LOS ANGELES – Larry Kosmont, CRE, is President and CEO of Kosmont Companies – a real estate, finance, and economic development advisory firm specializing in public-private partnerships. He has advised numerous municipalities, as well as serving in local government himself in the Southern California region. The Planning Report talked with Kosmont about tools for creating economic development in California without redevelopment agencies, focusing on the potential impacts of publically owned properties and special districts in accomplishing redevelopment goals, as well as the challenges to such approaches.
Larry Kosmont: In California, the most compelling tool for economic development, which was redevelopment tax increments, is no longer available. This has required cities and other public agencies to look at financing economic development transactions with an assemblage of different tools—tools that relate to planning and zoning, the adoption of special districts, the potential to use special financing authorities and dedicate specific taxes to a project, as well as the opportunity to use publicly owned properties in part or entirely as a contribution to a public-private or infrastructure transaction. In summary, we have 4 groups of tools to use as follows: public agency “owned” property, site specific tax revenues (SSTR) that can be leveraged in a variety of ways, special districts (for financing and services), and finally, land use/zoning policy to enhance and direct private investment.
TPR: How much do they satisfy the pent-up demand for tools to stimulate local economies?
Kosmont: I like to say that when we had tax increment and redevelopment, we had a power tool, and now that we don’t, we’re down to hand tools. It’s not like we can’t figure out how to do it. It just takes longer, it’s riskier, more complicated, and overall not quite as specifically effective. That’s how I’d draw the comparison. These tools we have to use today, despite being “hand tools,” enable a city, if creative and skilled, to accomplish economic development—both in terms of public infrastructure with the assistance to private sector investment, also known as direct public-private deals.
You can do them. It’s just harder and risker, I believe.
TPR: Before we get to the new tools that are being proposed or should be proposed, summarize in order of importance and value the hand tools that are now available.
Kosmont: Right now, the most important tool in my mind is the publicly owned properties. Normally, I wouldn’t conclude that, but we have a unique circumstance in California wherein over 400 former redevelopment agencies have been terminated and are mandated to liquidate all property assets through a city-by-city sales program that will by and large get started in 2014. The former redevelopment agency assets that are left are the property assets.
Because the state-imposed RDA dissolution plan has been going forward now for almost two years, we are at the point now where the cash has been distributed, the housing assets have been moved to housing successor agencies or housing authorities, and the debits and credits (who owes what to whom)—in the form of a final “true up” payment—have pretty much been resolved for a majority of these 427 dissolving agencies.
What’s left to do based on the law of RDA dissolution, called AB 1484, is the Property Management Plan, which is the governing document that, once approved by the Department of Finance, allows these agencies to sell property. The requirement, other than some exceptions, is to sell.
There are 427 cities and successor agencies out there that have anywhere from one to two properties to over a hundred properties that could be put into a productive real estate transaction under the right circumstances, either on a discounted sale basis or on a co-venture basis. Kosmont projects over 2,000 properties being available for sale and reuse at some level, and as a result of this unique state-imposed property liquidation program, serves now as a primary tool for economic development.
Full interview by The Planning Report at planningreport.com.
