in many cases, it may tell oversight boards simply to make their own decisions. The ability for public officials to get along with each other may therefore determine the fate of what's left of redevelopment agencies. This is especially important for cities, which, as Fulton noted, are outnumbered, 2-5, on the oversight boards. 

Conversely, if Finance doesn't make big decisions, then what about the small decisions? McOsker noted that AB X1 26 is fuzzy on successor agencies and oversight boards' powers and obligations. He posited the "paper clip problem": if the legislation doesn't specifically authorize the purchase of paper clips, then what do successor agencies do when they need to stick two pieces of paper together? 

That question is especially pressing since most of them will have to put together far more than just two pieces of paper. 

As for all of those audience members looking for answers and, possibly, for business: they may have to keep waiting. Though all the panelists, including Renta Simril, of Jones Lang Lasalle, and Tony Salazar, of McCormack Barron Salazar, were optimistic about the prospects for a replacement to redevelopment, it may not happen soon.

As Fulton noted, it's going to be a lot harder for state to give up money that it now controls rather than to take funds away, as it did with the ERAF payments of the past decade. 

 

"I think the governor is waiting for the body to get colder," said Fulton. 

 

 

 

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