CA Controller Rejects $148 million of San Jose Redevelopment Transfers

TAHOMA, Calif. – California Controller John Chiang said Thursday that San Jose’s redevelopment agency improperly transferred out $148 million of assets, including the potential site of a ballpark for the Oakland Athletics baseball franchise, before it was dissolved.

“The governor and Legislature made it clear that redevelopment assets need to go toward retiring RDA debt and funding critical services at the local level,” Chiang said in a statement. “Our reviews in San Jose and elsewhere are meant to ensure that happens.”

San Jose’s redevelopment agency was one of about 400 dissolved statewide under legislation that took effect in 2012.



The controller said the city should not have moved $108 million in land and other improvements from the RDA to itself, $11 million in cash to its housing agency and $29 million in property, which includes the ballpark property, to the San Jose Diridon Development Authority.

The city has already returned the money sent to the housing agency, but it is standing its ground on the rest of the controller’s claims.

“I am disappointed in the findings made by the state controller,” San Jose Mayor Chuck Reed said in a statement Thursday given to The Bond Buyer. “The properties transferred to the city include assets that serve a civic or government function, and likely will fall under the government use provisions of the new redevelopment dissolution law and my expectation is that the oversight board will make the same findings.”

Reed said he expects the city will continue to work to bring the Athletics to San Jose regardless of who ends up owning the properties.

The state Supreme Court in 2011 upheld a law dissolving California’s redevelopment agencies.

Since then, the so-called successor agencies — in most cases, the municipalities that created RDAs - have scrambled to tally their debts and assets, and get the tally approved by the state.



The review process involves oversight and review of RDA finances by a local oversight board, county auditor-controllers, the state controller’s office and the state Department of Finance.

The oversight board can return an asset, such as the ballpark property, if it finds that the asset serves a governmental purpose. It also needs the approval of the Department of Finance, according to the controller.

The state controller’s office has already disallowed some transfers between cities and their RDAs during in its role in reviewing the wind down. That’s happening in San Bernardino, is threatening to take the dispute into its ongoing bankruptcy case.

Examples are rife of the unwinding of redevelopment adding to the burden on local governments struggling amid a slow economic recovery, and several have sued the state over the issue.

Ratings agencies have issued several warnings about the impact of the unwinding on municipal finances, especially those that intermingled redevelopment funds with the other city funds.

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