Plan to Rebuild Quake-Hit Area Splits Homeowners, Merchants : Recovery: Residents and businesses in Sherman Oaks disagree on the role of the Community Redevelopment Agency as it seeks to establish an emergency zone.

A draft plan to redevelop earthquake-ravaged neighborhoods of Sherman Oaks has divided homeowners and merchants who disagree on the role to be played by the Community Redevelopment Agency.

Sherman Oaks is one of five heavily damaged areas of the San Fernando Valley where the CRA is seeking to establish an emergency redevelopment zone. The 570-acre area is roughly bordered by the San Diego Freeway, Coldwater Canyon Avenue, Ventura Boulevard and the Ventura Freeway.

The CRA’s goal in the emergency zone would be to use money diverted from local property tax revenues to rebuild crumbling and abandoned commercial strips and residential neighborhoods.

The Sherman Oaks Homeowners Assn. said the draft plan, which will be released tonight, does not go far enough to restrict the CRA’s power of eminent domain and to make planning decisions. Also, the plan needs a cap on administrative costs, homeowners said.

“They’re trying to shove this down our throats,” said Matt Epstein, chairman of the homeowner association’s CRA Study Committee.

But the Sherman Oaks Chamber of Commerce backs the draft plan because it believes it will rebuild housing, restoring the customer base that was eroded when the quake destroyed many apartment buildings and condos.

“Sherman Oaks lost between 25% and one-third of its residents,” said Barry Wegman, executive vice president of the chamber. “Businesses are dying because there is nobody to patronize them.”

Eleven community leaders have been involved in drafting the plan. Sherman Oaks residents will have their first chance to see the proposal tonight when the CRA holds the first of two community workshops at 6 p.m. at Millikan Middle School, 5041 Sunnyslope Ave. Another workshop will take place on Oct. 26 at the same time and place.

Also tonight, CRA commissioner and former U.S. Rep. Bobbi Fiedler will be the featured speaker at another community meeting sponsored by the homeowners association at 8 p.m. It is being held at the Union Federal Bank, 13300 Ventura Blvd., in Sherman Oaks.

Richard H. Close, president of the homeowners association, said Monday that his group of 1,600 families has begun circulating a petition to oppose the redevelopment zone for Sherman Oaks unless there is more local control over what is built and how the money is spent.

He is calling for a community panel that would have veto power over individual redevelopment projects in the area or a plan that would more specifically detail CRA powers in the zone.

Epstein added that homeowners want the CRA to limit itself to the role of moneylender, guaranteeing loans or providing gap loans to property owners whose insurance or loans from the Small Business Administration do not cover the full cost of reconstruction.

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Joe Nocella, finance officer for the CRA, estimated that the project’s budget will be $20 million to $56 million, depending on whether a five- or 10-year plan is approved. The money will be generated through a bond issue.

Under state law, redevelopment agencies are empowered to condemn property through eminent domain proceedings and typically assemble large parcels of land that are sold to a developer, who revitalizes the neighborhood with construction.

The redevelopment agency keeps the property taxes generated in the renewed neighborhood and invests that money in more improvements, such as sewers and business loans for more construction.

But under the Sherman Oaks draft plan, the CRA must abide by all zoning and land-use laws in the area and its power of eminent domain is limited. There are no single family homes in the proposed area.

“We are proposing to use eminent domain in very limited circumstances, only when the property is vacated . . . and only when the owner cannot or will not rehabilitate the property,” said John Spalding, director of policy and planning for the CRA. “We are prohibited from using eminent domain in properties where people live. No one’s home will be taken by eminent domain.”

CRA officials said they plan to give first priority to restoring vacated and partially abandoned residential buildings.

The Chamber of Commerce is satisfied that the proposal provides adequate safeguards for the community. Officials are concerned that the homeowners’ complaints will thwart a speedy revitalization of the area.

Wegman said the CRA’s draft is a good match with the chamber’s priorities.

“First, the chamber wants to try to rebuild the residential base, then the business base and finally the infrastructure,” Wegman said. “If any funds remain, some of the funds might be used to support a (landscaping plan) for Ventura Boulevard.”

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The CRA is expected to make its final recommendation to the City Council in November, after a 60-day assessment of the quake-damaged areas. Councilman Zev Yaroslavsky, who represents the area, will not take a position on the issue until hearing from all segments of the community, said Alisa Katz, his chief deputy.

Other proposed emergency redevelopment zones include portions of Northridge, Reseda, Van Nuys and Pacoima. Community groups in these areas, such as the North Hills Community Coordinating Council, have held hearings, but none has taken a position.