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Consulting Firms' Key Clients Disappear with Death of Redevelopment

Though most cities maintained full-time redevelopment teams, not all the work was done in-house. That would be hard to do in a $5 billion annual industry, with countless moving parts in hundreds of agencies across the state. 

As with many public sector entities, redevelopment agencies retained consultants for a wide range of services and special projects and services. Consulting firms often to helped to devise plans, draw up deals for market rate development and affordable housing, and identify project areas in accord with redevelopment law.  

When Gov. Jerry Brown announced his intention to shut down redevelopment agencies early last year—and then when the California Supreme Court handed down a nightmare ruling for RDAs—consulting firms were as surprised as anyone else was.  

"Many assumed that ‘worst case' translated into ‘least likely,'" said John Oshimo, of RC Associates, of the Supreme Court's ruling. 

Whatever the aggregate benefit of the shutdown of redevelopment may be, the abrupt cessation of a six-decade-old industry has taken a tremendous human toll, not just among redevelopment staff but also among the dozens of consulting firms whose practices depended, in part and sometimes in whole, on contracts with redevelopment agencies. 

"Some of the consulting firms are going to shrink – of course they are!" said David Rosen, principal of David Paul Rosen & Associates. "You've easily got a couple of billion in cash flow that's gone."  

Rosen said that, because his is a national firm, it is large and diversified enough to weather the loss of redevelopment-related business. But others are not so secure. 

Oshimo, whose employs only five consultants, said that the disappearance of redevelopment came abruptly, even with projects underway. 

"(Dissolution) has been tremendous. It eliminated all the projects that we were scheduled for," said Oshimo. "We were in the middle of a few projects that got put on hold."

Oshimo said that he has not had to let any of his staff go. The same cannot be said for Kathleen Rosenow, principal of the Rosenow Spevacek Group, Inc. of Santa Ana. Rosenow said she has laid off roughly one-third of her staff in the past year.    

Rosenow said that most of their work was on a project-by-project basis. All projects that did not already have construction projects are unlikely to be approved as enforceable obligations by successor agencies' oversight boards. As such, any project that was still being evaluated by consultants is unlikely to make the cut. 

"How we have dealt with that is through layoffs and attrition," said Rosenow. 

The Feb. 1 deadline did not of course eliminate all redevelopment-related work in California. To the contrary, successor agencies are working as intensively as ever on their wind-down. But former redevelopment agency staff are clinging to their own jobs, and the budget for the wind-down does not necessarily enable successor agencies to call for consulting help, no matter how badly it may be needed. 

"There's a lot of trying to figure out how to administer a lot of paperwork," said Rosenow. 

Successor agencies are, however, seeking legal advice. 

Unlikely their consultant counterparts, lawyers who specialize in redevelopment law have found themselves with plenty of new business – at least those who have quickly developed expertise in the new world governed by Assembly Bill X1 26. 

"We're very busy right now and have been probably for the last year because of the threat of dissolution, the ups and downs of what bills would be passed, and trying to help agencies work through all the various issues during that time," said Iris Yang, an attorney with Best Best and Krieger. 

Short of earning legal degrees in a pinch, consulting firms are holding out for a new version of redevelopment to arise. By then, the decimation of city staffs may create a greater demand than ever for consulting services. May think that affordable housing is likely to be revived relatively soon, especially with a bill pending in Sacramento that would restore the equivalent of the 20% set-aside. 

"I think that everyone feels that at least the affordable housing or the set-aside funds will eventually come back," said Oshimo. 

Not everyone is so optimistic, however. 

"I don't really have a lot of hope for those companies," said Larry Kosmont, whose firm, The Kosmont Cos., performs a wide range of land-use consulting services. "They are going to have to retool dramatically. Many of these companies have been involved in the arcane business for a long time." 

Contacts: 

Larry Kosmont, The Kosmont Companies, 213.417.3300

John Oshimo, RC Associates Inc., 626.331.6373

David Rosen, David Paul Rosen & Assoc., 510.451.2552

Kathleen Rosenow, Rosenow Spevacek Group, Inc., 714.541.4585