Raising the CRA Cap: Pros and Cons

In January, 1988, Mayor Bradley proposed to raise the spending limit for the Community Redevelopment Agency from $750 million to $5 billion. The proposal has sparked a debate among the social services, the legal services, and the City Council about how the city can best spend the redevelopment-generated tax revenues.

As the result of a 1977 lawsuit initiated by Councilman Emani Bernardi, the CRA is limited to spending $750 million of incremental revenue from the Central Business District redevelopment area. After reaching the spending limit, subsequent revenue would accrue to the General Funds of the City, County, and School District. It is likely that this limit will be reached in approximately five years.

Anticipating the attainment of the limit, the Mayor's proposal to raise the cap would allocate 50% of the funds for the development of housing and homeless services by the CRA, while the remaining funds would facilitate development in the downtown area. The varied responses to the proposed plan center on feelings about the CRA and a concern about how to most appropriately spend the tax revenues.

"The CRA is an effective agency for developing low-income housing," claims Ruth Schwartz, executive director of Shelter Partnership, a non-profit organization designed to develop housing for the homeless. "The CRA has financed over 20,000 new or renovated units. The majority (62%) of all units are affordable to low and very low-income people. Of the city agencies, the CRA is certainly the least bureaucratic and most effective entity."

However, many do not share Schwartz's opinion. Bob Erlenbusch, the Co-Chair of Health Access Coalition, argues that "the CRA is not a housing agency, and it is therefore inappropriate to develop and implement a housing policy for the city of Los Angeles. The City Administrative Officer’s audit of the CRA also revealed that there is no accounting of how funds are spent; it has no guidelines for recommending projects and programs to be included in the City's Community Development Block Grant applications, and there is no clear way of measuring the Agency's performance." 

Disagreements also focus on how the money should be spent. Advocates of raising the limit claim that since federal and state support for housing has declined, the Mayor's proposal to spend $2.125 billion for housing and homeless services is "one of the most progressive housing measures proposed nationally by a city mayor," according to Schwartz.

Another concern of advocates is Proposition 4, the Gann Spending limit. If the cap is not raised, one-third of the revenues will go to the city; one-third to the County and one-third to special districts. The City and County, however, will soon reach their limit on the revenues they can collect under Prop 4. "If the cap is not increased," notes Schwartz, "the funds collected will probably have to be returned to the taxpayers and will not be available for essential services such as general relief and mental health clinics."

Critics of lifting the cap would agree that funds for public services are desperately needed, and therefore don't believe that $2.2 billion, the other 50% of spending by the CRA, should be diverted to commercial development. "When basic programs in L.A. and the County health system are on the verge of collapse, it's outrageous to spend taxpayer funds on condominiums, night clubs, and street lights downtown,". states Erlenbusch.

In light of Erlenbusch's arguments, he has helped organize the Campaign for Critical Needs, a coalition of community groups and advocates to challenge the Mayor’s proposal.