The CRA: Powerful, Unexamined Agency

When my street needs new lights or new sewers, my neighbors and I are each assessed to pay for them. So are most other homeowners and businesses in Los Angeles. After all, when people live in buildings or run businesses in them they use the sidewalks, street lights, sewers andso forth. So, the thinking goes, they should pay for them.

But not everyone pays. According to internal talk that we have heard from within the local government circles, there could be multimillion-dollar proposals that allow free parking and other improvements to established downtown big businesses that are clearly no longer in need of such government incentives to locate or stay in the central city.

Spending like this is hard to believe in these days of large government deficits and fiscal crises. However, this giveaway is being pushed through by the Community Redevelopment Agency with less public scrutiny than usually accompanies the placing of stop signs. If the agency gets its way, and it usually does, the tax giveaway will happen.

Just where is this money coming from? It is the result of a process called “tax-increment financing.” In 1977 virtually all of downtown Los Angeles was declared “blighted” by the CRA and designated a redevelopment project. As a result, since 1977 the city and county governments get no more taxes from downtown properties than they got in that year. But downtown property owners continue to pay taxes at the same rate as everyone else. The difference between the 1977 revenues and the present amount goes directly to the CRA to spend as it sees fit. This additional money is called “tax increment” by the agency.

Los Angeles City Councilman Ernani Bernardi challenged this process in a lawsuit against the CRA. It was settled with a promise from the agency that it would take no more than $750 million in tax increment from the downtown redevelopment project. After this “cap” was reached, taxes would be returned to the city and county. In 1977 the cap seemed light years away.

Since then the downtown property owners have seen their property values increase astronomically, fueled by the tax-increment revenues. Finally, this year the redevelopment agency is reaching its cap. The process that was begun in 1977 has succeeded; the tax base has been reestablished. But the agency is not satisfied. It predicts that it could raise an additional $4.25 billion in tax increment over the next 20 years. The CRA does not want to return this tax money to the city and county, where it could be used to curtail drastic funding shortfalls in emergency health-care, mental-health, general-relief and other basic human services. Instead, the agency wants to eliminate the cap so that it can spend the money according to its whim.

Mayor Tom Bradley, for his part, has jumped halfway into the fray. He has told the agency that if the cap is lifted at least half the money must be used for low- and moderate-income housing and after-school day-care programs. But he has left the agency in charge of building the housing--the same agency that for the past 15 years has terrorized low-income communities from Bunker Hill to the Convention Center neighborhoods as a destroyer of its housing. Of course, in return for agreeing to the mayor’s proposal the CRA gets the other $2 billion to spend on its “projects.”

While the city and the county scrape for funds to provide basic human services, it is business as usual at the redevelopment agency. While the county has been debating the closing of essential mental-health facilities, the CRA authorized a $1.5-million loan to the financially troubled Stock Exchange nightclub on Spring Street. While the homeless sleep on city streets, the agency, with the approval of the City Council, gave another $1 million to the glitzy Bunker Hill-area YMCA in order to keep the area surrounding it open for public use. At the same time that the California Medical Center is struggling to keep its emergency-room doors open, the agency is helping the $6.3-million medical-center office building with tax-exempt bond financing.

Tax money is public money, to be spent for the public good. Scarce city and county tax money is spent only after extensive hearings and debate. The golden eggs of the CRA are given away by unelected agency officials after meetings attended only by knowledgeable insiders.

The City Council could decide that this tax-increment money should not go to the CRA at all. Other cities have tried innovative approaches like public-private housing partnerships designed specifically to create low-income housing. The city and the county both desperately need tax-increment funds to provide emergency health care, subsistence for the homeless, mental-health facilities and other basic human services. If the tax money was returned to the county and the city, guarantees could be obtained from these government bodies so that the money would be targeted for these services. This is our tax money that is being spent. Isn’t it time for an open public process so that we can decide where our money goes?