CRA maps plans for funding cutoff on downtown projects.

Work in that area to end if spending cap is retained

Government funding for redevelopment in most of downtown Los Angeles will be exhausted in June, under a new plan to phase-out the L.A. Community Redevelopment Agency's Central Business District project area.

The CRA for 20 years have been giving and loaning hundreds of millions of dollars to developers whose projects benefit downtown (for example, by restoring historic structures, expanding and renovating public buildings, and building affordable housing), and it has been funding social service projects in the CBD.

All that would end next year under the draft five-year plan completed last week, which is based on the assumption that a court-imposed $750 million tax-collection cap for the project area will not be lifted. The plan for phasing out the CBD project area will be the topic of a public hearing this week.

If the cap remains in place, the CRA will not be able to fund additional redevelopment in the CBD after the end of the current fiscal year, which began July 1.

CRA project areas are funded through tax "increment," which is the increase in property tax collected in an area after the project area is designated. The cap on CBD tax increment came about as the resolution of a 1977 lawsuit brought by former L.A. City Councilman Ernani Bernardi.

He believes the CRA abuses its power and wastes too much money on questionable commercial projects. He favors raising the cap only to pay for affordable housing and social services.

The draft plan calls for the CRA to complete a few affordable housing and homeless shelter projects already approved; for example, $500,000 would be available to complete construction work on six Single Room Occupancy hotels. The CRA would help complete the Grand Central Square project at Hill and Third streets ($4.5 million), and it would phase-out support for social service providers, such as Skid Row Development Corp.

Under the plan, the CRA would spend $6.1 million in fiscal 1994-95 on affordable housing construction projects and social programs. For example, in the current fiscal year, $2.4 million is available to fund 469 shelter beds. But after June of 1995, all the tax revenue collected in the CBD would be dedicated to paying off debt.

The CBD project area covers 1,549 acres and is one of the nation's largest redevelopment zones. It includes the Civic Center, the financial district, the Historic Core, the Central City East industrial section and the South Park residential community.

Over the past 20 years, the CRA has helped build 2,800 new housing units and rehabilitate 3,250 units in the CBD. Also, more than 20 million square feet of office, retail, industrial and institutional space has been developed. Of that, more than 3 million square feet is in rehabilitated buildings of architectural, historical and cultural significance.

CRA money helped with the renovation and expansion of the Convention Center, the Central Public Library and Pershing Square.

Early last year, the CRA set up a special escrow account to deposit most of its tax revenue and pay debt service on the $200 million in outstanding CBD bonds. Then in December, the CRA, L.A. City Council, L.A. County Board of Supervisors, L.A. Unified School District and L.A. Community College District all approved an agreement to lift the cap and allow the CBD to collect another $933 million for housing projects and $1 billion for other redevelopment.

The action had to be taken in the final days of 1993 because a new state law went into effect in 1994 disallowing such agreements. But the intergovernmental agreement still needs approval from the Superior Court (where the $750 million cap was imposed in 1977), and the agencies involved have yet to seek a judge's authorization to raise the cap.

Don Spivack, CRA director of operations, pointed out that even if the cap is raised, under the intergovernmental agreement, the CRA would "pass through" much of its tax revenue to the other governmental agencies. The CBD would continue to exist, and it could stretch out its debt repayment schedule, but it would not be able to fund redevelopment to the degree it did in the past, Spivack said.

Attorney Murray Kane of Kane, Ballmer & Berkman, which represents the CRA on this issue, said there are three main reasons the governmental entities haven't yet gone to court to raise the cap:

* Bernardi has filed four lawsuits challenging the validity of the intergovernmental agreement, based on allegations that the government boards involved violated the state's open meeting law (the Brown Act) when they approved it.

"Some of (the issues) go to the very validity of the documents necessary to raise the cap," Kane noted.

* Secondly, it takes time to prepare the case, Kane said.

* Thirdly, the governmental agencies have been trying to settle out-of-court by reaching agreement with Bernardi on a new cap.

"We anticipate going to court in the very near future," said Kane.

Some state legislators have expressed opposition to the cap being raised and have asked the state Attorney General and governor to intervene. Kane said the attorney general's office has asked to be notified if and when the CRA goes to court to raise the cap, but he doubts the state will ultimately oppose the action.

"The state should be joining us," Kane said. "For every dollar in retail sales downtown loses, the state loses seven-and-a-half cents."

The public hearing on the five-year plan has been scheduled for 9 a.m. on Thursday, Oct. 6 in the fourth floor boardroom of CRA headquarters, 354 S. Spring St.