Look to Alternative to Redevelopment to Aid Northeast Valley

One doesn’t give control of property to a contractor without reading the contract to see what he is going to do, when it will be done and for how much.

Voters don’t approve bonds unless they know how and where the money is to be spent.

The Community Redevelopment Agency’s plan for the northeast San Fernando Valley did not provide answers to such questions. It was vague and nonbinding. Except for favored developers, it did not benefit current or future property owners and businesses within its boundaries.

That’s why it’s a good idea that Los Angeles City Councilman Alex Padilla recommended putting aside the controversial redevelopment plan. And that’s why we need an alternative to CRA redevelopment, such as a program using state and local tax credits that already is proving successful in Michigan after only three years.

With the CRA out of the way, the northeast Valley has a wonderful opportunity to benefit from a dynamic economic alternative that would eliminate the middleman and put funds directly into the hands of property owners, residents and businesses.

The city could designate geographic areas in the northeast Valley that need both physical and economic revitalization. The amount of real property taxes in those designated areas would be small. The city’s share of the real property tax dollar, about 26%, could be waived for 15 years. Added incentives for businesses could include a 15-year waiver of local personal property tax, city business tax and developer fees.

These incentives alone would provide more benefits to the area than would the CRA. By increasing development and improvements in the first 15 years, the city would get a windfall in taxes instead of waiting 45 years and building up a billion-dollar public debt as with the CRA.

The CRA administers more than $50 million in federal, state and local grants each year. The CRA’s current budget shows that it has $104 million worth of these grants for this year. This money could also be used to subsidize development and improvements in the northeast Valley. The city doesn’t need the CRA to handle these funds.

This powerful dynamic could be completed with state legislation to waive individual state income taxes for 15 years for people who live and work in the designated area. Corporate state income taxes could also be waived for companies that located there. This would provide more incentive for businesses to invest in these areas.

This is a well thought-out process that provides built-in safeguards against abuse and, at the same time, stimulates physical improvements and income to local and state governments. For example, to qualify for tax benefits, an individual or business would have to pay any delinquent or back taxes and not be in violation of building codes. People earning more than $1 million per year would not be eligible. Individuals could not exceed $10 million in tax benefits.

The particular beauty of using tax credits is that they require little administrative overhead and are simple for businesses or developers to comprehend and calculate. Michigan began using this tax relief method with great success in 1996.

According to the Michigan Economic Development Corp., a public-private agency: “In just two years [1997 to 1999], areas that once had trouble attracting new business have become some of the fastest-growing communities in the state. These former blighted areas have attracted more than 146 projects responsible for the creation of more than 4,666 new jobs and investments totaling more than $405 million.” (For information, visit the agency’s Web site at www.michigan.org. Go to business services; look for Renaissance Zone, features section.)

When property values improve, this creates the asset wealth that makes further reinvestment viable. The improvements, along with the tax benefits, serve to make the overall area more attractive to new residents and businesses, and their resulting investment of energy and money.