Should the CRA Be Used to Help the Valley’s Quake Recovery? : Typically the agency helps with commercial property and apartment buildings in blighted areas. Its approach might not work for area with single-family homes.

After nearly 10 months of steady progress in repairing damage from the Northridge earthquake, the San Fernando Valley is facing a significant decision: whether to use the Community Redevelopment Agency to help the recovery along. This is not an empty bureaucratic issue--it’s important. Valley residents should pay attention and play a part in the decision.

Valley property owners are moving aggressively to rebuild, repair and renovate. A substantial amount of damage was covered by insurance. City and state officials moved quickly and effectively to mine federal tax dollars. It’s true that some homeowners and business people have been slow to act, but the government has extended the deadline for applications for assistance, and 300 to 600 people a day are still calling the Federal Emergency Management Agency for help.

Proposals by Valley City Council members to create redevelopment zones in earthquake-damaged areas are designed to fill the void for those properties not covered by either private insurance or government assistance. I am a Community Redevelopment Agency commissioner appointed by the mayor. I have attended most of the hearings held throughout the Valley in the past two weeks. I have not yet made up my mind on the wisdom of bringing the CRA into our community.

The CRA is a state-mandated agency born out of the need to help improve blighted areas. For decades it has been working in central Los Angeles. Last summer, City Council members looked to the CRA as another potential source of earthquake relief funds using the CRA law’s emergency provisions. These provisions do not require the CRA to find blight, and they bypass much of the lengthy approval process. Otherwise the process would work as it does in Hollywood, South-Central and elsewhere.

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When a redevelopment zone is created, the CRA sells bonds to raise money. It repays the debt using money generated by the increase in the property taxes in the zone. The higher taxes are caused by improved buildings in the zone and by inflation. The bond money is put into building projects, usually through loans to private individuals and businesses.

Most council members have narrowly drawn the proposed CRA districts to include only commercial property and apartment buildings. The exception is in the northwest Valley, where virtually all of the inhabited area of the 12th Council District is proposed to be labeled a redevelopment area. The effect would be to create a very large fund and the very large debt that goes with it. That redevelopment area would be 5 1/2 times the size of the other proposed Valley CRA areas combined.

There appears to be a potential place for the CRA in the recovery effort for commercial buildings and multifamily housing. But for several reasons, CRA’s place in neighborhoods of single-family homes is extremely questionable.

First, single-family homes would receive little or no benefit from CRA loans. Historically, single-family homes have been left out of CRA zones for this very reason.

Second, diverting much of their property tax increase to the CRA would result in a further reduction of services that already are underfunded in the Valley--police and fire protection, parks, libraries and street improvements.

Third, under California law, people selling a home must disclose anything that would materially affect a buyer’s decision to purchase it. This would certainly require sellers to disclose that the house was in a redevelopment area, since among other things it would be subject to CRA controls. This disclosure could have an effect on the value of the property.

A CRA is not a money tree. It represents a choice in where tax money goes. CRA funds have to be paid back, at a cost higher than other forms of financing. The pay-back period runs anywhere from 35 to 40 years, even though the plans are scheduled to run for only 5 to 10 years. Additionally, CRA funds have about 40% taken off the top before they ever get to the community. Half of this is mandated by law for low-income housing. The other half must go to other taxing entities.

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Each council district has held community meetings on CRA involvement. Now it’s on to City Hall. Separate joint CRA-City Council hearings will be held for each council district. After those hearings, revisions may be made and a vote taken on each redevelopment zone. Here are some of the questions I have been asked most often in discussions of this issue:

* Can the CRA use eminent domain to take people’s property from them?

The CRA is not required to include eminent domain in its plans, but historically it has done so. Its officials usually claim it is needed as an enforcement tool to implement CRA plans.

* How soon would recovery money be available?

In 14 months, on Jan. 1, 1996, and it could be longer. The law does not allow the CRA to sell bonds in anticipation of the increased property taxes until those taxes actually start to increase.

* What resources could achieve the same goal without the CRA?

There are many, including FEMA grants and Small Business Administration loans. Many people who were initially turned down for these funds have reapplied and received them. The city has recently approved $325 million in loans to help fix up properties. Condominium owners may be eligible for up to $35,000 per unit. The federal government has an additional $2.3 million set aside for blighted areas. There is $18 million in citywide housing funds. FEMA has set aside $2.8 million for “ghost towns.” So far the federal government has allocated $5.5 billion, and insurance companies have paid out $10 billion.

* How much damage cannot be repaired by insurance, FEMA grants, SBA loans or city and state grants?

Very little. Most, though not all, Valley properties are being repaired.

* The CRA would have the power to force property owners to repair or replace buildings that are becoming a blight on the community. Do such powers already exist?

Yes. Most obviously, the city can condemn property. Short of that, ordinances prohibit property from becoming a hazard. The city has been demolishing buildings for months.

* Could the CRA dictate the use to which property could be put?

That depends on the plan in each individual council district. However, land use is controlled by community and general plans. Changing the use of land is a big question in some areas. For example, vacancy rates in multifamily rental units in some Valley areas are nearly 20% and some apartment owners may choose to defer rebuilding until the market provides them a larger supply of prospective tenants.

I am continually told by people that they are afraid of the power of the Community Redevelopment Agency. It’s healthy for Valley residents to be skeptical about matters that could significantly affect their property and their lives. I hope they fully participate in the process of making this long-lasting decision.

Redevelopment Hearings

Council District/Area: Date

5 Sherman Oaks, Studio City: Nov. 15

7 Northeast Valley: Nov. 16

2 Laurel Canyon: Nov. 16

3 Southwest Valley: Dec. 6

12 Northwest Valley: Dec. 7

13 and 4 East Hollywood: Dec. 7

All hearings will be at 10 a.m. in the City Council chambers of City Hall.