Rich City’s Housing Funds Are Hot Potato

This discreet enclave of wealth has no overhead power lines marring the desert sky, no noisy schoolyards, no unsightly curbside trash (cans are fetched from backyards) and not a single gas station or pothole.

The idea of low-income housing here is the maid’s cottage behind the main house.

But Indian Wells, by some measures the wealthiest city in California, has gotten itself into the low-income housing business, and now confronts a ticklish public policy conundrum of its own making.

By using state redevelopment laws intended to help cities reverse blight--in this case, by turning empty desert into a 36-hole championship golf course flanked by opulent resorts--Indian Wells committed itself to spending millions of dollars in tax profits for low-income housing projects.

But Indian Wells--where the likes of Lee Iacocca, Bill Gates and John Elway own homes--is not a low-income kind of place.

So far, the city has fulfilled most of its obligations by spending $13.6 million on a gated, 90-unit senior citizens apartment complex (with subsidized rents as low as $220 a month), and by committing an additional $14.6 million for a 100-unit seniors complex.

Indian Wells officials now want to give $1.5 million in low-income housing money to Coachella, a sunburned farming community just down the highway.

Proponents see it as a solution that would make Robin Hood proud: Transfer the money from a wealthy community to a poor one where it will help more people.

Critics, however, say Indian Wells has benefited from the redevelopment law without taking responsibility for providing affordable housing for its waiters, gardeners and other workers within the town’s 14 square miles.

“Indian Wells is the poster child for redevelopment abuse in California,” said John Mealey, executive director of the nonprofit Coachella Valley Housing Coalition.

“It’s classist. It’s racist,” said Marc Brown, an attorney for the California Rural Legal Assistance Foundation.

Indian Wells City Manager George Watts said the toughest part of the proposal is to persuade others that the city’s motives are altruistic.

In Indian Wells--where some vacant one-acre lots sell for $1 million and high aesthetic standards add to construction costs--$1.5 million might benefit only 25 families, Watts said. In contrast, the proposal to fund low- and no-interest loans for the rehabilitation of existing housing in Coachella might benefit as many as 150 families, he said.

“We’ll never convince some people that this is not a racism thing,” Watts said. “But if we can provide funding for another jurisdiction to benefit more people there than we can here, that makes sense.”

State law allows cities to transfer some money for low-income housing projects to other cities--$1.5 million would be the maximum allowable for Indian Wells--but the conditions are so tough that so far no California city has qualified to do it.

The Indian Wells City Council tried to export its low-income housing money 10 years ago as well, but those efforts were blocked by then-Gov. George Deukmejian.

Some of the people expressing the greatest reluctance over the proposal are the ones who may have the most to gain.

When Indian Wells city officials recently pitched their offer to the Coachella City Council, not a single person in the audience spoke in favor of the idea. Some in the community, where the median household income is $29,000, challenged the principle of the matter.

“We are proud workers,” said Pet Otton, a local farm worker. “We are not so low-living that we do not know what is right and what is wrong.”

Coachella Councilwoman Sylvia Montenegro characterized the offer as self-serving. “How does Indian Wells benefit? By getting low-income credit but not [providing] the low-income housing. They will not put service workers in their community.”

Despite her misgivings, a majority of the Coachella City Council indicated support for the gift--which must be accepted before Jan. 1, when the enabling state legislation expires.

“I believe it’s our responsibility to our people to take advantage of this,” said Coachella Mayor Gilbert Ramirez. “Think of those who have an $8,000 house because they bought it in the ‘20s and grandmother is still living there, but there’s never been enough money to fix the roof.”

All California cities are required to offer a percentage of low-income housing. Indian Wells has met its obligations, mostly with the senior apartments and also with some “private-sector, low-income housing”--backyard bungalows for the domestic help--said city Planning Director Corrie Kates.

So Indian Wells is not under the gun to build more low-income housing, but simply must spend 20% of its redevelopment profits on such housing.

The city was founded in 1967 on the idea that it would remain forever an exclusive and insular community where city government would be financed by such exorbitant building fees that it wouldn’t need tax-producing retail businesses.

“You had to pay the price of admission, you might say, much like joining a golf club,” said former Mayor Richard Oliphant.

But with the 1979 passage of the Jarvis-Gann initiative, which prohibited cities from charging building fees greater than the cost of administration, Indian Wells nearly went bankrupt.

Desperate for a new source of income, city officials turned to redevelopment. That’s a state-approved mechanism in which an area of a city can be declared economically “blighted”--a term that usually conjures images of decaying downtowns, urban renewal and public housing.

After an area is declared blighted, the local agency can borrow money to fund improvement projects designed to increase land values. As that occurs, the agency uses the increased property tax revenue to repay the cost of improvements--and can pocket the rest as profit.

An Opulent Oasis

Indian Wells hardly fits the picture of a blighted city.

The median household income is estimated at $110,000. More than 75% of residents live behind guarded gates. Over the years, the list of members of the city’s four private country clubs has included Dwight Eisenhower, Bob Hope, Jimmy Stewart, Arnold Palmer and countless captains of industry.

City Hall promotional literature calls Indian Wells “the desert’s perfect playground . . . where you can have it all and more.”

Still, Indian Wells declared itself economically blighted in 1983 to use redevelopment funds to create its premium golf course.

City officials then lured a pair of resort hotels to build alongside the shimmering fairways. The Hyatt Grand Champions Resort opened in 1987; the second hotel opened in 1989 and is now owned by Marriott as the Renaissance Esmeralda.

City officials saw their tactics as innovative, but others called them such an abuse of redevelopment law that state lawmakers revised definitions of blight to mean physically deteriorated urbanized land. Indian Wells would be precluded from doing the same thing today, state redevelopment authorities say.

The golf course income and property tax and bed tax revenues generated by the resorts have proven to be such a cash cow for the city that Indian Wells runs on a $36-million annual budget and has more than $63 million in reserves.

The profits set aside in the housing fund also ballooned.

Indian Wells first proposed building low-income housing outside the city in 1987. But the Western Center on Law and Poverty sued, claiming the city was systematically trying to export its poor. The two sides settled on a compromise requiring Indian Wells to build 148 units in town--but allowing most of the money to be spent on 1,350 units outside city limits in Riverside County.

The Legislature approved the settlement in 1988, but the bill was vetoed by Deukmejian, who said there was not “sufficient cause” to exempt the resort city from its housing obligations.

Since then, other cities in California have tried to give low-income housing funds to other cities, and in 1992 another bill passed the Legislature setting down 27 stringent conditions.

“It was a good news, bad news joke,” said Peter Detwiler, who helped craft the law as a state Senate staffer. “Now there was a statute for redevelopment agencies to transport their affordable-housing money. The bad news was, there were so many conditions, the law probably couldn’t be used.”

Indian Wells is now trying.

Housing advocates are dubious about the latest proposal, but have grown weary of battling the city.

“In my idealistic days, I may have screamed about classism and equity and shouldering a fair share of responsibility,” said Jonathan Lehrer-Graiwer, one of the lawyers who filed the earlier housing suit. “But now I’m all for practicality. Indian Wells will fry before they build low-income housing for families, and Coachella can use the money.”

Indian Wells officials say they feel hurt by the criticisms.

“We built senior low-income housing. We aren’t trying to shirk our responsibility,” said Mayor Artie Henderson.

“We feel strongly that because we are affluent and the coffers are full, we have a moral responsibility to help others,” Henderson said.

Said Watts, the city manager: “If Coachella doesn’t want the money, we’ll keep it here and build 150 [senior] units instead of the 100 we’re planning. But state law is trying to force low-income housing where many low-income people don’t want to live.”

Scott Muller, who works at the local golf course, agreed that Indian Wells is an unlikely place for inexpensive housing.

“Why would they build low-income housing here?” he said. “This is a little, tiny place where rich people live.”