A new state report criticizes California's redevelopment agencies for loosely defining blighted areas, failing to pay about $33 million they owe to the state's public schools, and poorly tracking the number of jobs that redevelopment creates.
The analysis, released Monday, also pointed out widespread accounting deficiencies, questionable payroll practices, faulty loans and the inappropriate use of affordable housing funds.
The report is meant to inform legislators before a state budget vote that could abolish redevelopment agencies in California. Gov. Jerry Brown had hoped that vote would happen this week, but he indicated Monday it will likely be delayed because of a lack of Republican support.
Redevelopment supporters blasted the timing of the report, calling it a political ploy to prop up Brown's proposal to steer billions of dollars from redevelopment toward fixing the state budget mess.
San Jose's agency was dinged for questionable expenses, such as paying portions of the salaries of the mayor, council and other city employees. But the most egregious problems exposed in State Controller John Chiang's focus on 18 of the state's 398 active redevelopment agencies were elsewhere.
"For a government activity which consumes more than $5.5 billion of public resources annually, we should be troubled that there are no objective performance measures demonstrating that taxpayers are receiving optimal return for each invested dollar," Chiang said in a statement. "The lack of accountability and transparency is a breeding ground for waste, abuse and impropriety."
Brown's proposal to eliminate the agencies would shift the property tax the agencies collect back to schools, counties and cities.
But San Jose's agency chief, Harry Mavrogenes, said the report had little to criticize here.
"I just don't think there were any major findings at all," he said, adding that he was particularly frustrated that the review had not included his agency's answers to issues it had raised. "This agency has done a credible job of rebuilding areas like downtown and providing jobs and affordable housing.''
Among other issues, the review cited San Jose's agency as being unable to explain why the agency paid 25 percent of the salary and fringe benefits of the mayor and council and 40 City Council staff members. The Mercury News reported those concerns last week.
But Chiang's office said they did review the agency's most recent responses, and said San Jose's agency "still failed to address how they came to the 25 percent as well as the reduced rate in overhead," said Jacob Roper, a Chiang spokesman.
While five agencies in the review were taken to task for not paying into a fund for schools, San Jose can be credited with paying $62 million into the fund last year with a $13 million balance due in May. The state determines how much each agency owes schools based on its revenues.
The report also showed San Jose's $3.6 billion debt is highest of all the agencies reviewed -- double that of Los Angeles. Mavrogenes said the higher figure is because the agency has invested in more projects than many other agencies in the review. In an interview, Chiang said that "was not a positive or a negative, but debt obligation is a significant concern to the state."
The review also raised questions about how San Jose determined its redevelopment areas created 4,148 jobs over a recent one-year period. Mavrogenes said the agency provided a detailed response, which was ignored by the Controller's Office.
Even when there seemed to be a positive note -- San Jose's agency showed a zero fund balance for affordable housing, meaning it has spent the 20 percent of money it is supposed to collect for affordable housing, Chiang noted that the agency had just transferred that money to the city's housing department. Mavrogenes said the money has paid for that affordable housing.
John Shirey, executive director of the California Redevelopment Association, which represents all of the state's redevelopment agencies, called the review unfair.
"Unfortunately, rather than issuing a serious, methodologically and academically sound review of redevelopment, it appears that the controller has chosen to issue a politically motivated campaign piece to support those who want to abolish redevelopment," Shirey said in a statement.
But others disagree that the review is politically motivated.
"Until this year, no one was looking at how redevelopment agencies spent their money or whether the money was being spent wisely," said Bob Stern, president of the nonpartisan Center for Governmental Studies in Los Angeles.
"Even if Jerry Brown doesn't succeed in taking away the money, he has put a spotlight on these programs."
Contact Tracy Seipel at 408-275-0140.
State controller report Monday said the San Jose Redevelopment Agency:
Had the highest debt of 18 agencies reviewed -- $3.6 billion.
Had highest director salary in 2009-10 -- $273,000.
Failed to adequately explain why it pays portion of mayor, council salaries.
Claimed it created 4,148 jobs in one year.
Paid $62 million owed to schools fund with a balance of $13 million due.
Paid its entire $40 million affordable housing tab, 2009-10.