BILL ANALYSIS
SENATE LOCAL GOVERNMENT COMMITTEE
Senator Patricia Wiggins, Chair
BILL NO: SB 813 HEARING: 5/6/09
AUTHOR: Kehoe FISCAL: No
VERSION: 2/27/09 CONSULTANT: Detwiler
REDEVELOPMENT AGENCIES' ANNUAL REPORTS
Background and Existing Law
Every redevelopment agency must give its legislative body
--- the city council or county board of supervisors --- an
annual report within six months of the end of the fiscal
year. This annual report must contain eight types of
information, including an independent financial audit
report.
A certified public accountant or public accountant must
conduct the independent financial audit report following
the federal Government Accounting Standards and the State
Controller's audit guidelines. The audit must also report
on "the agency's compliance with laws, regulations, and
administrative requirements." If the annual report
identifies any of nine defined major audit violations, the
agency must tell its legislative body. The legislative
body has 21 days to review the annual report and take any
appropriate action.
Redevelopment agencies also send copies of their annual
reports to the State Controller's Office (SCO) which
compiles and publishes the data. The SCO must compile a
list of the redevelopment agencies that reported major
audit violations. In 2006-07, redevelopment officials
reported 62 major audit violations. The SCO must then
determine if the agencies corrected their major audit
violations. If not, the SCO sends the list to the Attorney
General and tells local officials about the referral.
State law spells out the procedures for the Attorney
General to sue an agency for failing to correct a major
audit violation.
Although the Attorney General has never sued a
redevelopment agency for failing to correct a major audit
violation, some observers believe that more local oversight
can avoid future lawsuits.
SB 813 -- 2/27/09 -- Page 2
Proposed Law
Senate Bill 813 extends the deadline for a legislative body
to review its redevelopment agency's annual report from 21
days to 30 days. SB 813 requires the legislative body to
adopt a written response that indicates what action, if
any, the agency intends to take to correct the major
violation. The bill requires the legislative body to send
a copy of its written response to the grand jury.
Comments
1. Who watches the watchers ? City councils and county
boards of supervisors usually govern their own
redevelopment agencies. Less than 5% of the 425
redevelopment agencies have a governing body that is
different than the city council or county board of
supervisors. Despite the legal distinction between
redevelopment agencies and their underlying cities and
counties, there is little political distance because most
of the time the same individuals govern both institutions.
When a redevelopment agency tells its legislative body
about a major audit violation, it's usually talking to
itself. Although the State Controller and the Attorney
General make and check the lists of agencies with major
audit violations, no one at the local level regularly pays
attention to this annual self-examination. By requiring
cities and counties to share their audit responses with the
grand jury, SB 813 increases local dialogue about
redevelopment problems and possible solutions before state
officials get involved.
2. Superfluous second-guessing . Redevelopment law is so
complicated that, as the redevelopment agencies' own annual
reports show, mistakes happen. But the current arrangement
that involves state officials seems to work. After all,
the Attorney General has never sued a redevelopment agency
for failing to correct a major audit violation. State
officials have learned how to encourage redevelopment
agencies into compliance without suing them. In contrast,
grand juries are made up of citizens who look into
complaints about public malfeasance, but they lack
reservoirs of long-term knowledge and deep experience.
SB 813 -- 2/27/09 -- Page 3
Sending copies to grand juries may spark local
controversies without generating any real understanding of
a redevelopment agency's problems or feasible solutions.
The Committee may wish to consider if SB 813's requirements
will just generate superfluous second-guessing.
3. Related bill . SB 813 is not the only bill that
requires local agencies to share audit problems with other
local officials. AB 288 (Nestande) requires mosquito
abatement and vector control districts to share information
about irregularities in their annual audits and their
written responses with the city councils and county boards
of supervisors that appoint the districts' trustees. This
year's Nestande bill is similar to SB 1326 (Ducheny, 2008),
which passed the Senate Local Government Committee, but
Governor Schwarzenegger vetoed.
4. Technical amendments . In 1999, the Legislature
required the SCO to track redevelopment agencies' "major
violations." In 2003, the Legislature changed that term to
"major audit violations." The statutory section that SB
813 amends still uses the older term. The Committee should
adopt technical amendments that insert "audit" on page 2,
lines 5, 7, and 16.
Support and Opposition (4/30/09)
Support : California Rural Legal Assistance Foundation,
Western Center on Law & Poverty.
Opposition : California Redevelopment Association, City of
Palm Desert .