Redevelopment agency abuses – not a new discovery!


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With the recent report by State Controller John Chiang of his department finding abuses in several redevelopment agencies in our state, a look back to AB 634 may explain part of governor Brown’s desire to shut down our redevelopment agencies. Back in 1999 Governor Pete Wilson also questioned cities hoarding redevelopment housing funds. As such a group of elected abusers across CA have opened Pandora’s box.

In  Feb. of 1999, while working on redevelopment legislation to curtail eminent domain abuses for Assembly Member George House’s staff, I noticed a redevelopment Bill authored by Scott Wildman in that same month. His legislation, AB634, was Chaptered by the Secretary of State on Sept 21, 1999.

On my copy of AB 634 I added a hand written note from an elected official in Sacramento who quoted a powerful member within the redevelopment world in which he stated “we’ve known about some of these abuses for some time.”

If our 400 plus redevelopment agency’s had collectively followed the appropriate steps this may not have become a taking point topic. One area that must be acknowledged is that for the past few years our state has been in a deep recession with virtually all new development being shut down. Whereas local governments may have a responsibility to set aside 20% of redevelopment project funds for low and moderate income housing, they are not developers and can’t force the private sector to make those investments in a down economy.

In Member Wildman’s Bill the comments read:

“Almost 10 years after the Legislation passed the 20% set-aside for L&M (Low and Moderate Income Housing) Funds in 1976, they realized that some redevelopment officials were collecting  but not spending their affordable housing funds. The Legislature passed the Palonco-Ferguson Housing Assistance Act [AB4566 (Polonco), Chapter 1565, Statutes of 1988] which required redevelopment officials to identify  the excess surplus  in their L&M Funds and properly spend it on affordable housing. The Community Redevelopment Law Reform Act of 1993 (Act), [AB1290 (Isenberg), Chapter 942, Statutes of 1993] revised that law to provide that a redevelopment agency not in compliance by December 31, 1993 would have to transfer that amount to the county housing authority.

The Act defines an excess as a surplus that exists when the unexpended and unencumbered amount  in a redevelopment agency’s L&M Fund exceeds the greater of $1 million of the total amount of property tax increment revenues deposited in the L&M Fund during the preceding four years.

During the State of the State address in January of 1999, the Governor set forth the proposition that redevelopment agencies enjoyed surplus housing funds that were not fully utilized and that state government oversight should be considered. The problem is that two different agencies, HCD and the State Controller, report two different amounts for excess surplus because of different reporting requirements . More clearly defining the calculations of excess surplus of L&M Funds would be beneficial in determining exactly how much excess surplus is being held by redevelopment agencies. The reporting of the excess surplus may be more beneficial and applicable if reported in the redevelopment agency’s fiscal statement . The author may consider placing the calculation of excess surplus in the fiscal statement as opposed to the financial audit.

Let me also quote from the summary. “Makes statutory reforms recommended by the state Auditor to increase redevelopment officials’s accuracy and accountability.

The Senate amendments read:

1) Require the Department of Housing and Community Development (HCD) to develop and periodically revise the method to calculate excess surplus funds.

2) Require the Director of HCD to appoint an advisory committee to advise in the development of the methodology. The committee must  include department advocates, affordable housing staff, and representatives of the California housing staff, and representatives of the California Redevelopment Association, the Californian Society of Certified Public Accountants ,the state Controller, and any other authorities or persons that the director deems necessary and appropriate.

3) Require redevelopment agencies’ annual report to its legislative body to include a calculation  of the excess surplus in the Low and Moderate Income Housing Fund (L&M Fund)

4) Provide that when a decision, determination, or other action by the agency or legislative body is required by the Community Redevelopment Law, neither the agency nor the legislative body shall delegate the obligation to decide, determine, or act to another entity unless a provision in this law specifically provides for that delegation. This provision is declaratory of existing law.

5) Double join this bill to SB 497 (Rainey), pending the Governor’s signature, to avoid chaptering -out problems.

Existing law requires:

1) A county auditor, at the request of the redevelopment agency, to report the amount  of property tax increment revenues generated by a redevelopment project area.

2) HCD to annually publish, by April 1, a report on the activities of redevelopment agencies, and to provide a copy of the report to every redevelopment agency included in it.

3) The state controller to annually compile and publish, by April 1, reports on the financial transactions  of redevelopment agencies.

AS PASSED BY THE ASSEMBLY, this bill

1) Provided that the calculation of “excess surplus” shall be included in the redevelopment agency’s financial audit report.

2) Required that any entity that receives L&M funds comply with the same legal and regulatory requirement imposed on the use of those funds which apply to the redevelopment agency that provided the funds.

3) Required that the annual statement submitted to the county auditor upon request specify the gross amount of tax-increment revenue allocated to the redevelopment agency and any payments to the taxing agencies.


About Larry Gilbert