Wednesday, March 9, 2011

Sacramento Bee: State Controller Blasts Redevelopment Funds

Controller John Chiang issues sharp critique of redevelopment agencies

Published: Tuesday, Mar. 8, 2011 - 12:00 am | Page 3A
State Controller John Chiang on Monday issued a sharp critique of local redevelopment agencies, saying they lacked accountability and transparency and were "a breeding ground for waste, abuse and impropriety."

The report from his office came days before the Legislature is expected to begin voting on a budget. It's part of the last-minute jockeying over Gov. Jerry Brown's controversial proposal to eliminate local redevelopment agencies and redistribute their funds.

Chiang's office reviewed 18 of the roughly 400 redevelopment agencies statewide, and said it found reporting flaws, substandard audits, questionable payment practices and inappropriate uses of affordable housing money.

For example:
• The city of Hercules used $38,400 in redevelopment funds, $9,600 of which was supposed to be for affordable housing, to pay for a lobbyist.

• The city of Pittsburg transferred $3 million in redevelopment funds to the city's general fund with little explanation. In addition, the city took a $16.6 million loan from the agency.

• The Palm Desert Redevelopment Agency allocated $16.7 million in funds for the Desert Willow Golf Resort – a posh, 4.5-star golf course that the agency has deemed "blighted."

Opponents of the governor's proposal were quick to attack the controller's report as a last-minute hit piece aimed at helping push through the cut.

"This is a politically motivated report. The controller does not regularly review redevelopment agencies," said John Shirey, executive director of the California Redevelopment Association.

Supporters of the governor's proposal, however, said Chiang's report is just more proof that the current redevelopment system needs to change.

"It goes further to the point that you've got to end it to mend it," said Mark Hedlund, press secretary for Senate President Pro Tem Darrell Steinberg, D-Sacramento.

Sen. Lois Wolk, D-Davis, said the report "just raises the issue of the need for reform."

"There's no doubt redevelopment agencies have needed reform for some time. They have fought that consistently," Wolk said.

Redevelopment agencies are controlled by local governments and charged with redeveloping blighted areas using tax increment financing. The agencies essentially divert an area's annual increase in property tax revenue – money that would otherwise go to schools, counties and other services – and use it to subsidize development in that area.

The state compensates school districts for lost revenue at a cost of nearly $2 billion a year. It's this cost the governor is hoping to eliminate.

Supporters of redevelopment say the money subsidizes projects that revitalize cities and create jobs, and which otherwise would fail for lack of funding.

The controller's report, however, blasted the agencies for inadequate record-keeping and reporting. The report also found no clear methodology or data to measure job growth. It also said virtually any area can be declared "blighted."

On the issue of pay, Chiang's office found that the salaries of redevelopment agency officials are not out of line with their counterparts elsewhere in government. But auditors questioned the way local governments use redevelopment money to help pay the salaries of top officials, such as mayors and city managers.

The Bee recently asked agencies in the four-county region for payroll data and found such payments are common here. In Davis, for example, 9 percent of the city manager's roughly $181,000 pay came from redevelopment funds last year. About 10 percent of the Placer County executive's $250,000 annual salary was redevelopment money. In Citrus Heights, nearly $55,000 – or 20 percent – of the city manager's pay comes from redevelopment money.

Agencies say such payments represent the portion of an official's time spent on redevelopment issues. But the controller's office questioned how local governments come up with the figure. The auditors singled out San Jose, which charged 25 percent of the salary and benefits for the mayor, City Council and council staffers to the redevelopment agency.

The Sacramento Housing and Redevelopment Agency was one of the 18 agencies the controller's office reviewed. Executive Director La Shelle Dozier declined an interview request. Her office provided a prepared statement saying the report "paints the performance of redevelopment agencies with a broad brush."

The Sacramento agency said it has "fully complied with all administrative, financial and reporting requirements."

Redevelopment advocates are fighting back, launching a marketing campaign Monday at The campaign, complete with radio and Facebook ads, follows threats last week of lawsuits should the Legislature follow through with the cuts.

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