July 5, 1995
By Yolanda Reynolds
The Redevelopment Agency in the City of San Jose is making “Expenditures of Funds Not Allowed by Law,” according to the recently released Grand Jury Report.
The findings of the Grand Jury are that the City and the Redevelopment Agency (RDA) are in violation of the “intent of federal and state law.” of federal and state law.”
One of the areas of violation was the use of tax increment monies to meet the obligations to a county-wide Education Revenue Augmentation Fund required by state law to contribute to K-12 school budgets. To do this, the RDA borrowed money from the Sewer Connection Fund and then repaid the Sewer Connection Fund with Bond Proceeds.
This action constitutes a deliberate “circumvention” of a law. Or it could be said they were “cooking the books” to obscure what was really happening.
The Agency issues bonds in order to build the many projects and to meet the operational costs associated with the “redevelopment/economic development‚” in San Jose. Most of these projects are focused on a few blocks in downtown San Jose.
The popular San Jose Best program, the Grand Jury points out, does not meet State Redevelopment law. According to the report, the City/Agency Attorney, Joan Gallo, said that the Agency paid for some programs that it can legally pay for that the “city would normally have paid for” in order to free up money for the Best program and thus not report a direct Agency payment – which would have been illegal.
The Grand Jury also questions the source of monies to meet the Agency’s administrative costs which, by law, must be attached to the “administrative costs associated with specific projects”. Evidently that is not happening.
For years, some San Jose residents have taken time from their busy lives to attend City Finance committee meetings, attend Agency and Council meetings, read the City Auditor’s reports and tried to follow the actions and reports made by RDA staff.
Information from the RDA is difficult to obtain, even for the press, and for the general public can even be costly. In its report the Grand Jury points out the sort of obstacles that interested parties face.
One obstacle is access to the RDA offices The Jury points out that, even upon going to the office it often takes two and even three visits to obtain requested information.
Important public meetings of the Agency Board can be scheduled at times other than the regularly scheduled first and third Thursday of each month.
To add insult to injury, copy fees for reports produced at City Hall, including RDA reports, cost 10 per page. Many RDA documents are many, many pages long; in particular, the DDA (Development and Agreements) which spell out the contractual arrangements that the Agency/City has made for a particular project. Such agreements include the Fairmont Hotel, the Nihonmachi (Japan town project), whose lead developer is Yosh Uchida, as well as many other projects designed by Frank Taylor and his staff for the Agency Board/City Council.
The City’s General Fund cannot be balanced without making enormous cuts. This problem has been years in the making. Part of the problem has been the millions of dollars that have been siphoned front the General Fund tax base into tax increment revenues for the RDA. The citizens of San Jose must now pay off $1.6 billion of RDA debt plus many millions more in operating and maintenance costs. It could become very costly to live in San Jose.
According to the Grand Jury report, the tax increment revenues for 1994-1995 are projected to be $72.4 million. Were there no RDA, 19% of that amount would go the General Fund of the City. Another 48% to the State’s General Fund for education, 31% to the County’s General Fund and the remainder to some Special Districts.
In that same period. 1994-1995 the City of San Jose’s revenues from property taxes amounted to $52 million. it becomes apparent why the Cities, State, and Counties are running out of money when so much tax payer money goes into the hundreds of RDA’s across the state. In San Jose, the hard-earned money of the taxpayer is more often than not spent by the RDA on projects of dubious merit.
The Grand Jury report also faults the City for not following recommendations made by the City Auditor’s office. One of this was that the Agency Board/City Council provide itself and the citizenry with “definitive and quantitative goals and objectives, and cost estimates for completion of each Redevelopment project area with a work program to accomplish these objectives.”
At the last Agency Board meeting the City allocated over $700,000 for “enhancements at the controversial and millions over-budget Arena.”
Kathy Chavez Napoli, a San Josean and long-time critic of the shoddy oversight of the RDA, says “it took the Grand Jury 3 years longer to come to the same conclusion that was made earlier by the City Auditor’s office regarding the RDA.”
Napoli adds, “Mayor Hammer and the City Council refused to implement the Auditor’s recommendations – hopefully they will now listen to the Grand Jury.”
Susan Hammer was the chairperson of the RDA Finance committee when the Auditor’s report was issued and seemingly ignored.
William Conlan, a Willow Glen resident and a long-time observer of City Hall, says, “the RDA is a prime example of the lax oversight of the State and local government.”
Unfortunately, it in not the sole example of of such attitude. He adds, “Unfortunately we have peoples involved in City government to have a complete and utter lack of responsibility.”
It is exactly such lack of sincerity and fiscal responsibility that is driving even the average citizen to despair that with a few exceptions, elected officials cannot be trusted.
Ray Bowdle, an Almaden Valley resident and City Hall observer, says, “without a proper accounting process that also includes an accounting of performance for the RDA, there is no way to know what is working nor what might be wrong.”
The RDA has had numerous projects that have run millions over budget as well as projects whose objectives were never realized and have become a major drain on the City’s General Fund.
Bowdle explains “the RDA Board should not fear an audit if as they claim everything is fine.” “In fact,” Bowdle adds, “under the Health and Safety Code Section 33080 which covers Redevelopment law there is a legal requirement for an annual audit that also requires an opinion on the respective RDA’s compliance with state laws.”
Some people point out that “the Council/Board should be the last to refuse an audit.”
San Jose citizens have repeatedly asked for a full performance accounting along with a detailed financial accounting of the use of RDA tax increment monies on an annual basis.
PACT a respected and vocal community/church based organization in San Jose, has pointed out “How Redevelopment can corrupt the City Council.” They explain that the Redevelopment Agency is governed by the Redevelopment Board.” In San Jose, as in many other cities, the City Council doubles as the Redevelopment Board.” “Thus”, PACT adds, “although council members run for election on the basis of what they will do on the City Council, they also wield considerable power as members of the Redevelopment Board.”
ThisGrand Jury Report was issued on June 19. For your copy of the Grand Jury report, contact the Grand Jury Office at 299-2731. Last year’s audit report also asked that the RDA follow the City Auditors 1992 recommendations. © La Oferta Newspaper.