ALAMEDA, Calif. — California’s redevelopment agencies have failed to provide a coherent explanation for their existence, according to state Controller John Chiang.
The controller’s review of 18 redevelopment agencies was released Monday, just ahead of a possible vote this week on legislation to abolish the state’s 425 RDAs, which are allowed to keep incremental property-tax growth in redevelopment zones and use that revenue to back debt.
Chiang found no reliable means to measure the impact of redevelopment activity on job growth because agencies either do not track the statistic or use methods that aren’t uniform and are often arbitrary.
The report also identified several missed payments to school districts, “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 said in a statement.
The controller announced that he would conduct the redevelopment review in January in the wake of Gov. Jerry Brown’s proposal, in connection with his state budget plan, to abolish the agencies.
Last week, the legislative joint budget committee signed off on most of Brown’s budget, including the abolition of RDAs.
Full votes in the Assembly and Senate could come by the end of this week, though they are dependent on behind-the-scenes negotiations to assemble votes from the Republican minority to gain the supermajority needed to place Brown’s proposal to extend temporary tax hikes on a special election ballot.
Redevelopment advocates have launched an all-out public relations effort to kill Brown’s plan, but they appear to be behind the curve, according to Stephen Ryan, a San Francisco attorney who represents developers that work with redevelopment agencies.
All signs point to the Legislature adopting Brown’s proposal.
“If there’s a bet to be made here, it’s probably going to be signed as is,” Ryan said.
That proposal would abolish redevelopment agencies as of July 1, but also includes an urgency provision that would suspend almost all redevelopment activity as of the date the legislation is signed.
Brown’s proposal would honor all existing contractual obligations, and agencies all over the state have been hurrying to create such obligations before the deadline.
Some have issued bonds, but more often the agencies have entered into agreements with developers and other governments.
Redevelopment advocates argue that the governor’s plan is illegal, and violates the state constitution, raising the specter of lawsuits.
Ryan said he’s worried that such legal action will make it almost impossible to issue bonds to finance the development agreements RDAs have already entered into.
“If we’re just locked in a court battle for the next three years, then what happens?” he said. “Would it just put finance and underwriting on hold?”
Ryan said redevelopment supporters may be better served by taking Brown up on his proposal to go back to the drawing board for a new vehicle to finance local economic development.
“In some ways it would be better if we accepted that the decision is made and moved ahead to another strategy,” he said.
That’s what the controller is recommending.
“Locally controlled economic development is vital to California’s long-term prosperity,” Chiang said. “However, the existing approach — born in the 1940s — is not how anyone concerned with performance, efficiency, and accountability would draw it up today.”