June 1, 2003 - From the June, 2003 issue

Superior Court Voids LA CRA's Central City Redevelopment Plan

The LA Superior court recently ruled that the City Center redevelopment project, as drawn up by the LA CRA, is invalid. The significance of this ruling is substantial. Among the projects tabbed for funding from the CRA were the LA Live entertainment complex and the convention center hotel. The future of those projects and the roadmap to continue the development boom in downtown now must be rewritten. On the other side of the coin, LA County has preserved a sizable portion of its revenues to service its programs. TPR is pleased to present this interview with Los Angeles County Supervisor Zev Yaroslavsky in which he addresses the significance of the ruling and what the decision means to the county.

Zev Yaroslavsky

A Superior Court judge ruled this week that the city of Los Angeles' approval of a City Center redevelopment project area violated terms of a 1977 court settlement involving much of the same downtown property. What is your reaction to the decision? What was the county's position in the litigation?

We're not surprised, but delighted because the city's approval of the redevelopment plan was illegal on its face. It had been adjudicated once before by the state courts -- it went all the way up to the state Supreme Court -- so the city was warned ahead of time that they could face the same fate. The county urged the city negotiate an approach that would meet both the city's and the county's needs. But, the city went forward under some very poor advice from its legal counsel and its staff.

The problem is that the original redevelopment plan put a cap on the amount of tax increment that could be diverted from the Central Business District Redevelopment Plan. The city has to live within that cap. I was on the City Council when we made that deal in 1977. The cap was $750 million of tax increment to be diverted from the various taxing agencies to the city. That included the county, the city, as well as the school district.

At that time, Mayor Bradley and the rest of us couldn't have conceived it would ever grow beyond $750 million. Well, it reached the cap relatively quickly, and ever since the city has been looking for a way to bust the cap. But, there's a reason for the cap. This money should be serving the purposes of the county, which is largely human services. Serving the poorer segments of our society, dealing with the problems of abused children's healthcare, and the whole gamut of issues that the county faces everyday is a significant challenge because the county is financially stretched. We are closing clinics and hospitals, laying off hundreds of employees, and to have $1.1 billion diverted from the county coffers over the next 45 years is a luxury we cannot afford.

A number of months ago, The Planning Report carried an interview with Law Professor George Lefcoe of USC, who suggested that re the creation of redevelopment project areas, a consensual arrangement between the county, the school district and the city with respect to the designation of new redevelopment areas would be preferable to a city acting in the absence of such consent. Do you share his opinion?

Absolutely. It's an issue between the city and the county (the school district is no longer affected). We asked the city not to go forward and approve the redevelopment plan a little over a year ago. We asked them to negotiate with us, to talk to us about something that accomplishes the city's needs without emptying the county's treasury. They refused and were very hungry to get 2002 into their base year calculation for tax increment. As a result, they rolled the dice and what they've come up with is not only no redevelopment plan today, but also no new redevelopment plan for the next eight years. So, rather than sacrifice a year trying to negotiate something with the county, they've lost eight years.

What is the significance of your reference to "no redevelopment plan for the next eight years?"

The Central Business District redevelopment plan expires in eight years, as does the contract involving the tax increment cap. The cap applies only for the life of the CBD plan. Once the CBD plan expires, they can propose another plan and we'll be at this again. But that's a ways off from now.

The L.A. Redevelopment Agency issued a statement in response to the judge's decision asserting that "everyone must now ask how the city of Los Angeles is to achieve their goals in downtown. It is unlikely there is a better alternative for meeting these needs." What is your reaction to their comment?

Well, not everyone has to ask that question. The city has to ask that question and the city should have asked that question before they approved this plan. They can't put the blame for their predicament on anyone else. They made their bed

The city does have options. They may have to scale back some of the ambition of their plans. They may not be able to subsidize major commercial development the way they had planned. However, they can still use the city's significant resources to leverage federal and state dollars for low-income housing.

They always cloak the redevelopment process in the garb of housing for the poor. But, in fact, a big chunk of the money that has been used in the redevelopment process has been primarily for two purposes. The first use has been for commercial development, high-rise commercial development, and retail development. The second use for their money is servicing the debt on the bonds they issue. To start, they've got to scale back their plans and prioritize. Then, if they want to underwrite a hotel next to the convention center-and I think everybody who knows downtown recognizes that the convention center would be significantly helped by a hotel-there's a way for the city to do that. They can forgive the bed tax for the hotel for a period of time – say, ten or fifteen years – which is worth tens of millions of dollars to the hotel developer. The city would lose that tax, but it would gain a hotel, which would presumably help the convention center. That would be a win for the city's development plans for downtown. If they really are serious about building a hotel next to the convention center, there's a way for them to do it without a redevelopment plan.

Beyond the hotel, the Staples people have said publicly and privately that they don't need the redevelopment plan to build their entertainment complex. They're going to build their amphitheater and the attendant facilities with or without a redevelopment project. They don't need the government subsidy for that. They do need help for the hotel. And, given the economics of hotels nowadays, that could be expensive for the city. But, on everything else, the Anschutz Group can do it on its own.

So, the city has a number of options. The first thing the city needs to do is come to grips with the fact that there are limits on what they are legally allowed to do. Their partners, in this case, are the county of Los Angeles, because we're not going to let our treasury be raided with impunity. We're going to fight to protect it.

This interview would be incomplete if you did not comment on the status of the county's budget, especially in light of political paralysis in Sacramento?


The status of our budget is in flux. Until the state passes a budget, we don't know what the impact will be on the county. This is an annual exercise we go through. We adopt a pro forma budget in June and then wait for the state to act to determine what the real budget's going to look like. That's even more the case this year because of the desperate situation the state budget is in. We're going to take a hit. The question is how big a hit.

We cannot have a rational resolution to the budgetary problem in California without a combination of revenue increases and cuts. To have cuts without a revenue increase means that, if they balance the budget, it will be on the backs of every single service that affects virtually every man, woman and child in the state and every city or county. Whether it's police or fire or child welfare or health care-the gamut of services that local government provides, both at the municipal level and at the county level, the cuts will be felt and they will be deep.

I was just speaking with some of my legislators this morning about where they see this budget negotiation going-and, nobody knows. If the Republicans continue to take the intransigent position of no revenue increases no matter what, then they are consigning the state, and all of its constituent parts, to a catastrophe. And, if the Democrats take the position of no cuts, which they're not taking anymore (the Democrats have actually proposed some very significant cuts), the same would apply. The Democrats and the Republicans have to put politics aside and try to get to a resolution.

This partisanship is foreign to me. All of us in local government in California, because we are legally nonpartisan, have a way of resolving our differences without being ideological and without being partisan. We remember who's paying our bills-the people. The state government has lost sight of that.

The state has got to ask itself how it got into this mess and I don't think that leaders in the state yet understand that they have a great deal of culpability for how they got into this mess. I'm not going to say it's anybody's fault. But, when a government spends significantly more money than it's receiving in revenues on a regular basis, it sets itself up for a structural problem. The structural problem has been exposed this year. And, it was evident that it was going to happen. This should never, ever be allowed to happen again. The way to prevent such an occurrence from happening again is the subject of some conversations a lot of people are having up and down the state.

I would assume then that you would be supportive of State Controller Westly's authorship of a ballot measure to bring back the open primary in California?

In both parties, both Democrat and Republican, the middle is disproportionately underrepresented. In California, we have a partisan primary, where you don't need a majority of the vote to get nominated. Because of that structure, whether you are Democrat or Republican, the ideological candidate has an advantage because the ideological constituencies mass together behind that candidate, even if it's 25, 30, or 35 percent of the vote.

As a result of this election structure, we end up with bills being passed in Sacramento that never would have seen the light of day in a prior era. Even under the current primary rules before term limits, where people had to account for their decisions over time, some of the bills that have been passed would have never seen the light of day. Now they're flying through both houses and getting signed by a weakened governor, vulnerable to pressure by similar ideological constituencies.

Workers compensation is a classic example of something that is out of control. In the last five years, the county's workers compensation costs have gone up by $250 million. It's gone from $150 to almost $400 million a year over the last five years. That's a lot of money for Los Angeles County. Can you imagine what we could do with $250 million? We wouldn't have to close a clinic, we wouldn't have to close a hospital, we wouldn't be laying people off-it's unbelievable. How did this happen? Look at the legislative record, look at the mandates that were imposed by the Legislature and ask yourself how did some of these bills get through and how did they get signed.

So yes, I am supportive of an open primary, more so today then I've ever been. Such a system would bring the middle back into play in these elections. And that's critically important because it's the middle that makes up the majority of the people, but they are not represented proportionally in the decision making halls because of the structure of the electoral process.

That would be a powerful platform for a campaign for governor, Zev. Could you be convinced to run for governor?

No they are not. I didn't want to be governor when they had a $10 billion surplus. Why would I want to be a governor when they have a $38 billion deficit?

However, we do need leadership-and not just in the governor's office, but in the state Legislature and across the political spectrum. This is a time that cries out for political courage. Let's hope elected officials throughout the state can summon it.


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