Debt continues to drag down Westside debate

Deirdre Newman

Debt information released by the Redevelopment Agency has done little

to quell the fears of industrial property owners who believe the city

is interested in redeveloping 400-plus acres of the Westside to help

pay off the money instead of reinvesting in the area.

Mike Robinson, the city’s redevelopment manager, released

information last week on the agency’s debt that shows the agency owes

more than $41 million in principal and interest on five different

debts.

The agency is considering adding 434 acres to the downtown

redevelopment zone. On Jan. 27, the Planning Commission approved

preliminary boundaries for an odd-shaped area roughly bordered by

15th Street, Whittier Avenue and West 19th Street. If this area is

added to the zone, the agency would be able to take a large part of

the property taxes, known as tax increment funds.

Robinson emphasized that while those funds could be used to pay

off the agency’s debt, it is not the intent at this time.

But John Hawley, owner of Railmakers Inc., who is leading the

industrial property owners’ charge against the addition, is skeptical

of Robinson’s claim, especially since Gov. Gray Davis has proposed

that the state take more than half of the redevelopment funds from

agencies throughout California to compensate for the dire state

budget crisis for the 2003-04 fiscal year.

“Considering the proposed cuts in incremental funds by the state

of 52% in the governor’s proposal, it seems logical that

redevelopment agency incremental funds are going to be slashed,”

Hawley said. “And although it’s not their intent to use these funds

to pay their debt, it’s obvious to me that that’s going to take

place.”

The agency created its debt reduction plan in the spring of 2002.

It projects that the agency will be in the red for the first time in

2006-07. However, this projection does not take into account Davis’

proposal to take 52% of cities’ redevelopment funds.

The five different debts the agency are paying off range from

about $200,000 to $13 million in principal.

The plan, using the assessed value of the Triangle Square property

and assuming an annual 2.5% increase over the next two fiscal years,

anticipates that the Triangle Square obligation will be paid off by

the end of this fiscal year.

After this debt has been paid off, the tax increment fund is

expected to have enough money to make the full annual principal and

interest payments on the largest debt -- a loan from the city --

through the 2023-24 fiscal year, with excess funds available.

This loan, which was given to establish the agency in the early

1970s, now has about $13 million outstanding in principal and about

$15 million due in interest. The agency is paying 8% interest on this

loan.

Robinson said he is concerned this is a high rate, but hasn’t made

a formal proposal to the city to lower it because it is not a

priority.