Redevelopment

Big Cities, Small Towns, Similar Goals

   The Atwater Chamber of Commerce occupies the basement of the historic library.

 

The Atwater Chamber of Commerce occupies the basement of the historic library.

 

One of my favorite perks about working for a consulting firm like RSG is that we get to help cities and towns of all shapes and sizes.  In the same week, we could perform a fiscal impact analysis for the City of Los Angeles and then help a small town like Atwater (in Merced County) to apply funding from its former Redevelopment Agency’s old bond proceeds to implement previously planned infrastructure projects in the historic downtown.

With a population of just under 30,000, Atwater is largely a farming community.  More than 7% of its workforce is employed in agricultural and related industries, compared to slightly more than 2% in California and less than 1.5% in the US.  The town used Redevelopment to sustain, and even revive, its historic downtown by funding façade improvements, streetscape improvements, new landscaping, and improved street lighting.

Despite the Great Recession and the elimination of Redevelopment, Atwater’s staff continues to work on maintaining and improving the community.  This includes the implementation of street and streetscape improvements in its downtown core.  As the Atwater Successor Agency’s consultant, RSG works with the city’s staff to follow the requirements of Redevelopment dissolution.  At the same time we secure approval for permissible actions subject to review, such as the spending of proceeds from bonds issued before 2011.

 

   Looking northwest along Broadway, the main boulevard of Atwater's historic downtown. Bond proceeds will be used to improve this street.

 

Looking northwest along Broadway, the main boulevard of Atwater's historic downtown. Bond proceeds will be used to improve this street.

 

Whether we’re working for a big city like Los Angeles or for Atwater and other towns like it, we strive in similar ways to help the communities we work with improve conditions and opportunities for their residents, businesses, and visitors.  At RSG, we have the same goals as the cities and towns that utilize our assistance.  And that’s another one of my favorite perks about working for a consulting firm like RSG: we get to see our efforts improve communities in substantial, meaningful, and long-lasting ways. 

Written by Dima Galkin who is an Analyst at RSG.

The Governor’s 2015-16 Budget Summary and Implications for RDA Dissolution

In 2011, Governor Jerry Brown proposed the elimination of about 400 redevelopment agencies across the state.  The redevelopment agencies utilized   property tax revenue to invest in communities, spur economic development, eliminate blight, and redevelop disadvantaged areas.  Dissolution of the redevelopment agencies sought to increase funding for school districts and other local agencies by diverting it away from redevelopment agencies. Since 2012, successor agencies have been winding down the affairs of the redevelopment agencies.

From 2011-12 to 2013-14, about $990 million in property tax revenue has been returned to cities, $1.3 billion to counties, and $430 million to special districts.  The Governor’s office anticipates that in 2014-15 and 2015-16 combined, cities will receive an additional $580 million, counties $660 million, and special districts $200 million;  with ongoing property tax revenues of more than $900 million annually distributed to cities, counties, and special districts.  This money could be used by local governments to fund police, fire, and other critical public services.

According to the 2015-16 Budget Summary released January 9, 2015, the dissolution process has been “complex and time-consuming,”, but has also provided substantial funding for local governments to use on core public services.  The Governor’s office suggests that the dissolution process has progressed to the point where the State can make legislative changes to finalize dissolution and remove the State from the process.  

The Administration hopes to introduce legislation that will:

•    Minimize the potential erosion of property tax residuals being returned to the local affected taxing entities. 
•    Clarify and refine various provisions in statute to eliminate ambiguity.
•    Maintain the expeditious wind-down of former RDA activities while adding new incentives for substantial compliance with the law.
•    Assure that approved enforceable obligations will be paid.

More specifically, the Administration’s proposed legislation will introduce or clarify the following:  

•    Successor Agencies will submit one ROPS per year instead of two.
•    Create a “Last and Final” ROPS process whereby a Successor Agency can submit one last ROPS to carry it through to dissolution of the Agency.
•    Clarify that former tax increment caps and RDA plan expirations no longer apply
•    Reentered agreements that are not for the purpose of providing administrative support activities are not authorized or enforceable. 
•    Litigation expenses associated with challenging dissolution determinations are not separate obligations, but rather are part of the administrative costs of the successor agency. 
•    Contractual and statutory pass-through payments end upon termination of all of a successor agency’s enforceable obligations. 
•    Finance is exempt, as provided in existing law, from the regulatory process. 
•    County auditor-controllers’ offices shall serve as staff for countywide oversight boards. 

In May the process will be revisited with specific legislation likely.  We will provide updates as they happen. Also, check back soon for a more thorough analysis of some of the proposed legislative changes.

The Great Real Estate Opportunity

2.5 Acre Development Site in Irwindale - currently available for sale

2.5 Acre Development Site in Irwindale - currently available for sale

To help facilitate the winding down process of local redevelopment agencies, successor agencies were created to manage redevelopment projects currently underway, make payments on enforceable obligations and dispose of redevelopment assets and properties. According to California law, successor agencies must come up with long-range property management plans (“LRPMP”) and submit them to the state.  

The LRPMP must contain a detailed inventory of all real property assets and a set of recommendations regarding how and to whom the assets should be disposed or distributed. This transparent process can be a boon to real estate developers.

Much of the real estate community is not aware of the good opportunity the LRPMP process offers. By looking at the LRPMPs, which are public documents, one can see what is potentially available for sale. RSG is currently working for successor agency clients to help them to sell their properties, as well as for developers/investors who are looking to buy these properties.  The New Year is a great time to take advantage of a way to find some great property.

For more information, see the following links: http://www.dof.ca.gov/redevelopment/long_range_property_management/view.php

Example LRPMP: http://www.dof.ca.gov/redevelopment/long_range_property_management/LRPMPC_Plans/documents/Atwater_LRPMP.pdf

A New Challenge

 

As a firm that deeply cares about Community and Economic Development and ultimately the fate of our Cities, we are constantly grappling with ways that we can help our Cities succeed despite the tough economic times.  It is extremely difficult to try to summarize the immensity and scope of the problems that different Cities face, but here are some quick observations being on the front line of the process:

The Challenge - After being wiped out from the redevelopment dissolution, many communities are strapped for resources and long-reaching fiscal challenges.  All of a sudden Cities are in the business of selling property, either because of obligation to do so under the law or driven by a larger asset management strategy to put the community on the right track. We are often asked by our City Clients the same questions: “Do we need an RFP, should we advertise, go to auction, and what are reasonable business terms now that we don’t have an RDA to help make a project work? Please help!”

Our Double Bottom Line Solution - After really analyzing the challenge we developed a guiding mandate to ensure that every transaction that we are involved in:  #1 - meets specific Community Development goals and #2 - is financially successful.

What does this really mean?  In basic terms, it means taking into account each City’s’ goals and visions that came with the original acquisition of the property.  It means enhancing the value of the property not solely on a financial basis but also positively impacting the surrounding community through job creation, low environmental impacts, pleasing aesthetics and sensible building design, a thought towards serving the surrounding community and many other principles that a City can uphold as the property owner.

Some of these problems can be tackled via a rigorous methodology; has a highest and best use analysis been completed?  Have the interests and values of the local community been adequately understood?  Can we carefully develop opinion of value calculations for different real estate solutions to better weigh the financial impacts of different types of projects?  What terms will the City be willing to negotiate on, and what are the guiding principles that the City will not waiver on?

A Time of Hope - My final observation is that we are at the early stages of developing creative strategies to meet the unique challenges of each City Client and that in some ways we are in a new phase of redevelopment, and that’s an exciting prospect.

Written by Andrew Gee, who is a Senior Associate at RSG.

Private Developers Unveil Proposals to Revamp Long Beach Civic Center

 

At a special study session of the Long Beach City Council on Tuesday, October 14, two developer teams finally unveiled their proposals for the redevelopment of the City’s 37-year-old Civic Center, which currently includes City Hall, a library, the 4.8-acre Lincoln Park, a shuttered state courthouse, and parking. It’s been a long time coming.

In 2005, seismic studies conducted in the wake of Hurricane Katrina revealed that City Hall was in danger of collapsing in the event of an earthquake with a similar magnitude as the 1994 Northridge quake. Naturally, this finding immediately prompted discussions among City officials regarding upgrading or replacing the Civic Center. About eight years later, in April 2013, the City issued a Request for Qualifications (RFQ) to solicit developers interested in constructing the new Civic Center. In October 2013, the City announced the three short-listed proposers and, in June 2014, received Request for Proposals (RFP) responses from two of the three, Long Beach CiviCore Alliance (LBCCA) and Plenary-Edgemoor Civic Partners (PECP).

Prior to beginning the RFP process, the City estimated that retrofitting the existing City Hall to address the seismic deficiencies would cost about $194 million. Rather than paying that hefty price to upgrade an inefficiently designed and somewhat functionally obsolescent 40-year old building, the City devised another alternative: identify a private developer who would design, build, and finance a brand-new Civic Center in exchange for 1) a maximum of $12.6 million in annual payments for 40 years from the City, which would rent the new public facilities and 2) the right to develop on the City’s unused portion of the 16-acre land. In its RFP, the City also expressed interest in the inclusion of a headquarters building for the Port of Long Beach in the new Civic Center and stipulated that Lincoln Park must be not only retained, but upgraded.

If successfully completed as described, the two developments proposed by LBCCA and PECP on October 14 would certainly transform the look and feel of the Civic Center area. Both proposals include an aesthetically and functionally modern City Hall, library, park, and port headquarters building, as well as a significant private mixed-use project comprising a hotel, residential units, and retail. LBCCA’s design also includes an “innovation village,” which is described as a hybrid between a technology incubator and an adult education facility that would be a collaborative effort with Long Beach City College and California State University Long Beach. Unlike the alternative of simply retrofitting City Hall for the purposes of withstanding a terrible natural disaster, the proposed developments could result in myriad benefits, including new jobs, new City revenue, new residential units, public facilities that better meet community needs, and potentially a more vibrant downtown. And the City would gain all this for no more than $12.6 million per year, which is the City’s estimated cost of operating and paying debt for the current Civic Center. However, the City would inherently take on some of the construction risk and also would forgo ownership of the public buildings and land until the end of the 40-year lease agreement.

What do you think about Long Beach’s proposed plan? What are your thoughts on public-private partnerships in general?

Written by Dominique Clark who is an Analyst at RSG.