Judge Deals Blow to Downtown Plan

A judge has ruled that Los Angeles city officials cannot collect more property taxes from a downtown business district for a new redevelopment program, jeopardizing city plans to revitalize the area by investing in residential and commercial projects.

Superior Court Judge Marvin M. Lager ruled Tuesday that the city’s approval of the City Center redevelopment project area violated terms of a 1977 court settlement involving much of the same downtown property.

“It’s unfortunate,” said Doug Ring, a member of the board that oversees the Los Angeles Community Redevelopment Agency. “There are a lot of things we have been looking to do there and clearly this will not be helpful to that.”

“It’s a disappointment,” said Councilwoman Jan Perry, who represents downtown. “In times like these, when revenue is at an all-time low and the homeless problem is still so incredibly significant, the opportunity to be able to collect tax in the area would have been of great benefit to the people in the community.”

Ring said the CRA board will meet as early as today to consider whether the City Center redevelopment plan can be salvaged, either by redrawing the project area boundaries, working out a compromise or filing an appeal.

The city created the 879-acre City Center district in 2002. It called for spending $2.4 billion over 30 years to assist developers in the construction of 12,900 units of housing and 6.7 million square feet of commercial and industrial space, while also providing $150 million to help the homeless. The owners of Staples Center proposed that a pro football stadium be built near the arena, within the district’s boundaries, but quickly dropped that plan.

The city ran into trouble with the court by including an area that was part of another redevelopment zone created in 1975, the Central Business District redevelopment district. After a lawsuit by then-Councilman Ernani Bernardi, the city entered into a court judgment in 1977 that limited the agency to receiving no more than $750 million in property tax revenue from the Central Business District to cover redevelopment costs. That cap was reached in 2000.

Los Angeles County sued to challenge the new City Center plan, alleging that the city improperly sought to transfer much of the old project area covered by the cap into the new area as a way of getting around the $750-million limit.

The county also charged that the plan would illegally deprive the county of $1 billion in property tax revenue that would be diverted to the redevelopment program.

Judge Lager agreed that the transfer of 760 acres from the Central Business District into a new City Center plan was not allowed. He noted that the city tried in 1997 to lift the cap, but a court rejected the request.

The judge said Los Angeles cannot get around the cap by “merely changing the definition of the CBD project area. Defendants may not do indirectly what they could not do directly.”

County Supervisor Mike Antonovich welcomed the judge’s decision: “This is a major body blow to the vested interests who wanted to develop downtown properties that were not blighted for football stadiums and other publicly supported projects,” Antonovich said.

“It’s a major, major win for taxpayers, because it will save L.A. County taxpayers in excess of a billion dollars over the lifetime of the project.”

The 91-year-old Bernardi, who joined the county suit, said he was grateful for the court decision, saying city officials were attempting a “money grab” by putting so much of downtown in redevelopment.

County Supervisor Zev Yaroslavsky said the mayor and City Council should never have approved the plan. “They ignored our pleas [to modify the plan] and this is the result of their woodenheadedness,” Yaroslavsky said. “The appropriate thing now is for the city to stop behaving as if it is judge, jury and executioner when it comes to the raising and spending of property tax money.”

City Atty. Rocky Delgadillo and Mayor James K. Hahn declined to comment on the ruling, saying through representatives that they were still studying the eight-page decision to determine its impact.

The CRA issued a statement saying that it is reviewing its options.

“Everyone must now ask, how will the city of Los Angeles achieve these goals in downtown? It is unlikely that there is a better alternative for meeting these needs,” the agency statement said.

At the judge’s request, attorneys for the county counsel’s office will draft a final judgment for him to approve. Those attorneys said their draft order will invalidate the city ordinances that created the redevelopment project.

The City Center redevelopment project area includes 43 acres that billionaire Philip F. Anschutz plans to develop into a $1-billion entertainment and shopping district next to Staples Center, known as L.A. Live.

The court decision should not affect those plans, which include a 1,200-room hotel and a 7,000-seat theater, according to Michael Roth, a spokesman for Anschutz Entertainment Group.

“The development of L.A. Live, including the 1,200-room Convention Center hotel, is not directly dependent on CRA funds,” Roth said.

The ruling could affect another redevelopment project involving downtown’s industrial district because part of it lies within the old Central Business District project area.