It turns out California’s redevelopment agencies—which, I just love to keep saying, will be abolished in a week—have produced something beside corruption, poverty, and blight: The RDAs have also run up nearly $30 billion in debt that must be serviced by Golden State taxpayers.
During the fiscal year ending on June 30, 2010, the state’s 425 RDAs—urban renewal fiefdoms empowered by eminent domain and catering to political hacks, connected land barons, community organizers, and Chamber of Commerce flunkies—saw their property tax hauls get lighter by 4.5 percent, showing that the agencies failed in their specific purpose of redeveloping property in a way that ups its assessed value. Chiang writes:
Total revenues decreased from $8.3 billion in the 2008-09 fiscal year to $8.0 billion in the 2009-10 fiscal year. Taxes and assessments, the largest revenue source, decreased from $5.7 billion to $5.5 billion, a 4.5 percent decrease.
Unfazed by this drop in revenue, state RDAs increased spending by 16 percent over the same period:
Total expenditures increased from $8.1 billion in the 2008-09 fiscal year to $9.4 billion in the 2009-10 fiscal year. Interest expense became the largest expenditure in the year, remaining at the same level as the prior year total of $1.4 billion.
Though interest payments are now the biggest line item, hundreds of millions of dollars of this spending is totally uncharacterized. On page 105 of the report you will find some $148.6 million in “Other Expenditures” listed for the Community Redevelopment Agency of Los Angeles (CRA/LA).
This figure is especially striking when you consider that most of the expenses you would normally associate with redevelopment—such as administrative costs, planning, real estate purchases, rehab, disposal, relocation, construction, low/moderate-income housing subsidies, etc.—are all broken out in separate line items.
Page 103 lists $1.6 million in Other Expenditures for the Vermont/Manchester Project. I have been covering this piece of property for years, and there has been no activity of any kind on this land since a portion of it was used to build a county welfare office in 2007.
A spokesman for the controller’s office says these expenditures are reported by the redevelopment agencies, which do not have to provide invoices or other documentation. [Controller Chiang's office provided more details after this article was published. See below.] I have a call in to the CRA/LA to find out what the agency actually spent $149 million on in a year, but given the imminent unwinding of the agency (which now handles media through contract spokesman after losing its regular PR staff), I don’t expect them to have a reply. One former CRA/LA staffer is unable to guess at where all that money could have gone.
Chiang’s report came out in November, and in a recent story the Orange County Register’s Teri Sforza highlighted the whopping debt redevelopment is leaving behind. From the controller’s report:
Total outstanding long-term debt increased from $29.4 billion in the 2008-09 fiscal year to $29.8 billion in the 2009-10 fiscal year. Tax allocation bonds accounted for the largest portion of debt, remaining at the same level as the prior year total of $19.1 billion.
The former CRA/LA staffer suggests this debt is mostly a matter of accounting that will be handled by expanded “pass-through” payments the redevelopment agencies make to counties. But there is a way the RDAs could partially compensate the public for the value they have destroyed while making a sharp turn away from their history of grandiose mega-projects that destroyed communities, warped the state’s civic life, and often produced nothing but vacant lots.
Most of the real estate titles in redevelopment project areas are owned by the redevelopment agencies themselves. The successor agencies of the RDAs should simply divide these properties into single lots and sell them without favor to individual buyers. This would bring in a windfall that would go a long way toward retiring redevelopment debt. It would also create an instant path to affordable real estate ownership in some of the state’s most overpriced counties.
Larry Kosmont, interim city manager for the city of Montebello, did not dismiss this idea out of hand in a recent interview, but he warned about the problems associated with a real estate fire sale held in a down market by the “dysfunctional family of public agencies” that will dispose of RDA assets.