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November 29, 2010.

City Council, Mayor Sanders, and City Attorney Jan Goldsmith

City of San Diego

202 C Street

San Diego, California 92101

Subject: Public Records Request and Senate Bill SB-863. – CCDC Cap Raise and Solutions.

New special Legal Loopholes that allows the Downtown San Diego Redevelopment Agency

(RDA) to steal Billions from Affordable Housing Set Aside Funds and Local Schools within

the Downtown Centre City Project Area Administered by the Centre City Development

Corporation (CCDC) by Not Enforcing Existing State Prohibitions and Penalties for Failure to

Pay the Mandatory State Bills using Redevelopment Tax Increment Funds by the Addition of

Section 33691.5 to the Health and Safety Code.

Dear City of San Diego.

On October 7, 2010 Senate Bill SB-863 added new Section 33333.14 and Section 33691.5 to the Health

and Safety Code. Section 33333.14 lifted the Redevelopment Agency’s (RDA) Cap through an

Amendment for the Downtown San Diego Centre City Project Area administered by the Centre City

Development Corporation (CCDC) (see Section 7 of SB-863). On October 8, 2010 SB-863 passed both

the Assembly and Senate.

At the same time, the addition of Section 33691.5 created new Legal Loopholes from regular California

State Redevelopment laws to benefit the Downtown San Diego Redevelopment Agency Officials, Centre

City Redevelopment Administrators, private developers, consultants, and outside legal counsel; at the

financial expense of the City of San Diego, Affordable Housing, and Education (see Section 8 of SB-863).

With Senate Bill SB-863 and the addition of the unknown Section 33691.5, aka. Section 8 of SB-863,

which no one in San Diego government ever discussed in public; the Downtown San Diego

Redevelopment Agency (RDA) literally rewrote inconvenient State laws that were getting in their way of

financing projects they deem worthy, and to cover themselves from State Penalties and Prohibitions which

would have closed down all of the Downtown San Diego Redevelopment Agency (RDA) Centre City

Project Area, and curtail Administrative Duties of CCDC Redevelopment Officials as a Penalty on May 10,

2010 in accordance with Health and Safety Code Section 33691.(e).

As part of this Public Records Request, please provide us the documentation that verifies that the

Downtown San Diego Redevelopment Agency (RDA) and CCDC Administrators have paid their

full 20 percent Affordable Housing Set-Aside Funds into a separate locked box account; the RDA

has paid the full Pass-Through Payments to the County and the local schools in accordance with

the 1992 Agreement; and the RDA has paid the full State Supplemental Educational Revenue

Augmentation Fund (ERAF) Payments for Fiscal Years 2009, 2010 and 2011.

Senate Bill SB-863 also exempted the Downtown San Diego Redevelopment Agency (RDA) and CCDC

Administrators from increasing Affordable Housing Set Aside Funds to 35 percent minimum, as a normal

part of the CCDC Cap increase through Health and Safety Code Section 33333.10. (g) (1) which added 10

percent, and as a Penalty for non-conformance with Section 33334.2. (k)(4) which added 5 percent for the

life of the Redevelopment Agency.

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Figure 1, attached includes excerpts from the Amended SB-863 that specifically provides the

Downtown San Diego Redevelopment Agency (RDA) and CCDC Administrators with new legal

loopholes to not pay their public Debts in full, not incur Prohibitions from operating, and not

incur Penalties to increase the percentage of Affordable Housing Set Aside funds to 35 percent

minimum. The new Subsection 33691.5.(b) also allows the RDA to use all legally available funds

to make those payments. The legally available funds to pay the RDA’s outstanding debt can

consist of State or Federal HUD grants and loans specifically set aside for the Homeless and poor,

or money from the City of San Diego’s General Fund for basic city services like police, fire,

libraries, and park and recreation centers, etc.

For this serious breach of public trust, the Downtown San Diego Redevelopment Agency (RDA) and

CCDC’s Administration of the Centre City Project Area should be abolished and merged, along with

SEDC, into the City’s in-house Redevelopment Agency. At the very least all Redevelopment Agency

Activity should be curtailed as required under Penalties imposed by Section 33691.(e). The State

Controller’s Office has the Legal Authority to Audit Individual Redevelopment Agencies itself. A Joint

Audit between the City Auditor and the State Controller’s Office should be conducted with

recommendations on how the City of San Diego can reach its 20 percent Affordable Housing Set-Aside

goals for Fiscal Years 1992 to 2011, and the 35 percent minimum Affordable Housing Set-Aside starting

for Fiscal Year 2012, which starts on July 1, 2011. Also the Merging of all three departments into one

City-wide department would allow Billions in Tax Increment Redevelopment funds to be used Citywide

instead of in Downtown San Diego only. Plus save $12 Million a year in Administrative Costs, outside

consultants, and expensive private, off-site Office Space.

“The Redevelopment Agency (RDA) of the City of San Diego was created by the City Council in 1958 to

alleviate conditions of urban blight in designated areas of the City. The Redevelopment Agency (RDA)

is a Separate, Legal Entity, with the City Council serving as the Legislative body. Redevelopment

activities in 17 different project areas are carried out by three entities: the City Redevelopment

Division, and two public, non-profit corporations; Centre City Development Corporation (CCDC), and

the Southeastern Economic Development Corporation (SEDC). The City Redevelopment Division

manages 11 Project Areas throughout San Diego. The Redevelopment Division of the City Planning and

Community Investment Department serves as staff to the Agency with duties that include coordinating

budget and reporting requirements.” CCDC Administers two Project Areas centered in Downtown San

Diego. SEDC Administers Four Project Areas and One Study Areas in Southeast San Diego, California.

“The Redevelopment Division of the Community and Economic Development Department serves as staff

to the Agency. The Agency oversees 17 Redevelopment Project Areas, encompassing more than 8,000

acres. In addition, it administers seven Project Area Committees that advise the Agency regarding Plan

Adoption and Project Implementation Activities.”

The Independent Audit should also include a 10 year time limit to repay the outstanding $223 Million in

Federal Community Development Block Grants (CDBG) and HUD loans. The City of San Diego and

the Redevelopment Agency agreed to repay back the full $223 million in misappropriated Federal funds

in 2008/2009.

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Instead on July 13, 2010 at the City Council meeting on Item 335, the Downtown San Diego

Redevelopment Agency (RDA) and CCDC Administrators came up with an unsolicited plan to pay back

only $78,787,000 within a 10 year period, and cessation on accrued interest. The approved partial

payment Schedule on Annual Payment Federal HUD funds would start at $3,633,800 for Fiscal Year

2010, and increase each year until the final payment of $16,402,800 for Fiscal Year 2019, for a total

partial payment of $78,787,000.

However, San Diego has negotiated in Bad Faith during the July 13, 2010 City Council meeting on Item

335 by implying the Federal Office of Inspector General for the Department of Housing and Urban

Development (HUD) is fine with the Redevelopment Agency of San Diego forgiving itself of

$144,214,499 dollars of the $223 Million owned in Federal HUD debt, and lobby for a change in the

Agreement with the Feds to stop accruing interest for no specified reason, which is not in the best

interest of San Diegans. The County, State, and Federal Governments have an obligation to reign in the

City of San Diego and its Redevelopment Agency.

Besides amending the Downtown San Diego Redevelopment Agency (RDA) and Centre City Project

Area Program administered by CCDC to remove the Cap limit on funding, Senate Bill SB-863 also

created Legal Loopholes from Prohibitions and Penalties that would prohibit the Downtown San Diego

Redevelopment Agency (RDA) and CCDC Administrators from operating until all State mandated Tax

Increment allocations are paid in full. See Figure 2 for the normal penalties under Health and Safety

Code Section 33691.(e), which would include a prohibition on issuing new debt to finance new projects,

and prohibit of the RDA from encumbering or expending any funds. The evidence that the RDA is not

in compliance with State Redevelopment law without the new exemptions provided the Downtown San

Diego RDA by Senate Bill SB-863 with the addition of Health and Safety Code Section 33691.5, needs

to be confirmed by the City Auditor, the County of San Diego, and the State Department of Finance. On

August 29, 2010, we made a Public Records Request of the Redevelopment Agency and CCDC

Administration to review public documents referenced in the May 22, 1992 Agreement for Cooperation

between the Redevelopment Agency of the City of San Diego AND the County of San Diego for the

Centre City Redevelopment Project Area. We have reviewed the referenced public documents.

Our Public Records Request also included documentation to confirm actual Tax Sharing

Payments to Tax Sharing Entities, and the Years Trigger Percentages Increased for Fiscal Years

1992 to the Present.

We still have yet to receive any documentation on the actual Tax Sharing Payments made to the

Downtown San Diego Redevelopment Agency’s (RDA) Tax Sharing Entities from 1992 to the

present, including the County of San Diego, the San Diego Community College District, the San

Diego Unified School District, the San Diego County Office of Education, and the State

Supplemental Educational Revenue Augmentation Fund (ERAF).

In addition, we still need documentation on the Years the four (4) Triggers were made in the 1992

Agreement, and the Years the increases in the Percentages paid in Pass-Through Payments first

appeared. We are also requesting documentation on the amount of Affordable Housing Funds

actual spent each year from 1992 to the Present. Please have the Downtown San Diego

Redevelopment Agency (RDA) and CCDC Administrators give us the documentation needed to

complete the missing information in the attached Figure 3, including Table I for annual actual Pass- Through Payments and Percentages, and the required State Supplemental ERAF payments, and

the actual amount of money use for Affordable Housing Projects every year.