According to a report by Steven Greenhut in last weekend's Wall Street Journal, the California Legislature allowed cities and counties to form these redevelopment agencies back in 1945 with a main purpose of removing urban blight. Once the boards of these agencies deemed an area blighted, they could use their state-given eminent domain powers to clear the properties and sell bonds to pay for improvements. To pay off the bonds, the redevelopment agencies were allowed to collect any incremental local taxes going forward, including sales tax and other local revenue that might have otherwise gone to the cities and school districts. Today, according to Greenhut, these agencies have 749 projects under way, including Livermore's planned new performing arts center, "gobbling up" (Greenhut's words) 12% of all state-wide property taxes, money that otherwise would go to critical public services.
In his scathing report, State Controller John Chiang offers the results of a five-week, limited-scope review of 18 redevelopment agencies across the state, finding no reliable means to measure the impact of redevelopment activity on job growth. He said the agencies either do not track their impact or their methodologies lack uniformity and are often arbitrary. The review exposed the difficulty of holding RDAs accountable for their funding decisions when existing legal standards are so loose that any area can be deemed "blighted." The report also identifies several missed payments to school districts and widespread accounting and reporting deficiencies, questionable payroll practices, substandard audits, faulty loans, and inappropriate use of affordable housing funds.
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 argues. Locally controlled economic development is vital to California's long-term prosperity. However, the existing approach -- born in the 1940s - is not how anyone concerned with performance, efficiency and accountability would draw it up today.
The 18 selected agencies represent 16% of all redevelopment dollars in fiscal year 2009-10. Auditors from the Controller's office conducted the review by interviewing redevelopment staff and analyzing financial statements, reports, plans, budget documents, ledgers, job creation data and payroll records. The report notes that the 18 RDAs share no consensus in defining a blighted area. While run-down sections of Los Angeles with abandoned buildings show obvious need for redevelopment, other cities were far broader in their declaration of blight. Coronado's redevelopment area, for one, covers every privately owned parcel in the city, including multi-million-dollar beachfront homes. In Palm Desert, redevelopment dollars are being used to renovate greens and bunkers at a 4.5-star golf resort. That RDA receives the 10th-highest tax revenue in the state, with a fund balance worth $4,666 for each of the city's 52,000 residents. Closer to home, the city of Pittsburg redevelopment agency signed a service agreement with the city and transferred $3 million to the city's general fund. But no documentation exists to show that the $3 million actually went to redevelopment services.
Most disturbing is Chiang's finding that five of the 18 RDAs failed to make $33.6 million in required payments to schools within their redevelopment areas. When RDAs fail to make these payments, it increases the state General Fund financial obligations to local school districts. While RDAs are able to borrow funds in order to make these school payments, none of the five agencies attempted to do so.
Given the governor's determination to use redevelopment agency funds to help bail out the state's $26 billion deficit, it's also puzzling as to why the mayors attending last week's Alameda County Mayors Association dinner in Pleasanton -- including our own Mayor Jennifer Hosterman -- voted unanimously to oppose Brown's plan to scuttle these agencies. Chiang's report was being widely circulated before the meeting. Perhaps these mayors and anyone else who's interested might want to read it. The full report can be found on the State Controller's website at www.sco.ca.gov.