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Abandon costly L.A. redevelopment agency, analysts say

January 10, 2012 |  6:04 pm

Los Angeles City Hall's two top policy analysts Tuesday recommended that the City Council abandon its redevelopment operation and nearly 200 agency employees, saying the city cannot handle more financial burdens in the middle of a major budget crisis.

City Administrative Officer  Miguel Santana and Chief Legislative Analyst Gerry Miller said the city would need to absorb $109 million in extra costs, including 192 employees, if it became the redevelopment agency's so-called “successor” agency.

"We can't afford it," Santana said.

Although the move would relieve the city of a potential financial burden, it also could leave the city with almost no control over the fate of a key economic development engine, which this year had a budget of about $670 million.

Santana said the city’s employee negotiating committee -– made up of Mayor Antonio Villaraigosa and four council members –- instructed him to “begin negotiations to initiate layoffs immediately of all 192 employees" of the Community Redevelopment Agency. But he objected to the notion that the city would be killing the agency.

“It’s already been abandoned. It’s been killed by the state. What we’re essentially doing is, we’re saying we’re not going to be responsible for implementing the closeout of the CRA and its projects.”

Last year, the state Legislature eliminated California's approximately 400 redevelopment agencies. Much of the $5 billion in property tax money they run on will now go to the state, counties and school districts. 

Under state law, a replacement agency must be created to handle the job of shutting down redevelopment activities, which were authorized by the legislature in 1945. Agencies must sell off their assets, but they also can complete economic development projects that already were underway.

Local officials from around the state, who vociferously protested and sued to try and stop the move to shut down the agencies, are now trying to persuade the Legislature to create a new mechanism to allow cities to pursue economic development and keep some of the redevelopment money. But prospects in the Legislature are uncertain.

Most cities plan to become the so-called successor agencies of their redevelopment agencies. Santana said Los Angeles could change course if the Legislature wrote a new bill shielding it from some of the large costs associated with shutting down the agency. But for now the city cannot risk having its general fund budget, which pays for basic services, take on so many new employees, he said.

In Los Angeles, city budget analysts found that redevelopment agency staffers make an average of $109,000 annually, considerably more than the $72,000 average earned by other city employees. They also concluded that redevelopment agency employees come with significant pension obligations since they do not contribute any portion of their salaries toward retirement

“In light of the substantial unknowns and potential impact to the general fund, we believe that it is not in the city’s interest to become the successor agency at this time,” the report states.

Cities throughout California must make a final decision on keeping or jettisoning redevelopment operations by Friday.

If the council decides not to be the redevelopment agency's successor, another local government body -– such as the county Board of Supervisors –- could choose to do. If no one wants the responsibility, the city’s redevelopment agency would be handed over to an oversight authority with three members –- all of them chosen by Gov. Jerry Brown, who pushed for an end to redevelopment agencies.

Los Angeles redevelopment officials have compiled a list of funds and projects that are now in jeopardy. Some $3 million could disappear from Mayor Antonio Villaraigosa’s so-called “clean-tech” business campus near the Los Angeles River. More than $5 million could be lost for affordable housing within downtown’s proposed Grand Avenue project, along with $10 million for proposed low-cost housing on Washington Boulevard.

“Everything is in chaos right now,” said Councilwoman Jan Perry, who is running for mayor. “We’re getting calls from developers every day, saying what’s going to happen to my project? We need to answer them and quickly.”

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