Long Beach Panel Asks to Borrow $25 Million

Struggling under the burden of declining real estate values, the redevelopment agency that has financed much of the resurgence of downtown Long Beach is running out of money and wants to borrow $25 million to help meet its payroll.

The Long Beach Redevelopment Agency said that without the loan, in the form of tax anticipation bonds, layoffs would begin Oct. 1.

The plan to raise the money was distributed to the mayor and City Council this weekend. Put on the fast track, it is expected to be approved by the council Tuesday.

Susan Shick, redevelopment director, said raising the money from tax anticipation bonds is nothing unusual, but she conceded that the redevelopment agency’s financial problems have been aggravated by a sharp drop in the values of the city’s showcase waterfront high-rise office buildings and hotels.

Some office buildings are now worth only half what they were in the early 1990s, and thus are producing only half the tax collections they once brought in.

For example, a cluster of downtown hotels and office buildings that was supplying the redevelopment agency with $10 million in tax collections is now contributing an estimated $4.9 million.

In her letter to the City Council, Shick said the healthiest of the city’s seven redevelopment projects, one that encompasses light manufacturing and other businesses on the west side of the city, could have a zero balance by the end of the next budget year in October 1997, unless the borrowing is approved.

The proposed borrowing is the latest round in a bruising fight that has been going on for years between the redevelopment agency and the owners of west side businesses who claim they are being asked to pay for the agency’s mistakes.

With the collapse of real estate values along the waterfront, the burden of supplying infusions of new money to operate the redevelopment agency has largely fallen on these west side businesses, including the port.

The business owners are in revolt, threatening a lawsuit challenging the new borrowing.

Among other things, the business owners have routinely accused the redevelopment agency of not giving a proper accounting of $165 million in redevelopment agency expenditures made over the last 20 years. They complain that the redevelopment agency has overhauled its accounting system three times since 1992, making it all but impossible to follow where the money has been spent.

“What they are doing is wrong,” said Gil F. Ficke, operator of a truck stop. Until recently, Ficke was head of a group of west side business owners that was negotiating with the redevelopment agency over how much of their taxes should remain in their district. But he said he quit in frustration after being unable to work out an agreement.

“They want to use this bond to keep the redevelopment agency alive for another few years. But where is the money going?”

The redevelopment agency contends that it offered west side business owners a package of $17.8 million in benefits over the next nine years, but the offer was not accepted.

Shick’s letter to the City Council does not spell out how the $25 million would be spent.

During a meeting of a committee of the redevelopment board last week, Judson R. Schoendorf, board chairman, acknowledged that there were problems in accounting for all the agency’s expenditures, but said the amounts in question represented a relatively small share of overall spending.

“I don’t think it will be shown that we did any egregious crime with that money,” he told a delegation of business owners in a City Hall meeting.

Long Beach now has seven redevelopment projects, accounting for roughly 14% of the city.

Created by the state to help cities breathe new life into blighted areas, redevelopment districts allow cities to raise money to finance loans and purchase land by a complicated process known as tax increment financing.

The way it works is that property tax values are essentially frozen at the level that exists on the day a city draws boundaries around a blighted area and calls it a redevelopment project. Then, as the value of the property rises and tax collections increase, these so-called tax increments can be used by the city to subsidize business development.