CRAs create rather than cure blight, grand jury charges.

It recommends changes in state law to tighten controls

Community redevelopment agencies in Los Angeles County sometimes create blight rather than alleviate it, and they pit local communities against each other in destructive, expensive battles to lure retailers across city borders.

Those were among the findings of the 1993-94 Los Angeles County Grand Jury in its final report submitted to the Board of Supervisors earlier this month. The grand jury's Community Redevelopment Subcommittee, in response to citizen complaints, studied local CRAs over the past fiscal year.

CRAs are special taxing authorities established by local governments to cure economic "blight" by funding redevelopment. In Los Angeles County, 70 of the 88 cities and the county have established CRAs with a total of 186 project areas.

CRAs incur debt by selling bonds and repay the debt by collecting and spending "tax increment," which is the increase in property tax revenue collected in a given project area after it is established. If a project area did not exist, that new tax revenue the community generated would be divided among other government bodies, such as the city, country and school districts.

The grand jury discovered several abuses of CRAs' authority and recommended legislation to provide greater oversight of the agencies.

Much of the criticism in the report dealt with the area of blight alleviation. The grand jury noted there is no law defining blight and some cities take advantage of this broad power by declaring open spaces, never urbanized, as blighted, in order to collect and spend more tax money.

Areas designated as blighted by cities included desert landscape (Palmdale and Lancaster), range land (Hidden Hills) and an entire city (Hawaiian Gardens).

In Monterey Park, the city was able to add 174 acres to a redevelopment project area despite a finding by the County Taxing Entities Fiscal Review Committee that the area was not blighted and that its addition would be an abuse of redevelopment law.

Once an area is declared blighted and a project area established, CRAs at times contribute to blight problems by encouraging the development of shopping malls which pull trade away from mom-and-pop retailers and drive them out of business, further deteriorating troubled areas or creating new blights, the grand jury found.

"Locally owned business thereby suffers and another potential CRA project for blight removal is created," the report states.

Perhaps most remarkable, the grand jury found that CRAs create "counterproductive" redevelopment competition between cities.

Cities use redevelopment money to entice businesses, especially retailers that generate sales tax revenues, within their boundaries.

"This has led to increasing economic rivalry among neighboring cities, despite the fact that economists agree that the only way to economic survival in Southern California is through regional cooperation and planning, not cutthroat competition," the report reads. "At the same time, the costs involved in intercity competition, in the form of financial incentives offered to the business in question, must be paid for by taxpayers in both communities.

"Furthermore, this race to acquire sales tax generators is symptomatic of an underlying problem with CRAs: the transformation of CRAs from agencies concerned about blight to agencies seeking short-term economic gain. ... By concentrating on sales tax generators, they encourage development that produces low-paying jobs that may not be of long duration."

Other findings of the grand jury included:

* Some CRAs incur excessive administrative and professional costs -- sometimes accounting for more than 60 percent of a project area's budget;

* While the tax increment financing system is advantageous in times of growth, it worsens municipal finance problems during depressed or stagnated economic periods, such as the Southern California recession that began in 1990;

* Some cities use CRA money for things other than redevelopment. South Pasadena, for example, used CRA money to finance its campaign against extending the 710 (Long Beach) Freeway.

Most of the grand jury's recommendations involved advocating passage of state legislation aimed at controlling CRAs and increasing community involvement.

For example, the grand jury encouraged the county supervisors to support passage of laws that would continue citizen advisory committees (now formed to determine the need and support for a CRA project area) throughout the life of the project, and that would provide for adoption of an official definition of blight.

Other recommendations included:

* Support state legislation to discourage dispossession of existing businesses and residents to attract businesses the CRA deems more desirable;

* Support adoption of a law requiring approval of two-thirds of the electorate to authorize creation of a project area;

* Support a law to discourage CRAs from luring businesses from one California city to another by using tax increment to provide incentives;

* Support legislation to clearly distinguish activities that CRAs can pay for from those more properly the obligation of cities.