Budget deal threatens redevelopment across California

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Community redevelopment agencies throughout Southern California warn that the proposed state budget deal would hinder or even stop new projects. Under the deal, the state would seize nearly $2 billion in property tax revenue that would have gone into redeveloping blighted areas around California. KPCC’s Frank Stoltze reports.

Frank Stoltze: In Southern California, Robin Hughes is one of dozens of developers of affordable housing.

Robin Hughes: The way we build our housing, the financing that we get to build our housing, typically comes from a combination of private sector, so we go out and get bank loans and we get equity from investors. But key to making our projects affordable to the families we want to serve is the public subsidies, and we rely heavily from funding from redevelopment agencies.

Stoltze: Hughes, who heads Abode Communities, says redevelopment agencies often provide the seed money for projects to get off the ground. She worries about state budget cuts.

Hughes: We may not be able to go out and acquire that vacant lot that is a blight in the community to build high quality affordable housing, or to preserve a historic building in a community that could provide affordable housing, without these redevelopment dollars.

Stoltze: Cecilia Estolano heads the community redevelopment agency in Los Angeles. It stands to lose more than $70 million under the state budget deal. She spoke with reporters outside of one her agency's mixed-use residential projects addressed reporters in front of one of the agency's projects at Hollywood and Vine.

Cecilia Estolano: The state takes $72 million from CRA-LA and this is the last project of its kind for 5 to 10 years. Why? Because the state is hitting us at the worst economy in 70 years. We're going to hit a 26 to 47 percent decline in our property tax increment – the life blood of redevelopment.

Stoltze: Agencies like Estolano’s use the property tax increment to subsidize projects in blighted areas. One proposal floating in Sacramento would shift 10 percent of the increment to the state while extending the length of time redevelopment agencies can collect money. Officials of those agencies oppose the idea. They say it would transfer many billions of dollars to the state over the next four decades.

During a news conference in Sacramento, Governor Scharzenegger said local officials need to accept the cuts.

[Audio of Governor Arnold Schwarzenegger]

Stoltze: In Los Angeles, union leaders joined local officials in vowing to fight the state’s cut to redevelopment agencies. Those agencies fund projects that create good paying jobs, says Richard Slausen of the building and construction trades council.

Richard Slausen: Here we have the state of California undermining the very thing that the federal government has decided that would take us out of the depression that we are currently in and that is creating good jobs – good paying jobs across the United States.

Stoltze: Los Angeles Mayor Antonio Villaraiogosa:

Mayor Antonio Villaraigosa: We're here to say, not just to complain. We're here to say we're going to fight Sacramento.

Stoltze: The mayor and other local government leaders have threatened to sue the state. Ann Kinsel is a community activist from Reseda who joined the mayor.

Ann Kinsel (shouting): Right now, it’s threatening time. Call the SOBs up and tell them. (cheers). I'm 82 years old, I say it like it is. Call ‘em up and tell ‘em they're not going to get re-elected.

Stoltze: Kinsel is one of many people who wonder what will become of California under the deepest budget cuts in a generation.