Metropolitan
News-Enterprise
Monday, June 4, 2001
Page 1
Upholding a Los Angeles
Superior Court ruling, the appeals court ruled that the county properly deducts
its administrative costs from the tax increment funds it is required to turn
over to the CRA under state redevelopment law.
The fact that several
CRA projects have had caps placed on the total amount of tax money they can
take in does not shift the burden to the county to bear the full cost of
calculating how much the agency gets, Presiding Justice Roger Boren of Div. Two
said.
“The plain
language of the statute here permits County to deduct the [administration fee]
from CRA’s tax increment allocation and is in harmony with the
legislative intent to allow counties to recover their administrative
costs,” Boren wrote. “To follow CRA’s interpretation of
[Revenue and Taxation Code Sec.] 95.3 would allow redevelopment agencies with
capped plans to avoid those costs.”
At issue is the
so-called tax increment that is the lifeblood of redevelopment projects.
Agencies like the CRA
operate by declaring particular urban areas “blighted” and then
adopting plans to renovate them. They sell bonds to finance the projects which,
when built, are expected to substantially increase property values in the formerly
rundown areas.
The cities, school
districts, and other government agencies that share in property taxes continue
to receive their portion based on the value the blighted area had before
redevelopment, or would have had if redevelopment had not gone forward. But the
tax increment—-the extra revenues now brought in because of the new,
higher values spurred by the redevelopment—-bypasses the cities and
school districts and goes directly to the agency to repay the bonds.
The CRA dispute with the
county is based on two added twists to the redevelopment scenario, one brought
on largely by hostility toward redevelopment philosophy, the other by a severe
financial crunch faced by counties in the early and mid-1990s.
Answering concerns that
redevelopment was diverting tax money from crucial services to pay
agencies’ ever-increasing appetite for new projects, the Legislature
allowed those tax increments to be capped. Initial caps were generous, but
legal action often worked to lower them.
For example, the $7.1 billion
cap for
Meanwhile, the
Legislature allowed cash-strapped counties to begin charging to recoup their
costs to collect and apportion the tax increment.
The agency alleged that
it was being underpaid. As property values in redeveloped areas continued to
rise, the CRA argued, state law allowed it to take in every dollar up to the
capped amount for each project. The deductions kept the agency from getting its
full cap value, it argued.
The CBD project is
expected to reach its cap in 2003 or 2004, but the agency argued that the
county’s practice of deducting its costs would keep the project about $5
million short of the cap to which it is entitled.
The Pico-Union area
redevelopment project already reached its $14 million cap in 1994, and the CRA,
which now receives no more tax increment, repaid the county the amount it got
over the cap. But the county later ruled that it was due another $107,113.63 in
administrative costs.
The Crenshaw area project’s
caps are annual, at $500,000 each year. The county imposed $67,261.55 for a
five-year period, a figure the CRA argued prevented it from reaching its
rightful cap in each of those years.
But Boren said the
deduction method employed by the county was appropriate, given the language of
Sec. 95.3.
“In this complex
area of property tax and redevelopment finance, clearer statements of procedure
and purpose would be difficult to achieve,” the presiding justice said.
“Because the statute is sufficiently clear in method and intent and
because County’s implementation does not conflict with the process and
procedure set forward in section 95.3, we uphold the trial court’s
determination.”
Boren was joined by
Justices Candace Cooper and Kathryn Doi Todd.
The case is Community
Redevelopment Agency v. County of Los Angeles, 01 S.O.S. 2637.