Redevelopment Agency Under Fire by City Council

Beset by a personal financial crisis, Los Angeles Mayor Tom Bradley is now facing a challenge to one of his most prized prerogatives--his control over the Community Redevelopment Agency and its billions of dollars in downtown property tax revenues.

Already under fire for allegedly ignoring social needs in favor of subsidizing developers, the CRA is now being accused of making major policy decisions without consulting the City Council, leading several council members to call for increased authority over the agency.

“The mayor and the CRA have tried to operate in a vacuum. They are cutting deals behind the council’s back,” said Councilman Zev Yaroslavsky, one of six members of a special council committee studying the agency.

Over the years, the CRA’s annual $500- million budget, which is independent of the city’s annual spending plan, has provided Bradley with the resources for one of his most significant accomplishments, rebuilding downtown Los Angeles.

If the mayor can maintain his grip on the agency, it will be the source of money for an ambitious program of housing and child care that could do a lot for Bradley’s image as a friend of the needy.

The CRA’s property tax revenue, the wellspring of its financial strength, is particularly precious because, so far, the money has been exempt from governmental spending restrictions set by the 1979 Gann initiative.

The CRA is coming under heavy fire from a combination of forces in addition to the City Council. Los Angeles County officials want a share of the agency’s tax revenue. Activists charge that the CRA has not done enough to house the poor. Developers say the agency is becoming a bureaucratic nightmare.

Now, City Council members and Legal Aid Society lawyers are accusing the CRA of negotiating a private deal with the county over the fate of a 2-million-square-foot real estate project that could have important environmental impact on the city’s downtown.

Lawyers for the Legal Aid Society revealed Monday that the CRA in 1986 agreed to let the county expand its proposed development by 200,000 square feet--the equivalent of a 10-story building--though the expansion of the project on 1st Street near the Civic Center was never approved by the City Council.

In exchange, the county agreed not to oppose the CRA’s Hollywood redevelopment. Moreover, the CRA agreed to pay $600,000 in “damages” to the county for every year the City Council opposed the deal, a way to ensure later that the council did not fight it.

“If the City Council deems in its infinite wisdom that it was a bad deal, the CRA has already agreed to pay $600,000 away to the county every year,” Yaroslavsky said. “A gun (has) been held to the head of the Planning Commission and City Council, and we are damned if we do and damned if we don’t.”

Mark Fabiani, a spokesman for the mayor, said two council members, Michael Woo and Gilbert Lindsay, were brought into the Hollywood discussions in 1985 because the plan affected their districts. They were fully supportive of the plan, Fabiani said, and “were free to discuss it with their colleagues.”

A spokesman for Lindsay confirmed that the councilman had been informed about the agreement and supported it. Woo said that he also was aware negotiations were occurring but that he was not aware of the $600,000 annual payment provision.

Lack of Interest Seen

Fabiani said the full council was not notified of the project because “it’s fair to say that most members of the council were not interested in CRA activities, except for the councilman of the district where the activity was taking place.”

That, however, has changed, as evidenced by the recent formation of the committee to study the CRA’s future.

Until recently, Yaroslavsky has been part of a minority of council members who thought that the council should take over the CRA.

Bradley has successfully opposed the idea by relying on a strong coalition of loyalists on the council who beat back efforts to reconstitute the CRA.

CRA officials who asked not to be named said they are concerned that the agency’s traditional role, as a catalyst for downtown redevelopment, could be in jeopardy if the mayor’s office remains preoccupied with the controversy surrounding Bradley’s financial dealings with firms doing business with the city.

The flap over the CRA’s dealings comes at a crucial time in the agency’s history. A lawsuit settled 10 years ago limits the agency’s power to spend its downtown property tax revenue to $750 million. If the terms of the settlement are not changed, the CRA will have spent itself out of business in downtown sometime during the next decade, and the tax revenue would thereafter go to the city, the county and the Los Angeles Unified School District.

If the CRA lost its spending authority downtown, the mayor would lose the financial leverage that laid the groundwork for the city’s changing skyline, as well as for Bradley’s downtown political base.

Last year, Bradley proposed a plan that would allow the CRA to raise its spending cap from $750 million to $5 billion. Bradley sweetened the proposal with a promise to devote more than half of the additional funds to low-income housing and to create a citywide program to provide after-school care for children of working parents. Bradley’s plan would leave an estimated $1 billion or more for downtown redevelopment.

For the plan to work, the county, which was a party to the 1979 court settlement, has to agree to the terms.

County officials have said they would agree to raising the CRA spending cap only if the county received the same amount of money, $1.8 billion, it would get if the cap were not lifted.

With the mayor concurring, the CRA balked at those terms and negotiations over the cap appeared to have stalled last year.

About a month ago, however, county officials began to accuse the CRA of holding its real estate projects downtown “hostage” until the county changed its position on the cap issue.

“We have been frustrated in our development objectives with the CRA because they are holding those properties hostage,” said Gerald Roos, the county’s senior administrative officer.

The controversy points up the CRA’s significant power over the fate of property in downtown Los Angeles and elsewhere in the city.

Source of Power

The CRA’s financial power derives from the hundreds of millions of dollars in property taxes flowing each year from real estate projects built under the agency’s guidance.

None of that money goes to the county and that represents a significant loss in annual revenue--amounting to about $200 million, Roos said.

Privately, the CRA contends that the county’s First Street property, once fully developed, will give the county as much or more in lease payments than it would receive in property taxes if the CRA ceased to exist. But CRA officials say they are not inclined to approve the county project on First Street until county officials agree to the CRA’s demands.

Members of the City Council object to the CRA’s negotiations with the county, arguing that the size of the county’s 2-million-square-foot project should be governed by such considerations as traffic congestion, jobs created, available housing and environmental effects--not simply by the county’s willingness to meet the CRA’s financial demands.

At the same time, county officials, under increasing financial pressures, say they have a right to develop their properties to the fullest extent possible for badly needed future revenues, especially since they lose millions now to redevelopment. In Hollywood, for example, the county stands to lose as much as $400 million over several years to the CRA.

Said Roos: “What people don’t seem to understand is, we had every right to negotiate for protections--in fact an obligation to secure these agreements from the CRA. . . . Property taxes are literally our life’s blood.”

He acknowledged that the $600,000-a-year payment revealed Monday “was unique” among the county’s past agreements with redevelopment agencies because it links the futures of two separate redevelopment areas--Hollywood and downtown.