January 1, 2003 - From the December/January, 2003 issue

Stepping Down From LA CRAA, Jerry Scharlin Reflects On Achievements & Lessons Learned

Jerry Scharlin came to the Community Redevelopment Agency as a specialist in corporate turnaround strategies. Before long, Scharlin had assumed the position of Administrator, making a pledge to turn around one of the most maligned and beleaguered agencies in Los Angeles. TPR is pleased to present this interview with Jerry Scharlin as he prepares to step down from his post as Administrator of the CRA. Scharlin discusses the challenges he faced entering the job, the lessons he learned while in the position and the impact and legacy he hopes to have left behind.


Jerry Scharlin

Jerry, as you step down from your post as Administrator of the CRA/LA, give us a synopsis of the challenges that face any CRA administrator in an urban redevelopment agency-challenges that will face Bud Ovrum, the incoming Administrator of the Agency.

The first challenge relates to the insufficient funding of redevelopment. There is particular concern at this time because of the unfortunate situation with the state budget and the likely withdrawal of funds from redevelopment agencies. We don't know what the size of the hit will be, but it's likely to be significant. This withdrawal of funds unfortunately will occur in a context where there is already insufficient funds to do redevelopment.

Here in Los Angeles, we have a unique challenge related to governance. We operate under an oversight agreement with the city, which makes decision-making very cumbersome and redundant. Effectively, all decisions have to be approved not only by our board, but also by the City Council. This creates a situation in which the Administrator is subject to the views of too many people.

Redevelopment is a very complex endeavor. Thus, to a very significant extent, the quality of redevelopment is a by-product of the quality of the staff, and the managerial, administrative and technological systems supporting the staff. The CRA/LA has some very talented employees. Every effort should be made to retain high quality employees and to hire new talent, when appropriate. The labor unions could be of assistance on this issue.

This institution also suffers financially and politically because approximately half of its redevelopment areas were not initially structured properly. Thus, certain areas do not produce any tax revenue or produce very little. That's a problem that needs attention, by expanding the redevelopment area base or combining them. The CRA/LA has recently targeted this problem. Hopefully, the effort to solve the problem will not get sacrificed by the state's budget problem.

Jerry, what is the legacy that you believe you've left behind given the challenges you enumerated above?

What I have attempted to do is create simultaneously a more business-like and more supportive environment for the employees. The institution was in very substantial chaos when I got here. It is, at least from my view, a much more orderly entity now. Currently, the CRA/LA has the tools, including managerial experience of its senior staff, to, in important respects, manage itself.

The key managerial indicators that one would usually look at are in reasonably good shape. We have a good budgetary and accounting system. We now operate under a clearly defined strategic plan. All the key work processes have been upgraded. Technology has been upgraded. We've hired approximately 35 people. All CRA/LA projects can now be identified, planned, tracked and managed. That capability did not exist before. Currently, managerial decisions by senior staff are being made in an environment that is largely open and co-operative. We've provided key redevelopment tools by moving forward with a series of redevelopment plans, including, but not limited to two in downtown. Most importantly, I repeat, is that this is complicated work and it is performed not by an Administrator alone, but by the hundreds of CRA/LA employees.

Thus, to the degree the CRA/LA is operating in a rational way and to the degree the employees have the education and the necessary background to do the work, the results will be good. Part of what I tried to do was to bring in new, talented people, to augment the existing staff. I tried to create an environment that would allow all of the employees to do the work that they're trained to do. The legacy is one of creating a more stable work environment, providing various managerial tools to its employees and providing redevelopment tools to various communities. Hopefully, those advances can be built upon.

You came from the private sector where you were involved in corporate turnaround matters. Compare and contrast that experience with working in the public sector, within local government, and within the CRA?

The political environment is a very substantial difference. It makes every decision much more complicated. It is really, in some ways, overwhelming - in terms of the political influence both inside and outside of the institution. The good news is that, in my experience, it is possible to move forward in positive directions. It does require bringing together a lot of constituents. However, it is possible to make changes, real changes, not superficial ones-even if it takes a long time and not always externally evident-by involving those that are affected by the changes. The part that I feel good about is that I have seen positive change. The CRA/LA employees have experienced empowerment and excitement about some of those changes. So I conclude that it is possible to make positive change. It is difficult, but the institution is important. It's worth the effort. It's important that our public institutions function.

Many redevelopment agencies in the state are in dire straits. The Governor has hinted that CRA funds may be tapped to cope with the state's deficit. Local critics have argued, given the state's fiscal crisis, that CRAs are, in fact, dinosaurs because their revenues, whether housing dollars or discretionary local dollars, be frozen or taken by their parent jurisdictions. Is there still, in your opinion, an ongoing viable role for redevelopment agencies in California?

There are serious problems with the way CRA's are currently legally structured-resulting in lack of revenue. It may be worthwhile thinking about how to change that. But what is ultimately critical for the state of California and local government is the power of CRAs related to land assemblage. Whether one is interested in job creation or housing creation or other issues related to livable communities, there will be some role for the land assemblage function. That tool will have to be married somehow with funding. With the passage of time, because of the expected density and population increases, that function will increasingly become more important, not less. However, it will operate best if it can be linked to a larger community plan or strategy, so that it's role is better understood and supported.

CRAs, as part of their mission, are to catalyze a dormant market in an area. But sometimes the amount of money it takes for major projects, some would say, is exorbitant-tens and tens and tens of millions of dollars to stimulate new investment. Some of the outcomes of those investments have not proven very successful in dealing with blight. Before a major investment is made by a redevelopment agency in a Hollywood & Highland or the Santa Barbara Plaza, what process, criteria for evaluation of return should be employed by a CRA?

Let's get real. The LA CRA, unlike some other redevelopment agencies operates in very difficult geographic areas. Redevelopment of truly physically and economically blighted areas is difficult. If it weren't hard, the redevelopment CRA/LA wouldn't be there. The CRA/LA is in those areas because the capital markets and free enterprise system are not working well. Therefore, it does take an extraordinary effort to try to stimulate the capital markets. I don't think there is any magic to those decisions. One makes the best judgment one can. Some of these projects will succeed better than others. The extreme alternative is to make no investment at all and that is even more harmful.

It is not sensible to have a single development strategy for all project areas. Every community is different. Every sub-economy is different. However, I have seen, in areas where CRA initiated investments, that good, if imperfect, results can occur. This is true in Hollywood, and many other locations where the CRA/LA quietly does it's work. I am confident that the public investments ultimately are worthwhile. There is an effective shortage of developable land in Los Angeles. Job and housing creation is tide to land issues. CRA/LA can play a critical role in solving these problems.

A change, that I would make, if the we had the funds, would be to get ahead of the process-by assembling the land, relocating occupants, performing certain entitlement work etc., prior to engaging with developers, in order to set the stage for the capital markets and capture for the public the financial value of the assemblage and entitlement process. That's a long discussion that we don't have time for here.

For almost the entire Riordan Administration, there was discussion about reorganizing redevelopment, housing, and related other units of local government in Los Angeles to more holistically and effectively approach the challenge of economic reinvestment and development. Not much has happened despite a voter-approved new charter. Is there anything now on the horizon with respect to the reorganization of the different silo-like functions that touch or involve the redevelopment agency?

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I'm not aware of any plan to do that, but I could be out of that loop. However, I'm not convinced that a re-organization will help. Ultimately, what we need is a coordinated development and redevelopment strategy. Reorganizing won't, in and of itself, create the needed economic strategy.

Once a strategy is identified, and agreed to politically, one can provide clearer roles to these various City departments. A strategy is a way of coordinating these various departments without dealing with the difficulty of combining these bureaucracies. My sense is that the mayor's office is moving in that direction and they are thinking of using certain mechanics, that we have developed and employed in this CRA/LA to co-ordinate departments within the CRA/LA, to try to clearly establish strategies and goals and roles for various relevant City departments. They have just begun that process, but it ought to be tested before attempting a very complex consolidation of departments.

Speaking of coordination, what have you learned about how to collaborate with other independent jurisdictions in the metro area, like the school district and MTA, given that their facilities and agenda often impact your community development agenda? How difficult is it to collaborate?

We have yet not found a way to coordinate as much as we would like to. That's certainly a direction that we need to go. We've seen a model of co-ordination in San Diego where there is some really wonderful work being done by the combined school system, redevelopment agency, and other institutions. This is a critical issue and if we can cause more coordination to take place, it would be very helpful. If it has not already done so, the Los Angeles School system should consider the San Diego model. There are ongoing conversations occurring with the hope of greater co-operation, but I am uncertain if they will succeed.

Let's turn to what advice would you give to your successor, Bud Ovrum? What would you put in the top drawer of your desk to be opened on the first day of his new job?

I continue to think that it's impossible for any Administrator to be everywhere. There are around 400 projects that the CRA/LA is involved with. Approximately 50 of them are deemed very important. That means that one must depend on other people doing their job-one must depend on the entire system working. Thus, I would hope that the new Administrator would at least give some weight to the ongoing organizational improvement efforts and processes that we've started.

Importantly, we have improved the capability by bringing in new talented employees. There may be some retirements of older employees in the near future. The average age of the work force is very high and thus the CRA/LA needs to continue to develop and execute upon a long-term employee succession plan.

I would encourage continuing efforts to create an orderly, safe and productive environment. The CRA/LA has experienced downsizing in the past whereupon its systems essentially collapsed. Morale was very low. It takes an effort just to maintain a reasonable environment- one that is both business-like and supportive of professional employees. Continuing that effort will help.

Another aspect is to consider addressing the issue of the oversight ordinance-to determine if there could be some better balance between the subject areas over which the City Council must maintain control and those matters that would be better left to the Administrator and to the CRA board.

For the long-term economic and political stability of the CRA/LA, I would focus on the so called "deficit project areas", which, because of their condition, tend to cause certain communities to feel that their needs are not being met. Ultimately, those issues feed into the political system and cause a lot of pull and tug on the CRA/LA. As of this point, we have created a certain level of economic stability, by going forward with the downtown redevelopment plans. However, for the long-term, one needs to deal with these other redevelopment areas in order to provide further hope for some of these communities and greater long-term stability for the CRA/LA.

Jerry, in the last year, the agency has brought almost 2,000 acres under its jurisdiction. Given the fragmented nature of the land that the agency is responsible for now, and given the budget crisis, was it prudent to add land? Give our readers your view on expanding the CRA to more areas of the City.

One must take a long-term view. At some point the state will have solved it's budget problems and funds will again flow to redevelopment. Expanding was exactly the right solution. If we operate in the right areas and the redevelopment areas are properly economically structured, it will create the revenues that will allow the CRA/LA to be successful, both for the communities in the subject areas and for the institution as a whole. This is a situation that lends itself to self-fulfilling prophecy. By expanding into these geographic areas, by creating better efficiency internally, one provides the tools necessary for success. Creating redevelopment areas in order to create funding and provide the eminent domain tool makes it possible to be successful. The alternative is shrinking. I was against shrinking the CRA/LA. I am against it now. This institution is too important for the city. Thus, we went forward both with the downtown areas and with upgrading plans in other areas including the San Pedro area. I am confident that moving forward in those areas was and is the right strategy.

In a companion piece in TPR this month, the former chair of both the City and County Planning Commissions of Los Angeles, George Lefcoe, suggests that very little planning actually takes place in the Los Angeles basin-a lot of mediation and arbitration, but very little planning. He adds that, perhaps the only planning taking place, is within redevelopment areas and is being done by the CRA. Is George right here?

I cannot speak about institutions outside of the redevelopment arena. But, it is very clear to me that one of the positive aspects of redevelopment is that planning can occur and does occur. The CRA/LA has some very talented planners and it is exciting to see what they are capable of doing. What the CRA/LA needs is funds and political support.

Lastly, given the incredible experience you have just had, and this on top of your career to date, what are you looking forward to doing next?

This was a very enriching experience for me-I'm so happy that I did it. I've seen areas of this town and met many wonderful people in communities that I would not have otherwise experienced. I would like to continue, in some form or other, to be involved in the public sector, even in a minor way. For example, I'll soon be a board member of one of the homeless shelters located downtown. Otherwise, I am joining together with some dear friends and turn-around colleagues, looking for the next financial opportunity and adventure.

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