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Monday, March 7, 2011

Controller: Redevelopment Rife With Fraud Statewide

The battle over liquidating redevelopment agencies across California received some additional ammunition today as State Controller John Chiang released a review of 18 redevelopment agencies, finding widespread accounting and reporting deficiencies, questionable payroll practices, substandard audits, faulty loans, and inappropriate use of affordable housing funds.
The Emeryville Redevelopment Agency was not among the agencies reviewed.

According to the report, no reliable means was found to measure job creation with redevelopment spending because Redevelopment agencies either don’t track job creation or methodologies lack uniformity and are often arbitrary. The review exposes the difficulty of holding RDAs accountable for their spending due to loose definitions that enable any area to be labeled “blighted,” and then subject to redevelopment.

Required payments to school districts were also frequently missed.

Chiang said that $5.5 billion dollars that would otherwise provide services are consumed instead by redevelopment agencies annually, with little accounting.

The report notes that there is no consistency in defining blight. In the Southern California city of Coronado, every privately-owned parcel in the city, including multi-million dollar beachfront homes, are considered blighted. Emeryville's redevelopment area includes the entire city, with the exception of the Watergate condo complex. In Palm Desert, redevelopment dollars are being used to renovate greens and bunkers at a 4.5 star golf resort.

In the City of Pittsburg, the 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.

Many agencies also may have misused money that was supposed to pay for affordable housing.
• The City of Los Angeles charged 20 percent of its redevelopment administration costs, $833,000 to its affordable housing fund.
• The City of Calexico also charged for administrative costs, code enforcement and for performing audits of the agency to affordable housing funds.
• The City of Parlier inappropriately bought a daycare center with it.
• and The City of Hercules billed $9,600 it spent on lobbyists to its affordable housing funds.
“The lack of accountability and transparency is a breeding ground for waste, abuse, and impropriety,” said Controller Chiang. “In whatever form local redevelopment takes in the future, the level of oversight and openness must be consistent with the amount of public dollars entrusted to their care.”
Read the full report here.


  1. The effort to eliminate redevelopment poses a very real threat to our communities. Redevelopment is one of the primary ways we invest in our physical communities in California. Redevelopment provides funding for valuable projects such as affordable housing, public infrastructure, public spaces, etc. Without redevelopment, the City of Emeryville would be without the Doyle Hollis Park and the Triangle Neighborhood Traffic Calming and will most likely lose out on the Bay Street bike/pedestrian bridge over the railroad tracks and the bridge over the freeway at 65th Street. The City Council is currently considering the Capital Improvement Program which is full of valuable public projects. If redevelopment is eliminated it is likely that almost none of these projects will happen and the rest will be severely delayed.

    Affordable housing development in this State will be virtually non-existent without redevelopment. Development of affordable housing requires public money and a significant portion of that money comes from redevelopment.

    Redevelopment currently does not take any money away from education or other services. The State makes up every penny that would otherwise go to schools, counties and other special districts. This is not an either/or choice between redevelopment and other services. Investing in our physical environment is equally as important as investing in other sectors of our communities.

    I encourage anyone who cares about having funds for affordable housing, development of bike and pedestrian facilities, streetscape improvements, city beautification, etc. to contact your State elected representatives. I have already done so. We shouldn't sacrifice our physical communities for other aspects of our community. There are many important aspects of communities and the physical environment is something we all value.

  2. This issue of redevelopment agencies being dissolved is not as simple as the above commentor would have you believe. The sky is not falling, contrary to the redevelopment agency alarmists.

    We must remember cities evolved and became beautiful places before the invention of the redevelopment agency idea. In fact, most cities in America were very concerned with public amenities and civic beautification and they paid for this with general obligation bond financing, something we will return to if Sacramento dissolves redevelopment agencies.

    Every public improvement the commentor says cannot happen without the Redevelopment Agency in fact can happen with the issuance of municipal bonds. One nice thing about old fashioned bond financing is the democratic nature of it. The people of Emeryville will get a chance to vote on each development proposal, unlike the top-down authoritarian culture of City Hall's Redevelopment Agency. Also, the debt we incur will be entirely of our own making and known by everyone, unlike the massive debt we're now saddled with at the hands of the Redevelopment Agency, never voted on by any resident.

  3. From the Anonymous at 10:06 "Redevelopment currently does not take any money away from education or other services. The State makes up every penny that would otherwise go to schools, counties and other special districts."

    Earth to Anon guy, the State of California is broke....there is no more "State Money" left to make up for the local money diverted from local schools to greedy developers.

    Schools, bridges and the like will still be built. The only people potentially losing are crappy projects that provide nothing for the public, but tens of millions for greedy private hands like subsidizing Rich Robbins' office buildings or constructing Mt. Davis at the Oakland Coliseum. These projects take from the poor and give to the rich.

  4. I agree with Brian that the issue of ending redevelopment is complicated. It is far more complicated than he has described.

    General obligation bonds are not a panacea. There is a reason they are used so seldom. The ability of a redevelopment agency to issue bonds is much greater than any municipal government. A redevelopment agency gets to keep the increased property taxes that result from redevelopment. The agency can bond against these future revenues. A city has nothing near as close a guarantee of future revenues to bond against.

    The argument that general obligation bonds are more democratic is a red herring. The voters of this state created redevelopment and as recently as four months ago in November 2010 the electorate voted to protect redevelopment funds from raids by the State government. The voters of California clearly support redevelopment. The State is arguing that redevelopment agencies are agents of the State and thus the State can unilaterally eliminate them. However, this is principally undemocratic since the voters created redevelopment. This will surely be challenged in court if adopted.

    A community which has to vote to issue a general obligation bond for every project is neither efficient or necessarily just. We have a representative democracy in this country for a reason: it protects minority rights. Direct democracy is not prudent solution. Do redevelopment agencies need additional over sight? Perhaps. Do we need to reform redevelopment law yet again? Perhaps. However eliminating redevelopment is the alarmist action. Redevelopment pays for itself. One of the reasons that bonds can be issued without authorization of the voters is that redevelopment pays for itself and then some. The bonds are paid back with future redevelopment agency revenues and no other funds are used. Redevelopment is such a reliable tool that redevelopment agencies virtually never default on bond payments. I don't have any data, but I would wager a guess that the rate of municipal bond default is much higher.

    There is very little downside to redevelopment. We have just reached a point where the state politicians want to use the money that goes no redevelopment agencies for other purposes. I maintain that if we truly value our physical communities rather than eliminating redevelopment, we should prioritize it with education and other aspects community that we value.

    It is not within my character to be alarmist; I am normally a very calm and measured person. However, the proposal to eliminate redevelopment is a real concern. If redevelopment is eliminated public investment in our physical communities will grind to a halt. General obligation bonds are not going to create anywhere near the same amount of funding. If a community is able to issue bonds at all they will be choosing very few projects from a list of very worthy projects to fund.

    That our State politicians are targeting redevelopment, a program that works well, accomplishes its goal effectively and has voter support, is a sign that California is truly broken. This is a program that truly improves communities in need. If the state government worked as well as redevelopment and paid for itself as well, we would not be in such a mess.

  5. What is the total dollar amount of redevelopment money that was spent on the Triangle "Traffic Calming"? I see jail time for these thieves.

  6. It seems Mr Anon (at 3:16) doesn't trust that the people of Emeryville know what's good for them in terms of how to develop this town.

    Redevelopment works well only insofar as the unelected city staff managers that control it have the best interests of the residents in mind. Unfortunately, like virtually all oligarchic systems where the elite run the show, the peons needs somehow never quite get attended to. Emeryville could use a shot of direct democracy, at least as it pertains to development.

    The downside to redevelopment in Emeryville is the uncivil ugliness of the warren of anonymous shopping malls, the choking traffic and the decidedly less than livable space that's been created, never mind the soaring debt that the citizens don't even know about.

    Governor Brown's bold move against redevelopment agencies will likely change how Emeryville is run and it may end up being beneficial for the residents overall. The corporate developers and the paid staff at City Hall, whose interests demonstrably aren't the same as the residents may not see benefit.

  7. These scumbags would rather see our schools closed down, the poor in the streets and old folks eating cat food than give up a cent of their precious redevelopment agency funding. What a crock.