Monthly Archives: February 2012

Questions About The End of California Redevelopment

We are starting an extremely interesting and confusing period as redevelopment agencies (RDAs) come to an end. Firstly, RDAs were a powerful force in every city’s arsenal. They employed large staffs and had enormous budgets. A lot of the built commercial world is attributable to redevelopment through direct land contribution, infrastructure, subsidies, guarantees, loans or other physical or financial contributions.  RDAs created a lot of very good development that would not have otherwise been built. High quality, low income housing units were developed.  Many private and capable developers profited.

Legislation (AB X1 26) that allowed for redevelopment’s dismantlement appeared as if it were a minor line item in the Governor’s budget.  Many redevelopment  professionals did not take the legislation seriously. Many staff members at the RDA’s had a sense of their own special value and mission. With the weapon of eminent domain at their disposal and a large war chest of tax increment funding, RDA’s had enormous power if they wanted someone’s property. Attorneys were always available to defend RDA actions. The only remedy for a disgruntled private party was to obtain a better valuation in front of a judge. This same sense of entitlement led the RDAs to court in order to challenge AB X1 26 instead of negotiating with the Governor for a share in the tax increment. But the RDAs lost and the Agencies are now gone.

But what is not gone are the hundreds of projects in various stages of completion and an enormous financial obligation to pay bondholders that financed these developments. The biggest question and greatest complication is that there are no detailed rules that can be used as guideposts. Only the barest instructions are available and they mostly consist of the institutional framework and not the details of dismantlement. In other words each RDA has flexibility to wind itself down as long as it meets state oversight.  Many cities have decided the risks of administering the end of their RDA is too great and have abdicated the responsibility to the state. Los Angeles is the largest example. Nelson Rising was selected yesterday to be part of the three person panel to unwind the Los Angeles RDA

I took a look what the RDAs own in Los Angeles County. I counted almost 2500 parcels of land. Some parcels comprise one project area but it is an enormous amount of property. Many of the sites are in very valuable commercial locations or are perfect for multi-family development.  By next week I should have it mapped out as a feature layer on my MAPP program.

Will the vacant properties be sold if there is no agency to manage them? Will the proceeds for the land sales be needed to offset bond obligations and administrative costs? What kind of conflicts of interest will be created by the selling agencies? Who will be hired to evaluate and dispose of the sites? What is the future of subsidized development? Will new city agencies be created or will exisiting ones take over the redevelopment mission in another form?

I have already heard from a few clients that they are eyeing certain properties. The same developers who already partnered with the RDAs and have proven capabilities are in the best position to purchase these properties. It is after all a very small world when it comes down to the final short list.

Order can be brought to the disposition process. The ideals that led to redevelopment can still be preserved as properties are sold. However the challenge is enormous because of the large number of sites, the value of the properties, and the clunkiness of any disposition apparatus on this scale. Unfortunately, many cities and government agencies that have operated by weak legal standards or lax oversight in the past may be tempted to dismantle their RDA’s in the same manner.

We are just at the beginning of the process but I expect it will heartbreaking to many and an opportunity for some. For readers that want a better understanding of the end of California Redevelopment, one of the best sources is The California Planning & Development Report. It makes their publication essential reading.