Grover Beach’s use of redevelopment funds scrutinized

June 5, 2011

By LISA RIZZO

Critics of a proposed sale of a community garden allege Grover Beach city leaders have been using state redevelopment funds to bail out the city during revenue shortfalls by funneling money from its Improvement Agency into its general fund. And the city is preparing to do it again.

“The redevelopment agency is clearly getting screwed,” said San Luis Obispo Attorney Babak Naficy who has been tracking the transactions. “The more I look at this, the more it seems to be a scandal.”

Naficy was retained by a new “grass-root neighborhood group” coined as Organization Keeping Recreational Activities (OKRA) which formed to launch legal opposition against a proposed sale of a 6,620 square foot city-owned lot located at 920 Brighton Avenue in Grover Beach which they say is a bad deal for the redevelopment agency.

Like many small cities throughout California, the governing members of the redevelopment bureau known as the Grover Beach Improvement Agency are the same people sitting on the city council. They are required to act in different capacities to look out for the best interest of the agency and the city separately to avoid collusion.

The agency is an arm of the state, a separate legal entity and receives more than $1.1 million annually from the state redevelopment agency to help eliminate blight in the town. State law requires that 20 percent of that money be used to support or create low income housing.

Naficy argues Grover Beach city leaders are not looking out for the best interest of the low-income community which is being shafted by the lack of “due diligence” as the city makes “self dealings.”

One such alleged deal, expected to be approved Monday following a required public protest hearing, is the proposed sale of the Brighton Avenue property to the Improvement Agency for $235,000 to help meet the city’s 2011 budget expectation.

Protesting the sale, OKRA says its main point of contention is city leaders have “grossly inflated” the purchase price for the lot which is “ill-suited for constructing low-income housing.” They believe Grover Beach is motivated by a desire to meet a general fund revenue goal that the city is expecting to help fill a budget gap. OKRA also argues Grover Beach is skirting process by not making the necessary zoning changes first, conducting a conformity report and environmental review.

While the Grover Beach City Manager Bob Perrault, who also acts as the Improvement Agency Director, and the City Attorney Martin Koczanowicz have not returned CalCoastNews’ calls for comment, Perrault did prepare a staff report which addresses some of the critics’ concerns.

Good or bad, this is the deal

The plan is to sell the Brighton Avenue lot for $235,000—an arrangement where the buyer and the seller are technically the same five people but acting as different legal entities.

Looking at comparable properties in the area, OKRA argues it’s a price tag that is “extremely high,” and from the affordable housing perspective not the best deal for the buck.

OKRA contends that the city it not representing the buyer, the Improvement Agency, fairly and plans to take too much from the public fund which is set aside for affordable housing. They say if the organizations were seeking a fair deal they would have at least had the property appraised or formally consulted a real estate professional or developer.

Instead of an appraisal or expert opinion, the city’s methodology behind the $235,000 purchase price was to compare similar properties in the area. Perrault lists the research in his staff report.

The majority of the properties detailed, however, do not support the city’s proposed sale price. Four of the seven properties are larger than the Brighton location by as little as 872 square feet and as much as 3,355 square feet but are priced $10,000 to $90,000 less than what the city has deemed an appropriate asking price for its lot.

OKRA contends that if the Improvement Agency wanted to spend its affordable housing funds wisely, it would have looked at an inventory of property for sale in the city for the best deal available.

A basic search of comparable and existing vacant properties in Grover Beach shows numerous larger lots selling for much lower prices. For example, a lot roughly three blocks away on North 12th Street is nearly 5,000 square feet larger than the Brighton property and is listed for $70,000 less.

Filling the deficit

Naficy says he believes the city is trying to unload its property on the redevelopment agency purely to fill a budget gap.

Grover Beach’s 2011-2012 budget calls for a $250,000 sale of a city-owned parcel to meet funding requirements so the council selected 920 Brighton Avenue. The city needs the money fast to make up for the budget deficit and may not have the time to list the property for sale and solicit offers from the general public even with the possibility of a higher bid.

In his staff report, the city manager confirmed “the general fund will receive the proceeds of the sale” and the fiscal year 2011 “general fund budget anticipates the proceeds from the sale of the property.”

“While we understand that the city is facing a budgetary short-fall, we do not believe that using the Improvement Agency’s low and moderate income housing funds to balance the city’s budget is fair or consistent with the law,” Naficy said in a letter delivered to the city last Wednesday.

Grover Beach officials contend the property would be deed restricted for an affordable housing project and would help meet low income housing goals for the city and agency.

Meanwhile, the staff report says “the city’s general fund becomes the beneficiary of the sale.” The city remarks the funds were set aside for affordable housing and that is what they will be used for.

Similar transactions have been made over the last several years, where Grover Beach leaders have sold city-owned property, without appraisals or professional valuations, to the Improvement Agency for the exact amounts of anticipated short-falls in the city’s general fund, according to city records.

In a 2010 case of a parcel at 1541 Hillcrest Drive, Mayor John Shoals “commented that he had concerns regarding the proposed property being suitable for an affordable housing project, but that he recognized the city’s current budget constraints which necessitated pursuing this option,” according to the minutes of a June 21, 2010 meeting.

Regardless, moments later the council and the agency jointly adopted resolutions to approve the sale of the property, which is surrounded by cellular towers and a water reservoir, for a future affordable housing project using redevelopment funds.

The Hillcrest site is now owned by the Improvement Agency but has yet to be developed, according to county tax assessor records.

In a February staff report regarding zoning changes, the city acknowledges the Hillcrest property is still a “possible location for an affordable housing project.”

Suitability

Opposition to the Brighton sale stems from the fact that the property is currently being used as community garden in which nearly all the plots are being cultivated by residents. It is zoned as a public facility and is designated in the general plan as parks and recreation.

As the city confirmed in its May staff report, converting the property to “residential use would require a general plan amendment, zone change and a possible amendment to the Ramona specific plan.”

OKRA argues the fact that the proposal conflicts with Grover Beach’s general plan should alone bar the city from selling the property for a residential purpose. In addition, the critics say the Improvement Agency cannot buy the property as an investment; instead it should be directly used to create low-income housing.

As to the conformity report and environmental reviews that have not taken place, the city manager said in his staff report that “environmental review shall occur” “if the potential zoning change to this and perhaps surrounding parcels is presented for consideration by the city council.”

The public hearing prior to any formal decision authorizing the sale is scheduled for Monday at the Grover Beach City Council meeting which begins at 6:30 p.m. The hearing will be a joint meeting, meaning the governing body will be acting in both capacities as the city council and the Improvement Agency.

Reprimand and threat to pull funds

Regardless of the city’s decision Monday, which arguably teeters in a gray area, Naficy said he is feeling leery and would not want the state to catch wind of it, as any misuse could provide cause for Governor Jerry Brown’s proposal to pull redevelopment funds from cities across the state to help balance California’s budget—money Grover Beach has recognized it cannot afford to lose.

“For the people in the low-income housing community there is a long history of abuse of redevelopment funds. I am concerned that this kind of abuse would become the poster child for why these funds from the state would be scrapped,” Naficy said.

Following media reports alleging funding abuse in California cities, the State Controller’s Office conducted a review of 18 redevelopment agencies across the state and found inappropriate uses of affordable housing funds.

The office issued a statement in March expressing frustration for such abuses of taxpayer dollars.

“For a government activity which consumes more than $5.5 billion of public resources annually, we should be troubled that there are no objective performance measures demonstrating that taxpayers are receiving optimal return for each invested dollar,” State Controller John Chiang said.

“Locally-controlled economic development is vital to California’s long-term prosperity. However, the existing approach – born in the 1940’s – is not how anyone concerned with performance, efficiency, and accountability would draw it up today.”

“The lack of accountability and transparency is a breeding ground for waste, abuse, and impropriety,” Chiang said. “In whatever form local redevelopment takes in the future, the level of oversight and openness must be consistent with the amount of public dollars entrusted to their care.”


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choprzrul

The next piece of property that is getting the shady deal treatment is the empty lot located on South 13th street, 1/2 block south of Grand. The land was donated to the city in someone’s will for the purpose of becoming a park. The language in the will was such that the city would lose ownership if they don’t make it into a park. Well, the city is working on an underhanded deal to gain ownership and then intends to sell the property rather than make it into a park.


It makes my blood boil to think that some poor soul is rolling over in their grave. This type of thing is a bunch of crap and needs to stop now.


standup

This sounds like the mis-appropriation of public funds to me. At least get the property appraised like a normal seller of buyer would do to avoid this kind of scrutiny. What a bunch of idiots wanting to go to jail. Public housing funded by the feds is just more socialism. Let’s put a roof over the heads of more illegals.


MaryMalone

“Critics of a proposed sale of a community garden allege Grover Beach city leaders have been using state redevelopment funds to bail out the city during revenue shortfalls by funneling money from its Improvement Agency into its general fund. And the city is preparing to do it again.”


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LOL, shades of the City of Bell. Good work, Karen. Thanks so much.


OKRAmemberDB

Whether for or against retaining a Community Garden, every Grover Beach (GB) resident should nonetheless be interested in how their City is managed. If one thinks it OK for the City to sell off, to itself without due process, open space recreational parcels at inflated prices and then misappropriate the funds to uses other than those intended originally—–by all means, take another apathy pill and don’t concern yourself with political business as usual. If, on the other hand, one thinks two wrongs have yet to make a right, you might find it interesting to observe how things may get resolved when citizens question the stewardship of those entrusted to look out for the long-term benefit of us all. PLEASE ATTEND THE PROTEST AT GB CITY HALL ON MONDAY, JUNE 6th AT 6:30 p.m.


JTS

This is a great expose’ and I hope a lot of your readers will take the time and effort to come to the Monday night (6:30) June 6th City Council meeting that has been scheduled for protests to stop the use of these funds. Every citizen of GB should let the City foxes know they are not forthright in guarding the henhouse. I for one do not wish to forfeit any more precious GB taxpayer eggs. PLEASE FILL THE CITY HALL MONDAY NIGHT TO LET YOUR PHYSICAL PRESENCE SHOW YOU ARE OPPOSED TO SUCH MISAPPROPRIATION OF FUNDS. The City Hall is located on 8th street one block south of Grand Ave. JTS


mslfv

The GB Community Garden is a fully utilized, self sustaining, urban open space that provides for recreational, social, educational, and nutritional needs of the community. The sale of the garden for a low income housing project is inappropriate because the garden site is zoned for parks and recreational use. Also, the Ramona Specific plan and the GB General Plan designate this area for park use.


If the garden is sold for housing, it will be almost certainly be gone forever. Persons interested in beautification and quality of life issues should oppose the proposed sale of our recreational amenities for a one time, relatively small, cash infusion to the City’s general fund.


connected one

Lisa should look into the city of Pismo Beach’s RDA. They voted to desolve it in lieu of paying Lucia Mar School Dist. their fair share and are conducting transactions thru RDA and have approved the sale of a lot owned by the city on Park Ave. to build affordable housing. While this is something that all cities need to have I question their handling of this in addition to providing fiancing for this project as well.


r0y

They cannot pull earmarked funds; however, the amount of slime contained within the specifics of government earmarks is enough to make the Ghostbusters cringe.


I’m really glad more people, whether they have personal vested interests or not, are getting involved with what their government is doing. We can expand these good-old-boy clubs to more and more, so less and less will hopefully be pilfered or squandered.


Excelsior!


oto

This is a great article because it raises issues about how your local government acquires private property. What rules must Grover Beach follow to arrive at a reasonable purchase price? What funds may be used to buy the property? Can they legally pull money from one fund to pay for services or goods normally paid for by another fund? What interests may create a conflict?


I heard some talk about a month or so ago about doing away with “redevelopment agencies” to free up the funds for other beneficial uses. I would like to see more articles on “redevelopment agencies” and the business of “public housing.” There is a lot of federal government funding to be gained by building “affordable housing.” So much, in fact, that it leaves the area wide open for abuse by unscrupulus planning department employees who receive kickbacks from developers and real estate investors to inflate project costs, and to push through projects that violate the area’s specific plans, zoning laws, minimum lot sizes, and open space requirements. Many stories could be written about this and the public would benefit from the knowledge.


We are still waiting for a resolution to the “Gearhart scandal” which calcoastnews broke a couple of years ago. I would like to learn more about the standards a local government must follow in negotiating the purchase of land for development. Hats off, to Ms. Rizzo