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Redevelopment agencies may lose state funding
Workers install the red carpet in front of the Kodak Theater on Hollywood Boulevard in Hollywood, California, on February 23, 2011.
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TEXT OF STORY
Bob Moon: Did you watch the Oscars last night? That gala has taken place for almost 10 years now at the Kodak Theater, in the center of Hollywood. The complex that includes that theater was partly paid for by public money. Now, though, a $25 billion hole in California's budget means that stream of public money may soon end.
Marketplace's Jennifer Collins has the story.
Jennifer Collins: The Kodak Theater is the gilded center of the Hollywood and Highland complex. There's also a high-end hotel, a fountain and a four-story mall. Local resident Marion Gore says she comes here as little as possible.
Marion Gore: It's really not user-friendly. Not on any level -- not for shopping, not for events that I've come to.
Hollywood and Highland is one of thousands of projects in California partly paid for by community redevelopment agencies. The state agencies help finance projects through bonds and then use a share of the property taxes to pay off debt. For Hollywood and Highland -- the agency kicked in nearly $100 million of the more than $600 million it cost to build the place.
Then, three years after it opened, the developer sold the complex at a huge loss -- and that was before the real estate market collapsed. Bob Blue is with a Hollywood preservation organization.
Bob Blue: By any stretch of the imagination, it's a financial failure.
But the complex did help attract tourists and shops to the area -- which also includes the Hollywood Walk of Fame, Grauman's Chinese Theatre and Madame Tussauds wax museum. Madeline Janis is on the board of the L.A. redevelopment agency.
Madeline Janis: You go to hotel owners in Hollywood and they'll say, "Thank God for the Hollywood and Highland project. It helped us bring our business back.'
Dozens of states use redevelopment programs to finance similar projects. But now California Governor Jerry Brown says his state's agencies should be shut down. They lock down as much as $5 billion in taxes that could be put toward education and other programs.
Steven Frates teaches public policy at Pepperdine University.
Steven Frates: There's no question it has distorted development. And in terms of distorting cash flows of government, you can make a strong argument that its time has passed.
California lawmakers are still debating whether the state should roll up the red carpet on projects like Hollywood and Highland -- and other states will be watching.
I'm Jennifer Collins for Marketplace.
Hollywood-Highland like all the other CRA projects is a horrible drain on the city's and school district's budgets.
The first thing voters need to understand is that we need not give up property tax income for the next 30 to 40 years to incentivize development. In the world of city's magical accounting, those tax dollars end up in developers' pockets.
Second, we need to understand that the government is atrocious at constructing private enterprise buildings. No one who cared about securing long term tenants would have ever designed Hollywood-Higland. Tenants hate it and exiting. The City gave CIM and extra $30 M to rehab the new Kodak Theater. IF there had been all private money with no CRA meddling, they private developer rising his own neck would have gotten it right the first. It's not as if the Kodak Theater was the first theater built in Hollywood.
Third, and most importantly, the CRA stops privately financed development. They harass you and the council office blocks your permits until you let the CRA have a piece of the action and then they insist on junk.
1/2 the CRA retail space in the City is vacant and vacant retail generates no taxes. The CRA often takes the sales taxes from a project as well as taking the property taxes, e.g. CRA Midtown Project in CIM Group in CD 10.
In the last 10 years the CRA has siphoned off about $1.5 Billion property tax dollars. That's why we cannot afford to repair are streets and pot holes are everywhere.
No, they have the story right. The Hollywood and Highland project cost $650 million to build in 2001 and was sold at a record-setting loss of $201 million to CIM Group, Inc. TrizecHahn took a record setting tax write down on this project and the City took a bath on parking.
Just making a statement that the City gets taxes and everything is Rosy is typical double talk from Redevelopment Agencies Statewide. But math isn't based on emotions, it is out there for the world to see and its universal.
Just google search for articles and you will see.
Even after the massive bargin CIM Group got on this project, they needed additional governmental assistance in the form of a HUD Section 108 grant and a City of LA guarantee of a loan of $30 million to bring in Cirque du Soleil.
And don't even get me started on the $52 million of public funds for Billionaire Eli Broad museum's parking lot while at the very same time the Mayor, your boss, was trying to sell parking lots under the "P3" deal.
All we can ask for is accuracy, not sales talk.
You got the Hollywood & Highland story wrong. Hollywood & Highland and the Kodak Theater generate positive return on City investment. The City gets Sales tax, Hotel tax, Utility tax and property tax from the project far above what was pledged to build it. The project restored the Historic Chinese Theater, and quadrupled tourism spending in Hollywood and kick started a widespread improvement in Hollywood. In 1987, Hollywood was a drug infested slum with high crime. Why not report that?
