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Lots of cash and little scrutiny in city redevelopment

City agencies meant to improve blighted areas are rife with problems that cost the public millions.

October 01, 2010|By Kim Christensen and Jessica Garrison, Los Angeles Times

It was a redevelopment deal with an unusual form of payment: plain white envelopes stuffed with cash and delivered to a go-between at a preschool.

Redevelopment: An article in the Oct. 1 Section A about redevelopment spending said the Banning Community Redevelopment agency paid "top dollar —and then some" for a vacant car dealership it bought last year for $1.2 million without an independent appraisal. In an interview earlier this year, Mayor Bob Botts declined to discuss a Riverside County grand jury's finding, based on witness testimony, that the city paid above market value. The article should have included a later response to the jury, in which the city said the purchase was supported by various factors including favorable seller-financing and comparable sales data furnished by a broker involved in the deal. The article also said the Riverbank Redevelopment Agency paid $1.7 million for a theater before conducting a structural evaluation that deemed it unsound. It should have noted that the city had two less extensive inspections done before the sale closed.

And that was only part of what developer Randy Wang said he paid to Temple City officials who "repeatedly solicited bribes" in return for their support of his $75-million Piazza mall project.

His allegations led to criminal charges against then-Mayor Judy Wong and three other people, all but one of whom have pleaded guilty or no contest to bribery, perjury or other crimes. Wong recently was sentenced to 16 months in state prison, the harshest penalty so far.

As for the project — 3.7 acres of retail space and restaurants — construction that was to be finished two years ago has yet to begin.

"Does anyone REALLY believe this will get built in our lifetime?" asked a miffed Facebook user on the "I Love Temple City" page, under the heading of "The Piazza/vacant lot/mud hole."

The Temple City fiasco reflects problems at many of California's 400 municipal redevelopment agencies, obscure arms of government that pair public money with private developers to improve blighted areas.

The Times found widespread instances of corruption, questionable spending and poor accountability at such agencies, which take in $5 billion in property tax revenues each year. Under state law, the agencies are allowed to keep any increases in tax revenue in areas they improve.

For years, the agencies operated largely unnoticed, with little state scrutiny. Now, California's budget crisis is forcing them to make a case for their importance — and their considerable resources. They lost a big round in May, when Gov. Arnold Schwarzenegger and the Legislature authorized shifting $2 billion from their coffers to schools.

Proponents say redevelopment has paid for thousands of affordable homes and public buildings, reviving moribund neighborhoods and business centers. They point to Pasadena's Old Town and San Diego's Gaslamp Quarter as models of success.

"There are literally hundreds of communities in California that look better today, are healthier and better places to live and work than they would have been without redevelopment," said John Shirey, head of the California Redevelopment Assn.

Still, The Times found many agencies beset by problems that have cost taxpayers millions. Sometimes it's malfeasance; other times it's officials at small agencies lacking the skills to manage large sums or negotiate complex deals.

Even scofflaw agencies run little risk of getting caught, and rarely face consequences when they do.

One state audit found that dozens of agencies had failed for years to share money with schools and counties, as required. Los Angeles County agencies shorted schools and services by at least $60 million in fiscal year 2005, a review by the state controller found in 2008.

Auditors also found that the City of Industry reported to the state that it gave $2.5 million to schools and the county in 2006. The problem was the payment should have been $21 million.

And when auditors sought more information, 14 of the county's 74 agencies did not respond and 11 others admitted they did not follow the law. .

A recent report by the Senate Office of Oversight and Outcomes concluded that no state agency oversees redevelopment. Instead, "oversight is left largely to the city council members and county supervisors who sit as local redevelopment agency board members."

In many projects, even the most basic accountability is lacking, said George Lefcoe, a professor of real estate law at USC.

"What we really want to know as taxpayers is, what kind of public funds were involved — what did we give and what did we get?" he said. "You cannot get those answers anywhere."

Small agencies, big problems

The old All Star Dodge dealership in Banning looked to be just another ghost of business past in a town hit hard by a sour economy.

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