Metropolitan News-Enterprise


Monday, June 4, 2001


Page 1


 CRA Revenue Cap Includes County DeductionsC.A.


By ROBERT GREENE, Staff Writer


An attempt by the Los Angeles Community Redevelopment Agency to avoid paying the county at least $5 million for figuring how much tax money to allocate for projects has been rejected by this district’s Court of Appeal.

Upholding a Los Angeles Superior Court ruling, the appeals court ruled that the county properly deducts its administrative costs from the tax increment funds it is required to turn over to the CRA under state redevelopment law.

The fact that several CRA projects have had caps placed on the total amount of tax money they can take in does not shift the burden to the county to bear the full cost of calculating how much the agency gets, Presiding Justice Roger Boren of Div. Two said.

“The plain language of the statute here permits County to deduct the [administration fee] from CRA’s tax increment allocation and is in harmony with the legislative intent to allow counties to recover their administrative costs,” Boren wrote. “To follow CRA’s interpretation of [Revenue and Taxation Code Sec.] 95.3 would allow redevelopment agencies with capped plans to avoid those costs.”

At issue is the so-called tax increment that is the lifeblood of redevelopment projects.

Agencies like the CRA operate by declaring particular urban areas “blighted” and then adopting plans to renovate them. They sell bonds to finance the projects which, when built, are expected to substantially increase property values in the formerly rundown areas.

The cities, school districts, and other government agencies that share in property taxes continue to receive their portion based on the value the blighted area had before redevelopment, or would have had if redevelopment had not gone forward. But the tax increment—-the extra revenues now brought in because of the new, higher values spurred by the redevelopment—-bypasses the cities and school districts and goes directly to the agency to repay the bonds.

The CRA dispute with the county is based on two added twists to the redevelopment scenario, one brought on largely by hostility toward redevelopment philosophy, the other by a severe financial crunch faced by counties in the early and mid-1990s.

Answering concerns that redevelopment was diverting tax money from crucial services to pay agencies’ ever-increasing appetite for new projects, the Legislature allowed those tax increments to be capped. Initial caps were generous, but legal action often worked to lower them.

For example, the $7.1 billion cap for Los Angeles’ Central Business District was reduced to $750 million in the wake of a lawsuit brought by then-City Councilman Ernani Bernardi in 1977.

Meanwhile, the Legislature allowed cash-strapped counties to begin charging to recoup their costs to collect and apportion the tax increment.

Los AngelesCounty officials calculated their expenses for the CBD and two other Los Angeles projects, then deducted them from the amount they remitted to the CRA.

The agency alleged that it was being underpaid. As property values in redeveloped areas continued to rise, the CRA argued, state law allowed it to take in every dollar up to the capped amount for each project. The deductions kept the agency from getting its full cap value, it argued. 

The CBD project is expected to reach its cap in 2003 or 2004, but the agency argued that the county’s practice of deducting its costs would keep the project about $5 million short of the cap to which it is entitled.

The Pico-Union area redevelopment project already reached its $14 million cap in 1994, and the CRA, which now receives no more tax increment, repaid the county the amount it got over the cap. But the county later ruled that it was due another $107,113.63 in administrative costs.

The Crenshaw area project’s caps are annual, at $500,000 each year. The county imposed $67,261.55 for a five-year period, a figure the CRA argued prevented it from reaching its rightful cap in each of those years.

But Boren said the deduction method employed by the county was appropriate, given the language of Sec. 95.3.

“In this complex area of property tax and redevelopment finance, clearer statements of procedure and purpose would be difficult to achieve,” the presiding justice said. “Because the statute is sufficiently clear in method and intent and because County’s implementation does not conflict with the process and procedure set forward in section 95.3, we uphold the trial court’s determination.”

Boren was joined by Justices Candace Cooper and Kathryn Doi Todd.

The case is Community Redevelopment Agency v. County of Los Angeles, 01 S.O.S. 2637.