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REDEVELOPMENT AGENCIES AUDIT

Posted by xaviervir on March 7, 2011

FROM THE MERCURY NEWS:

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California redevelopment agencies blasted in state review

By Tracy Seipel

tseipel@mercurynews.com

Posted: 03/07/2011 02:42:17 PM PST
Updated: 03/07/2011 06:43:35 PM PST

A new state report criticizes California’s redevelopment agencies for loosely defining blighted areas, failing to pay about $40 million they owe to the state’s public schools, and poorly tracking the number of jobs that redevelopment creates.

The analysis, released Monday, just days before a state budget vote that could abolish redevelopment in California, also pointed out widespread accounting deficiencies, questionable payroll practices, faulty loans and the inappropriate use of affordable housing funds.

Redevelopment supporters blasted the timing of the report, calling it a political ploy to prop up Gov. Jerry Brown’s proposal to steer billions of dollars from redevelopment toward fixing the state budget mess.

San Jose’s agency was dinged for questionable expenses, such as paying portions of the mayor, council and other city employees’ salaries. But the most egregious problems exposed in State Controller John Chiang’s focus on 18 of the state’s 398 active redevelopment agencies were elsewhere.

For example:

  • Even though redevelopment agencies must spend their money on improving “blight,” Palm Desert dedicated more than $17 million in redevelopment dollars to improve a luxury golf resort.
  • Coronado’s redevelopment area includes all privately owned property within the ritzy city near San Diego, including oceanfront property and multimillion dollar homes.
  • The city of Hercules paid $38,400 of redevelopment


    agency funds to a lobbyist.”For a government activity which consumes more than $5.5 billion of public resources annually, we should be troubled that there are no objective performance measures demonstrating that taxpayers are receiving optimal return for each invested dollar,” Chiang said in a statement.. “The lack of accountability and transparency is a breeding ground for waste, abuse and impropriety.”

    Brown’s proposal to eliminate the agencies would shift the property tax the agencies collect back to schools, counties and cities.

    But San Jose’s agency chief Harry Mavrogenes said the report had little to criticize here.

    “I just don’t think there were any major findings at all,” he said, adding that he was particularly frustrated that the review had not included his agency’s answers to issues it had raised.

    Among other issues, the review cited San Jose’s agency as being unable to explain why the agency paid 25 percent of the salary and fringe benefits of the mayor and council and 40 city council staff members. The Mercury News reported those concerns last week.

    But Chiang’s office said they did review the agency’s most recent responses, and said San Jose’s agency “still failed to address how they came to the 25 percent as well as the reduced rate in overhead,” said Jacob Roper, a Chiang spokesman.

    While eight agencies in the review were taken to task for not paying into a fund for schools, San Jose can be credited with paying $62 million into the fund last year with a $13 million balance due in May. The state determines how much each agency owes schools based on its revenues.

    The report also showed San Jose’s $3.6 billion debt is highest of all the agencies reviewed — double that of Los Angeles’. Mavrogenes said the higher figure is because the agency has invested in more projects than many other agencies in the review. In an interview, Chiang said that “was not a positive or a negative, but debt obligation is a significant concern to the state.”

    The review also raised questions about how San Jose determined its redevelopment areas created 4,148 jobs over a recent one-year period.

    Even when there seemed to be a positive note — San Jose’s agency showed a zero-percent fund balance for affordable housing, meaning it has spent the 20 percent of money it is supposed to collect for affordable housing, Chiang noted that the agency had just transferred that money to the city’s housing department.

    John Shirey, Executive Director of the California Redevelopment Association, which represents all of the state’s redevelopment agencies, called the review unfair.

    “Unfortunately, rather than issuing a serious, methodologically and academically sound review of redevelopment, it appears that the Controller has chosen to issue a politically-motivated campaign piece to support those who want to abolish redevelopment,” Shirey in a statement.

    While Shirey and other redevelopment agency defenders say the review is politically motivated, others disagree.

    “Until this year, no one was looking at how redevelopment agencies spent their money or whether the money was being spent wisely,” said Bob Stern, president of the nonpartisan Center for Governmental Studies in Los Angeles.

    “Even if Jerry Brown doesn’t succeed in taking away the money, he has put a spotlight on these programs.”

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