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Redevelopment: The Party’s Over

The theory of “redevelopment” is that public agencies borrow money they then put to public or private purpose to increase the borrower's tax base. The tax base thus magically broadened, the public agency pays back the redevelopment loan. In other words, the proverbial private (or public) pig dives face first into the public poke.

Lots of people think that redevelopment has been deployed to rehab blighted neighborhoods. That depends on your definition of “blighted,” and whether you think privately owned housing financed with public tax dollars is a good thing.

Over the years, as the pigs grew fatter and the pokes thinner, redevelopment has expanded and expanded and expanded to include big giveaways to corporations, unions, schools, the construction industry (including roads, of course), and on and on. It became an insider’s game and everybody wanted in. Thousands of redevelopment agencies were formed, even in small towns like Willits and Ukiah where, well, pick a name from your big bag of Mendo non-profit barnacles — Richard Shoemaker, say — and there they all were, redeveloping the heck out of their Ukiah and Willits counterparts.

Much of the ensuing “redevelopment” created a need for greater public services — police, fire, roads, schools, water, sewer, etc. — which was never adequately paid for by additional tax revenues that were generated years later, not that anyone could remember, much less connect, which development created which need.

Recently, with Governor Jerry Brown wielding the long-overdue budget ax, redevelopment has been discontinued. Legislation was passed last year to phase out redevelopment, much to the chagrin of those who profited from it.

In Mendocino County, the new legislation means that cities and the County have been ordered to come up with redevelopment phase-out plans, which in turn means, basically, evaluating multi-year projects and funding commitments that were already in the pipeline and trying to figure out what to do with them.

The phase-out legislation also requires that “oversight committees” be appointed to review the phase-out plans because even the politicians in Sacramento realized that asking the organizations involved to phase themselves out might result in unpleasant last gasps. The Redevelopment agencies have been renamed “Redevelopment Successor Agencies,” to reflect their remake as suicides. They now must fall on their own swords.

And so, on April 10th, the Mendocino County Board of Supervisors dealt with the question of who they should appoint as the one (1) “public member” for the oversight committees for Fort Bragg, Willits, Ukiah and the County. (The oversight committees are dominated by government staffers, although they generally are not from the Redevelopment agencies themselves.)

Without discussion the Board appointed businessman Ronald Morehead to the Willits Oversight Committee. They also appointed realtor Scott Dietz to the Fort Bragg oversight committee. Dietz was also recently elected to fill the late Jere Melo’s seat on the Fort Bragg City Council, but that potential conflict of interest didn’t come up in the Supes’ April 10 discussion.

Redwood Valley resident and frequent Board critic Jim Houle was first up for the Ukiah or County oversight seat. We think Houle, as an honest government skeptic of long standing, would have been a good pick, but…

“I have been following this RDA business for a few years trying to understand what the state had in mind when they set it up and how it has been applied here,” Houle began. “I have been particularly following the city of Ukiah although I live in Redwood Valley. I have been trying to understand the difference between providing infrastructure and support to further the development of Ukiah and what amounts to corporate welfare in terms of providing specific assistance to stores that want to build or expand in the area. So I am very interested in seeing how the money that has been set aside so far is to be administered. The housing program has been quite successful in Ukiah and they have met their requirements of 20% or better of the RDA funds. On the County level I'm concerned about the paucity of funds that have been put into housing and the lack of any real program for the last three or four or maybe five years. There are funds available, there are set-asides that have been made. I am curious to see how that money is disposed of, what it goes into, and whether there are ways to improve the cooperation with other housing agencies at the state and federal level to get a program going for repair, reconstruction or new housing in Calpella and in South State Street which are in pretty shoddy condition at the present time.”

Supervisor McCowen pointed out that the County’s “Community Development Commission” was already dealing with the housing aspect of redevelopment phase-out and that that was separate from the current appointment’s purview.

The next applicant was local financial gadfly John Sakowicz. Sakowicz said he was familiar with the new phase-out rules and had attended a meeting or two on the subject, adding that he’s a finance guy with a long career in affaires d'argent.

“Also in the last month I have graduated from a weeklong training at Stanford Law School by CalPERS staff for both fiduciaries and public trustees so I bring that to the table as well. I was also certified in ethics at that very same training at Stanford. If there is anything specifically that you would like to know about the successor agency, who the other appointees are, or the projects that they focused on at that April 3 meeting [in Ukiah] I would be happy to elaborate but I do not want to monopolize your time.”

Sakowicz pointed out that the two main redevelopment items Ukiah is focusing on are the new Ukiah Courthouse and the pending Costco development at Redwood (Airport) Park, both of which are flagrant expressions of the kind of corporate welfare that "redevelopment" has become.

“There are millions of dollars of bonds outstanding,” said Sakowicz giving an improved glimpse at how bloated, insiderish and semi-corrupt the Redevelopment process has become locally (Costco?). “It remains to be seen what the payment schedule is going to be. This is a huge, huge issue. I will bring all of my experience, all of my training in RDAs [Redevelopment Agencies] and in public business to make sure that the special districts for which tax increments were intended as the recipients of this money will in fact get that money. They are ably represented on the board with Vicki Todd from the Ukiah Unified School District and Larry Perriman of the college district and Mr. Mirata of the cemetery district. But I will also be there as an advocate for those special districts.”

Supervisor Carre Brown pointed out that Vicki Todd represents the Mendocino County Office of Education. “MCOE,” said Sakowicz. “Yes, I'm sorry, I stand corrected.”

Suffice it to say that school districts have always taken a big share of redevelopment funds, and are now well-represented when it comes to how the redevelopment leavings will be divvied up.

Also applying for appointments were a Wells-Fargo Ukiah financial adviser, John Goldsmith, Ukiah School District business manager Sandra J. Herrington and Ukiah Valley-based Lee Howard who has been elected and appointed to a number of Ukiah-area fire and water districts over the years.

Before interviewing these three, county staffer Tammi Weselsky pointed out that Ms. Harrington had already been appointed to the County's oversight board as a school district representative.

Mr. Goldsmith didn’t have an opinion on redevelopment, just “enough interest in the community.” “I am neutral with regard to any of these positions. I try to bring some sense of analysis to anything I am challenged with. But when it comes to this particular oversight board, checks and balances are really important in my perception of this. … I think it's very important to be impartial in that process.”

Sandra J. Harrington: “I was interested in this as the chief business official for the school district. Ukiah Unified is one of the largest recipients of pass-through funds from the previous city of Ukiah redevelopment agency which had a pass-through agreement going back to 1990. Subsequent to the discussions over the last couple of years when the state first started looking at how they could potentially recapture or take over some of the redevelopment agency funding or functions I began to be more involved with looking into and doing research with some of the other areas that directly impact school districts. … I am also one of the current appointees on the County Board, appointed by the County Office of Education and I am very interested in participating and being part of this process not only to ensure continued compliance with the laws and legal responsibilities, but in trying to establish and do so in a transparent manner and make sure that those obligations and any funding that's left over after those things are identified or resolved such as your pension and redevelopment bonds and borrowings are done so in a very collaborative manner that we are able to resolve and go forward in this process. That's why I'm interested and that's why I'm here today.”

Translation: I want to make sure the schools get every last nickel they can.

Lee Howard said he applied “because I have an interest in the community. I started a business here in 1972, Lee Howard Construction operation and we are still going. I held my first elected office in 1978. I have served on many boards. I served 11 years with the California Special Districts Association as a board member and all the way up to and including President of that statewide organization including through the time that redevelopment was coming on board. One of my major concerns always has been redevelopment and the opportunity for condemnation as some of you will recognize that I opposed residential condemnation in this county and the city associated with redevelopment over the years. I sat on the county's redevelopment agency for 18 months to two years back when it was the CAC [Community Development Commission]. We participated in the set up and entire thing with the county, guidelines, pass-throughs, etc. During my time with CSDA I also sat on another district jobs like the bond council and participated in indebtedness, how pass-throughs are worked through, and how you get [financing] to fund some of these things. Redevelopment, the way it is today, we have a charge with the state and that is to wind redevelopment down, plain and simple, that's the job. And to make sure it's done right. I have participated in budgets extensively on the public side. … I attended four hours of training in Oakland two weeks ago on the redevelopment wind down and the new bills that are coming out or anticipated to come out. A lot of people would like to see some of this continue and that's fine — if you don't like the law, change it. … This process is kind of like weaning a cow from a calf. [Addressing Supervisor John Pinches] She don't want to go, John!”

Mr. Howard continued, “The training I went to in Oakland was sponsored by people who want to see RDAs continue. There were lots of people in nice double-breasted suits and there were a lot of sharks swimming in the blood trying to figure out how to get around. There was a consortium of labor groups that was putting it on. Labor unions were involved because there is so much money out there.”

Supervisor John McCowen asked, “You said it was very clear that successor agencies pay if there are mistakes. I just want to clarify that. You are saying that the successor agency is responsible for paying the enforceable obligations and therefore it's important to retain enough funds until they have settled all those obligations?

Howard: “You know it’s…”

McCowen: “That was kind of a yes or no.”

Howard: “No it isn't, because the county has a great deal of obligations here. The county has the obligation to hold this money and make sure it's done right. The successor agency is going to lay it out but then the oversight board will look at it and the controller is going to look at it. Everybody will look at it. But the money is being held by the county and you are getting paid for it.”

McCowen: “But my question is, if sufficient funds are not held and there are not funds available to pay the enforceable obligations is the successor agency on the hook at that point?”

Howard: “I believe they are.”

McCowen: “By the same token, if the successor agency approves enforceable obligations and pays out funds and then later that’s successfully challenged, then would the successor agency be responsible for refunding those monies?”

Howard: “I can't answer that. It's not clear enough at this point in time where it's at. But I can give you one example that it could go sideways. In the law there is a $250,000 obligation right off the bat for maintenance and administration of the agency. So your county can pick up $250,000 right off the bat which the city did and they took it right to the maximum. The maximum can be less if in fact they agree to it with the oversight board.”

McCowen: “But that's at the option of the former agency.”

Howard: “That's right.”

McCowen: “It's at the option of the successor agency?”

Howard: “Right. But what I am saying to you is that it looks like to me on some of these very small units like the counties… I don't know if there's $250k in there, totally. But the state and the legislature in their great wisdom they put that forward and they put that budget into the thing. But yes, it could get upside down. But I hope that the oversight boards have enough moxie, have enough intelligence to ask the right questions and follow the money.”

Unfortunately, the question McCowen really wanted answered — is Mendocino County’s battered budget on the hook if redevelopment termination costs more than anyone thinks? — went unanswered.

Supervisor Brown had a concern: “I want to express my disappointment in the Ukiah RDA successor agency. It appears we have a process driven by speed without concern of our full participation. This really upsets me. I don't think it's right. [We assume she means the County didn’t have a chance to dip into the remaining Ukiah redevelopment money.] As to the public appointment, I think I want an individual in there that will truly know the process, not necessarily have to ask someone that's already involved in another capacity, I guess is the best way to say it. For instance, I believe it was said that Ms. Harrington already sits on the Mendocino County [oversight committee]. I have a lot of concern. I think it should be a true public member and I think it needs to be someone that's very strong. So I would like to put forth Lee Howard in nomination for the Ukiah RDA oversight agency.”

Mr. Howard was unanimously appointed to the Ukiah oversight redevelopment-ending committee (which has a lot more money to work with than the County).

And Mr. Sakowicz was unanimously appointed to the County redevelopment-ending oversight committee.

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