October 30, 1997 - From the October, 1997 issue

LA CRA’s John Molloy: A Candid Review of the Redevelopment Agency’s Agenda & Capacity

Despite calls in Sacramento for the abolition of redevelopment, a court victory by former Council Member Ernani Bernardi that capped the L.A. Community Redevelopment Agency’s expenditures Downtown and a brewing proposal to merge the CRA with the Housing Department, the CRA continues to thrive. The Planning Report is pleased to present the following update from CRA Administrator John Molloy on the agency's evolving programs and strategies.


John Molloy

“We have… seen reductions in the federal commitment to housing along with an almost complete shift from direct subsidy financing to the tax side. The IRS is now the federal government’s largest housing agency…”

Has the recent court decision in favor of Ernani Bernardi and against the LA/CRA forever set the CRA's spending cap for the CBD redevelopment area, and can the Agency continue to have a pivotal role in the CBD?

At this point in the evolution of our downtown strategy, the cap issue is very anticlimactic. We've ingrained in our thinking for the last five years that we wouldn't rely on a court victory with respect to the spending cap to maintain an aggressive development program in Downtown. We are now much more reliant on deals that provide a great deal of private sector money. We have moved away from the old concept of depending primarily on tax increment money, and we're frankly doing a lot more Downtown with a lot less.

I want to get your reaction to an article in the LA Times by Hugo Martin in May headlined: ‘CRA Tries to Tough Out Lean Times’. It spoke of CRA having to slash its budget from $133 million in 1993 to $97 million this year how its staff has already been reduced by about 100 and the noticing of another 23 for layoffs. It mentions the request by you to the Mayor not to divert funds from the CRA budget each year to pay for cityadministrative costs. What is your read of the fiscal health of your agency and what happened to that request to the Mayor re diversion of funds? 

The City hasn't hit us up for new funds, so that request was successful. We have made no secret about the agency's fiscal situation, whatsoever. We have been struggling to maintain our capacity in the face of diminished tax increment resources, as have other agencies up and down the State faced with recession and the concomitant reduction in property values.

Right now, this agency is as small as it can get and still maintain an aggressive, functioning program in 29 project areas City-wide. We now want to stabilize our work force and not make any additional cuts. We are encouraged by increasing residential values as well as some indications that commercial values have hit bottom and are stabilizing.

The Agency is currently shifting its approach in South Central L.A. Can you describe the change in strategy and tell us how it reflects lessons learned over the lifetime of the Agency? 

For many years, the CRA's activities in South Los Angeles were focused in three areas: around USC, around the Crenshaw Mall, and a small area in Watts. Today, much of the highest quality development in South L.A. is concentrated around those three nodes—and we will continue that trend. But only since 1992 have we begun to put the balance of South Los Angeles into redevelopment project areas. 

We are selecting additional nodes where we can begin to infuse some quality development. Central Avenue is one target area, particularly in and around the Dunbar Hotel. Another is at the comer of Broadway and Manchester, a very important intersection in South Los Angeles. A third centers around Vermont and Manchester. We are also working in Mid-City. We are looking at creating a development center, for example, in the area around the Ebony Showcase Theater on Washington Boulevard. 

We are also working closely with the Mayor and Council offices to develop an industrial reuse program for South Los Angeles.

The CRA's mission statement includes the following: "The Redevelopment Agency of the City of Los Angeles is the prime entity responsible for devising and implementing geographically-based action strategies that serve to check and reverse deterioration in Los Angeles' most troubled urban neighborhoods". Can you elaborate on action-based strategies to check and reverse deterioration? What are the tools in the CRA's arsenal to do that?

We are unique within the Los Angeles bureaucracy in that we think in terms of specific areas. Many other City programs are City-wide.

First and foremost, our tools come from the traditional redevelopment toolbox—tax increments, federal grants, and private sector investment.

We also use the planning tool to provide strategies around which private sector investment can rally. We use our ability to assemble properties. And we use our position to leverage the resources of other departments and bureaucracies. We’re very active, for example, in trying to leverage the Community Development Block Grant program as well as Economic Development Administration programs, Transportation Department programs, and others that can benefit our project areas.

The CRA mission statement goes on to say, “… the Agency will direct governmental and private sector investments as necessary to implement these strategies and will undertake the necessary steps required to engender new investment and growth in these areas.” “Undertake the necessary steps required”—could you elaborate for our readers on the meaning of this statement?

That runs the whole gamut from going through the visioning process—conferring with residents of an area and coming up with a plan—to going forward with implementation and proactively recruiting developers and others who will come in and invest in those areas.

The mission statement concludes with “The Agency remains prepared to assist any Los Angeles neighborhood facing economic or physical deterioration.” Does the Agency have the capacity to respond to such an expansive challenge?

The purpose of that section of the mission statement is to let every citizen of Los Angeles know there is no program of triage in this City—there is no policy that will keep us from going forward with reinvestment programs in any area. We will look at the potential in any part of Los Angeles that is experiencing financial disinvestment, and we will find a way to assist that area and begin a process of reinvestment.

The Agency has been directed by the Council to bring revitalization strategies and redevelopment programs to 29 project areas throughout the City, and an additional six areas are under study. I want to go back to this capacity question. What are the challenges you face in meeting such an expansive agenda?

First, we are at long last emerging from a period of economic downturn. During that period, however, the City was very forward-thinking in developing new approaches to redevelopment. Plans have been adopted, projects conceptualized, and financing mechanisms put in place. As real estate values now improve regionwide, we will begin to generate a new resource for reinvestment.

And that leads directly to the capacity issue, which goes far beyond the availability of tax increment money. It goes to our willingness to devote other City resources to troubled areas, and to proactively go after federal, State, and other programs which we can leverage to help revitalize these areas.

John, there has been a lot of discussion over twenty years since Prop. 13 and its successors about what is called the fiscalization of land-use. Now, more recently, there is a companion discussion, based on what West Covina is doing along the 10 Freeway—the fiscalization of the redevelopment assets. Is the City of L.A.’s Redevelopment Agency faced with the same tax needs as West Covina—sales tax revenues?

First, the Los Angeles Redevelopment Agency does not support those kinds of “fiscalization” processes which, in our view, run counter to the historically sanctioned purposed of redevelopment—revitalization of the inner city. We have been very judicious in that regard.

We have not used sales tax increments at all for new commercial development. Frankly, those revenues are needed to deal with larger issues within the City. Some of our neighbors, though, have moved much further in the direction of that sort of fiscalization process.

Perhaps, in some areas within Los Angeles, it may well be warranted and should be considered. But only in very tightly defined circumstances where the purpose is clear. We are now at a point where we may need to look at ideas like that to remain competitive with some of our neighbors who have gone much further down that road.

Could you talk a bit about the state of the L.A. Sports Arena and your take on the significance for Downtown L.A. of this proposed project? 

The Agency is gearing up in many ways for the implementation of that project. We are preparing to go forward with the property acquisition, working on the environmental mitigation issues and so forth.

Completing the Arena would be very positive for the City. We have repeatedly said that the project has tremendous value from a redevelopment perspective and for everything else that can occur in the Downtown area. We remain very optimistic and are working diligently on our parts of the implementation program.

Please also elaborate on CRA proposed & planned projects in Hollywood and the San Fernando Valley?

The project interest in Hollywood has been very, very strong as of late. We are deeply involved in major negotiations with the TrizechHahn development firm on a project at the intersection of Hollywood and Highland. That site is right above the end of the Red Line in Hollywood, and it could be a major catalyst for the Hollywood project area.

We’re moving forward on many other projects in Hollywood: the Egyptian Theater renovation, the retention program for Capital Records, a number of smaller commercial rehabilitation and job retention programs, the beautification of Hollywood Boulevard, the business improvement district and many of the other efforts out there. A total revitalization package is planned.

In the Valley, we have active programs in Canoga Park, Reseda, North Hollywood, Laurel Canyon and Pacoima/Panorama City. Our approach there is to deal early on with any signs of deterioration, check and reverse them quickly.

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I gather a new CRA project area has been proposed for portions of the North Valley in CD7. Can you elaborate?

We’re very optimistic and very excited about that project area. We already have an earthquake redevelopment project there now, and we’re transitioning it into a permanent redevelopment project. One of its major focal points will be on Van Nuys Boulevard, the main street of Pacoima, which has been designated as a Community Development Block Grant target area, as well. It will also include innovative programs for the Hansen Dam area and industrial redevelopment along San Fernando Road.

That project area is long overdue, and we are very anxious to get to work.

In the August issue of Metro Investment Report Joel Kotkin offered some instructions on how cities can be saved and even thrive. “I’ve offered some good news and some bad news; the bad news is that cities are never going to be the primary centers they once were. The City and the County of L.A. play a much smaller role in the California economy than they did 10 years ago and 20 years from now they will play an even smaller role and that is true of all major cities across the country”. Your reaction to Joel’s assessment would be welcome.

My sense is that his comments were directed particularly at Downtown. The role of downtowns here and nationwide is changing. We saw a period during the ‘70s and ‘80s of extensive commercial office development. But everywhere, the other aspects of downtowns—the civic center, the cultural center, the sports, and entertainment center—are becoming more important.

So, to the extent that Joel may be indicating that center cities will become less important centers of commerce and office space, he’s probably right. But they will retain a very significant role as center of civic discourse, culture, entertainment, and sports. Our efforts with the Cathedral, Disney Hall, the Colburn School, the Japanese American National Museum, the Arena and the New Coliseum are indicative of that transition.

Kotkin goes on to say that “Southern California, which has recovered from a whole series of cataclysms, has made only modest progress in reviving its civic culture despite considerable reductions in the crime rate, high job creation, and an improving real estate situation. We continue to allow ourselves to be positioned nationally as the poster child for urban dystopia.” Please comment on the health of our civic culture.

I’m not sure that Joel’s observations are entirely correct. We do face a struggle here with the fourth estate: Public perceptions are often formed by the media, and they are frequently just not correct. Part of the remedy is programs like NewLAMP (Los Angeles Marketing Partnership), in which we are working together to build a positive image for Los Angeles and the Southern California region.

Part of the solution is in the hard capital projects I have discussed above. And our image is changing. The tremendous success of the local movie industry is helping at the national level, and we’re really making good inroads locally. 

I really believe that we are going to continue to change that image and change the sense of civic involvement here in Los Angeles. This morning, the Board of Directors of the Economic Development Corporation was talking about this exact issue. NewLAMP is coming with a full court press. We are going to do some national advertising and we're going to succeed in changing people's opinions about L.A. 

Which recalls the proposed Figueroa Sports Corridor, the Coliseum and NFL football. What is your prognosis for such a sports corridor in downtown Los Angeles?

NFL football is going to come back to L.A.—there's no doubt about that. We're making a very strong case for the Coliseum, which is the natural place for the next NFL team in L.A. to locate. It has the history. And it also has the potential to be a first-class NFL facility for a lot less expense than any of the other options being discussed. 

I want to return to the structure of the Redevelopment Agency, which relates to its capacity to accomplish its newly adopted mission statement. Several proposals are now being floated to merge CRA and LAHD and CDD under one economic development entity. Your thoughts and comments on these proposals would be of great interest to our readers. 

Over a year-and-a-half ago I published my thoughts on that in a widely circulated white paper, which has been discussed in The Planning Report. The essential idea was that the total government resource base for housing and community development functions is shrinking; the block grant program has stayed at the same level in Congress for many years now, while inflation and the shrinking dollar have eroded its real value; and the HOME and Section 8 programs have also stagnated. UDAG and HODAG are memories. The State has not been forthcoming with significant dollar resources and local tax increment resources have declined.

We have also seen reductions in the federal commitment to housing along with an almost-complete shift from direct subsidy financing to the tax side. The IRS is now the federal government's largest housing agency.

The upshot is that we need to look internally to our ability to continue to function and be effective in that world of diminishing resources. And given that backdrop, an honest look at some consolidations within the bureaucracy is a good thing. I have been a proponent of that thinking. It would be worthwhile to go forward.

I want to also come back again to one other point you raised earlier. Drawing upon your experience both in Sacramento and L.A., how successful have redevelopment agencies and metropolitan cities in California been in reversing blight? What is the record of success that you call upon to enlist support for new ventures? 

Up and down the State, if you look just a few millimeters below the surface of any successful inner-city revitalization program, you'll find a redevelopment agency. This holds true in San Diego, San Jose, Sacramento, and in all the other cities that have had tremendous success with their downtown areas. 

We and other agencies in the State have been trying to be more successful in the neighborhood areas, as well. Most of the larger agencies have quite a few neighborhood-based redevelopment projects. Because the tax increment revenues in those areas have been smaller, it's been a slower, tougher battle. Frankly, we're all much more dependent on the block grant program than we are on tax increment in those areas.

So, the answer to your question is divided between the very successful big central city redevelopment projects Statewide and the more challenging neighborhood efforts. 

In Los Angeles, we are proud to stand on our record of accomplishment. We are strong believers in evaluation and hope to publish a comprehensive one in conjunction with our upcoming 50th birthday. 

TPR has an interview in its September issue with Lisa Stipkovich from Anaheim in part focusing on a new 89-unit affordable housing project that the City is bringing on-line this year. One of the successful lessons she draws from that experience was the fact that in Anaheim, her Community Development Department oversees an array of departments and agencies from the Housing Authority to Redevelopment to Community Development. She also worked cooperatively with the Police and with Code Enforcement. Anaheim employed a coordinated citywide approach to a major reversal of a blighted area. Is that a lesson that can be transferred to L.A.? 

That's a lesson we learn again and again from cities throughout the State. With resources as thin as they are, everyone in California is struggling to put together effective programs for housing construction, rehab, code enforcement, commercial rehabilitation, and revitalization in general.

Again, you really need to closely coordinate your resources, whether it be tax increments, the HOME program, the block grant program, EDA or whatever you have available. You need very tight coordination and control over those resources to be effective. If necessary, organizational restructuring should be considered.

Given the charter reform conversations that are taking place in L.A., what changes could be made to the City's charter to improve interdepartmental and agency coordination?

Clearly one of the main issues is the strength of the executive function. Charter reform efforts will look very closely at the balance between the executive and the legislative functions of City government. That's something that they must deal with.

Last question: A year from now, how should we measure the success of LA CRA?

You must go to the essential geographical function of the Agency that I talked about earlier. We should be measured by what we are able to achieve in each of those geographical areas. In some areas we have been more successful than others, and in some areas we have more money than we do in others.

The Agency's success, simply, should be measured by the success of its projects. I am willing to put forward that we are doing very well on that front. And we will continue to.

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