Money for Housing Was Put Away in O.C., State Reports

At a time when affordable housing was as scarce in Orange County as congestion-free days on the Santa Ana Freeway, local governments had stashed away almost $33 million that was supposed to be spent on housing, the state says.

The money was in the coffers of some of the county’s 17 redevelopment agencies in June, 1988, according to a report by the state Department of Housing and Community Development. The state report shows that individual funds ranged at the end of the 1987-88 fiscal year from $59,569 in Anaheim to $14 million in Brea.

State law allows local redevelopment agencies to retain all property tax revenue derived from increased property values within a redevelopment area. Since 1976, redevelopment agencies, which are controlled by city councils and county boards of supervisors, have been required to set aside 20% of that money for housing.

But some redevelopment agencies have instead stashed it away, at times protesting that it is not enough money to make a dent in the housing problem. While redevelopment agencies are required to report to the state Department of Housing and Community Development about how they are using their housing set-aside funds, that agency is powerless to enforce redevelopment law.

Other redevelopment agencies, including Anaheim and Fullerton, have not designated any money for low-cost housing from tax revenues raised in some of the county’s oldest and richest redevelopment areas. The state law allowed them not to bank money for housing if they could show that when the law was enacted in 1976, they already had committed all redevelopment revenue in those areas to other projects.

But new state legislation soon may prod the more reluctant redevelopment agencies into building low-cost housing. The law requires agencies that have accumulated more than $500,000 in housing “set-aside” funds to adopt a plan to spend the money within five years or risk forfeiting it to a local housing authority.

New legislation also requires cities with older redevelopment areas that have not set aside housing money to begin making an accounting of 20% of their tax revenue as a housing IOU that they will have to pay in the future. The cities may have to make an accounting as far back as 1985, according to some interpretations of the law.

Some Agencies Act

The new state mandates have already prompted some county redevelopment agencies into action.

May Hui, Buena Park’s economic development manager, said the new spend-it-or-lose-it legislation provides incentive for the city to adopt a housing strategy to spend $1.2 million that it had accumulated for low-cost housing. Previously, she said, the Buena Park redevelopment agency had other higher priorities, chiefly a face-lift of the city’s downtown.

Lisa Stipkovich, Anaheim’s housing director, said that under the new redevelopment legislation, Anaheim’s low-cost housing debt will grow by about $2.5 million a year. She said she will recommend that the city start paying for some low-cost housing, which she argues can be done without delaying other projects.

Santa Ana and other cities are spending most of the redevelopment revenue targeted for housing on rehabilitation of existing units, rather than for new construction. One reason is to avoid displacing low-income families. Another is that new construction takes a lot more money and is far more politically sensitive.

Housing advocacy groups such as the Western Center on Law and Poverty in Los Angeles and local legal-aid groups have filed lawsuits against some cities in other counties to stop redevelopment agencies from using housing money for public works projects. They have also lobbied for legislation to spell out more specifically how money set aside for housing can be used.

Some Re-Evaluated

As a result, some cities have re-evaluated their housing priorities.

Among them is Brea. In the last three years, Brea spent $11 million from money set aside for low-cost housing, paying to repair downtown streets, sewers and water lines. Before doing so, the city got an opinion from Orange County Superior Court affirming the legality of the project.

But Brea City Atty. James L. Markman said that under the latest revision of the state redevelopment law, “we couldn’t do it again.”