Cities throughout California are using redevelopment funds — intended to fight blight and promote economic development — as emergency ATMs to pay for core services, including police, fire and code enforcement, and sometimes the mayor’s salary.
FOR THE RECORD An article in the Feb. 18 Section A about cities’ use of redevelopment money to pay salaries and other general expenses misspelled the name of the Sacramento River town of Isleton as Ilseton.
This use of redevelopment money is clearly illegal in some cases, and legal or on the margins in others. Either way, officials in many cash-strapped cities say they have come to rely on redevelopment money to avoid making deep budget cuts.
That helps explain why many are fighting so hard against Gov. Jerry Brown’s proposal to abolish municipal redevelopment and shift the money to other purposes.
Brown wants to shut down the state’s approximately 400 municipal redevelopment agencies and send much of the $5 billion in property taxes they take in each year to schools, counties and the state instead. He has characterized redevelopment, which was created more than half a century ago, as a laudable endeavor that the state can no longer afford.
“Do we take more from the university and start cutting into the public schools?” he asked city officials recently.
The picture looks different to mayors such as Walt Stanckiewitz of Grand Terrace, a small city in western San Bernardino County.
For years, the city stayed afloat by directly transferring money from its redevelopment fund to the general fund — a practice that was illegal and that Stanckiewitz and other officials say they have halted. They are struggling to pay back the $4 million owed.
Even so, the city continues to rely heavily on redevelopment to pay a portion of the salaries for 14 of its 20 City Hall employees.
Like many officials throughout California, Grand Terrace leaders say it is legal because those employees work on things related to economic development.
Without the redevelopment money, Stanckiewitz said, the city would be forced into adopting “doomsday budgets” or possibly into disincorporation.
“We could return to an unincorporated part of San Bernardino County or become South Colton.... We may not exist as a city,” he said. “That’s how serious this is.”
Other cities also have been borrowing or appropriating money from their redevelopment agencies — sometimes skating up to or across the line of what is legal.
Last fall, council members in Montebello authorized borrowing up to $19million from their redevelopment agency to balance the city’s $45-million general fund. Redevelopment money also pays for parts of several employee salaries, including the city manager’s.
Peter Cosentini, the interim city manager, called it mostly a “cash-flow loan” because the city takes in most of its revenue in the second half of the fiscal year.
He said the funds will be paid back this year as required by law, but acknowledged that the city may have to seek another loan from somewhere else to raise enough money.
In Huron, a hard-scrabble town in the Central Valley, redevelopment money pays for police officers, code enforcement and animal control.
All told, City Manager Gerald Ford estimated that redevelopment money accounts for “between 10% and 20%" of the city’s $1.2-million budget.
For years, borrowing or taking from redevelopment funds attracted little notice. Historically, the state has provided sparse oversight of redevelopment, and state and local governments have made little attempt to reign in abuses.
Karen Chapple, a UC Berkeley professor of city planning, has described raiding redevelopment money as a “bad habit,” akin to tapping “a slush fund.”
But she also noted that it is easy to understand why cities have turned to it. “This is a tool cities use to fill the gap when they are desperate,” Chapple said.
Los Angeles officials say they do not borrow or otherwise use their redevelopment funds for core services such as police and fire protection.
Mayor Antonio Villaraigosa has been trying to persuade legislators not to eliminate redevelopment, and has proposed a number of ideas including limiting it in communities where there aren’t large numbers of people living in poverty.
“We’re willing to share the burden [of the state budget crisis], but this is a tool we need to create jobs,” Villaraigosa said.
Other big cities frankly acknowledge that they use redevelopment money for basic functions.
Long Beach, Oakland and San Jose are among dozens of other cities that use redevelopment money to pay for the city staff, including police officers, the mayor and city council — a practice officials say is legal because the expenditures confer benefits to blighted areas.
In Oakland, for instance, money from the redevelopment agency pays the salaries of the equivalent of 171 full-time employees in 12 city departments — more than the entire payroll of many smaller cities. That includes the salaries of 17 police officers.
Mayor Jean Quan said the move is justified because the officers work only in blighted neighborhoods such as “the most dangerous parts of east Oakland.”
In fact, redevelopment pays half of Quan’s own salary, as well as some of the salaries of several City Council members. It also covers parts of the salaries of planners, building inspectors, graffiti patrols, architects and people in the housing department.
When Brown was mayor of Oakland, redevelopment paid 15% of his salary.
“People think, oh, you’re not supposed to use [redevelopment money] for core service, but [what] if economic development is a big part of your core service?” Quan said.
In Long Beach, officials use redevelopment money to pay the salaries of the equivalent of 90 people. The city’s leaders have found other novel, highly complicated ways to use the funds.
Two years ago as Long Beach was facing a $40-million budget hole, officials decided that the city’s port would take over debt payments that the city general fund had been paying on bonds used to build the Aquarium of the Pacific.
Then, the redevelopment agency stepped in and pledged to reimburse the port for public improvements that will be made there. The result: The city’s general fund got to keep $14 million over the next three years.
Such creative maneuvers — which officials argue are quite legal — are becoming increasingly common.
La Mesa and Rohnert Park have sold city land to the redevelopment agency and used the proceeds to balance their budgets. San Jose’s redevelopment agency pays for improvements to city streets and roads, allowing the city to use the savings for police officers and gang intervention workers.
It is easy for city council members to convince their redevelopment agency boards to go along with these plans — in most cities, the two bodies are made up the same people.
It is not always clear where the redevelopment money goes. A Times review last year of redevelopment agencies’ affordable housing funds found that more than 30 cities spent most of their affordable housing money on “planning administration” — and yet never built a single unit of housing.
A state Senate report noted that some cities “paid salaries … with little additional or improved housing to show for the money.”
Some cities already have learned that they poach on redevelopment coffers at their peril.
In tiny Ilseton, which sits on the banks of the Sacramento River, officials long paid their bills with illegal transfers of redevelopment funds, despite warnings to stop from a county grand jury and the state attorney general’s office.
Responding to state and county audits, a new city manager managed to pay the redevelopment funds back — but the consequences for the town have been profound. The Fire Department is now made up of volunteers and so is the Police Department.
“These are the kinds of cuts cities have to make,” said the new city manager, Bruce Pope.
Still, Pope said he could understand the mindset of officials who break the law to put redevelopment money into their general funds.
“They’re looking for ways to pay bills and they just started grabbing money,” he said. “They just hid it, or started adopting budgets that weren’t real. Or [maybe] they thought they were the state of California.”