Report 93112 Summary - July 1994
The Adelanto Redevelopment Agency Needs to Improve Its Procedures to Comply with the Community Redevelopment Law
The Adelanto Redevelopment Agency (agency) is responsible for preparing and implementing redevelopment plans designed to eliminate blight within the territorial boundaries of the City of Adelanto (city). Under the Community Redevelopment Law (law), the agency may raise funds for redevelopment projects by issuing bonds, selling or leasing redeveloped property, and collecting tax increment revenues. Tax increment revenue is that portion of property taxes that is attributable to added property value caused by redevelopment efforts. However, the law requires that the agency use 20 percent of its tax increment revenues to increase, improve, and preserve the community's supply and its regional share of low- and moderate-income housing, unless the agency meets the legal requirements to claim exemption to the set aside provision.
The purpose of this audit was to determine whether the agency's redevelopment fund expenditures complied with the law. Specifically, we were requested to determine the extent to which the agency has used redevelopment funds to acquire George Air Force Base (GAFB) and to pay for legal actions against neighboring communities and an adjacent redevelopment agency.
We determined that the agency has inappropriately spent funds in an attempt to redevelop GAFB, and the agency spent some funds relating to GAFB for legal fees relating both to the environmental impact of the proposed reuse of GAFB and to water rights issues, which appears to be an appropriate use of redevelopment funds. GAFB is located outside the agency's territorial jurisdiction. The agency's territorial jurisdiction is defined by the law as the boundaries of the city. In addition, our audit revealed that although the Adelanto City Council (city council) discussed redevelopment projects in public meetings, it did not always follow the Health and Safety Code and Brown Act requirements to keep the public informed of the decisions made by the city council and the purposes for which the agency spends redevelopment funds. Further, we found that the agency did not meet the purposes of increasing, improving, or preserving the community's supply of low and moderate-income housing when it paid for part of the cost of the city's police and fire facilities from the Low and Moderate Income Housing Fund. Finally, the agency claimed exemption to the requirement to set aside 20 percent of its tax increment revenue for low- and moderate-income housing before it fully documented that no need existed for additional low- and moderate-incoming housing in the community or that its regional share of such housing was adequate. A more specific discussion of these conditions follows:
- The agency has inappropriately spent at least $2.1 million for purposes relating to the redevelopment of GAFB. These expenditures include costs for land use planning, lobbying, public relations, promotional materials, and legal services.
- The agency spent approximately $2.3 million relating to GAFB in what appear to be appropriate uses of redevelopment funds. These expenditures include amounts for legal fees relating both to the environmental impact of the proposed reuse of GAFB and to water rights issues. The agency has determined that the reuse of GAFB, as proposed by the Victor Valley Economic Development Agency (VVEDA), will exacerbate blight in the agency's project area. Based on the Legislative Counsel's opinion, we determined such expenditures are appropriate under the law.
- The city council has not always followed the Health and Safety Code and the Brown Act requirements to keep the public informed of the decisions made by the city council and the purposes of agency expenditures. For example, the city council did not make the necessary findings or publish notice of public hearings before the agency paid for the costs of publicly-owned facilities. In addition, it did not follow the requirements of the Brown Act when it used closed sessions to discuss the purchase of property used to expand the Adelanto police facility.
- The agency did not meet the purpose of increasing, improving, and preserving the community's supply of low- and moderate-income housing when it paid for part of the cost of the police and fire facilities from the Low and Moderate Income Housing Fund. Further, the agency claimed exemption to the requirement to set aside 20 percent of its tax increment revenues for low- and moderate-income housing before fully documenting that no need existed for additional low- and moderate-income housing in the community or that its regional share of such housing was adequate.
- The agency accepted city-owned property, valued at $3,050,000, as payment for debt owed to it by the city. As of June 30, 1993, the city owed the agency approximately $4.4 million for its share of legal fees and operating costs paid by the agency. The law does not provide the agency the authority to acquire property for the purpose of relieving debt.
- Finally, we were asked to report on how the agency intended to use and repay its December 1993 $46 million bond issue. The agency used its December 1993 bond issues to refinance prior obligations in order to reduce interest costs. See Appendix A for a schedule of the sources and uses of the funds.
We recommend that the agency develop and implement procedures to ensure that agency expenditures comply with the law. In addition, the city and agency should follow the requirements of the Health and Safety Code designed to keep the public informed of the purposes of agency expenditures. We further recommend that the city ensure that it has identified its needs for low and moderate-income housing before it takes steps to commit available funds for other purposes. Finally, the agency should reverse its acquisition of city-owned property and the city should prepare and implement a plan to repay all its debt to the agency.