Roughly 600 Redevelopment Projects Approved For L.A.

LOS ANGELES-In the wake of the passage of AB 26, which terminated more than 400 redevelopment agencies in California, the largest oversight board in the state by far has made a successful showing. CR-LA recommended roughly 600 redevelopment projects to the state Department of Finance, and all of them have been approved by the Department to move forward.

“We’ve been getting lots of calls from other agencies asking how we did it,” Richard Close, a real estate attorney with Gilchrist & Rutter in Santa Monica, CA, who was appointed to the CR-LA oversight board, tells GlobeSt.com. Early in the process, CR-LA board members explained to the Agency that it would carefully review all of its recommendations and only approve those they thought were in strict compliance of the law.

“My goal was to build credibility with the Department of Finance, so as we move forward, they can trust our judgment,” Close continues. “I don’t speak for the board on this, only myself.”

Close, one of only two attorneys on the board, and the only one who is an active attorney involved in real estate, tells GlobeSt.com that there are approximately 1,600 total proposed projects or obligations proposed by the agency, “so a lot of the controversial ones in which there were no payments required for this calendar year have been postponed and will be considered in the fall. The process is just beginning.”

The projects that are likely to survive the Department of Finance auditor’s red pencil are those that have clear documentation of an obligation that existed in June 2011. “The controversy is or will be over projects where there are unclear obligations, obligations in which the developer wants to change the project and obligations based on handshakes rather than legal contracts,” Close says.

Close adds that he anticipates a lot of litigation throughout the state as the fate of these controversial projects is decided. He says that CR-LA’s success in getting projects approved is due largely to avoiding playing games like other jurisdictions have. “If it didn’t have a signed written contract dated June 2011, it didn’t get past us to the Department of Finance. Other jurisdictions tried to concoct reasons why a project was an enforceable obligation, and it was easy if there was any ambiguity for the Department of Finance to eliminate it.”

Close expects years of litigation on equitable obligations where potentially hundreds of millions of dollars have been invested by developers in projects throughout the state. As GlobeSt.com previously reported, with the California Assembly’s decision to dissolve redevelopment agencies in the state, the RDAs are sorting through the complicated process of determining ongoing debt obligations, understanding cash flows and eventually selling properties—all while thinking through new ways to finance and achieve economic-development priorities. At this point, the situation is murky, and investors, developers and financing firms are sitting tight until the agencies finish assessing the projects on their slate. Some will remain state-sponsored projects, others put up for sale, and still others scrapped entirely, but just which projects fall into each category remains to seen.