What is going on here? Well, this parade of people are looking for their next Redevelopment deal, i.e., government handout. The Los Angeles Business Journal this week reported that the City of Industry has entered into a development agreement with Majestic Realty Co. for some 350 acres. Majestic is one of the premiere developers in California and can easily do the job. What is unusual about the deal is that the City of Industry will retain ownership of the land, for which the city will receive one-half the net revenue when and if there is any.
The term "net revenue" is loosely defined as what is left after "debt service and all costs associated with ownership, operation, financing, maintenance and leasing." This is why it is doubtful how much "profit" will be left over to split. It was a non-competitive hush-hush deal and one can understand why. The City of Industry's start-up investment will be $156 million to assemble and clear the land, and to build the streets, sewers, storm drains and other infrastructure necessary for the project. The term of this ground lease is 68 years, long enough for everyone involved to be rich and buried.
In the past the City of Industry has just sold off these big parcels and taken the property taxes as Redevelopment Agency income. This is the first time the City has retained ownership of the land. It will be interesting to see if this land goes on the property tax rolls.
I thought this question of land being on or off the tax rolls was settled when churches had to start paying property tax on their business adventures. For instance, years ago all those orange groves in Mockingbird Canyon lost their church exemption and that potato chip factory in Orange County got sold because it lost its church tax exemption. Now, I find out it was only the churches that got hit.
The newest wrinkle in Redevelopment is to have non-profit organizations front projects with the result they are off the property tax rolls. This is also true of the 20 percent set-aside money used to build welfare housing, but the real stopper is the use of non-profit fronts to own commercial projects. This is the latest scam in Redevelopment. In a Sacramento project some very fancy footwork allows for a Sheraton Hotel to be owned by a non-profit. So in this case, not only does Sacramento's General Fund not get the property tax portion, but the Redevelopment Agency does not either. They can not charge enough bed tax to make up for those lost dollars.
A similar problem confronts Downey. Because of new earthquake standards, Kaiser Hospital would like to build a new hospital on the south end of the Boeing site. While Kaiser brings a quality name to town, it generates miniscule sales taxes (the gift shop) and even a $100 million building is non-profit, "welfare exempt" and creates no property taxes. So why do the deal unless you can make up the loss of taxes by increased rent which is not being offered.
These are the types of deals the parade of suits are trying to do-corporate welfare.