Chick Asks City to Review CRA Management

The Los Angeles city controller called Monday for the City Council to study whether to overhaul the management of the Community Redevelopment Agency after a second audit in two weeks found serious financial problems.

Controller Laura Chick said her audit of agency subsidies to developers found the city failed to collect nearly $1 million that it was owed and is proposing to write off millions of dollars in other loans.

“The CRA does a poor job ensuring that the public receives the benefits promised in exchange for subsidies to private developers,” Chick said.

When she was a member of the City Council, Chick wanted the council to take on greater oversight of the CRA, which uses property tax dollars to provide incentives for developers to build in blighted areas of the city.

She said Monday that the idea should be revived but stopped short of calling for the council to take over the agency from the mayoral-appointed redevelopment commission.

Councilman Eric Garcetti, who heads the council committee that deals with redevelopment issues, said his panel would hold hearings on the audits and management issue.

“Everything is going to be on the table, including the issue of greater council oversight,” Garcetti said.

Chick released her latest audit after she issued a report indicating that developers were in default on $41 million of the $496 million in loans issued by the agency.

The new report focuses on the vast majority of loans that were forgiven, that were converted to grants or that require no monthly repayment unless the developer turns a profit, known as residual receipt loans.

Chick’s auditors looked at a small sample of residual receipts and found that $387,000 billed by the city was not collected, that $360,000 was uncollected after the property involved was sold through foreclosure and that errors in financial reporting resulted in the CRA’s under-billing those who hold residual receipt loans by $213,000.

Chick said she was concerned that only $38 million of the loans may be recoverable and that the city has budgeted $24 million this year to be gained by the discounted sale of poor-performing loans.

“If we are giving this money away, why are we giving it away, and what are we getting back for it?” Chick said.

“The CRA cannot answer, in an accountable way, those questions,” she added.

CRA administrator Robert Ovrom said he would report on the audit findings to the agency board in 30 days.

“I look forward to reviewing the controller’s recommendations and implementing changes that would improve the CRA/LA,” Ovrom said in a statement.

Ovrom said last week that cuts in state funding had reduced staffing and hampered the agency’s ability to oversee the money it provides to developers.

The audit released Monday also found that the agency had failed to ensure that some of the housing built with subsidies was set aside for low-income residents, as required, and that the agency had not complied with a requirement to conduct periodic on-site inspections to make sure there were no building code violations.

A third audit, focusing on the agency’s sale of property to developers, is to be released later this week.