LAFAYETTE: Where's the blight?

(01-29) 04:00 PST LAFAYETTE; SAN FRANCISCO BAY AREA -- LAFAYETTE - Where can you find urban blight in the Bay Area? East Oakland, downtown Richmond, San Francisco's Hunters Point, Lafayette. . . .

That may sound peculiar, but just a few days after Christmas, the city council in this Contra Costa County bedroom community ruled that its downtown suffered from

"urban blight" and declared it a redevelopment zone. That gives the city far-reaching fiscal powers to shuffle around its property taxes in order to raise funds for jazzing up its staid retail hub.

Improvements along the 12-block Mt. Diablo Boulevard commercial strip will include vintage ornamental lighting, upgrading the city library, bike lanes, new sidewalks, undergrounding utilities, more parking downtown and senior services.

For those unfamiliar with Lafayette, one local guide book described the community as a "nice, upper-income town where people don't hesitate to fight for the fine points of western civilization." The average household income, according to the Association of Bay Area Governments, is $90,500.

The problem, however, is that Lafayette has a 1950s retail district that hasn't kept up with neighboring 'burbs. Orinda, Walnut Creek, Concord and Pleasant Hill all have thriving commercial districts that generate piles of sales tax revenue.

While Lafayette does have a Starbucks and some other fashionable shops that you expect in well-off suburbs, the retail area doesn't have that well-scrubbed glistening buzz like Walnut Creek's Broadway Center or Orinda's new theater shopping area.

Considering the income of the residents, the boutiquing of Lafayette seems inevitable.

But is the powerful fiscal tool of redevelopment really the proper course?

One defense of Lafayette's actions is that "everyone else is doing it." The city is following the path taken by surrounding suburban communities, such as San Ramon and Danville, and suburbs throughout California.

Indeed, a recent report prepared by the state Legislative Analyst office concludes that many communities are stretching the limits of state laws that permit them to create redevelopment zones.

The report, called "Redevelopment After Reform," was released the same week in December that Lafayette approved its redevelopment zone. The report concluded that recent reforms by the Legislature to curb redevelopment abuses haven't worked.

"Contrary to predictions by redevelopment officials, we find no evidence that (new) redevelopment agencies are more focused on eliminating blight than project areas adopted in earlier years."

One problem with the state redevelopment law, which has raised billions of dollars to restore older urban areas, is that there is no oversight. No regulatory agency looks at decisions to create redevelopment agencies and, therefore, no one is there to say no if the decision is dubious.

"We found the existing enforcement over redevelopment has significant shortcomings," said Marianne O'Malley, principal fiscal and policy analyst with the Legislative Analyst office in Sacramento.

The report recommends that proposed redevelopment plans be submitted to the state Attorney General for a finding of consistency with state law.

While the report doesn't specifically address Lafayette's redevelopment decision, Contra Costa County, which stands to suffer from the plan, thinks the city is on the wrong track.

In a 10-page legal treatise filed with the city last month, Contra Costa County outside counsel Lee S. Rosenthal said Lafayette's district will bleed property taxes from the county and other taxing agencies to pay for redevelopment efforts.

Rosenthal estimates that over the 45-year life of the district, $25 million will go from the county's general fund to redevelopment. Another $25 million will be diverted from the Fire Protection District and $3 million from the county library fund.

This happens because redevelopment districts use an esoteric money-raising device called tax-increment financing, which permits a city to freeze property taxes in redevelopment districts. The growth in property taxes that happens as a result of redevelopment flows to the city, which uses the funds to make other improvements in the district.

Most of the increase in taxes would ordinarily go to other county tax authorities but instead goes to the improvements in the redevelopment district. In the case of Lafayette, some of the tax growth will go to the county, which is required because of a change to state redevelopment law.

In the end, critics charge much poorer communities in the county are helping to subsidize Lafayette's scramble for retail tax dollars.

Contra Costa County could sue to stop Lafayette's redevelopment plans, but county officials said they haven't decide to do so yet.

The city's ability to use this controversial taxing scheme hinges on whether the community has urban blight, which is required by state law before creating redevelopment zones. To make its case, Lafayette hired the Orange County consulting firm Urban Futures Inc., which prepared a 40-page redevelopment plan and numerous reports attacking the county's objections.

Summarizing the findings, assistant city manager Steven Falk said that the downtown has six boarded-up buildings, business vacancies, some graffiti, apartment buildings next to a 7-11 convenience store and other incompatible land-uses like the swank Park Hotel next to a muffler shop.

Unlike Walnut Creek, Concord, Danville, Orinda or Pleasant Hill, "there is a general economic malaise" in Lafayette, said Falk.

Indeed, the city does have one major eyesore, the boarded-up Town Center project near the BART station.

But this failed project wasn't a function of Lafayette's mediocre retail scene. Instead, it's a sour 1980s real estate deal that got caught up in a local developer's problem real estate portfolio.

Peter Bedford, a Lafayette resident, had plans to tear down the Town Center buildings and replace them with his corporate headquarters and a retail center. But Bedford's nationwide $2 billion real estate empire unraveled in the early 1990s. Most of it, including Town Center, was turned over to his financial partner, Kemper Insurance, which has been trying to unload many properties, including Town Center.

Town Center is similar to Orinda's theater site in the late 1980s, which also suffered from the collapsed real estate market and sat vacant for years. But instead of redevelopment coming to the rescue, the plan for finishing off the stalled retail-entertainment complex was done entirely by the private sector in 1993.

(There is a proposal for revitalizing the Town Center project by a Berkeley real estate partnership, which has an option to buy the Kemper site.)

As to the definition of urban blight, the law tries to be clear. An area must be predominately urbanized and characterized by conditions of physical and economic blight. Moreover, the blight must be so "prevalent and so substantial that it causes a reduction of or lack of property utilization of the area to such an extent that it constitutes a serious physical and economic burden."

"Urban blight is a legal definition, not a gut feeling," said assistant city manager Falk.

Nevertheless, there have been some court decisions that seem to move away from the technical definition. In Fosselman's Inc. v. City of Alhambra, the Third District California Court of Appeal ruled in a redevelopment case that substantial evidence of urban blight is defined as

"relevant evidence that a reasonable mind might accept as adequate to support a conclusion."

This reasonable mind concludes that Lafayette is stretching it. But there's nothing that will likely stop it from going forward with its plan.

Bradley Inman is a Bay Area-based real estate writer and author of "San Francisco Bay Area: Livable Neighborhoods," a guide to affordable and unique places to call home (Foghorn Press, San Francisco, 1-800-842-7477, $12.95, 300 pages).<