L.A. Controller Urges Framework for More Accountability and Transparency in Report on $1 Billion in Developer Tax Incentives

Posted on August 10, 2018

 

Los Angeles - L.A. Controller Ron Galperin today released a first-of-its-kind report on up to $1 billion in tax incentives offered by the City for large-scale real estate developments. The report includes recommendations for approved and possible future projects to better achieve total accountability, transparency and the best value for the public.

The Controller’s Office conducted an in-depth review of agreements centered on five projects, which were approved to receive up to $654 million in tax refunds or abatements over a 25-year-period. The City also approved an additional $345 million in tax incentives for three more projects. These incentives are intended to stimulate economic activity and make up for what developers said was a “feasibility gap” they said prevented them from bringing their projects to fruition. Another four projects that could receive tax incentives are currently being considered by the City Council.

“Tax incentives can be a useful tool to help spur worthy projects and jobs. But when the City provides financial assistance to any business, it is vital that we ensure total accountability for every cent of taxpayer funds,” L.A. Controller Ron Galperin said. “It’s essential that every deal be maximally transparent and advantageous to taxpayers. That is why we need a clear roadmap to ensure consistency, fairness and value for those we serve.”

Since 2005, the report finds, the City has approved incentive agreements without a comprehensive citywide economic development strategy. Instead, policymakers have evaluated and approved financial incentives using a Block Grant Investment Fund policy, which was not originally intended to determine incentive agreement eligibility.  

In the report, which can be found at lacontroller.org/incentiveagreements, the Controller’s recommendations include developing and codifying a:

  • Framework for Incentive Agreements to ensure the City identifies clear and measurable goals, identifies opportunities for economic and fiscal optimization, and considers opportunities for improvement;
  • Revised Scope of Evaluations and Consultant Studies to require a more thorough evaluation of claimed “feasibility gaps,” encourage development with fewer public dollars, and more rigorous analysis of future economic and fiscal benefits;
  • Post-Completion Analysis to compare actual vs. projected costs and conduct an appraisal of the project post-completion to determine whether incentive amounts should be reduced; and
  • Annual Report to identify how the goals, number of jobs and tax revenue realized as a result of incentivized projects are meeting the parameters when first approved.

Read the full report here.

Follow L.A. Controller Ron Galperin at @LAController on Twitter, Facebook and Instagram.

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