Long Beach To Lose 48 Employees; Statewide Estimate As High As 3,000

By Sean Belk - Staff Writer

February 14, 2012 - Municipalities across California are bracing for a new era of diminished resources as they rapidly disband redevelopment agencies, or RDAs, that were officially dissolved by the state on February 1. The agencies are facing widespread local government layoffs and service cuts.

Cities and counties that opted to become “successor agencies” are now tasked with liquidating the former system, with oversight from the state and other taxing agencies. The move closes the books on more than half a century of community work to remove “blight,” provide affordable housing and other economic development functions in an expedited fashion. Also, many will have to do so with less staff.

The sudden shift of more than $1 billion in annual redevelopment tax increment funding to schools and public safety – in an effort to fix the state’s budget crisis – has caused abrupt revenue shortfalls for many cities and counties. Local governments will be given a small portion of administrative support funding to dissolve redevelopment. But, some have already issued layoff notices, primarily in housing and economic development departments previously paid for through RDA dollars.

It is estimated the elimination of some 400 redevelopment agencies will cause anywhere from 2,500 to 3,000 local government job cuts statewide, said Jim Kennedy, interim executive director of the California Redevelopment Association (CRA). The organization, a nearly defunct redevelopment advocacy group, fought the constitutionality of the state’s decision in California Supreme Court, but lost. “I’ve never seen anything quite like this,” he said.

Business Journal Publisher George Economides pointed out that on top of the direct government jobs being lost, there are potentially thousands of indirect job losses from firms and individuals receiving contracts for services from redevelopment agencies. These include architectural firms, real estate appraisers, printers, marketing/public relations/communications companies, graphic designers, artists, research firms and a variety of consultants who conduct surveys and gather data.

“A lot of people in the creative industry – many of them younger entrepreneurs in a mostly green industry – are or will be feeling the pain of this action by our state elected officials,” he said. “I don’t believe our local representatives – State Sen. Alan Lowenthal and Assemblywoman Bonnie Lowenthal – understood the trickle-down effect this was going to have on the economy. No matter how they try to spin it, their action was irresponsible.”

The amount of General Fund impacts mostly depends on how much investment in redevelopment each agency had delved into, how many RDA workers each city and county had hired, and whether employees are able to move into vacant positions. But, for the most part, large urban cities and counties were hit hard. San Francisco and Oakland, for instance, are expected to layoff at least 100 employees each.

In Long Beach, there are a total of 31 classified and 17 unclassified positions affected by the elimination of RDA, for a total of 48 employees to be given official notices starting March 2. The city’s civil service commission has already received the Order of Layoffs to begin the process of identifying impacted staff, including “bumping,” or laying off workers based on seniority, according to Amy Bodek, director of the city’s department of development services and former executive director of the former Long Beach RDA.

Within the next month, it will be difficult for the city to calculate cuts to both staff and city services in such an expedited timeframe, she told the Business Journal. “What we’re essentially doing is unwinding 60 years of public finance practice in a one-month period, and that does not happen overnight,” Bodek said. “Even in a one-month period it is extraordinarily difficult to do, and I’m not just talking about staff positions, I’m talking about actual delivery of services to the community.”

Although services and positions will be inevitably cut, city staff is asking the state to reimburse the city for some RDA services, including code enforcement, graffiti abatement and debt service, estimated to cost $2.2 million this fiscal year, according to a city staff report to be presented at tonight’s February 14 city council meeting.

“The City’s position is that these expenditures are enforceable obligations and should be reimbursed as part of the dissolution process,” city staff wrote in a memorandum. However, if the state and the newly formed “oversight board” decides not to allow the reimbursement request and no other alternative funding sources are found, the costs for services may have to come from the fiscal year 2012 budget or be discontinued by an approval from the Long Beach City Council.

The restoration of other services will have to be discussed during budget talks for fiscal year 2013. Also, city staff is currently working to make recommendations on forming a new “Community Improvement Commission” to carry on affordable housing and community revitalization functions now through federal funding and grants through a possible non-profit status.

Nearby, the City of Carson has handed layoff notices to a total of eight employees and is expected cut more than 30 other positions when the new fiscal year begins July 1, losing in excess of 10 percent of the city’s total workforce, said Barry Waite, the city’s business development manager who is now responsible for overseeing two other divisions that are federally funded.

While an increase in sales tax revenue, reserve funding and some vacant positions may help buffer the hemorrhage of employees, maintaining the current workforce would have caused a structural deficit, he said. “We all recognize that there will be people going out the door,” Waite said.

Some cities, however, were a bit more fortunate. The cities of Signal Hill and Cerritos, for instance, haven’t had to make any job cuts so far, according to city officials.

Ken Farfsing, Signal Hill city manager, said he made a point to back off on hiring any new redevelopment employees when he first was hired about 15 years ago, mainly because the city’s RDA was expected to expire in 2017. “As employees left, we decided to not rehire,” he said. “We were kind of in a downsizing mode . . . Essentially, we only have one full time employee.”

However, as redevelopment funding continues to deplete, it’s uncertain if city budgets will be able to cover the process of dissolving redevelopment, which may include property assessments, real estate services and other staff support.

The state’s legislative trailer bill ABX 26 allows cities an administrative budget of up to 5 percent of the property taxes formerly allocated to the RDA. That money will now go to successor agencies for fiscal year 2011-2012. The funding rate will drop to 3 percent of property taxes for an undetermined period of time. City staff estimates the City of Long Beach will receive anywhere from $1.9 million to $4.5 million in fiscal year 2012. But it’s unclear whether more funds will be needed from the city’s General Fund to cover the cost of winding down the RDA.

Successor agencies are now responsible for dispersing remaining RDA funding and liquidating assets through what’s called an Enforceable Obligation Payment Schedule, “as expeditiously and highest value possible, regardless of land use.” Funding will start being dispersed amongst surrounding taxing agencies, with oversight from the state and a seven-member “oversight board,” to be formed by May.

Established at the county level, each oversight board will be represented by members mostly appointed by various taxing agencies, such as the community college district and the sanitation district. The city is granted two member positions to be appointed by the mayor.

Uncertainty Remains

But, it’s still uncertain what will happen with millions of dollars worth of commercial and housing projects that have been halted, and exactly how the dissolution process will be carried out due to ambiguous legislative language. In fact, the uncertainty has caused three of the top investment rating firms to either downgrade or put California redevelopment bonds on “watch.”

“We think it’s kind of a train wreck waiting to happen, because of some of the difficulties, ambiguities, lack of clarities and outright inconsistencies within the law itself,” Kennedy said.

While a bill was introduced in the state senate to postpone the extended dissolution deadline and resolve potential conflicts through “clean up” legislation, that effort had proved unsuccessful.

Another bill, known as SB 654, was introduced by Senate President Pro-Tem Darrell Steinberg to preserve $2 billion in outstanding balances in affordable housing funds and resolve issues over start-up loan repayments to cities. That bill was recently passed in the senate and still requires approval from the state assembly and Gov. Jerry Brown, who led the charge in ending redevelopment.

However, even if approved, whether the bill will do any good is uncertain since an urgency clause was removed due to Republican disapproval, said Alicia Trost, spokesperson for Senator Steinberg’s office. If signed by the governor, the bill wouldn’t be enacted until 2013, she said.

Also, another request to block the deadline through an injunction filed in Sacramento Superior Court was denied on January 27 by Judge Lloyd Connelly, who said the legislature had a right to use the money for schools rather than redevelopment agencies.

The request for an injunction was based on a lawsuit brought last year by a consortium of nine cities led by the City of Cerritos, raising constitutional challenges to ABX 26 that weren’t brought up in the original state supreme court case.

The main objection was defending millions of dollars in RDA start-up loan repayments to cities that the legislature is now not honoring. Long Beach is still owed some $119 million, while Signal Hill is owed about $8.5 million.

Cerritos Mayor Carol Chen said the options now are to either file an appeal or set a trial date to go to court on the case. “We’re waiting to see what some of the other cities are doing,” she said. “Although [the judge] feels that we may have a difficult time with the lawsuit . . . These are all the things that we’re reviewing right now.”

Legislative Discourse

Now that redevelopment agencies have officially been dissolved, the legislature is expected to start conversations in upcoming legislative hearings on the future of redevelopment. The senate governance and finance committee is expected to conduct a hearing on February 22, while a joint hearing of state assembly committees is expected on March 7.

Additionally, California Assembly Speaker John Perez of the Los Angeles district has introduced a “post-RDA” bill known as AB 1585, which provides solutions to several key issues brought up in previous bills, including affordable housing funds and responsibilities, loan repayments, government purpose assets and other issues.

“We’re pretty optimistic that we’ll be able to get the votes for it,” said John Vigna, spokesperson for the office of Assemblymember Perez. “Redevelopment has been such a hotly contested issue over this past year that this particular fight has taken on a life of it’s own. But now that the redevelopment agencies are no more . . . It does beg the question, ‘How do we continue replicating the work that they do that was good and that was positive?’”

Kennedy said the main goal of the CRA now is to help cities and counties deal with dissolving RDA assets and housing functions based on current legislation. But how the state or local governments will fund the existing needs for such things as economic development and affordable housing is questionable.

“A collection of tools that may be there are not going to have the financial fire power that redevelopment previously did,” he said. “[We] will be entering an era of diminished expectations and diminished opportunities . . . But the need for what redevelopment previously did hasn’t gone away, so there will probably be something.”