Redevelopment agencies to be probed by State Controller

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State Controller John Chiang announced late last month that his office will audit 18 of the state’s redevelopment agencies, the latest twist in what is becoming a vigorous public debate on the value of these state agencies.

The Los Angeles Community Redevelopment Agency Los Angeles will be one of the entities that the state controller will be reviewing, according to a list found on the office’s Web site.

The agencies to be reviewed were chosen for, among other reasons, the diversity of the populations that they serve and their geographical locations, according to Garin Casaleggio, a spokesman in Chiang’s office.

Depending on the results of the examinations of the 18 agencies, slated to be completed by March, Chiang could call for further probes of redevelopment agencies. “We wouldn’t rule it out,” Casaleggio said. “We’ll know more after we complete the reviews.”

Chiang’s Jan. 24 announcement comes weeks after Gov. Jerry Brown proposed disbanding more than 400 redevelopment agencies to free more revenue for local communities to use for public safety and school districts. The governor’s plan has drawn harsh criticism from city leaders around the state, who claim that redevelopment is a vibrant tool for economic diversity and growth, while others call them cash cows for well-connected developers.

“The heated debate over whether (redevelopment agencies) are the engines of local economic and job growth or are simply scams providing windfalls to political cronies at the expense of public services has largely been based on anecdotal evidence,” Chiang said in a statement. “As lawmakers deliberate the governor’s proposal to close (redevelopment agencies) and divert those funds to local schools and public safety agencies, I believe it is important to provide factual, empirical information about how these agencies perform and what they bring to the communities they serve.”

The probes will look at, among other things, how the redevelopment agencies define a “blighted” area, whether they are appropriately paying for low- and moderate-income housing as required by law, whether they are accurately “passing through” payments to schools within their community, and how much redevelopment agency officials, board members and employees are being compensated for their services.

The controller’s office said the probe was being launched to determine how redevelopment agencies are using their funds and to the extent to which they are complying with the laws that govern them.

“We want to provide cities with factual, empirical data on the state’s budget problems, and this review could assist them in doing so,” Casaleggio told the News.

Brown’s office said the elimination of these agencies could save the state nearly $2 billion.

On Jan. 22, Culver City leaders took action to safeguard a number of pending development projects in case the governor’s recommendation is eventually adopted by the Legislature.

“The city’s short- and long-term growth would absolutely be affected as the funding source for many of the projects that have already been talked about and are in process would disappear,” Chief Financial Officer Jeff Muir said. “Long-term, we’d lose millions in property taxes that were coming back to us locally, and the ability to put that towards meaningful public improvements, investments in parking, development agreements, etc.”

City Councilman Andrew Weissman said it was important that the public know what the possible consequences would be if redevelopment entities were eliminated.

“One reason [why we called the special meeting] was we felt that it was important to talk about how significant redevelopment is to the community,” the councilman explained.

The Kirk Douglas Theater, City Hall, the city’s Senior Center and Westfield mall are all projects that have been funded with redevelopment revenue.

The last four months have been a challenge to advocates of redevelopment agencies. A Sept. 30 report from the state Office of Oversight and Outcomes cited deficiencies in a dozen selected redevelopment agencies, including the fact that many California cities have been delinquent in filing their redevelopment annual reports on time, which the nonpartisan team charged with investigating and measuring government performance called “a major violation.”

Culver City was one of the 12 cities named in the oversight office’s investigation and the legality of some of its affordable housing expenditures were questioned, as were its lack of creation of low- and moderate-income housing.

Chiang completed an audit on Dec. 21 of the Bell Redevelopment Agency, where his office said numerous accounting standards were not followed by the audit firm Mayer Hoffman McCann. “Mayer Hoffman McCann appears to have been a rubberstamp rather than a responsible auditor committed to providing the public with the transparency and accountability that could have prevented the mismanagement of the city’s finances by Bell officials,” Chiang said. “Had [Mayer Hoffman McCann] fully complied with the 17 applicable fieldwork standards, it would have led them to identify some – if not all – of the problems my office has uncovered since August.”

The News revealed on Dec. 9 that Mayer Hoffman had a three-year contract with Culver City from 2008 to 2011 to audit its municipal and redevelopment expenditures. After initially stating that it would be premature to call for an outside audit of its redevelopment finances, City Hall announced on Dec. 21 that it would seek an outside auditor to review its 2009-10 audit.

“We are undertaking this additional review by another qualified auditor to provide additional assurance to the agency board and the community,” City Manager John Nachbar explained.

Redevelopment agencies to be probed by State Controller