Lean Budget Proposed for CRA

The new head of the cash-strapped Los Angeles Community Redevelopment Agency proposed a $340-million bare-bones budget Wednesday that he said represents a “a meaningful work program” of combating blight while beginning to reorganize the agency against threatened future budget shortfalls.

Acting Administrator Jerry Scharlin warned in a report to be considered Friday by the CRA board that the redevelopment agency could face deep cuts in its work program during the next four years unless it finds new funding sources and efficiencies.

The budgets for the next five years, Scharlin said, “present an agency that faces many challenges but is not in crisis.”

CRA board President Peggy Moore said the budget shows clearly what financial commitment will be needed from City Hall and elsewhere to make the many project areas work in the future.

Other city officials, however, said the budget and a five-year projection of revenue also released Wednesday paint a grim picture.

“He faces a herculean task to rescue that agency,” said Councilman Mike Feuer, chairman of the council’s Budget and Finance Committee. “The five-year plan assumes an enormous series of cuts.”

In comparison with the $123 million available for redevelopment work this year, $81 million is known to be available for 2001, $64 million in 2002 and $48 million in 2003, agency officials said.

CRA revenues are expected to decline largely because one-time federal grants are running out and because the downtown Central Business District is reaching its limit on collecting taxes from that area.

“What he’s talking about there is they won’t be able to afford the employees,” said David Cochran, a representative of the union for CRA workers.

Scharlin was brought in by the board to replace Administrator John Molloy, who took a retirement buyout after the board rejected his proposed budget for the fiscal year that began July 1.

In drafting a new budget, Scharlin undertook a review of the agency’s 31 project and revitalization areas. He concluded in the budget report released Wednesday that 20 of them are not financially self-sufficient and officials must decide whether to keep subsidizing them.

CRA board member Keith Richman said the budget projections for the next five years give the board a clear picture of the issues that have to be faced.

“It clearly shows you where the problems are. It enables us to prioritize. Now we know the problems we have to address,” Richman said.

By detailing which projects are not financially self-sufficient, the CRA appears to be laying the groundwork for closing some project areas, council members suspect.

“We suspect that’s why they did that,” said Barry Glickman, chief of staff for Councilman Rudy Svorinich Jr., who represents Watts. “It’s a concern because some project areas need more help than others. Watts may never have the property tax revenue to support redevelopment without outside help.”

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In his report to the board, Scharlin said three of the oldest project areas--Hollywood, Crenshaw and Watts--are “lacking financial resources to fully implement the proposed work program and will require ongoing financial support from agency discretionary funds.”

Eight other newer project areas also are not self-sufficient, while nine others, including the Adelante-Eastside, Mid-City and Reseda-Canoga Park projects, are new and just starting to generate tax funds but very likely will become self-sufficient in 2004, Scharlin said.

Another issue expected to stir controversy when it reaches the City Council is a suggestion that the city general fund pass along $9 million annually to the CRA beginning next year, when the Central Business District reaches a $750-million taxing cap and money normally going to the CRA will be diverted to the general fund.

Redevelopment officials argue the $9 million is a windfall for the general fund, created by the new value provided by redevelopment in the Central Business District.

But Feuer said he is unlikely to support such a diversion to the CRA, given the other pressing needs of the city.

“I’m very skeptical of that suggestion,” Feuer said, adding he believes it was Scharlin’s job to put that suggestion and several others out for city officials to consider.

The 50-year-old redevelopment agency uses property tax revenue generated from additional value on redeveloped land to provide subsidies to new development.

But the economic and real estate downturn of the early ‘90s has resulted in steep drops in property tax revenue going to the agency, forcing it to scale back its staffing from 350 employees five years ago to fewer than 200 today.

Most of the proposed $340-million budget for this year--about $216 million--is going to pay down the agency’s $630-million debt and provide pass-through tax revenue to the county, city and schools.

Scharlin is proposing another $123.6 million be dedicated this year to actual work programs, supporting a staff of 200 employees.

About 18% of the work-program budget is set for salaries and other administrative costs, with the remaining $101.1 million proposed for “hard costs,” including brick and mortar work, land, legal expenses and professional services such as the hiring of private engineers to design projects.

Scharlin said the agency will fall far short of meeting its work program budgets--starting in 2001 through 2004--unless other steps are taken.

“For these programs to be fully implemented, additional outside resources and a more efficient delivery of services are required,” Scharlin said in a report to be considered by the CRA board at a special meeting Friday.

Scharlin’s budget also includes $1.5 million for outside consultants to help him restructure the agency and create strategies for making the most of its projects.

As a separate issue on Friday’s agenda, Scharlin is proposing to issue $7.7 million in tax revenue bonds for the North Hollywood Project Area, which is negotiating with a developer for construction of a major film sound stage and office complex. North Hollywood is one of the minority of project areas that are financially self-sufficient.

Richman had opposed plans by Molloy to use $1 million in bonds to pay for administrative costs, but said he would not object if the debt went to actual work programs.