Redevelopment’s Dissolution Leads City of Glendale To Create Its Own Economic Development Corporation

Phil, post-redevelopment, what mission has the City of Glendale charged you with?  

Phil Lanzafame: I’m now charged with two things: moving forward an economic development program for the City of Glendale without redevelopment, and unwinding the activities of the Redevelopment Agency, ensuring that Glendale receives its fair share of assets and resources.

Clearly, the demise of CRAs in California has forced cities to adapt. How is the City of Glendale now pursuing its economic development agenda?

We all have to live with the notion that redevelopment is a creature of the state, and so the state could eliminate it. That was the opinion of the Supreme Court. 

Given that, we had a choice to make: We could either lament the loss and say, “Please, give us one more try,” or we could recognize that economic development is important to us and create a vehicle that we can truly control on a local level. 

Glendale decided to take matters into its own hands. We established a non-profit, the Glendale Economic Development Corporation. Funding came back to the city from the dissolution of redevelopment—the county, the school district, the college district, and the City of Glendale all get a piece of what used to go to the redevelopment agency. The City of Glendale said, “Let’s use that money, which we weren’t expecting in the General Fund, to fund our own economic development program. We’ll make rules that make sense to us, and we’ll control our own destiny.”

Elaborate on the differences between the city’s new economic development corporation and redevelopment. Is the former capable of catalyzing private investment with public subsidy? What, if anything, is different?

We’re setting our own tone. For Glendale, we’ve gone from a program that is about subsidy to a program that’s about facility. 

We spent 40 years in our economic development program doing things that the law asked us to do: revitalize blighted downtown areas; improve infrastructure; create affordable housing; build public facilities, and do commercial development that makes sense for the economy. We were very successful at it and were ready to wind up our Central project area anyway. 

Now, rather than subsidizing an Americana at Brand or a GC3 campus, how do we facilitate continued private investment without the need for a catalyst of public investment? Using projects, amenities, and programs we’ve created with redevelopment, how do we now pivot and facilitate private investment around them? 

If you remember, redevelopment was intended for when the private sector either couldn’t or wouldn’t invest to revitalize an area. The public steps in, uses the redevelopment tool, creates a catalyst, and attracts private investment. 

We’re at the point now where private investment is starting to come. The focus of our economic development program is: How do we facilitate that? We don’t need to subsidize it anymore, because we’ve done that through a robust redevelopment program.

Glendale now clearly has a robust private sector investment profile, so let’s focus on an example of an important new mixed-use project—the Laemmle Lofts. Please share what about the project attracted city attention.

We had established an Art-Entertainment District—an area that encouraged nightclubs, bars, restaurants, music clubs, and had a small theatre. It was pretty insulated from adjacent residential, so it was a good place for people having fun late into the evening. 

We had the Central Library on the south part of this corridor. We also had a new museum, the Museum of Neon Art, which we were creating next to the Library and our Adult Recreation Center/Central Park complex. All of these things fit in well. Think of the typical campus configuration, with east-west and north-south spines. We started to see that emerge at the Americana at Brand, where Caruso Avenue extended through to a pedestrian paseo adjacent to the museum and leading into the civic complex of public buildings and facilities. This spine created  a hand-off from the commercial and private sector into the more civic area—the library, Central Park, and Adult Recreation Center. 

Looking north-south, we’re reorienting our library so that it has an entrance on the north of the building as opposed to the east, which turns its back to the downtown. That was going to be the southern anchor. The north end of that spine runs right through the Art-Entertainment District, where it dead-ended at the Alex Theatre. Fitting nicely into that was the location for the Laemmle Lofts project. Along with the Alex Theatre, we really saw it as a strong north anchor for the Art-Entertainment district.

Describe the Laemmle Lofts project and the development’s timeline.

We started looking at the Art and Entertainment District around 2009-2010. The Laemmle Lofts project finally landed about November of 2011. 

The idea was to build a five-screen Laemmle Theatre with loft housing or apartments above. We wanted it to look and feel like a real urban project. We want to encourage pedestrian activity and alternate modes of transportation. Given that we had a lot of public parking around the project, we decided to approve it without any parking. People would park—in designated spots—in a public structure some distance away that was separate from the project. 

We first approved Laemmle Lofts in March 2011. We went through our economics and concluded that the project needed assistance of about $1.5 million. 

This was going to be a pilot experiment for us. But when we looked at the realities of the market and started to get into financing, we weren’t sure that the project would be successful without parking. Maybe we were too far ahead of what Southern Californians will accept. We decided that we should probably put at least one parking stall per unit. 

That certainly has added an increased cost to the project. We already knew this needed $1.5 million dollars of subsidy, and the Redevelopment Agency negotiated with the developer to say, “We all want to move this project forward in a way that we think will be successful in the current marketplace. Let’s split that cost.” We agreed to split it, and calculated about $2.2 million to add that one level of subterranean parking.

Then redevelopment disappeared.

Redevelopment disappeared in December of 2011, when the Supreme Court said that AB 26 is valid and AB 27 is not. 

When that happened, the Dissolution Act that eliminated redevelopment looked back to June 28, when the legislation was adopted, and said: “That’s the elimination date.” 

We had approved Laemmle Lofts before the ultimate cut-off date of June 28, 2011, but had amended our agreement in November of 2011, before the Supreme Court had made a decision and confirmed that June 28 date. 

We found ourselves with a $1.5 million as an enforceable obligation, and a $1.1 million in limbo. It wasn’t really an enforceable obligation because we had amended the agreement after the cut-off date.

We went back to the Department of Finance and got creative in an attempt to continue to do redevelopment. The suggestion was: See if other taxing entities want to commit their monies to the project. 

We looked at what the project would generate in total dollars, and then at how those dollars were split out. Looking at a pro forma over a long period of time, the lion’s share came to the City of Glendale, because we were getting permit fees and sales tax as well as tax increment. 

We said to our taxing partners, “Why don’t we all agree to put in this $1.1 million, and then Glendale will pay you what you would have realized if we had sold the property and distributed the property tax, out of what we generate from the project?” 

We got all of those taxing entities to agree. We knew that the project was going to benefit Glendale in more than financial terms, so we were willing to take the financial benefits and share them with the taxing agencies so that they would approve the use of that money. We thought, “Maybe this is a model for doing economic development in partnership going forward.” 

When we went back to the Department of Finance for approvals, we didn’t meet the strict guideline included in the statute: It needs to reduce costs of the agency. If it was going to reduce costs, one of the other taxing entities would be short-changed, and then why would they do it? 

Not to be deterred, we went back to the drawing board with the same concept in mind. We knew we were going to generate a certain amount of money in property tax, sales tax, and permit fees. We thought, “Why doesn’t the City enter into an agreement to fund the $1.1 million outside of redevelopment? We’ll use the property tax distributions that we’re getting to make that payment.” Those were increment dollars that would have flowed to the agency anyway—funds that we would have used to subsidize the project. 

That structure worked in accordance with the dissolution law and the Department of Finance. We restructured how the payments were made, and we were able to go forward with some of the project being paid for as an enforceable obligation out of “old” redevelopment property tax, and some of the project being funded by the new economic development corporation.

Going forward, economic development that uses the redevelopment tool is going to have to partner with the county, because that’s where the majority of the funding is. If you’ve got a big project that is going to have regional benefit, it makes sense to do a project with the county. 

Phil, what’s the status of the project today?

We had a recent groundbreaking, and construction should start shortly. They’ve already demolished the site. 

Another great outcome: A Panda Inn Restaurant had been at that location for quite a long time.  It was either store number two or three in the chain. We were able to make introductions and the project was enticing enough that Panda Inn agreed to become a partner in the project—they vacated the building and will come back in the rebuilt project. We always had about 8-10,000 feet of commercial, so Panda Inn will go back into that space. 

Does Laemmle Lofts set a precedent for other cities, or for other projects in Glendale?

I think so. The scale of projects will be much smaller, simply because we’ve now got to collect money over several years. We don’t have the tax increment we once had to do something like an Americana at Brand, where we committed almost $80 million in acquisition and public improvements, or a Disney GC3, where we committed $128 million over 30 years from increment that was being generated by the project. We can’t do projects on that grand scale, but we’re not sure that we need to at this point. 

Again, through a robust redevelopment program, we’ve done the improvements to downtown, which once was a blighted area. Now, if we’re all keeping an eye on the ball, we just have to do some tweaks to maintain that vitality. With this type of program—assuming that our General Fund doesn’t take more hits from the economy, the State of California, or other threats—we should be able to maintain that vitality through economic development programs that are more about facilitation rather than large subsidy.

Did the city ever consider, as a tool for financing  Laemmle Lofts, using an Enhanced Infrastructure Financing District now permitted by California Senate Bill 628? (EIFDs are also featured in this month’s TPR.)

We have. Enhanced Infrastructure Financing Districts are a step in the right direction. But Glendale has outstanding redevelopment bonds. Remember, we were encouraged to incur debt. A lot of bonds already rely on the increment that’s being generated. That means you don’t have the critical mass of funding to make EIFDs happen until those bonds are retired. And then it is probably necessary to partner with the county to generate the critical mass of funding necessary to achieve a successful outcome.  

Phil, pivoting from Laemmle Lofts, could you describe the goals of Glendale’s Strategic Economic Development Program? What metrics are relied upon to show progress toward those goals? 

When redevelopment was dissolved, we decided that we were going make our own rules. 

First, we established an economic development ordinance in our code that actually gave authorities to do this kind of program. We then formed a non-profit corporation. Since it was funded with public dollars—funds the city receives that would have gone to the redevelopment agency—we thought it important that the City Council sit as the Board of Directors. 

Then we started to look at which holes we needed to fill. Glendale had experienced a large exodus of business during the recession, and our office vacancy rate had risen north of 25 percent, even as late as 2011-2012. We had been heavily concentrated in finance, real estate, and insurance. Those companies contracted. Some left the market, while some relocated. The council formed a goal to reduce office vacancy by 10 percent over the next five years—two percent a year. 

While we have done a lot of things to put ourselves on the map, Glendale is still seen as a sleepy bedroom community that rolls its doors up at six o’clock. So we focused on changing that perception. How do we create an 18-hour city? How do we attract the uses that will keep people active in the local economy until later in the day, and even into the night? Then, how do we improve our service to business? 

We no longer have big dollars to spend on subsidizing redevelopment projects, so what sets Glendale apart from every other city that’s trying to attract investment? That has to be our service to business. Can we streamline some of our processes and make them less cumbersome? To help in that area, we employed a program that we started in redevelopment—a concierge service. As a project came through the front door, it was assigned a concierge responsible for navigating their client through the city process. Some ask, “Why are you treating business so well?” The sooner that investment gets in the ground in Glendale, the sooner it starts producing benefits for Glendale.

GEDC has issued an RFP for its Glendale Technology Initiative. Elaborate on the city’s intention there.

I mentioned that one of our goals is to reduce office vacancy. Through several activities, we achieved that goal and then some. We’re down to about 13 percent now. Get below 10 percent vacancy and you start having to ask: “Where do I put people that want to come to Glendale?” 

Looking back, what got us into this predicament? Being too concentrated on one thing. We wanted to diversify. But what should we be attracting, if not real estate, finance, or insurance? Technology is certainly one of the fastest-growing clusters. 

Our plan right now is to identify what area of technology Glendale is piqued to grow in. Is it entertainment, content development, content delivery, utility and electric, or energy management, for example? Is it in medicine, since we have two major medical centers and a third hospital in town? 

We want to get our arms around the right area of technology for us to go after.

To close, Phil, please share your reflections on the impacts of the dissolution of CRAs in California.

I’ve thought long and hard about it. 

When redevelopment was first dissolved, the reaction was: “This just isn’t fair. The state can’t do this.” But when you look at the legal argument, sure they can. You resign yourself to that. 

I may agree that the state can dissolve redevelopment, but should they, and should they do it in this manner? It’s hard for me to see anything but the negative side, because I’ve lost a powerful tool and resources that have not been replaced. 

Unwinding our redevelopment programs seems to be a moving target. We get one set of rules and everybody thinks they understand them. Then you start to peel the onion away and the target moves. We’re just trying to get out of the redevelopment business and do what the Legislature asked us to do. But we want to do it in a way that allows us to survive and move forward.