Controller reports redevelopment agency failings

City redevelopment agencies improperly shortchanged schools by more than $40 million last year while allocating millions of dollars in public money for such things as a luxury golf course and a lobbyist, state Controller John Chiang said in a report released Monday.

Chiang’s report, adding fuel to the argument that redevelopment agencies are sucking up precious funds with little to show for their efforts, was immediately condemned by redevelopment advocates as politically motivated. A furious battle is playing out between the state and cities over the governor’s proposal to scrap redevelopment entirely.

Cities launched a statewide radio ad blitz and petition-gathering campaign Monday urging legislators to protect the state’s approximately 400 municipal redevelopment agencies. Gov. Jerry Brown is recommending that much of the $5 billion a year in property taxes they collect be sent instead to schools, counties and the state.

One ad called the move “a scheme” that will “put thousands more out of work.”

The California Professional Firefighters and the California School Employees Assn. countered with a campaign on radio stations in Sacramento. “While deputies are facing layoffs, fire stations are closing and local school funding is slashed, redevelopment agencies are spending taxpayer money for stadiums, parking garages and ‘mermaid bars,’ ” one declared.

Cities also continued their rush to shield redevelopment money from the state, with Long Beach voting to transfer $180 million in property from its redevelopment agency to the city. The Los Angeles Community Redevelopment Agency held an emergency meeting Monday morning at such an early hour that one activist showed up in a bathrobe as a form of protest.

At the meeting, which followed a weekend of frantic preparations, they committed about $100 million more for housing projects, parks and shopping centers and a public relations consultant to keep the money out of the state’s reach. That is on top of more than $900 million the agency pledged in January for a laundry list of projects. The Los Angeles City Council is set to vote on all of the allocations Tuesday.

Housing advocates across the state have broken out on their own, proposing a plan that would save affordable housing funds if the rest of redevelopment is eliminated.

The state Legislature could vote on the budget as soon as this week, and many observers believe killing redevelopment is a real possibility, despite furious lobbying from the traditionally powerful California Redevelopment Assn. and League of California Cities.

Chiang’s report, prepared in just five weeks, poured fuel on the flames.

Brown’s office issued a blistering statement referring to the findings: “It’s unfortunate that the same redevelopment agencies that spent taxpayer dollars to build mermaid bars and rehab sand traps at luxury golf resorts have now commissioned their high-priced lawyers and political consultants to defend and preserve the status quo.”

Redevelopment proponents responded with fury.

“This review is politically motivated, and it was timed to make redevelopment agencies look bad prior to an important vote in the Legislature,” said John Shirey, head of the California Redevelopment Assn.

The move to eliminate redevelopment follows a series of Times reports that found widespread abuse in agencies across the state, use of redevelopment dollars to pay city salaries and the failure of city auditors to catch violations of the law.

For years, The Times reported, state officials gave the agencies little scrutiny.

That changed in January when the governor, desperate to balance the budget, proposed scrapping redevelopment. His plan would take $1.7 billion for next fiscal year’s budget and send the rest of the money back to schools and counties.

Chiang then dispatched auditors to 18 cities to collect “factual, empirical information about how these agencies perform and what they bring to the communities they serve.”

The biggest finding was the $40 million Chiang said the agencies should have given to schools. Shirey contended that state law only requires agencies to give the money if they have it, and some of them did not.

Among Chiang’s other findings:

• None of the 18 agencies surveyed met all the filing requirements for their financial reports, and internal auditors often failed to disclose violations.

• Most of the 18 cities charged their redevelopment agencies for “questionable” expenditures. The city of San Jose charged one-fourth of the salaries of the mayor, 12 council members and 40 council staff members to the redevelopment agency. When Chiang’s office asked why, it could not get an explanation, the report said. The city of Hercules used money intended for housing to pay a lobbyist.

• Cities can call virtually any area “blighted” and turn it into a redevelopment area. The report notes that Coronado, in San Diego County, includes all privately owned property in its “blighted” area — including multimillion-dollar ocean-front homes. In Palm Desert, officials allocated $16.7 million to clean up “blight” at a luxury public golf course that has been listed as a “Best Place to Play” by Golf Digest magazine.

Shirey denied that agencies can declare anything blighted.

He noted that the law was changed in 1993 to make it more difficult for agencies to declare empty land blighted, and that courts often rule against redevelopment agencies that make inadequate blight findings.

jessica.garrison@latimes.com