During Gov. Jerry Brown’s inaugural address, he declared the year ahead will demand courage and sacrifice, noting his budget will be painful.

The Hollywood & Highland center was one of the projects that the CRA/LA helped build in Hollywood. (photo by Edwin Folven)

In his proposed budget, Brown is planning to close down all of the Community Redevelopment Agencies (CRA) statewide, using their $5 billion budget for essential local government services. Meanwhile, pundits and politicians statewide are rolling up their sleeves preparing to duke it out amidst the billions of dollars on the line, including approximately $930 million allocated to the Community Redevelopment Agency/Los Angeles (CRA/LA).

During his State of the State speech on Monday, Brown didn’t mince words about doing away with California’s 400 CRA offices.

“It is a matter of hard choices and I come down on the side of those who believe that core functions of government must be funded first,” Brown said. “But be clear, my plan protects current projects and supports all bonded indebtedness of the redevelopment agencies.”

Yet lines have been drawn and many are looking out for what they believe to be the best way to serve their community. Mayor Antonio Villaraigosa immediately took a stand against Gov. Brown’s proposal to do away with CRA/LA.

“Los Angeles is prepared to shoulder its fair share of the responsibility, but any scenario that would completely eliminate the Redevelopment Zones and State Enterprise Zones is a non-starter,” Villaraigosa said.

Depending on whom you speak to, Brown is either seen as a man with a plan to repair the state’s budget, credit rating and reputation, or as a Sacramento pickpocket attempting to steal local funds to fix the financial crisis the state currently finds itself in.

Christine Essel, CEO of CRA/LA and a former Paramount Studios executive, believes dismantling the redevelopment agency with a 60-year track record of success in creating jobs and stimulating economic activity is a mistake.

“In Los Angeles, redevelopment has made a significant economic impact in our city, through projects such as Staples Center, the development on Hollywood Boulevard, and Plaza Pacoima, just to name a few,” Essel said. “Clearly, Governor Brown is choosing the wrong time to take such drastic steps to eliminate this proven job creation tool. Our initial review has also raised concerns about the legality of the governor proposing to take $1.7 billion of redevelopment funds in fiscal year 2011-12, in light of the voters’ support for Proposition 22 in November, which prohibits the state from removing local revenues for state purposes.”

Jim Dantona, a spokesperson for CRA/LA, agrees that Sacramento is trying to work around the law.

“I think Prop 22 wouldn’t allow them to take funds, which they feel they need, so in order to stay within the law and take that money they want to eliminate redevelopment,” Dantona said. “You create one set of rules and they find a way to get around that.”

Los Angeles currently has 32 community redevelopment districts responsible for the revitalization of South Park, downtown’s historic core, as well as Hollywood and North Hollywood, among other areas. According to the CRA/LA website, the agency employs 216 full-time positions with salaries totaling over $22.5 million. While the CEO’s salary is listed at $223,256.00, the lowest salary belongs to Clerical Assistant II at $51,300.

Under current law, redevelopment agencies receive most of the growth in property tax revenues, attributable to increases in property value (“tax increment”) in redevelopment project areas. A portion of the tax increment revenues must be shared with other local agencies, including counties and school districts, and at least 20 percent must be used to preserve, improve, or expand the supply of affordable housing.

A staunch supporter of CRA/LA is Leron Gubler, President and CEO of the Hollywood Chamber of Commerce. “We think it’s very unwise for the state to do away with redevelopment agencies,” Gubler said. “The public needs to understand that all projects that redevelopment agencies build also generate a lot of taxes for the state and cities. If they do away with the redevelopment agencies they’re going to see a like decrease in their tax revenue from these projects that won’t be [built].”

Completed redevelopment projects like Staples Center and the Hollywood & Highland complex have been a big boon for the city. Although CRA/LA’s current 44 redevelopment projects under contract will not be affected by the governor’s budget plans, future projects, including the completion of the Hollywood redevelopment undertaking, some additional 20 years in the making, could be shelved.

Los Angeles City Council President Eric Garcetti, 13th District, finds himself somewhere in the middle.

“All levels of government are feeling the crunch of this economic crisis,” Garcetti spokesperson Yusef Robb said. “It’s important that we work together to make sure the people of California and Los Angeles are best served. That’s what this discussion has to be about.

“We’ve seen incredibly sophisticated and smart use of redevelopment funds in Hollywood for example where you have Hollywood & Highland that has created jobs and transformed neighborhoods. The construction of the Kodak Theatre for example not only made sure the Academy Awards stayed in Hollywood where they belong, but soon Cirque de Soleil will begin a ten-year run on Hollywood Boulevard with more than 360 shows a year. The city not only benefits through the jobs surrounding that performance but from tax revenues of all of the surrounding restaurants and shops where people will hopefully go out for dinner and drinks during their night out.”

Evan Westrup, a spokesman for Brown, pointed out that the elimination of the CRAs would actually improve the current fiscal situation.

“This eliminates a state subsidy for state private development,” Westrup said. “This doesn’t preclude local government, cities and counties from continuing to pursue redevelopment. Ultimately, this will provide locals, and that includes cities and counties, with funding they would not have previously received. And it’s not only additional funding; it’s funding that can be spent on core services such as education and public safety. What’s happening now is that you have redevelopment agencies whose budgets have continued to balloon while local government budgets have shrunk or flattened so you have police forces being cut, fire stations being cut and you have school staffs being cut, but at the same time you have money for various redevelopment efforts.”

Last week it was reported that CRA/LA has set aside $5.5 million in public help for Watts, yet earmarked $52 million to build a garage for the Bunker Hill area Eli Broad museum. But Dantona is quick to point out that while that may seem out of balance, that is just the nature of politics.

“Unfortunately, we are restricted to funding that is generated by the area,” Dantona explains. “Downtown is generating a lot of money. We can’t take that money and move it to help another area. Redevelopment laws are very strict about that. So what we were planning into the future was looking at making the South Los Angeles area more efficient in its ability to accumulate funds and create more catalytic projects.”

In an attempt to stay one step ahead of the state, CRA/LA went to the Los Angeles City Council proposing to place nearly $1 billion in a non-profit organization so Brown can’t touch it. Describing this contentious issue as a “huge fight,” Gubler believes keeping the money out of Sacramento’s hands, by any means necessary, is the right move.

“The reason they’re hiding the money is because they’ve been working on these projects for years to revitalize their communities and the governor is asking, ‘Is it better to build a parking structure for a museum than to keep the schools open?’ Well, that’s not the real argument, the real argument is, is it justifiable for the state to raid local funds to meet their budget because they were irresponsible spending their money and creating their budgets in the past? By extension of that argument, the state might as well do away with the cities next and take all their money to balance the state budget.”

With schoolteachers and state employees being forced to take furloughs to cut costs, the possibility of a shortened school year is actually being bantered about.

“We feel the bigger story is that we provide jobs so you don’t need as much for health care and unemployment and crime,” Dantona said. “The strain on resources is reduced when we’re able to provide jobs that aren’t being provided at the moment. Everyone sees that the governor has a tough budget ahead of him but our job is committed to the residents of L.A., so we need to look out for them first and foremost. We weren’t brought to the table to see how we could do this officially or even as a phased-out process. Saying in six months we’ll be eliminated forces our hand to do the job that we intended to do.”

While Brown has made it clear that immediate action is needed as the longer the wait the worse the situation becomes, given the fiscal crisis California is facing with its $25 billion deficit. With the closing of CRA offices statewide, hundreds of jobs will be lost.

“The governor has proposed an honest budget that requires shared sacrifice and many difficult decisions across California,” Westrup said. “What he has called for is to set aside the turf wars and the narrow interests that have defined many of our previous political battles that have in many ways gotten us to this point, and to set that aside and move forward and act as Californians first to address out budget deficit. And that means everyone tightening his or her belts. There are stakeholders, including local government officials, saying that certain parts of his proposal are ‘off the table’ and ‘nonnegotiable.’ And the governor is saying, ‘OK, what are the alternatives?’”