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The “Red Flag!”

During the takeover 80s, Corporate Raiders would go into a feeding frenzy when they came upon an undervalued company with untapped markets and assets that were disproportionate to its total indebtedness.

And if Inglewood were a corporation and not a municipality, a Corporate Raider would’ve thought they hit the “mother-lode” upon noting in last year’s budget, under “City of Inglewood Debt Summary in Brief” and reading:

“None of the City’s current debt issues are subject to the legal debt limit. (The legal debt limit is 15% of the City’s total assessed valuation). As of September 30, 2000, the debt limit was $596,034.193”

The “red flag” was Inglewood’s reported indebtedness of $84,460,000, which meant the city was enormously under-invested, and had legal authority to use a half-a-billion dollars worth of tax allocation bonds to develop major capital improvements. However, it doesn’t take a rocket scientist to surmise that Inglewood was deadset against floating tax allocation bonds and/or increasing bonded indebtedness. Simply put, the city can be likened to those who own little and are prideful of owing even less!

A “Pay as You Go” Mentality!

Still, the current CRA management team would argue that Inglewood doesn’t need Tax Allocation Bonds. They prefer a “pay as you go system” that seeks to avoid increase indebtedness. They also point out that the recent improvements and upgrades at Hollywood Park Racetrack (which became part of the Century Project Area in the early 80s) were accomplished without need of CRA bonds or Redevelopment Funding. Since the “Assessed Value” has increased as a result of Hollywood Park’s sale to Churchill Downs—coupled with the additions of Home Depot and Target Stores—the Century Project Area Tax Increment Revenue has risen to $4 million-plus annually, and would cause some to say, ‘who needs bonds?!’

The Charts Tell The Story

The following 6 charts will focus on the 36 most populated cities in Los Angeles County that are currently utilizing a CRA. Praise or criticism of Inglewood’s CRA should be withheld until one reviews exactly how the city is rank among others in a similar set of circumstances. Should we continue with a low-profile “pay as you go” system, or should we resort to the primary tool—tax allocation bonds— that distinguishes a CRA from all other aspects of city government.

Simply put, the charts will reveal where Inglewood ranks among the other 36 cities with over 50-thousand plus population. Are we keeping pace? Are we gaining, leading, or falling behind?

First, however, it might be necessary to provide a brief review of California’s CRA history, along with some of the current problems and controversies that cloud its future.

HISTORY:

Before California adopted the CCRL, investing and upgrading cities was left to the whim and caprice of wealthy investors, who generally determined where, when or what would be developed in which particular city. More often than not, these private sector investors would choose to place their funds at risk in economically enriched cities where the economic viability would lessen their risk. This greatly benefited cities like Beverly Hills, Manhattan Beach, and Palos Verdes which attracted as much private capitol that was needed to keep them head-and-shoulders above their neighbors. It was a simple case of the rich getting richer and the poor getting poorer. Less affluent cities found themselves languishing and falling behind economically.

REMEDY:

To offset the indifference and reluctance of the private sector to take risks in the less advantage cities, the California legislature created and passed the California Community Redevelopment Law (“CCRL”) in 1952. It was a post-World War II continuation of the Great Depression’s New Deal programs, and Redevelopment, as it came to be called, would provide disadvantaged cities with the tools to assist in their own improvements. Local municipalities would be authorized to launch major capitol improvement projects by floating “Tax Allocation Bonds.”

METHODOLOGY:

The costs of redevelopment would be met by using tax increments—the property tax revenue derived from the increased assessed valuation that would result from redevelopment—instead of from a city’s general fund. In short, the goal was for the new developments to “pay for themselves.”

Cities, through a Community Redevelopment Agency (CRA) would borrow against future tax revenue by selling bonds to pay the initial cost of development. Repayment for the bonds would come from future property taxes (tax increments) collected on the enhanced value of property. In short, tax increment revenues was the means for merging CRA funds with private dollars to finance projects and modernize cities. It provided the means for blight-infested cities to realize the CRA mantra that redevelopment indebtedness is good!

DISPUTE:

Fifty years after its inception, many might argue that Redevelopment was the single most effective tool which launched California cities, and the state itself, into being an economic force in the nation. However, many more would also argue that Redevelopment had become the single most abused and misused program in the state, and the leading cause of the very blight it sought to eradicate!

Which ever side of the argument one might agree with, redevelopment made it possible for many cities to initiate capital improvements projects and private development that would not have been accomplished by other public or private means.

OBSERVATIONS:

A series of Charts capsulizes the current state of Redevelopment Activities in the Los Angeles County: Top 36 Cities with Redevelopment in L.A. County; Indebtedness Chart; Debt-to-People-Ratio; Assessed Value Chart; Assessed Value to People Ratio Chart; Tax Increment Rankings Chart; Assessed Value to Square Mile Ratio Chart.