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The obscure financial instrument that could save your life from a quake

The obscure financial instrument that could save your life from a quake
An example of a reinforced building on the campus of USC, Webb Tower has x-beams added from top to bottom, as shown on Aug. 7, 2013. (Los Angeles Times)

When the city of Los Angeles enacted a sweeping earthquake retrofit mandate last year, the mayor and City Council managed a feat that had eluded other politicians for two decades. But property owners still faced the same problem that triggered the years of squabbling over mandatory retrofitting of wood soft-story and brittle concrete structures: How do you pay for it? The city estimates that 15,000 properties may need to be retrofitted, with costs per building ranging from the thousands of dollars to the millions.

Last month, the council agreed to let landlords pass half of the retrofit costs on to tenants, capping rent increases at $38 a month over a 10-year period. That seems reasonable.

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On shakier ground (so to speak) is a proposal by California Assemblyman Adrin Nazarian (D-Sherman Oaks) to give property owners a state tax credit equal to 30% of their seismic retrofitting costs. The measure would limit the available credit at $12 million a year in total for five years, probably leaving a lot of eligible property owners out of luck. Nazarian pushed an identical bill through the legislature last year only to have it vetoed by Gov. Jerry Brown on budgetary grounds, and there's no indication that the results would be any different this time.

More promising is another proposal from Nazarian to allow retrofitting projects to be financed through programs that are now used mainly to improve energy efficiency or water conservation. Operated by state and local governments, these Property Assessed Clean Energy (PACE) programs obtain lower-cost financing for property owners from private lenders, which are paid back over time through assessments on the properties involved. The funds are collected with property tax payments. If the owner sells the property, the assessment stays with the property and becomes the responsibility of the new owner.

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In fact, the city of Los Angeles has already begun to do this, as has San Francisco, which also mandates retrofitting of vulnerable soft-story apartment buildings. And in Santa Monica, where new mandatory retrofit legislation will be taken up later this year, the city manager said such financing might accelerate compliance. Nazarian's bill would open more access to PACE programs across the state for retrofitting projects at a time when more local governments are requiring property owners to fix their buildings.

In Los Angeles, some property owners will soon be getting their first notices from the city that retrofitting orders are on the way. The timetable for completion is years-long. But the more innovative and accessible the financing for these retrofits are, the more likely property owners will be to do the work that could save people's lives — and do it sooner rather than later.

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