DOWNTOWN LOS ANGELES - The elimination last year of redevelopment agencies in California allowed the state to direct more property tax dollars to core government services, but it also killed a vital Los Angeles engine of economic development.
In the year of its demise, the Community Redevelopment Agency of Los Angeles was slated to spend $162 million, or about 25% of its budget, which came from a portion of local property tax dollars, on affordable housing projects.
Now, city officials are hoping that a new department, working with a new nonprofit corporation, could fill the void left by the demise of the CRA. They are moving to create the Economic Development Department for the next fiscal year, which begins July 1. The City Council approved the concept last month, pending a more detailed plan for how to staff and fund the department.
The first details were released in a report on Tuesday, April 2, by city Chief Administrative Officer Miguel Santana. According to the report, the Economic Development Department would essentially be a more focused version of the existing Community Development Department. It is uncertain who would lead the new unit.
The plan calls for the EDD to have 185 employees, 180 of whom would be current CDD workers. The five additional employees would be upper-level managers from other departments.
The consolidation plan does not require any layoffs and its $16.2 million budget would be comprised of funds transferred from the CDD and other departments, according to the report. The report recommends folding the non-economic development functions of the CDD into the Housing Department.
By locating all economic development services in one department, officials hope the EDD will create a more user-friendly experience for business owners in need of city assistance.
“One of the common things we hear is that businesses don’t know exactly where to start,” said Gary Toebben, president and CEO of the Los Angeles Area Chamber of Commerce. “When they have a question, if it could be clear that it was the place to start when small businesses have questions about City Hall, I think that would be a real plus for everyone.”
While the Economic Development Department could result in a more effective organization of city services, it doesn’t create any new programs for spurring investment. That’s where the proposed nonprofit economic development corporation comes in. Officials imagine it functioning as an entrepreneurial, business-minded entity that would advise the EDD on issues such as city real estate deals.
“The EDD is a sort of a bureaucratic consolidation as far as I can tell,” said Carol Schatz, president and CEO of the Central City Association, a business advocacy group. “The interesting and important part is the proposed nonprofit that will be created.”
A key role of the nonprofit would be maximizing the value of city real estate, said Santana, who envisions the nonprofit negotiating deals with developers to invest in city assets.
Much like the CRA stipulated community benefit packages when assigning development rights, the nonprofit would leverage private investment dollars to improve public resources, he said.
He pointed to the Los Angeles Mall, the city-owned underground shopping center north of City Hall East. An economic development corporation staffed by real estate and business experts could devise a plan to redevelop the faded facility, Santana said.
“We think that working with a nonprofit to identify the more effective utilization of assets like that, to bring jobs and provide additional revenue to the city makes sense,” he said. “It’s not a core competency of the city to accomplish that.”
Like the CRA, the nonprofit would prioritize investment in low-income neighborhoods, though it remains unclear how the city would regulate or enforce an emphasis on affordable housing. The CRA was required by state law to set aside at least 20% of its budget for affordable housing.
In theory, the nonprofit would generate revenue through fees it would negotiate as part of development deals. It could also charge for managing properties like Figueroa Plaza, a city-owned office complex that houses several private tenants.
The city currently pays a broker to handle leasing. The nonprofit would use the management fees paid by the city to reinvest in economic development.
The plan still requires council approval, and several questions remain. Ninth District Councilwoman Jan Perry, who pushed for the proposed economic development corporation, said it will be crucial to establish a system that spurs development in a way that protects and benefits communities.
It is also unclear how the nonprofit would be funded in the short and long term. Santana said the city will likely identify seed money in its 2013/14 budget, but the amount is uncertain.
Contact Ryan Vaillancourt at email@example.com.
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