State Controller’s Redevelopment Audit Released

As promised, State Controller John Chiang’s audit of 18 different redevelopment agencies was released. It paints a picture of obligations not met, bloated salaries, and limited returns. Here’s the summary of findings from the report (PDF):

  • All 18 redevelopment agencies made deposits into the Low and Moderate Income Housing Fund in accordance with statutory requirements.
  • Of the 18 redevelopment agencies, 5 failed to deposit a portion of their tax increments into the Supplemental Educational Revenue Augmentation Fund (SERAF). Collectively, the amount was $33.6 million. On a statewide basis, we identified another three redevelopment agencies that collectively failed to deposit a total of $7.1 million into the SERAF. As a result, the state General Fund had to make more than $40 million in backfill payments to meet minimum funding levels for the schools for FY 2009-10.
  • Ineligible charges were made against the Low and Moderate Income Housing Fund. These charges were identified through review of a limited number of transactions.
  • Questionable charges were made to the RDAs. Again, these charges were identified through a review of a limited number of transactions.
  • All of the 18 redevelopment agencies reviewed had reporting deficiencies.
  • All of the 18 redevelopment agencies’ independent auditors failed to identify major audit violations and did not include all required information in the audit reports.
  • The City of Calexico has failed to repay the RDA for principal and interest for a loan. Under current legal standards, virtually any condition could be construed to be blight.

Specific observations include:

  • The redevelopment agencies do not have a consistent methodology to capture accurate and reliable data regarding the number of jobs created or retained as a result of redevelopment activities.
  • Significant variation exists among the redevelopment agencies for how indebtedness is determined.
  • Significant differences exist among redevelopment agencies for accounting for planning and general administrative costs.
  • Compensation of redevelopment agency officials appears to be in line with other local government officials.

Regarding the last charge, San Jose’s RDA appears to be an exception in that its top five highest paid employees earned more than $180k last year, the head making nearly $300k. 25% of salaries for Mayor Chuck Reed, the City Council, and 40 of their staff members are under the SJRA budget. In Fremont, the City Attorney and City Manager are on RDA payroll. Richmond’s agency neglected to pass through over $10 million in education-bound revenue. And then there’s Palm Desert, which will go down in ignominy by somehow declaring one of the best public golf courses in the state, Desert Willow Golf Resort, “blighted.” The report’s finding:

The fact that the RDA continues to insist that a 4 1⁄2 star golf course to be blighted further illustrates our point that virtually any condition could be construed to be blighted. Moreover, the renovation of all 18 greens, reshaping of greenside bunkers and fairway bunkers, new bunker drainage improvements, bunker liners, new sand, and restoration of all lake edges to maintain the publicly owned golf course is in violation of Health and Safety Code section 33445(a)(3) which prohibits RDAs from paying normal maintenance or other improvement of publicly owned facilities.

If you’re looking for that one item that the media, especially the national media, will pick up and run with, that’s it.

2 thoughts on “State Controller’s Redevelopment Audit Released

  1. Interesting that the mayor and city council does also reside over the redevelopment agency and they find fault in the rda paying for part of their salaries? That practice is pretty standard in my world—charging time to an appropriate project is the right way to do business—brown is avoiding the bigger issue that needs to be addressed to fix our budget challenges and it isn’t redevelopment–

    Also, looks like Santa Clara is moving to not only secure the proposed ‘9ers stadium from brown but also taking steps to protect all rda owned properties—

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.