We’ve moved! Check out our new website at www.lbbizjournal.com

After Redevelopment Loss, Long Beach To Carry On Efforts With New Commission

By Sean Belk - Staff Writer

January 31, 2012 - The imminent shutdown of redevelopment, as we know it in California, is expected to commence tomorrow, February 1, starting the process of winding down operations, while causing possible city layoffs, lawsuits and other long-term impacts, according to city officials. Although a last minute urgency bill has asked for more time to resolve issues, city and state officials say chances of the initiative passing is highly unlikely.

The state’s decision to eliminate redevelopment agencies (RDAs) in order to fix a billion-dollar budget gap was upheld by the California Supreme Court in late December, after redevelopment advocates challenged the constitutionality of the action in court.

Moving ahead, the City of Long Beach is hoping to carry on future economic development, affordable housing and other services by forming a new “Community Improvement Commission.” But, there remains hanging questions regarding vague legislation as to what will now become of left over RDA assets – worth $1.28 billion in Long Beach alone – tied up in bonds, lease agreements, third party contracts, enforceable obligations, equipment and property.

“The successor agency is essentially winding down the affairs of the redevelopment agency at a highly accelerated schedule in very unique circumstances,” said Amy Bodek, executive director of Long Beach RDA and director of the city’s development services department during a Long Beach City Council meeting on January 17.

A majority of cities throughout the state, including Long Beach, have opted to take over redevelopment assets and housing functions as “successor agencies.” As heir’s to RDA estates, successor agencies have the sole responsibility to dispose of the remaining dollars to surrounding taxing agencies, while liquidating assets, in what’s called an Enforceable Obligation Payment Schedule, “as expeditiously and highest value possible, regardless of land use.”

But how much power local cities will have in directing what happens with RDA properties and funding remains unclear. For the most part, cities and counties are entering uncharted territory, muddled by varying interpretations of the state’s legislation, known as AB 26, that pits cities, counties and surrounding taxing agencies against each other in a scramble for resources.

The actions of successor agencies are to be watched over and directed by a seven-member “oversight board” established by the county. Cities are granted only two member positions, appointed by the mayor. The rest of the members are to be appointed by counties and special taxing districts, such as the community college district and the sanitation district. Also, the state’s department of finance has jurisdiction to oversea each city’s actions in handling the dissolution process as well.

Exactly where the remaining RDA money and assets will end up is still ambiguous. But, some city officials are at least hopeful that cities will have a voice in deciding what’s best for local residents when it comes time to auction off vacant lots, properties and other assets to potential buyers and developers.

Fearing years of “blight” removal being reversed, Pat West, Long Beach city manager, said, by becoming the successor agency, the city is in a better position to make sure RDA assets don’t just go to the “highest and best bidder.” Expecting forthcoming legal battles, he said the city attorney’s office would work to influence the disposition of certain assets on a “lawsuit by lawsuit basis.”

A request for an injunction to block the pending RDA dissolution deadline was denied by Sacramento Superior Court Judge Lloyd Connelly on January 27. He said the legislature had the right to use the money for schools rather than redevelopment agencies. The suit was filed by nine cities, including Signal Hill, Cerritos and Carson, and raised several constitutional challenges with AB 26 that weren’t brought up in the original supreme court case.

City officials are also hoping to defend millions of dollars in RDA loan repayments that legislation has since ruled void. In Long Beach, for instance, the city’s General Fund is still owed some $119 million for establishing its downtown project area, while the City of Signal Hill is owed about $8.5 million, according to city officials.

General Fund Impacts

In carrying out the duties of the successor agency, legislation allows cities an administrative budget of up to 5 percent of the property tax allocated to the successor agency for fiscal year 2011-2012 and 3 percent of property tax funding allocated to the agency thereafter.

City staff estimates that the City of Long Beach could receive anywhere from $1.9 million to $4.5 million in fiscal year 2012, depending on interpretations of the law, to carry out such state-mandated functions as appraisals, real estate transactions and basic administrative support, Bodek said.

However, city staff projects the administrative budget to be “extremely limited” after carrying out required duties and may need to rely on General Fund support, she said. “We do not know if it will cover all of our obligations in the next few months or whether or not we will have to rely on the General Fund in the interim period,” Bodek said.

Although impacts to the city’s General Fund are still being calculated, RDA currently pays for about $6 million annually in administrative services for code enforcement, graffiti abatement and CityPlace parking structure debt service, which would now need to be reduced or eliminated from the General Fund.

RDA funding currently pays for a total of 59 full-time equivalent employee positions, in housing, RDA and other development services departments. A majority of the positions will now be significantly impacted, according to Bodek, who said the number of city employees laid off is likely to depend on “the order of how layoffs will be occurring, what are committed obligations and what will withstand scrutiny by the oversight board.”

Affordable Housing Assets

Successor agencies are also responsible for taking over “housing assets and functions” derived from 20 percent of RDA tax increment, allocated through a low- and moderate- income housing fund. In the case of Long Beach, which handles most of the city’s housing functions and assets through a non-profit corporation, known as the Long Beach Housing Development Company (LBHDC), the city is expected to lose out on annual affordable housing support of $18.4 million due to the loss of redevelopment, according to Tom Modica, the city’s director of government affairs.

However, there are varying interpretations of current legislation regarding how remaining affordable housing functions and assets are to be allocated and distributed after redevelopment is shutdown.

A new bill known as SB 654 was recently introduced in the Senate and tries to clean up legislation in order to “preserve for affordable housing the roughly $2 billion in outstanding balances in [low- and moderate-income housing] funds maintained by redevelopment agencies throughout the state.” If the bill is not passed, however, the affordable housing funds would be “liquidated and distributed as property tax revenues to local agencies,” according to the bill.

The LBHDC will still exist after the Long Beach RDA closes, and will be able to move forward on projects already fully executed and under construction, Bodek told the Business Journal via e-mail. But, the non-profit won’t likely be able to take action on any new projects or programs that used RDA housing set-aside funds or housing bond proceeds. “This effectively limits what LBHDC can do at this time,” she said.

Currently, Long Beach uses a voluntary zoning process in which the city subsidizes developers of multifamily complexes through loans primarily funded by RDA set-aside funds to offset the cost of providing low-to-moderate rental housing units at below market rate for new apartment buildings.

The Long Beach Planning Commission had recently recommended the city council study a citywide inclusionary zoning policy, which would have made it mandatory for developers to provide low-to-moderate-income housing. But that plan has so far been scrapped by the city council, primarily due to lack of needed funding for the study.

With no funding from redevelopment and the city not including any inclusionary affordable housing ordinance in the city’s new Downtown Plan or even studying a citywide policy, Susanne Browne, senior attorney for the affordable housing advocacy group, the Legal Aid Foundation of Los Angeles, said the lack of affordable housing funds in Long Beach will most likely be devastating for low-income residents in the city.

“The council made a decision to not create affordable housing and not look at citywide policies for affordable housing,” she said. “If there’s no money they cannot create it. Private developers don’t just do affordable housing . . . It’s going to be devastating to the low and moderate income residents of the city.”

Erin Rank, president and CEO of Habitat for Humanity of Greater Los Angeles, said RDA affordable housing set-aside funds have helped the organization build a total of 30 new homes in Long Beach over the past 21 years, funding the purchase, designs, city permits and site work of new homes for local residents. The group is currently in the process of acquiring and repairing another 25 foreclosed homes in Long Beach to be completed by the end of 2012.

RDA funds have enabled Habitat for Humanity to partner with private companies, churches and individuals in the community for the labor of building homes. RDA funds have also provided loans to homebuyers for long-term financial assistance. “We’ve leveraged the public dollars by using private dollars to build almost every home we’ve built in the City of Long Beach,” she said. Throughout the state, redevelopment funds have helped the organization build 300 homes a year, Rank said.

While Habitat for Humanity is working to find other alternatives at the state level, she said there still is a need for affordable housing dollars to assist low-income residents being edged out in a growing population with a lack of housing inventory. “The fact that our funding was zeroed out means there will be many more families who are living in substandard housing and not able to access affordable housing unless we can come up with a funding source down the road,” Rank said.

Meanwhile, the City of Long Beach staff is working on making recommendations to the city council to establish a “Community Improvement Commission,” which would take on the affordable housing functions as well as other community revitalization services. City staff is expected to explore options of possibly obtaining a non-profit status to be able to apply for federal and state grants and endowments, while maximizing federal funds.