LOS ANGELES - Redevelopment officials in California generally agreed at a conference last week that their industry could face another state legislative onslaught, but their strategies for mounting a defense appeared less certain.
Conference participants identified many challenges facing redevelopment at Thursday's annual legislative conference sponsored by Katz Hollis, a consulting firm specializing in urban redevelopment. But the prospects for a unified solution seem daunting, especially given some of the divisions between groups such as those charged with revitalizing inner cities and those representing taxpayers.
The focus for much of Thursday's daylong discussion was the state's decision to balance its fiscal 1993 budget in part by diverting local property tax revenues. That action diverted on a one-time basis about $200 million from redevelopment agencies, or an amount equal to about 16% of their fiscal 1991 gross property tax revenues.
Many redevelopment officials contended the diversion is blatantly unconstitutional. Among other things, they cited a state constitutional requirement calling for redevelopment funds to be spent only to finance projects that generated the funds in the first place.
But many redevelopment agencies, and their statewide trade association, oppose a constitutional challenge for now. They fear that a successful challenge could invite a state backlash, possibly by restricting the use of redevelopment. As a result, redevelopment officials seem likely in coming months to use legislative channels to protect their turf, unless the state mounts another financial assault in the coming fiscal year.
Murray Kane of Kane, Ballmer & Berkman, a law firm that provides' many redevelopment services, expressed displeasure Thursday with the consensus approach to avoid mounting an immediate constitutional challenge.
"It's my opinion that this policy of appeasement is not going to work," Kane said, likening the situation to letting the state have "Czechoslovakia and Poland this year. and then they'll want France and England the next year."
Kane added that the diversion of redevelopment funds "should be vigorously challenged - there is simply too much at stake."
Various fiscal staffers who helped legislators hone this year's state budget noted that redevelopment officials will continue to face an uphill fight unless they offer convincing proof that renewal efforts are providing positive benefits.
Redevelopment agencies, which are mainly created by cities, work through specific projects to rehabilitate blighted areas and spur commercial activity.
But there is a perception that some of this effort simply shifts economic activity from city to city, observed Fred Silva, chief fiscal policy adviser to the state Senate majority leader.
Redevelopment officials must prove they meet a "test of providing a net gain in economic activity," Silva said.
The problem, according to James Hankla, city manager of Long Beach, is that "we do an absolutely terrible job" of conveying redevelopment success stories.
That must change, Hankla said, because the recent state diversion of local property tax dollars is probably just a dress rehearsal for what's going to happen next year and the next" in the state capital.
Rating agency officials noted Thursday that there should be no direct rating impact on existing tax allocation bonds already issued by redevelopment agencies. But they expressed caution looking ahead, especially if local agencies lose additional property tax revenues.
Sheelagh Flanagan, a vice president in the tax-backed department of Municipal Bond Investors Assurance Corp., noted that insurers "want to know the risk going in." So firms like hers, she said, are likely to insist on tougher legal covenants to counter uncertainty about future developments affecting redevelopment finance.
The last session at Thursday's conference, on why disaster legislation failed to pass in response to last spring's civil unrest in Los Angeles, highlighted some of the difficulties in arriving at a consensus on redevelopment activities.
Richard Gann, president of Paul Gann's Citizen Committee, a taxpayer advocacy group, said his organization is "hell-bent on bringing back the right of voters" to approve taxes and indebtedness, including tax allocation bonds.
Richard Gann's late father, Paul, was a co-author of Proposition 13.
Gann expressed concern that the Los Angeles disaster legislation would have "dramatically altered current redevelopment law" and paved the way for potential abuses and lack of accountability.
Representatives of the Gann group occasionally clashed at the conference with local officials who spoke about their progress in addressing inner-city renewal. These exchanges tended to underline the difficulty of finding a consensus on redevelopment at the state level.
Katz Hollis also sponsored a similar redevelopment conference on Friday in Napa, Calif.