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Controller Issues Scathing Audit Of Redevelopment Agencies

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Fontana Mayor Warren calls the report “one-sided and suspicious in its timing”

By Chris Levister –

Redevelopment boosters claim that their projects help create jobs that wouldn't have been possible otherwise, but a five-week review found no reliable means to measure the impact of redevelopment activity on employment growth. The report also found that agencies were shortchanging schools and engaged in 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 taxpayer's are receiving optimal return for each invested dollar," said Controller John Chiang. "Locally-controlled economic development is vital to California's long-term prosperity. However, the existing approach - born in the 1940's - is not how anyone concerned with performance, efficiency, and accountability would draw it up today."

Eighteen agencies were selected (L.A. and Riverside included). The scathing report gives ammunition to Gov. Jerry Brown and others who want the agencies eliminated. (The Legislature is scheduled to vote this week on Brown's budget package.)

Only 10 of the 18 RDAs attempted to track the number of jobs created by their projects. Of those ten agencies, four could provide no methodology or explanation for their figures.

The remaining six all used different methods to find the number of jobs created. The County of Riverside used projections from developers, while the City of Desert Hot Springs looked at permit and employment records. Employee compensation levels for RDAs were largely consistent with the salary and benefits offered to other local government employees. But the report found that redevelopment dollars often went to city or county payroll without evidence that those dollars actually supported redevelopment services.

"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.

Fontana Mayor Acquanetta Warren, an ardent supporter of redevelopment agencies, dismissed the report as “one-sided” and suspicious in its timing. “At the eleventh hour, they chose to cherry pick those cities with the most problems,” said Warren.

“They ignored cities with measurable success such as Fontana.”

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.

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.

Redevelopment advocates are fighting back, launching a marketing campaign Monday at MyVoteCountsCA.org. 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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