LONG BEACH, Calif. -- One year after a massive revamping of California redevelopment law, key players in the industry said here last week that the changes have returned credibility to an often criticized segment of public finance.
Several speakers at an all-day redevelopment conference on Thursday grumbled about the new restrictions, but most agreed that last year's wide-ranging reform law was necessary.
"It has prevented [redevelopment] agencies from doing certain types of projects, but it has had a greater impact on our credibility," said William A. Carlson, executive director of the California Redevelopment Association. "We've cleaned up some of the problem areas."
For years, critics have argued that California's 364 redevelopment agencies are out of control and more concerned about generating sales tax revenue than revitalizing blighted neighborhoods.
Many agencies exacerbated that criticism by competing for intensive sales tax generators, such as auto dealers and shopping centers, and sometimes "redeveloping" land that hadn't been developed in the first place.
As pressure mounted in the state legislature to crack down on redevelopment abuses, the industry itself began work on a reform bill, Assembly Bill 1290, that was eventually signed into law by Gov. Pete Wilson.
Among other restrictions, the law tightens the definition of blight, imposes time limits on debt repayment, and bans once lucrative tax rebate deals with auto dealers, shopping centers, and other similar businesses.
Most of the restrictions apply only to project areas created after Jan. 1 of this year, and the law has not affected current holders of tax allocation bonds. But, in years to come, bond terms for these types of projects are expected to shorten.
"The AB 1290 hangover," as one participant called it, was the main topic of conversation at the annual conference, sponsored by the California Redevelopment Association and Katz Hollis, a consulting firm that specializes in redevelopment.
"We have had some strange looks from developers, saying, 'What do you mean we can't do that anymore?'" said Calvin Hollis, a senior principal with Keyser Marston Associates in Los Angeles. He helped found Katz Hollis but later left that firm.
Hollis said many developers were not happy to hear that redevelopment agencies can no longer share sales tax revenue with them.
"One developer in a meeting a couple days ago actually said, 'Well, had I known about that, I would have negotiated this deal last year,' "Hollis said. "So we are seeing the nature of some transactions changing ... the developer has to front more money."
Lawrence J. Arceneaux, president of Katz Hollis, said it is too soon to say much about the overall impacts of reform, but he agreed that the credibility boost was an important element.
"Just the sheer fact that agencies did a self-correcting move gave them a lot of stature," Arceneaux said. "They were saying to the legislature, if you perceive problems, we're willing to work with you to fix them."
In Sacramento, state officials were less concerned with credibility than the implementation of the reforms.
"If redevelopment law had not been reformed, then a political backlash was in the making," said Peter Detwiler, staff director of the state Senate local government committee. "So, whether it was self-serving political strategy or righteously intentioned self-reform, I don't much care. I'm concerned about outcome.
"Certainly, I think the redevelopment agencies have gained political credibility," Detwiler said. "Now, whether that changes the practice on the ground, I suppose that's the real story."
