📋
Extracted from Consolidated Report

This investigation was originally published as part of a larger consolidated report containing multiple investigations. View the consolidated PDF for the complete document.

Shasta County Grand Jury • 2005-2006

Redding Redevelopment Agency Ready, Aim - Spend! Redding Redevelopment Agency

136 pages
View PDF View Full Original

Findings 19 findings

F1 Page 63
The Cities of Anderson, Shasta Lake and Redding and the County of Shasta currently operate RDA’s. In total there are six redevelopment project areas in the county: Shasta Dam (Shasta Lake City); Southwest (Anderson); and Market Street, Canby-Hilltop- Cypress, Buckeye and Shastec (Redding). In 1993, section 33216.5 of the California Health and Safety Code was enacted and authorized the transfer of the Shasta Dam Area Redevelopment Project from Shasta County to the City of Shasta Lake. The City of Anderson and Shasta County cooperate with the Redding RDA as a multi-jurisdictional agency in the Shastec Project Area. The County also partners with the City of Redding in controlling the Buckeye Project Area. Currently, these partnerships generate no income for Shasta County. As of June 2004, the total indebtedness for all RDA’s in Shasta County approached $50 million, with the City of Redding’s Redevelopment Agency (RRA) issuing more than 90 percent of that debt.
F2 Page 63
Table I shows financial data which demonstrates the significant growth of the RRA over the past decade. Both the property tax increment and the administrative cost to run the agency have nearly tripled since 1995 and total agency bond indebtedness has ballooned 63 to over $40 million. The 2004/2005 total assessed property value of the RRA project areas was $1.75 billion. Table 1: Economic data for the Redding Redevelopment Agency 1995-1996 2001-2002 2004-2005 Tax Increment Income $3,714,000 $5,591,000 $11,720,000 Total Bond Debt $25,200,000 $22,550,000 $41,425,000 Administrative Costs $428,000 $1,208,000 $1,477,000
F3 Page 64
The 2005 RRA tax increment income of $11.7 million represents the amount of money (less set asides and pass-through funds) that must, by law, be reinvested in the redevelopment project areas within RRA, or debt service. This tax increment results from increased value, usually created by the redevelopment. Critics of redevelopment have claimed that the tax increment diversion deprives a city’s general fund of needed cash. It is true that increases in property taxes from outside the project area are deposited directly into the General Fund, but the City retains only about 10 percent of these property tax dollars (due to the 90 percent diversion to the state and county). In contrast, the RDA receives approximately 60 percent of each tax increment dollar and only 40 percent is diverted to the state and county. Additionally, a commercially successful project area, like the Canby-Hilltop-Cypress development, also generates significant sales tax revenue for the City. Proponents of RDA’s further argue that, without redevelopment, blighted areas may generate little, if any, future property tax revenue. Redding City officials interviewed agreed that the Downtown Mall is an example of a redevelopment project area that actually resulted in blight while attempting to reverse it. The mall’s high vacancy rate, lack of economic productivity, and deteriorating physical structure are prime components of blight. Instead of accepting a redevelopment failure 64 and terminating this project, the RRA board decided, in 1990, to rename and expand this zone from its initial 10 acres to over 2600 acres. This decision has stimulated revitalization of the City’s core.
F4 Page 65
Redevelopment agencies commonly allocate 10 to 20 percent of their income for administrative costs, primarily staff salaries. In 2005, the RRA spent nearly $1.5 million on administrative costs, which was 16 percent of the tax increment after set-asides and pass-throughs are deducted. The RRA contributes $4,000 annually to the California Redevelopment Association. Although the RRA has a dedicated core staff, the total number of city staff supported by agency funding at any time fluctuates. Employees of various city departments track their hours devoted to RRA business and the agency is charged accordingly. For example, the Executive Redevelopment Director for the City of Redding draws half his salary from redevelopment funds. Redevelopment funding affords the City of Redding a means of creating staff positions not entirely devoted to redevelopment functions. City officials could not supply the Grand Jury with a formal accounting of job-sharing costs between agency and non-agency staff.
F5 Page 65
The RRA is required, by law, to pass-through some of its incremental property tax revenues to local schools and community colleges. This amount was $782,553 for 2004/2005 and is estimated to be $811,961 for 2005/2006. After housing, pass-through and administrative funds are deducted, the remaining revenue is reinvested in the redevelopment project areas. The RRA has adopted a Capital Improvements Program (CIP) to spend in excess of $20 million over the next five years. Some CIP funding is dedicated to the partial removal of the roof on the Downtown Mall. The remainder of the CIP funds will be invested throughout the city’s four project areas. In addition to CIP 65 spending, the RRA will contribute $3 million towards the Cypress Avenue bridge replacement and $5.2 million for the widening and realignment of Churn Creek Road.
F6 Page 66
The RRA must, by law, set aside 20 percent of its tax increment to preserve and improve low- and moderate-income housing. This currently amounts to $1.4 million per year. The housing fund has a current balance of $4 - 5 million. In the past, over $8 million in RRA funding has been appropriated to provide affordable housing in the Martin Luther King area. According to its Director, the RRA is exceeding its five-year goal for affordable housing. The RRA added over 100 housing units (predominantly rental) in 2004/2005. The RRA board also proposed changes to its Downpayment Assistance Program (DAP) which will make it easier for low-income citizens to purchase a home.
F7 Page 66
In most instances, funding needed to begin a redevelopment project is generated by issuing tax allocation bonds. These are repaid using the property tax increment revenue described above (Finding #3). Repayment of these bonds is the responsibility of the RDA, not its sponsoring city or county. However, because the credit-worthiness of these bonds is critical to any city’s or county’s overall credit rating, it is highly unlikely a city or county would let a redevelopment bond default. Indeed, RRA staffers and each Redding City Council member interviewed by the Grand Jury indicated that the City of Redding would never permit any RRA bond default. City officials told the Grand Jury that the City, on two occasions, saved the downtown redevelopment project area from default. In 1972, the Redding City Council authorized a $550,000 loan from its Electric Utility Fund to the RRA for the construction of the mall parking garage in its Downtown project area. Currently, the outstanding loan balance is $539,183, which includes principle of $308,105 and interest of $231,078. Also, during the 1970s, the City made an “advance” (not a loan) of an indeterminate amount of money 66 from its Parking Fund to the RRA to support construction of the garage. During FY 2004/2005, the RRA made a $250,000 payment on this advance, and the outstanding balance is $734,162.
F8 Page 67
Redevelopment funding is approved by a simple majority vote of the five-member RRA board which also serves as Redding’s City Council. No vote of the public is required to authorize the issuance of tax allocation bonds. The RRA board (City Council) is the sole check-and-balance over redevelopment decision-making and the commitment of tens of millions of dollars of redevelopment spending. Newly elected City Council members receive redevelopment orientation by RRA staff. They are also offered an opportunity to attend a formal training seminar provided by the California Redevelopment Association. RRA staff stated that none of the current City Council members have availed themselves of this opportunity. The City Council/RRA board members who were interviewed rated themselves between “somewhat” and “very” knowledgeable regarding redevelopment law and policy. However, they agreed they depend heavily on RRA staff for input and explanations of pending RRA decisions. The four RRA board members were asked seven basic questions regarding redevelopment. Only one scored greater than 30 percent, and another was able to answer only one of the seven questions correctly. Only three votes (a board majority) are required to commit millions of future tax dollars for decades of debt service. The California Community Redevelopment Law Reform Act of 1993 (AB1290) removed the requirement of citizen oversight committees for redevelopment project areas. When queried about reinstating this citizen safeguard, RRA staff unanimously opposed reinstating it and the RRA board agreed, stating that citizen committees are ineffective. Instead, City Council members stated elections are a 67 sufficient curb on redevelopment abuses. (The Grand Jury notes that two of the current five RRA board members were not actually elected to the Council, but were appointed by the other members.) Additionally, Redding city officials stated that they believe input from the city attorney, yearly agency audits, and the periodic public review of project area implementation plans provide adequate RRA oversight. Because of the significant amount and complexity of funding ($50 million), the Grand Jury is concerned that this is not adequate oversight and that this “unknown government” operates beneath the radar screen of public scrutiny.
F9 Page 68
As stated in the above findings, the RRA board is comprised of the same individuals who serve as Redding City Council members. These individuals are also board members of the Redding Housing Authority, Redding Joint Powers Financing Authority, and Redding Capital Services Corporation. These agencies control the flow of significant amounts of money and the Grand Jury is concerned that City Council members “wear too many hats” while performing these agencies’ various functions. Indeed, at the October 18, 2005 Council meeting, the Grand Jury observed that all council members were unaware they were directors of the Redding Capital Services Corporation. The RRA board meetings are often held concurrently and interchangeably with City Council meetings. And, although the City Council shares similar interests with its redevelopment agency, potential conflicts may arise because each agency has different legal powers, responsibilities and functions. However, this does not represent a true, legal, “conflict of interest” because the board members do not directly benefit financially from their decisions. Nevertheless, these multiple roles afford city leaders a mechanism to bypass procedural hurdles that can impede costly projects from moving forward. For example, 68 the City Council can exercise eminent domain only for public use and must gain voter approval to issue general obligation bonds. However, acting as the RRA board, the City Council members can create a redevelopment zone (or annex land into an existing zone) and then employ eminent domain for public or private use, or issue bonds without voter approval. A proposed auto mall and a business park are excellent examples of expensive projects unlikely to garner voter approval for financing, but readily accomplished with the aid of the city’s multiple financing mechanisms. At the October 18, 2005, City Council meeting the City signed a letter of intent to partner with its RRA and a private entity to begin development of an auto mall on State Route 44. Similarly, over $16 million from the city’s Capital Services Corporation and $10 million from the RRA have been proposed by City staff to support infrastructure improvements for the Stillwater Business Park.
F10 Page 69
After a declaration of blight, eminent domain law allows RDA’s to acquire private land and/or property within a redevelopment project area. Blight is broadly defined by statute. It is usually categorized as physical, such as a dilapidated or unsafe building or structure, but may also be socio-economic, such as a stagnant area with low property values or a high crime rate. Even vacant, undeveloped land can be designated blighted, usually on an economic basis. All redevelopment staff interviewed by the Grand Jury agreed that vacant land might fit the definition of blight. Although most RRA staff members considered the undeveloped areas of Park Marina blighted, each of the four RRA board members interviewed did not. The vague, legal definition of economic blight can even be applied to Redding’s recently completed City Hall – if replaced by a shopping mall, the 69 property and sales tax generated could be of greater economic benefit to the city than the current, non-taxable building. Recently, California state legislators from this area co-sponsored two constitutional amendments that would further restrict the use of eminent domain. While the Shasta County Board of Supervisors unanimously supported both proposals, the RDA staffs of Anderson, Redding and Shasta Lake City, and all RRA board members interviewed by the Grand Jury opposed the amendments. This difference in opinion is possibly explained by the significant funding ($50 million) the cities have invested in redevelopment.
F11 Page 70
Usually RDA’s are able to negotiate real property purchases from private property owners by offering “just compensation” for their property. Often, simply the threat of eminent domain proceedings is sufficient to convince reluctant property owners to negotiate. All those interviewed recognized the unpopularity of eminent domain and preferred to avoid it. Although used rarely, the RRA has resorted to eminent domain to seize private property in the past. Examples include: o The Dana Drive freeway ramp o Completion of the Court Street extension north to the Sacramento River The Park Marina Drive area along the Sacramento River has a huge potential impact on Redding’s future downtown development. This area is situated between RRA’s Market Street and Canby-Hilltop-Cypress project areas. There has been a spirited and sometimes contentious debate as to exactly how and when this privately owned property should be developed. The Grand Jury has learned that City of Redding staff has recently discussed the possible use of eminent domain proceedings if development of this property is indefinitely delayed. However, four members of the RRA board assured the 70 Grand Jury that the City currently has no plans to either incorporate Park Marina into a redevelopment project area or utilize eminent domain to acquire this property. The four RRA board members interviewed also stated they would not apply eminent domain proceedings to the Parkview Market, but some were less certain about using eminent domain for the Stillwater Business Park. All Grand Jury interviewees expressed reluctance regarding the use of eminent domain, and some pledged never to utilize it. In some jurisdictions, however, it appears eminent domain becomes more acceptable when large amounts of money are involved. The mayor of Dunsmuir in Siskiyou County was quoted as saying, “I’m the guy who came on council and said, ‘I have a problem with eminent domain’ and I do.” However, he subsequently reversed his position when the city stood to forfeit a $140,000 federal grant and in March 2006, The Dunsmuir City Council decided to implement eminent domain to seize private property around its airport.
F12 Page 71
California redevelopment law limits the amount of vacant land within a redevelopment area to 20 percent. However, there is no limit to how much of a city’s developed land can be placed into redevelopment zones. The law also requires a determination be made that only a redevelopment agency, and not private development, can revitalize a blighted area, but the law does not specify any objective standards for this determination. Therefore, a RDA board has autonomy in making this determination. In the past 10 years, the amount of land within RRA’s project areas has more than doubled. Twenty-five percent, or 15.34 square miles, of Redding’s total geographic area is now located within redevelopment project zones. The City Council, acting as the RRA board, designated this land as blighted and determined that only redevelopment could 71 revitalize it. Obviously, as more land is placed into redevelopment areas, less land will be available for private development not specified in the project plan.
F13 Page 72
This Grand Jury’s review of Shasta County RDA’s did not reveal any illegalities. It has, however, made us acutely aware of the large sums of money involved with redevelopment and the potential for abuses to occur without proper scrutiny. The total bonded indebtedness of the RRA is approaching 10 percent of the City of Redding’s total assets (estimated at $500 million) and one quarter of the city is now included within redevelopment areas. A highly professional staff with sophisticated knowledge of redevelopment law and policy manages the RRA. It has successfully utilized this funding tool to make many infrastructure improvements, develop capital projects, and provide economic recovery and affordable housing. In most instances, areas designated as “blighted” have been improved. We applaud the RRA’s efforts, but at the same time, we encourage increased public scrutiny and transparency to ensure that abuses do not occur.
F14 Page 143
During its last ISO evaluation in 2004, the ISO indicated the City of Redding’s fire rating would be changed from 3 to 4 (that is, the City’s ability to combat fire worsened). In a last minute effort to maintain its prior rating, the RFD was able to make improvements by purchasing additional equipment and upgrading communication equipment at the SHASCOM dispatch center. These actions allowed the City to narrowly retain its rating of 3 and prevented both commercial and residential fire premiums from rising. According to the Fire Chief, two major deficiencies continue to prevent the City from improving its ISO rating: insufficient RFD staffing levels and the lack of a second ladder truck to serve the eastern half of the City. 45 143
F15 Page 144
Rank and file support for RFD administration is negligible. Some fire personnel view RFD administrators and the City Council and its staff as “the same enemy.” Several fire personnel thought their union did not represent all members, and others believe being active in the union limits their ability for promotion. A long-standing “history of distrust” between the fire department and the City of Redding regarding staffing levels was reported. Several RFD administrators labeled a few of the firefighters as troublemakers (the “five percenters”) who create dissension within the ranks. The Grand Jury confirmed the existence of such a group. Some City Council members felt the union “goes overboard in its demands.” It was apparent to the Grand Jury that there were significant issues between all investigated public agency personnel (RFD, SHASCOM, Redding Police Department and Shasta County Sheriff’s Office) and their respective management staffs and governing boards. No interviewee could offer an easy resolution to the above problems. Despite this seemingly insurmountable degree of distrust, firefighters overall felt satisfied with their jobs and City Council members felt satisfied with the level of RFD service. It was universally agreed that, “when the bay doors open, they become firefighters who do their job.”
F16 Page 144
The end result of RFD understaffing is a greater risk to citizen’s lives and homes. The Grand Jury finds that, at current staffing levels, when the RFD responds to a structure fire, its main objective, after the protection of human life, is the prevention of the fire’s spread to adjacent structures. In most cases the burning structure itself will incur significant damage or be a total loss. Fire department personnel and City staff substantiated that Redding’s ex-city manager stated he would rather pay a homeowner for the loss of a home from fire than have any fire department at all. Perhaps this statement shouldn’t be taken literally as the Grand 46 144 Jury notes that, without a fire department, not only would a home be lost, but the unchecked fire would immediately spread to adjacent homes. However, the statement further emphasizes the distrust between firefighters and City Hall. Of greater concern to the Grand Jury are statements, heard from all fire personnel interviewed, predicting the inevitability that a devastating wildland fire sweeping through western Redding. All fire personnel agreed that it is not a matter of if, but when this catastrophe will occur. The topography of the west side, our hot and dry summers, and a triggering act (natural or human carelessness) are the ingredients of a “perfect storm” for fire. When queried about this potential danger, City Council members pointed to mutual aid agreements with CDF and Shasta County Fire Department; seasonal firefighters; fire sprinklers in new Westside housing divisions; and weed abatement programs, all as mitigating factors for this catastrophe. However, all fire personnel assured the Grand Jury that these factors would have little impact on an out-of-control wildland fire.
F17 Page 145
Fire protection services in Redding could be enhanced if the general public applied sufficient pressure on the City Council. As an example, once residents in the northeast area of Redding became convinced of a need for increased fire protection, they lobbied the City Council and Station No. 8 was constructed well ahead of schedule. There are other examples of pressure producing results. As this Grand Jury investigation proceeded: 1) Fire Station No. 2, which had been observed by Grand Jurors to be frequently unoccupied, now is usually occupied. 2) The Fire Chief, when informed by the Grand Jury that it was in his job description to do so, now regularly attends Redding City Council meetings. 47 145 3) A RFD training log for 2005 was submitted to the Grand Jury after it was informed that there was no such log. RFD training has also intensified during the last four months. 4) After initial Grand Jury interviews called attention to communication deficiencies within the Department, morning briefings between RFD administrators and firefighters were instituted in January. Fire protection is similar to an insurance policy: the premiums seem costly upfront, but the coverage is always appreciated once an emergency occurs. The citizens of Redding must decide what level of fire protection they want to pay for, and then lobby City Council members to allocate the appropriate funds.
F18 Page 180
Despite its staffing and facility deficiencies, RPD continues to provide a high level of safety and security to the community. The Department works to develop proactive programs that continue to enhance the well-being of the community. Notably, the lack of significant gang activity is attributable to the aggressive actions of RPD in collaboration with other law enforcement agencies within Shasta County.
F19 Page 180
Due to allegations of excessive use of force in other jurisdictions, RPD has provided additional training in this area. RPD officers began a study in October 2005 regarding the use of force during contacts with the public. It revealed that force over and above control holds was used in only 18 of 1,742 arrests during the last quarter of 2005, and in only 17 in 2,500 arrests in the first quarter of 2006. This demonstrates maturity and restraint in dangerous situations.

Recommendations 18