Torrance May Borrow to Complete Renewal Project : Redevelopment: Money budgeted to revitalize blighted industrial area is spent before the work is completed.

Seven years into a project to rehabilitate the dilapidated industrial east side of Torrance--and with only half of the blighted area improved--the city’s Redevelopment Agency has run out of money to complete the work.

The city’s 1983 plan for improving 292 acres near the Old Downtown underestimated the cost of acquiring property, clearing the earth of toxic waste and moving heavy industry out to make way for offices and research centers, city officials said. In order to complete the project, city planners have recommended that Torrance borrow more money--loans they say can be repaid with the increased sales and property taxes new businesses will bring.

But there is at least one hitch in the city’s plan to sustain the influx of clean, high-tech businesses: Los Angeles County officials say they are entitled to a greater share of the property taxes generated by the improvements. And in a vote earlier this month, the Los Angeles County Board of Supervisors pledged to sue Torrance to get the larger share, if a compromise can’t be reached on how to divide the increased revenues.

Torrance’s leaders said the redevelopment of its east side could be crippled if the county insists on more of the tax pie.

“The project was a very bold step on the part of the city and we are hoping for cooperation from the county,” said Torrance Mayor Katy Geissert. “If it weren’t for the project, we would have vacant, idle land and the county would have very little in the way of tax money” from the area.

But county officials say the city has already benefited from a sweet property tax deal and now should give the county more money to sustain such troubled countywide services as health care, relief for the poor and child foster care.

When the redevelopment plan was adopted in 1983, the county agreed to take just 20% of the property taxes generated by the area through 2013, instead of the 57% it gets in most areas not subject to redevelopment. Torrance officials hope to continue the city’s favorable tax rate until 2033. But county officials, relying on a policy they invoke when cities seek to change redevelopment plans, want their tax rate to return to 57% now.

“Part of the problem is that these projects never seem to end,” said Diane Shamhart, who heads the county’s negotiations with Torrance. “It used to be a 20-year life, then we saw 30 and 35 years and now we are talking about 50 years. . . . That’s an awful long time to wait for tax money.”

Torrance officials said they have already spent, or set aside for future obligations, the entire $90 million budgeted for the Torrance Industrial Redevelopment Project, which was to be completed in 2013.

Under a proposed amendment to the redevelopment plan, expected to be adopted next month, the city would be able to spend $90 million more on the project and have an additional 20 years, until 2033, to complete the work. The extra time is needed, city officials said, to finance such improvements as removal of toxic waste from the earth, repaving of streets and installing underground power lines.

The disagreement with the county came to a head earlier this month when the county told Torrance officials it will contest the proposed 20-year extension of the favorable tax collection rate the city receives within the project area.

Such tax disputes between the county and more than 60 city redevelopment agencies are not unusual, especially since the passage of tax-cutting Proposition 13 in 1978, Shamhart said. Although bargaining postures can be tough, most disagreements of this kind are settled out of court, she added.

The state redevelopment law, which gave birth to the Torrance project, is designed to encourage the renewal of depressed areas by offering low-cost property and other incentives to developers. The municipal costs of buying land and improving it are supposed to be recouped by cities through higher property taxes generated by the redeveloped land.

The Torrance City Council adopted its Industrial Redevelopment Project plan on July 23, 1983, proposing to replace the worn steel plants, machine shops and lumber yards on its east side with clean new offices, shops and hotel rooms.

The area was once typified by businesses such as the U.S. Steel plant on 76 acres along Western Avenue and the Armco Steel factory just to the south. The plants had been in Torrance almost since the community was established in 1912. But they succumbed in the late 1970s and early 1980s, their products unable to compete with lower-priced foreign imports.

Torrance defined its project area by drawing a pistol-shaped boundary around 292 acres, running roughly along Western Avenue, as far north as Del Amo Boulevard and nearly south to Sepulveda Boulevard. What had been dubbed the “Model Industrial City” by founder Jared Sidney Torrance in 1912 was renamed “The Balanced City: Industrial, Residential, Commercial.”

North American Honda Motor Co.’s 101-acre development on Torrance Boulevard is the centerpiece of the project. It replaced the old U.S. Steel plant and more than 40 smaller businesses with its headquarters, giant parts warehouse, computer center and research facilities.

Honda had announced that it would move its headquarters to Torrance in 1981, to take advantage of its proximity to Los Angeles International Airport, the Port of Los Angeles and freeways. The redevelopment plan helped the company decide to expand its project from 76 acres to 101 acres, a Honda spokesman said.

Ultimately, more than 2,000 Honda employees will work at the Torrance facility, including more than 1,000 who are to begin moving into offices on Torrance Boulevard later this month.

Redevelopment also is under way on 50 acres along Western Avenue, between Torrance Boulevard and Carson Street, where San Diego-based Gascon Mar Ltd. is directing construction of offices, a 250-room hotel and a shopping center.

A few smaller improvements dot the project area, but 140 of the 292 acres--mostly south of Carson Street--remain a hodgepodge of rusting corrugated buildings, lumberyards, stores and homes.

Torrance officials said they must amend the redevelopment plan to provide enough incentives--such as subsidies of land purchases by builders--to keep new developers coming to the area.

Mike Bihn, senior principal planner for the city, said the project ran out of money in just seven years because the original plan did not anticipate a variety of costs. For instance:

* The industries that moved out of the area took a heavy toll on the land, leaving underground pools of gasoline and soil soaked with solvents. Up to $6 million has already been dedicated to clean pollutants from underneath the Honda property and the Gascon Mar land. An unknown amount will be spent to clean the remaining 140 acres.

* As developers show interest, the city tries to purchase small businesses in stages and then package the lots into larger parcels to attract big firms into the project area. With the project’s initial success, land prices have soared from about $12 a square foot to as high as $35. The project has been victimized by its own success, city officials said.

* The price tag for moving smaller businesses to new locations was unexpectedly high. The city must pay to find new locations for the businesses that it relocates and then pay all their moving expenses.

All three factors combined to boost the cost of clearing 26 acres of the Honda property, for example, from $25 million to $32 million. “It’s just been darned expensive,” said Torrance Finance Director Mary Giordano.

To keep the east side rebirth on track, the Redevelopment Agency has borrowed $15 million from city funds. “That will slow down the introduction of new programs and the replacement of certain equipment” in the city, said Mayor Geissert, “but I don’t think it is something the public will feel a hardship from.”

In return, Geissert said, the city will get “upscale office buildings and luscious landscaping” on its east side. Based just on what’s been developed so far, the city can expect at least $2 million in added property taxes each year, beginning in 1991, and an increase in sales taxes from just over $1 million this year to $4.1 million by 1994, according to city projections.

County officials note that much of Torrance’s property tax bounty will come at the expense of the county treasury.

When cities amend their redevelopment plans, the Board of Supervisors has a standard policy of demanding that taxes revert to standard distribution levels, said Shamhart, the county’s negotiator. “Since the county provides services, the Board of Supervisors has a policy that it should get its fair share of (revenue) growth,” she said.

But Torrance officials argue that their projections show the county will get as much in taxes, even at the lower rate, by agreeing to the amended redevelopment plan, thus spurring more growth and increased property values in the project area. Forcing the higher tax rate on Torrance now, the officials contend, will only stymie the redevelopment.

“It’s a matter of grabbing for 25 cents today,” Torrance Councilman Bill Applegate said, “but if they would wait, they would get a dollar down the road.”

Torrance Industrial Redevelopment Project Area 1. North American Honda Corporate Headquarters 2. Gascon Mar Ltd. 3. Capellino Investment Corp. (Rubbercraft) 4. Capellilno Investment Corp. 5. Dong K. Lin 6. Frank Scotto Option Property 7. Grant and Popvich 8. Joslin Lumber 9. Pacific Smelting Site 10. Plaza del Amo Parcel 11. Railroad Team Track 12. Surf Management 13. Surf Management (Gulf Development)