Controller Finds Reporting Deficiencies, Some Anomalies in State's Redevelopment Agencies

A state review of 18 redevelopment agencies in California found reporting problems, some questionable charges, and a lack of clarity about what is considered blight. 

The report, from State Controller John Chiang, comes at a time when the state legislature is poised to vote on eliminating redevelopment agencies as part of Gov. Jerry Brown's proposal for balancing the state budget. 

Combating urban blight is the primary purpose of redevelopment agencies, which are funded by the increase in property taxes from redeveloped areas. But Chiang's auditors found the 18 RDAs had different definitions of what may be considered a blighted area.

The report noted that one redevelopment area in the City of Coronado, near San Diego, includes "all privately owned property within the city’s limits which includes oceanfront properties among multi-million dollar homes."

The State Controller’s office also looked at how Palm Desert used RDA funds to renovate the 4.5 star 

“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,” said Chiang in a news release.

The report found that none of the 18 reviewed agencies complied with all of their reporting requirements. In some cases, RDAs failed to file annual financial reports, according to the news release. 

The Controller's office also found problems with the housing component of RDA funds. Under redevelopment law, agencies must set aside part of their funds to support access to low and moderate housing. While Chiang found that all agencies reviewed set aside the required amount, some made inappropriate charges to the housing fund.

Los Angeles inappropriately charged 20 percent of its redevelopment administration costs to its Low and Moderate Housing fund, the report found. Hercules charged $9,600 of its lobbyist expenses to the fund. 

Auditors found only 10 RDAs tried to keep track of how many jobs were created by their projects. Of that number, four RDAs could not explain their figures or provide the method on how they gathered the data.

The report also shows five RDAs failed to deposit $33.6 million in required payments to school districts located inside their redevelopment areas. 

Northern California RDAs reviewed included Hercules, Fremont, San Jose, Richmond and Sacramento. According to the State Controller’s office, the 18 RDAs scrutinized represent 16 percent of redevelopment dollars for the 2009-2010 fiscal year. 

Luke Sims, who oversees the City of San Leandro's redevelopment agency as Community Development Director, said he hadn't yet read the report, but said the Controller was "doing his job."

Sims said the city's RDA has submitted its annual report to the Controller's office, as required, every year on time. He said the state's auditors had never flagged the reports for problems. 

“We’re very proud of that record,” Sims said. "It stands on its own." 

Sims said the state had, perhaps, not scrutinized some redevelopment jurisdictions as much as they should have in the past. But he cautioned against judging RDAs, on the question of blight, based on their work in what now don't appear to be blighted areas. 

"Maybe they’ve done a really good job at correcting that economic and physical blight," he said.

Sims said you'd have to see the area as it was several decades ago to judge whether or not redevelopment was warranted there in the first place.

The State Controller's complete report is attached.