LOS ANGELES -- The California Supreme Court has refused to hear challenges to a proposed $922 million plan for redeveloping Hollywood, a decision that allows the Los Angeles Community Redevelopment Agency to begin selling bonds for the project.

The 30-year program to revive the once-glittering section of Los Angeles has faced a roadblock since 1987, when a citizens coalition of home owners, renters, and others filed a lawsuit charging that Los Angeles acted fraudulently and violated state guidelines in drafting the plan.

Among other things, they alleged that the redevelopment agency conspired with the Hollywood Chamber of Commerce to draft a plan favorable to big business.

A Los Angeles County Superior Court Judge Barnet M. Cooperman in 1989 ruled that the citizens "produced no credible evidence" to support the charges. A state appellate court upheld the judge;s decision, and last week the state's high court denied petitions for review.

"We are very pleased" with the decision, Pierre E. Lorenger, deputy administrator of finance and audit for the redevelopment agency, said yesterday.

The courts lifted a cloud that had stalled the project and also barred the agency from issuing bonds for the plan. Pending resolution of the lawsuit, property tax revenues that could repay the tax allocation bonds have been frozen in a special joint account controlled by the agency and Los Angeles County.

Mr. Lorenger said the agency plans to sell a bond issue of about $35 million in the next few months, particularly because "the market looks to favorable."

The issue probably will involve a mix of taxable and tax-exempt bonds, he added. Taxable bonds have played a role in municipal redevelopment in recent years because the federal Tax Reform Act of 1986 imposed tight restrictions on loans to private developers who participate in urban revitalization effort.

The Hollywood project bond issue will be sold through a competitive bidding process, Mr. Lorenger said. He added that the agency also will select a financial consultant and bond counsel from a pool of proposals the agency already has in hand.

The overall redevelopment project will be financed with a mix of cash and bonds. The agency can have up to $307 million of bonds outstanding for the project area, Mr. Lorenger said.

An 1,100-acre section of Hollywood is covered by the redevelopment plan, and it encompasses famous landmarks on both Hollywood Boulevard and Sunset Boulevard.

But some small businesses and residents fear they could be displaced by large building projects.

Under state law, 20% of redevelopment funds accumulated for the plan must be set aside for housing and could provide almost $10 million for construction of low- and moderate-income housing in the area within the next fiscal year, a redevelopment agency press release says.

Mr. Lorenger said that proposed funding for the current and subsequent fiscal years calls for "quite a bit of housing" along with such items as parking improvements and social services.

The Los Angeles City Council adopted the Hollywood redevelopment plan in May 1986, after a three-year study and approval process. Besides housing construction, the plan calls for commercial development, preservation of historic buildings, and rehabilitation of existing housing.

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