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Audit Targets Redevelopment Agency

The staff has given about 74% of funds to a handful of builders, L.A. city controller finds.

September 29, 2006|Patrick McGreevy | Times Staff Writer

The bulk of project money from the Los Angeles Community Redevelopment Agency has gone to a relatively small group of developers -- a holdover from the "good old boy" days at the agency, the city controller charged Thursday.

Controller Laura Chick released an audit that found that 37 -- about 10% -- of the 339 developers who received agency money got 73.6% of the funds.

"There are a handful of developers seeing most of the action," Chick said at a City Hall news conference, saying the statistic represents "a vestige of the good-old-boy days."

Chick said the agency should start setting limits on the amount of money awarded to any one developer.

She also called on the agency to develop policies that would encourage competition and de-emphasize politics in the award decisions.

The audit also found that the agency was not doing enough to ensure that loans are repaid, to see that the agency shares in any project profits and to be sure money goes mainly to neighborhoods where private investment is lacking.

In a letter to the mayor and City Council, Chick questioned why an agency that has a $535-million loan portfolio isn't doing a better job of finding a broader cross-section of development partners.

"It is difficult to believe that in a real estate town such as Los Angeles, that the CRA's explanation is that they can't find enough interested and qualified developers," Chick wrote.

The agency already has begun implementing recommendations from the audit, including doubling the list of developers invited to compete for projects, said Cecilia V. Estolano, the agency's top administrator.

"We are a new team," said Estolano, who took over the post in May. "We are not the old boys network. We are far from it."

She said the agency is doing "serious marketing on the ground" to make sure a wider group of developers can participate.

Politics often has played a part in the agency's funding decisions, with developers approaching City Council members, who then tell the agency what projects to finance, Chick said.

"I think that politics plays a role in how the city is managed and how the CRA is doing its business," Chick said.

Estolano said she could not speak for the way business was done in the past but said her staff considers projects on their merits.

The report, released Thursday, follows audits conducted two years ago that raised similar issues.

Chick said most of the recommendations she made then have been enacted but that she nonetheless views the agency as "still fundamentally off course."

The controller said she is encouraged by the appointment of Estolano and her willingness to change the way the agency does business.

One holdover problem: 77% of all loans are granted with provisions that no repayment is required unless the project turns a profit, but the agency is not doing sufficient verification when developers claim that no profit was made.

"We are not scrutinizing carefully enough -- is their overhead real?" Chick said.

In addition, Chick said the agency does not sufficiently monitor developers who obtain loans on a promise to provide affordable housing.

The controller's criticism of the enforcement of affordable housing rules comes as city voters are being asked to vote Nov. 7 on a $1-billion affordable housing bond measure.

Chick said she wants to make sure city funds pledged to affordable housing are spent for that purpose.

Estolano said the agency has assigned people to provide the loan oversight Chick called for.

Chick also criticized the agency for continuing to invest in downtown's booming housing when its mission is to provide money for blighted areas that have trouble drawing private investors. She did not cite any examples.

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