LA County Supervisors Approve $15 Million for Affordable Housing

The preservation and creation of affordable housing has been a longstanding goal of both Los Angeles County and many of its 88 cities, but the demise of redevelopment agencies delivered a blow to low-income residents struggling in one of the nation’s most difficult housing markets.

On March 5, 2013, acting on a joint motion by Chairman Mark Ridley-Thomas and Supervisor Gloria Molina, the Board of Supervisors unanimously reaffirmed the county’s commitment to providing permanent housing for low-income residents.  The Supervisors transferred $15 million to the Community Development Corporation for affordable housing in Los Angeles County.  

How Much the RDA’s Mattered

The dissolution of California’s redevelopment agencies has caused great consternation about how apartment developments that are deeply affordable will get financed, as RDA’s annually contributed several hundred million dollars to create or preserve several thousand affordable apartments. CTCAC reported that in 2011 in the competitive 9% LIHTC rounds, 63 of 101 (62%) awarded projects included RDA financing. With those funds no longer available, how much will development decline in 2012 and 2013? The average RDA loan was $5.8 million, 32% of the total cost of a development in 2011 – how can a project happen with 1/3 of its funding is goes missing?

 

 

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Transit Oriented Development and the H+T Index

MoveLA held their 4th Annual Transportation Conversation last week, and, as usual, it was filled with golden nuggets of knowledge delivered by the wise men and women who work in the fields of transportation, urban development and housing.

One of the themes was the need to link new transit with the businesses, workers and residents of the communities being served by LA’s growing fixed guideway public transportation system.  It is recognized that transit location has an effect on property values and development patterns.* (See the post Getting Ahead of the TOD Train in this blog for some examples of how Century has worked with developers in this arena.)  There was some discussion on how LA can accelerate its transit construction program and how best to plan for the kinds of development that will optimize the use of the transit and benefit the community, without leading to gentrification. We will be talking more about some of those ideas in the coming weeks and months. Read more

One Newspaper’s Perspective on Redevelopment Agencies

Monday’s Orange County Register posted a story (Doomed redevelopment agencies leave debt of $30 billion) warning that the Successor Agencies to the 25 RDAs in Orange County will inherit $29.8 billion in unpaid long-term debt (their emphasis). First, of course it is unpaid, otherwise it wouldn’t be a debt. The story goes on to summarize recent events and state that there is much confusion in the air over what will happen to the employees and assets (financial and real estate) of dissolving RDA’s after February 1.

But nowhere is the “risk” of existing RDA bonds addressed after the first paragraph. To be clear, there is always a repayment risk when money is being loaned, even to bond investors. But as to the risk of RDA-issued bonds, a key provision of the RDA dissolution law is that debt service for any bonds issued by the RDA will be paid before property tax revenue is distributed to the other agencies (school districts, city general funds, etc.) in the line. Fitch and Moody’s have both commented negatively on the credit quality of California RDA bonds (Fitch here, Moody’s here), as the dissolution process is moving too quickly for anyone to know what will happen on the other side of February 1st.

But it sure is making it fun!

Redevelopment – Looking Through a Thick Fog

The California Supreme Court’s ruling in CRA v Matosantos has been widely reported and is beginning to be digested by the more than 400 redevelopment agencies (RDAs) and cities that have to begin unwinding their agencies, accounting for all of the funds on hand, projects in progress, debts owed (mostly bonds), and determine the best course for their city (or county). There are, of course, several emergency legislative efforts underway to delay and/or soften the blow from dissolving every RDA in California, especially with the potentially huge impact on affordable apartment development. But there doesn’t seem to be serious effort to reverse the decision, which is wise – the Senate and Assembly votes to end redevelopment agencies are on record, very difficult to walk those back (from David Smith’s learned Affordable Housing Institute blog).

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Redevelopment’s Demise – a Blessing in Disguise?

Well, unfortunately, our prognistication (or at least alertness to the possibility) was correct – the CA Supreme Court split the baby and ruled to kill RDA’s without allowing a quick-and-easy means for their rising from their own ashes (does Phoenix have a redevelopment agency? Phoenix Lake doesn’t.). The reaction by many parties will be to try and reestablish the status quo – is this a good thing? I think that there is an opportunity here for a new and more effective use of affordable housing subsidy funding, as was debated at the May 2011 California Housing Consortium Policy Forum. It seemed very hypothetical at the time, concentrating funding decisions at the state level, but that may be the outcome of this ruling. Much more to come….

CA Redevelopment Doomsday Scenario 2.1

As most everyone in the affordable housing business or local government is aware, the California State Supreme Court is considering the arguments regarding the legality of ABx1-26 and ABx1-27, the two Redevelopment Restructuring Acts.  It is clear that the Legislature expected that both statutes would be found constitutional and would work together to create a stream of revenue to help close a substantial part of the Budget gap projected to occur over the coming years.

However, the statutes have been challenged and the Supreme Court has accepted briefs and oral arguments regarding their legality.  Most observers have expected that both statutes would be found constitutional together, or that they would be found unconstitutional together.  But the County of Santa Clara and others argued for a different outcome – that ABx1-26 be validated and that ABx1-27 be overturned.  This would result in local redevelopment agencies going out of business (ABx1-26) and not having the option of resurrection through “voluntary” payment of an annual remittance (ABx1-27).

There is, however, a twist to this outcome that most people have not considered. Read more

Century Backs CRA/LA in Sylmar

Sylmar Court RenderingNew state legislation, and a resulting court challenge, affected redevelopment agencies statewide and could have derailed a high-impact affordable housing development in Sylmar. But a smart partnership and timely bridge financing between Century Housing, developer DDCM and the Community Redevelopment Agency of the City of Los Angeles has kept the project on track.

CRA/LA approved purchase of a Sylmar development site in August, planning to lease it to DDCM to build Sylmar Court, a project with 150 units of senior affordable housing plus ground-floor retail. But the California Supreme Court put the deal on hold when it issued a stay while it reviewed new redevelopment legislation. CRA/LA faced losing the property when sellers declined to extend an option on the lot beyond September 30th.

On September 1st, CRA/LA contacted Century to arrange a $3.1 million bridge loan for the Sylmar property. Century was able to underwrite, approve and close the loan in 29 days, thanks to close cooperation with CRA/LA’s East Valley Region staff and DDCM President Kurken Alyanakian.

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What Can Redevelopment Agencies Do While They Wait?

Seal of the California Supreme Court

On August 11, 2011, the California State Supreme Court issued a partial Stay of Execution of the two statutes that together make up the Redevelopment Restructuring Act (ABx1 26 and ABx1 27).  Many questions continue to come up regarding what redevelopment agencies can do until the Court finally decides the case, sometime in January 2012.

The outline below is adapted from guidance provided to local redevelopment agencies by their counsels.  If you have questions, you should seek specific advice from your own attorneys, but this seems to be consistent with what attorneys around the state are telling their clients. Read more

Redevelopment Agencies – Splitting the Baby?

From Josh Rosa at PublicCEO.com, an interesting proposition – what if the California Supreme Court, in ruling in the lawsuit, CRA v Matosantos, over the constitutionality of the Redevelopment Death and Resurrection laws, AB1X 26 and 27, decides to split the difference and allow one law to stand and strike down the other?

There is, however, a third possible outcome. The Supreme Court could uphold the first law (eliminating redevelopment) and strike down the second. This potential “split decision” would inevitably end redevelopment, without any backup plan to compensate cities for such a dramatic loss. Bundled together, the two laws effectively form a policy of shrinking redevelopment radically, but allowing it to go on in a smaller version. To continue existing, for example, the Sacramento Housing and Redevelopment Agency is preparing to make a $21.9 million payment, which is roughly 40 percent of its total tax-increment funding. These cuts are painful but, in theory, SHRA will survive and persevere. Throughout the state, hundreds of agencies are preparing their own voluntary payments and adjusting to a new reality of scarcer resources. But that safety net might be taken down. Stripped of the reinstatement law, the Legislature’s last budget deal could potentially end redevelopment permanently [emphasis added].

Whichever way the Supreme Court rules, redevelopment funding for all development, including affordable housing, is going to stay shrunken for some years to come, if it is available at all. Lenders and developers should be well down the road of planning for this very-likely outcome – what is your organization doing to prepare?