Loan Plan for Renewal Seen as Mixed Blessing

A plan to use redevelopment powers to help rebuild and rejuvenate five quake-ravaged areas in the San Fernando Valley and Hollywood is taking shape as a strategy with some promise, but also serious pitfalls.

The Los Angeles City Council voted last winter to use the powers of the Community Redevelopment Agency, or CRA, to help revive communities still suffering from the Northridge quake.

Considered to be a funding source of last resort for quake victims, the CRA program now expects to provide $34.3 million in low-interest loans over five years, mostly to repair quake-damaged shops and to revitalize business areas.

But most of the money won’t be available until next January, about a year after the City Council established the program and two years after the quake hit.

The program is further tarnished by its cost: Because of long-term bond financing, it will cost the city $96 million in tax dollars over 30 years to pump that $34.3 million into the quake-recovery projects.

And the CRA’s quake project list has effectively been whittled down to four sites because newly elected Councilman Michael Feuer is working fast to kill a project in Sherman Oaks that has generated loud community opposition.

Still, city officials defend the CRA’s aid to the remaining four projects as a vital long-term funding source that augments the emergency aid programs by state and federal agencies.

“To do these recovery programs does not take away from anything; it only adds to the recovery efforts,” said Councilman Richard Alarcon, whose northeast Valley district includes one of the recovery areas. “For those businesses that have been waiting, there would not be any other option.”

Bob Lloyd is one businessman eager for some CRA help.

After the front of his antique store on Sherman Way in Canoga Park collapsed in the quake 18 months ago, Lloyd leased a building two doors away for $1,200 a month. But every day he walks past the damaged building that still costs him $1,500 a month in mortgage payments.

“This is killing me,” he said as he gestured toward his quake-ravaged building.

Because his business draws minimal profits, Lloyd didn’t bother to apply for a bank loan or federal emergency funds, convinced he would not qualify for a loan. A longtime antique dealer, Lloyd now sees the CRA as his last hope for a $22,000 loan to repair damage to his store’s front window and facade.

CRA Director of Operations Don Spivack, who oversees the quake projects, said the agency is indeed the last major funding source for quake victims like Lloyd.

“I think that you’ll find that there are a lot of situations where people are having to make do with what they have,” said Spivack, a 13-year CRA veteran.

The five quake projects would bring to 23 the total number of CRA projects, which encompass 13,598 acres, or 5% of the city’s land, mostly in blighted and deteriorated areas.

The new projects, however, come when the CRA faces dwindling tax revenues from the recession and a diversion of about $100 million in CRA funds to help bail out the city and state.

The original five quake-related redevelopment projects encompass 6,766 acres in some of the hardest-hit areas--including parts of Reseda, Canoga Park, Sherman Oaks, Studio City, North Hollywood, Pacoima, North Hills, Sylmar, Sun Valley and Hollywood. The city’s Building and Safety Department identified 32,271 homes and apartments and 835 businesses in those areas with quake damage.

Under state law, the CRA can keep some of the property tax revenue generated by new development in these designated areas to help finance the loans, even if the improvements are not created by the CRA.

CRA officials estimate that the four remaining quake project areas--excluding the Sherman Oaks project--can generate enough revenue to issue $47.7 million in bonds over five years. But the CRA is expected to spend $13.3 million on studies, attorneys and other outside consultants, leaving $34.4 million to be loaned. Paying off the bonds at 8% interest would bring the total cost to $96 million, according to CRA officials.

But the officials now fear that the financial institutions that normally buy these bonds may see them as a high risk because of the financial troubles of Los Angeles County and the bankruptcy of Orange County. CRA officials worry that prospective bondholders may seek an unusually high interest rate or may require a large reserve fund to guarantee repayment.

So far, no quake bonds have been sold because CRA officials are still awaiting a comprehensive report from county tax officials on the projected additional city tax revenue that might stem from the redevelopment aid. That report is needed to help redevelopment officials get a lower interest rate when they issue the bonds.

The agency, though, may be able to offer some loans within the four areas by next month. It would do so through a commercial loan for $7 million based on tax-revenue estimates.

The agency has also received a $23.5-million federal grant to provide loans at no interest to quake-damaged industrial and commercial businesses citywide. Twenty-three applications for about $5 million have already been filed.

The first loan from that program was made last month to Networks Electronics Corp., a Chatsworth firm with 58 workers making bearings for the military. The company had been rejected for a loan from the Small Business Administration but did get $800,000 from the CRA to repair a huge gap the quake opened in the roof of the firm’s machine shop.

“We had customers who were very irate because we could not deliver our product on time,” said David Wachtel, Networks Electronics president. “The CRA really came through for us.”

Since the quake, the firm has had to convert its lunchroom into a makeshift machine shop. The CRA loan will allow the company to repair the collapsed roof and move operations back into its shop.

Despite such apparent CRA success stories, the agency continues to generate fear and loathing among some residents and city officials.

A sixth emergency redevelopment district was originally proposed around Northridge but was canceled at the request of Councilman Hal Bernson, who represents the area.

Bernson wanted to eliminate the CRA’s power to seize property in his district, and limit the agency to providing only loan-guarantee funds, so quake victims could get traditional bank loans. But he said the CRA put up too many hurdles, so he recommended that the plan be scrapped.

Bernson is now studying the possibility of using funds from the Department of Water and Power or other city agencies to provide loan-guarantee funds for small businesses and homeowners.

He has also become a harsh CRA critic.

“It’s going to take a year to get funding,” Bernson said of the CRA earthquake projects. “By the time the money comes along, there won’t be anyone around anymore.”

The troubled Sherman Oaks project, covering 740 acres, was adopted in December on the recommendation of former Councilman Zev Yaroslavsky, despite vocal opposition from the Sherman Oaks Homeowners Assn. The homeowners group feared the CRA’s power of eminent domain, which is the authority to seize property for public purposes, and filed a lawsuit in January to kill the project.

Supporters of the program argued that the use of eminent domain would allow the agency to condemn and repair abandoned and damaged condominiums that have become eyesores.

But Feuer, who was elected in June after Yaroslavsky resigned to sit on the County Board of Supervisors, took initial steps this month to phase out the project.

Feuer said that other aid programs can take care of his district’s problems. Feuer has instructed CRA and other city officials to outline how to phase out the Sherman Oaks project.

“It is not enough to simply halt a process that was not favored by the community,” Feuer said. “It’s even more important that my office works aggressively to identify sources of funding, free of CRA constraints, to rebuild our neighborhood and businesses.”

In the CRA quake projects that are moving ahead, the agency says that the lion’s share of the money may be used to revitalize business areas where repairs have been made but continue to suffer through an economic slump.

For example, at the Valley Plaza shopping mall in North Hollywood, millions of dollars in insurance money and federal grants have been spent to repair some shops and pay for a new facade for the front of the plaza. But seven large stores there are still out of commission, including the 90,000-square-foot J.C. Penney store.

Those shop owners without enough money to make all their repairs can apply for low-interest CRA loans. But some Valley Plaza shop owners are also looking for CRA money to hire security guards, upgrade nearby bus stops and fund landscaping on surrounding streets and sidewalks.

“We want to make it a nicer place to be,” said John Simons, a partner in the family-owned Simons Group, a major landlord at Valley Plaza that has completed most of its repairs with private funds and federal emergency loans. “Basically, what we are asking the CRA is to assist with funds to overcome our economic problems.”

At the request of Councilwoman Laura Chick, CRA officials plan to apply for a federal grant to build a community theater in Canoga Park on the site of the Pussy Cat Theater, an X-rated movie house razed after massive quake damage.

“We are trying very hard to make a comeback,” said Christina Ayriss, the owner of an antique shop near the vacant theater lot.

She said businesses along Antique Row would also like to get the CRA to pay for better street lighting, landscaping and other area improvements.

“The more we do to Antique Row, the more we are doing for the rest of the community,” Ayriss said.

* HIDDEN DAMAGE: Costs of repairs to some buildings have owners worried. B1

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The Earthquake Assistance Projects

Last November and December of 1994, the Los Angeles City Council set up five emergency redevelopment projects to speed earthquake repairs. State law allows local governments to help rebuild disaster-devastated neighborhoods by using some property taxes collected within these areas to fund residential and commercial loans and to repair public buildings and streets. But new City Council member Michael Feuer has vowed to cancel the quake investment project in Sherman Oaks because, he says, other aid programs can take of most of the area’s problems.

The remaining four projects could receive up to $34 million, but most of that money will not be available until early next year.

1) Canoga Park / Reseda

Area: 2,400 acres

Investment: Up to $12.4 million over five years. Will emphasize rebuilding small businesses along Sherman Way, such as a plan to turn a quake damaged X-rated movie theater into a community theater.

Damage: 1,448 residential sites and 324 commercial properties were damaged during the Northridge quake.

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2) Pacomia / North Hills

Area: 2,914 acres

Investment: Up to $14.6 million over five years. With special emphasis on improvements to streets, sidewalks and landscaping around the vacant General Motors plant. It may help fund a proposed police station on the plant lot.

Damage: 1,151 residential sites and 211 commercial sites were quake-damaged.

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3) Laurel Canyon

Area: 248 acres

Investment: Up to $1.9 million over seven years. With special emphasis on rebuilding retail stores in and around the Valley Plaza and Laurel Plaza shopping centers.

Damage: 81 residential sites and 32 commercial sites were damaged in the Northridge quake.

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4) East Hollywood

Area: 656 acres

Investment: $5.4 million over five years. With special emphasis on landscaping and loans for small “mom and pop” business along Hollywood Boulevard.

Damage: 461 residential sites and 39 commercial sites were quake-damaged.

Source: City of Los Angeles

Researched by HUGO MARTIN / Los Angeles Times