PURPOSE:

The purpose of this report is to provide the Agency a variety of information on the Redevelopment Agency, and to seek direction from the Agency on determining the Agency�s priorities in the coming years.

BACKGROUND:

Staff has been requested to schedule a Study Session to provide a variety of information concerning the Redevelopment Agency.  The Redevelopment and Housing Division of the Community Development Department is responsible for redevelopment, economic development and affordable housing.  Since approximately half of the Agency efforts are focused on redevelopment and economic development and the other half on affordable housing, and because there are separate funding sources for affordable housing, it has been recommended that there be two Study Sessions, with the Study Session on affordable housing scheduled later for July 22, 2003. 

This report will provide a summary of current redevelopment and economic development projects and programs, and a discussion of the financial challenges facing the Agency including possible solutions.  Finally, staff will be seeking direction from the Agency on determining the Agency�s priorities in the coming years.

CURRENT PROJECTS

The Agency currently has four redevelopment project areas.  Each has their own specific characteristics in terms of economic vitality, projects and financial strengths and weaknesses.  The following summarizes the Agency�s activities in the four project areas.

West Olive Project Area

The 128-acre West Olive Project Area is located in the southwestern portion of the City within the Media District Specific Plan area (Exhibit �A�).  The Project Area was originally formed in 1976.  This area is made up of primarily media-related uses.  Since many of these businesses have been quite successful on their own, the Agency�s recent efforts have been focused on public improvements to correct existing infrastructure deficiencies.

In 2001, the Redevelopment Plan was amended to clarify the amount of tax increment that the Agency may receive for this project area and allowed for the issuance of $13.96 million in tax increment bonds to finance public improvements totaling $12.42 million (with the remainder set aside as a debt service reserve fund).  These funds are being used for freeway access improvements on the SR-134 Westbound Ramp Improvements Project.

This includes the relocation of an existing freeway off-ramp allowing Caltrans to construct a new on-ramp to the SR-134 freeway.  The intent of the project is to alleviate the heavy left-turn movement of northbound Hollywood Way traffic, and easier freeway access for eastbound traffic on Alameda Avenue.

There are no other capital improvement projects anticipated at this time for the West Olive Project Area assuming that all of the bond funds will be necessary for the SR-134 Westbound Ramp Improvements Project.

Golden State Project Area

The 1,107-acre Golden State Project Area was originally adopted in 1970 and is located in the northwestern portion of the City, which has been used primarily for industrial and airport related uses (Exhibit �B�). However, the project area continues to change from industrial to more office and media related uses, such as motion picture studio and post production facilities, and promotional retail such as the new Burbank Empire Center.  Current projects include the implementation of the Disposition and Development Agreement (DDA) for the development of the former Lockheed Building 85 (M. David Paul office complex) site.  The Agency is also assisting with the Empire Avenue Streetscape Improvement Project, and the Five Points Realignment Project.

Because the area is large and so much of the area has been successfully recycled from heavy industry, the Golden State Project Area has generated the largest share of tax increment received by the Agency.  In February 2003, the Agency authorized the issuance of Golden State tax increment bonds, which generated $32.9 million for capital projects in the Golden State project area.  The $32.9 million was earmarked for a variety of public improvements in the bond documents including streetscape improvements.  The following were some of the suggested uses of the bond proceeds and estimated costs:

Suggested Use of Golden State Bond Proceeds

            1.         Burbank Boulevard Streetscape Project                                 $10,000,000

            2.         Hollywood Way Streetscape Project                                        $  8,000,000

            3.         Victory Boulevard Streetscape Project                                    $  8,000,000

            4.         Utility Undergrounding                                                                $10,000,000

            5.         Wayfinding Signage Program                                                   $     700,000

            6.         DCSB Improvements Participation                                           $     700,000

            7.         Old Buena Vista Library Improvements                                    $  1,500,000

                                    Total                                                                                 $38,900,000

It should be noted that these were general recommendations, and the bond was initiated in a way to facilitate flexible resource targeting. One option that will be discussed later is for the Agency to consider whether to redirect some of these funds to other project areas that are more financially constrained, through a possible merger of project areas.

City Centre Project Area

The 212-acre City Centre Project Area encompasses the area known as Downtown Burbank (Exhibit �C�).  This Project Area was formed in 1971 and includes a variety of uses that you would typically find in downtowns including retail, entertainment, civic and housing uses. 

This Project Area is very active with the Agency undertaking a number of new and proposed projects and programs.  Projects underway include the AMC Burbank Entertainment Plaza. Phase One is nearing completion, and Phase Two is programmed to initiate construction within one year.  In addition, staff and resources are committed to the redevelopment of what is commonly referred as the old Police Block, which is bounded by Olive Avenue, Third Street, Angeleno Avenue, and San Fernando Boulevard.  There are two projects planned for the block. The Olson Company is developing Burbank Village Walk, a mixed-use project consisting of 140 for-sale condominium units, and 14,000 square feet of retail along San Fernando Boulevard.  This project is programmed to begin construction in Fall 2003.  The Cusumano Real Estate Group is also developing Burbank Civic Plaza, an approximate 88,000 square foot office project with ground floor retail and restaurant uses.  This project is scheduled to start construction in Fall 2003. Also, the Agency plans to facilitate the renovation/repositioning of the Media City Center mall.

The Agency is also involved with various programs designed to help revitalize the Downtown.  They include the Downtown Tenant Assistance Program to fill downtown vacancies with exciting new retailers.  The Agency has already approved one project under this program, Urban Outfitters, which is scheduled to open by February 2004.  The Agency is also involved in the process of forming a Property-based Business Improvement District. 

In 1997, the Agency adopted the Burbank Center Plan, which among other things, identified �Opportunity Sites� within the City Centre and South San Fernando Project Areas where further redevelopment projects may be considered.  In the City Centre Project Area, they include two proposed mixed-use project for Opportunity Site 5 bounded by First Street, Olive Avenue, San Fernando Boulevard and Angeleno Avenue, and Opportunity Site 6B located on the two blocks bounded by First Street, Orange Grove Avenue, the I-5 Freeway and Magnolia Boulevard.  Also Opportunity Site 3 is being planned for a new central library and the proposed Development & Community Services Building (DCSB).  

The Agency has purchased one property on Opportunity Site No. 6B, however, no additional funds have been earmarked for Opportunity Sites 5 or 6B.  Also, the Agency has assisted with planning and design work for the DCSB project, and at this point, it appears that additional funding would be provided through a Golden State remarketing bond. 

The City Centre Project Area is subject to substantial financial constraints due to ongoing debt requirements.  These include a 1993 tax allocation bond, and loans for parking and improvements toward the Media City Center mall.  These ongoing debt service requirements could hamper the Agency�s ability to move forward with many of the above projects and programs, which will be further discussed later in this report.

South San Fernando Project Area

The South San Fernando Project Area is the Agency�s newest project area, adopted in 1997. The 467-acre project area is located just south and west of the City Centre Project Area (Exhibit �D�).  While the project area is the Agency�s newest, it is also a very active project area in its own right.  Some of the current projects underway include the Robert R. Ovrom Park and South San Fernando Streetscape project, and the AmeriCold property acquisition.  The near-term use of the AmeriCold acquisition is for construction staging for the new Magnolia Power Plant.  After the construction period, the long-term use of the property would be well suited for the expansion of the City�s transportation facilities as well as a transit-oriented, mixed-use project. 

Several housing projects are also planned in the project area.  The Senior Artists Colony on the 400 block of South San Fernando Boulevard will be a 141-unit senior housing project, which is scheduled to start construction in July 2003.  An Independent Living Facility is planned at 600 South San Fernando Boulevard consisting of 18-units for disabled adults.  Staff is also planning for the development of a housing project on the 700 block of South San Fernando Boulevard (Lance site), and is currently in negotiations with the Olson Company to develop 33 for-sale housing units.

At the same time that the Golden State Project Area issued bonds, the South San Fernando Project Area also issued $5 million in bonds.  Of this, $3.75 million have been earmarked towards the South San Fernando Streetscape improvements with the remaining $1.25 million earmarked for the opportunity acquisition of parcels for the Robert R. Ovrom Park, and various infrastructure improvements.  

Economic Development and Related Activities

The Agency is also responsible for a number of economic development initiatives to increase jobs, retain and expand businesses and promote the general economic welfare of the City.  The Work Force Connection assists workers in finding jobs as well as outreaching to local businesses to help their employment needs.  Currently, the Work Force Connection receives approximately 800 clients per month seeking jobs.  Approximately $40,000 of the Work Force Connection budget is funded by the federal Work Force Investment Act through the City of Glendale. The remaining $75,000 is funded by the Agency.   The Economic Development program also oversees several endeavors to help reduce office and industrial vacancy rates by recruiting businesses and assist with business retention through such programs as the Mayor�s Business Outreach Program.  An economic development report on the city-wide marketing efforts is attached as Exhibit �E�.

The Agency also assists with various efforts throughout the City including the reuse of the old Buena Vista Library, and assisting with efforts to improve the Magnolia Park area.  The Agency is also responsible for most of the City�s real estate services such as acquisition services (ex. AmeriCold), and street and alley vacations.  

FINANCIAL CHALLENGES

There are financial challenges facing the Redevelopment Agency, not the least of which is the ongoing budget crisis on the State level that threatens to divert funds from both the City and Agency.  Also, while the Golden State Project Area is well funded with its recent $32.9 million �new money� bond issue, other more active project areas are facing ongoing cash flow problems (i.e. City Centre).  There are additional opportunity sites that the Agency should be planning for development, which currently do not have funding.  In addition, the City has important public improvement projects that it is considering such as the Robert Ovrom Park and DCSB project.  The following outlines the major financial challenges facing the Agency.

Educational Revenue Augmentation Fund

One of the many areas that the State is looking for budget solutions is with redevelopment agencies. Specifically, they are looking to redirect Agency funds to the educational system through the Education Revenue Augmentation Fund (ERAF).  Similar to the uncertainties facing cities and counties, it is still unclear what the State may ultimately choose to do.  In the Governor�s budget proposal, he recommended that $250 million be redirected from agencies state-wide, and rising to approximately 53% of agencies tax increment after 15 years.  If in fact, the Governor�s proposal was approved it would be catastrophic to agencies state wide including Burbank, likely leading toward the default on numerous bond issues.

On the other hand, the Assembly and State Senate are far more sympathetic to the benefits provided by redevelopment agencies.  Currently, the Assembly proposal does not provide for any ERAF payment, and the Senate version provides a one-time payment of $250 million from agencies.   The Assembly and Senate are currently in a Budget Conference Committee where it is unpredictable where the ultimate outcome may be.  However, staff believes the state-wide ERAF payment will be between $100 million to $250 million for at least this coming year. 

It is very important to note that even if redevelopment agencies receive only a one-time ERAF payment, it is clearly anticipated that the State budget crisis will be a multi-year problem.  What may be an acceptable ERAF payment this year, could become a multi-year prospect that challenges us for the near term.    

City Centre Cash Flow

As previously mentioned, the City Centre Project Area undertook a number of long-term debt obligations.  They include a 1993 tax increment bond issue and loans for the construction of portions of the Media City Center mall parking as well as the construction of the Macy�s store. (The loans to the mall are repaid from the tax increment generated from the mall, and the sales tax generated by Macy�s and several other mall stores.)  While there is sufficient tax increment to repay these long term debt obligations, City Centre does not have any additional funds to support new capital improvements or projects.  In fact, by the 2005-06 fiscal year, there will not be sufficient funds to pay for ongoing administrative costs, even though this is a very active project area. While the Agency has in the past and is currently using one-time measures such as land sale proceeds to help with the cash flow, there is no dedicated long-term source of funds to maintain a positive cash flow.

South San Fernando Project Area Cash Flow

The South San Fernando Project Area is a relatively new project area, therefore, there has been a limited amount of tax increment generated from the project.  Unlike City Centre, this Project Area does not anticipate a negative cash flow problem. However, except for the $5 million in bond proceeds for capital projects, the cash flow for South San Fernando will not support additional capital improvement projects in the foreseeable future.

PROJECT AREA MERGER

As discussed earlier, the Agency will be facing significant fiscal challenges in the very near future.  The City Centre Project Area is unable to fund any new capital projects beyond the ongoing projects noted above, and by the 2004-05 fiscal year will no longer be able to pay for administrative functions.  This is despite the fact that City Centre is one of the most active project areas and still has additional opportunity sites that have not been addressed.  The South San Fernando Project Area is still somewhat young in terms of generating tax increment revenue with only the $5 million in bond proceeds available for capital projects.  On the other hand, the Golden State Project Area is fiscally strong, and has $32.9 available towards capital projects.

One way to rebalance these fiscal differences between the project areas and to provide more flexibility in addressing the priorities of the Agency is to merge the Project Areas.   The State redevelopment law specifically allows for the merging of project areas and has set forth the required procedures and requirements for merging Project Areas.  While the tax increment of each Project Area must be first pledged to the debt of its respective Project Area, it does allow for the sharing of the Golden State bond proceeds among the merged Project Areas, thus allowing funds to be allocated where they are most needed. 

If this approach is used, staff recommends merging three of the four Project Areas; Golden State, City Centre and South San Fernando Redevelopment Project Areas.  In order to merge these Areas, the City Council would be required to make the findings that the merger would:  1) result in a substantial benefit to the public; 2) contribute to the revitalization of blighted area through the increased economic vitality of the Area; and 3) increase and improve housing opportunities in or near the merged Area.

In order to make these findings, however, the rationale and justification for merging the Project Areas must be documented and the Agency would have to follow a process that is very similar to the plan adoption procedure.  Among other things, this includes the preparation of a preliminary plan, an environmental analysis, and public hearings before the Planning Board, City Council and Redevelopment Agency. The Agency most recently went through this procedure in 1996 to 1997 when the South San Fernando Redevelopment Project Area was established.  The merger process is anticipated to take between seven and twelve months to complete depending on the amount of environmental analysis that is required. It is recommended that the Agency direct staff to initiate the process of merging the project areas.

PROJECT PRIORITIES

In May 2000, the City Council adopted a 10-year Strategic Plan, and each year thereafter, developed a Work Program of specific objectives which are intended to help implement the vision and goals of the Strategic Plan.  Also, last month, the City Council and Redevelopment Agency conducted a goal setting workshop to help determine the priorities over the next year.  Staff has tried to incorporate those ideas as well as planned redevelopment efforts such as the development of certain opportunity sites to develop a draft Project Priorities List (Exhibit �F�).  The list has been divided between �First Priority� and �Second Priority�, and the projects are listed alphabetically.

It is important to note that this is only a draft list, which is intended to provide the Agency an opportunity to discuss their priorities.   It should be also noted that some of the items on the list may actually be funded from the Agency�s affordable housing funds, such as Opportunity Sites No. 5 and 6B.  Also some of the items are actually ongoing programs rather than one-time projects.  For the programs, we have totaled the estimated costs for the next five years.

CONCLUSIONS:

The information provided in this report outlines the Redevelopment (80%) and Economic Development�s existing and proposed initiatives for the coming years.  It is recognized that there could be some difficulty for the Agency to discuss the Agency�s priorities independent of a discussion of its affordable housing priorities, but in any case, staff has scheduled a Study Session on the Agency�s affordable housing initiatives for July 22, 2003.   

The focus of the Study Session is to offer the Agency the opportunity to have a discussion on the Agency�s efforts for the coming years.  Staff is prepared to provide a 15-minute presentation on the items in this report.  However, given the one-hour time constraint of the Study Session, the Agency may choose to forgo staff�s presentation, allowing more time for discussion amongst the Agency members.  In either case, staff will be available to answer any questions or concerns the Agency may have.

EXHIBITS:

A         Map of West Olive Project Area

B          Map of Golden State Project Area

C         Map of City Centre Project Area

D         Map of South San Fernando Project Area

E          Economic Development Report

F          List of Project Priorities

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