City of Industry Seeks Redevelopment Benefits : Opponents Call Funds for ‘Blighted’ Area a Tax Grab

On one side of a broad San Gabriel Valley thoroughfare, a fleet of earth movers works the soil, preparing for construction of a new corporate headquarters. On the other side, a large business park is quickly taking shape.

To the City of Industry, this rapidly developing area is an example of urban blight.

As such, the city argues, the 95-acre construction area, along with a separate, undeveloped 600-acre ridge of hills along the Pomona Freeway, should qualify for redevelopment benefits under state law.

However, critics say that the proposed redevelopment zone, which could divert millions of dollars from schools and government agencies, is little more than a tax grab--the very kind of activity by redevelopment agencies that recent state laws were enacted to prevent.

“The proposed redevelopment project is clearly illegal. Under no stretch of the imagination could you say the area is blighted under state law,” attorney Murray Kane, counsel for the Los Angeles Community Redevelopment Agency, said recently.

Calling the proposal “outrageous,” Kane said that it could undercut legislative support for legitimate redevelopment projects, and that he plans to oppose it on behalf of several county taxpayers at a Feb. 25 Industry City Council hearing.

The California Redevelopment Law was enacted 34 years ago to help aging cities rebuild slum areas, not to provide financing for prosperous, expanding cities such as Industry, Kane said. Once parcels are within a designated renewal area, property taxes on the value of all new construction go to the redevelopment agency.

Industry, a 14-mile-long business strip with only 700 residents, has been built primarily through the efforts of its redevelopment agency. Nearly 80% of the city is already within its three redevelopment areas. And the new zone would put another 696 acres, 9% of the city total, within the jurisdiction of the redevelopment agency.

Most of Industry and parts of several other cities were vacant lands, not slums, when included in redevelopment areas in the 1970s. In an effort to close the loophole that allowed cities to include undeveloped land in the zones, the Legislature in 1984 tightened the legal definition of a project area, generally requiring that new redevelopment zones be 80% urban.

In documents filed with the city clerk, Industry officials attempt to justify the new zone, technically an addition to an existing project area, by saying it is necessary because the property is an economic blight on the city that cannot be eliminated without the financial tools of redevelopment.

The grassy hillside is legally blighted because the redevelopment agency has built up debts of $40.3 million in buying it in 1983 and financing it since then, the documents say. To pay off the debt, the agency needs to develop the 600 acres as an industrial and commercial park, they say.

Explaining the alleged blight of the 96-acre parcel, 85% of which is now being developed, City Atty. Graham Ritchie said the new construction would not have taken place if the redevelopment agency had not widened a main boulevard and promised other public improvements.

The term blight has not been precisely defined in law, and its definition has been the subject of numerous lawsuits.

However, the law says a blighted area must be a “serious physical, social or economic burden on the community which cannot reasonably be expected to be reversed or alleviated by private enterprise acting alone.” Once that is established, the law requires that at least one of several other tests be met.

Authorized Lawsuit

Critics--including Los Angeles County officials and two school districts--say in a November report and in other documents that they see no legal justification for the zone. The county Board of Supervisors and the Walnut Valley school board have authorized lawsuits to block it, officials said.

But county officials now say it is unlikely that they will sue Industry, since the city has agreed during negotiations to pass along the 70-cent share of each general property tax dollar that several county taxing entities stand to lose. A special payment to the county Fire Department would also be provided, they said.

Walnut Valley officials also say they hope to negotiate an agreement with Industry even though no bargaining sessions have been held so far. And Pomona Unified School District has been negotiating with the city.

City Stands to Gain

Even if settlements are reached with all three, Industry’s redevelopment agency stands to gain by forming the new zone, Ritchie said.

He said, for example, that the agency may decide to pass along a portion of the schools’ 20% tax share from new construction, but not all of it.

Also, the agency would receive revenues that would have gone to the Mt. San Antonio Community College District, which gets about three cents of each general tax dollar, and money that new construction would have generated for a dozen other small tax districts that provide lighting, water, mosquito abatement, school and social services to the area.

Taxpayers statewide could be helping pay for the new zone, because any operating revenues lost by the schools must be made up by the state general fund, said Peter Detwiler, analyst for the Local Government Committee of the State Senate.

Highly Critical Documents

“The state is a backstop for the schools,” Detwiler said. “That means the state is directly subsidizing local redevelopment agencies. . . . The state general fund pays a substantial portion of redevelopment costs.”

Because of negotiations going on with Industry, county and school representatives said in recent interviews that they were hesitant to comment on the proposed zone. But in documents submitted in opposition to it, they were highly critical.

“There is no justification in the (law) for the adoption of this plan,” Principal Deputy County Counsel Paula A. Snyder wrote in a letter to the city last summer. It is “inconceivable” that the new zone meets the 80% urbanization requirement passed in 1984, she said.

Donald M. Wickert, a consultant for the Walnut Valley district, concluded last fall that because so much of the zone is rural, “it is most obvious that the area does not qualify as blighted. . . .

“For the agency to declare the area blighted may be a perversion of California’s redevelopment laws,” he wrote in a detailed analysis.

Construction Under Way

In addition, Walnut Valley schools Supt. David L. Brown said in an interview the fact that construction is under way within the 96-acre parcel seems to belie redevelopment agency assertions that the property probably could not be developed for years except as part of a redevelopment zone.

That is hard to believe “with the heavy equipment rolling out there,” Brown said.

Of the construction activity already going on, county counsel Snyder remarked this week: “It’s amazing. I don’t know how they can reconcile that” with claims of blight.

As members of the legally required Fiscal Review Committee, the Walnut Valley district has joined the Pomona Unified School District and the county in formally challenging the new zone. The Mt. San Antonio district, also a member of the review committee, has taken no position, a spokesman said.

Lose $10 Million a Year

The county has stated that the taxing entities could lose up to $10 million a year, or a total of $263 million, over the 45-year life of the zone.

Since passage of tax-cutting Proposition 13 in 1978, many counties and school districts have routinely opposed new city redevelopment proposals, county and state officials said. Agreements are often reached where the agencies pass along all or part of the tax on new construction to the other agencies, they said.

Nonetheless, in Los Angeles County, $261 million in property taxes, 10% of the total, was diverted to 60 redevelopment agencies in 1986-87, the county auditor reports. About $29 million went to Industry’s agency, ranking it third in the state behind only the cities of Los Angeles and San Jose, state and county analysts said.

‘Economic Dislocation’

City Atty. Ritchie and John Radecki Jr., acting executive director of the city Urban-Development Agency, the city’s redevelopment arm, declined to discuss the blight issue in detail.

However, in documents supporting its plan, the redevelopment agency says the 696 acres, 600 of which are owned by the agency, are “characterized by properties which suffer from economic dislocation and disuse,” a situation that cannot be corrected without redevelopment activity.

Radecki acknowledged, however, that four new warehouses with about 730,000 square feet are nearly completed on 40 acres of the 96-acre parcel. The warehouses represent about one-fourth of a new 189-acre, $138-million business park being developed in that area of the city.

On another 42 of the 96 acres, a food-service company is constructing its regional headquarters. The headquarters will cost $23 million, and a second phase that is nearly as large is also planned, he said.