The primary purposes of Redevelopment Agencies (RDAs) are to alleviate urban blight, provide affordable housing, develop downtown property and stimulate economic growth. In 1976 California created the Low and Moderate Income Housing Fund (AB 3674, Montoya). That legislation requires that all new redevelopment projects set aside a minimum of 20% of their tax increment revenues for low and moderate income housing. "Tax increment revenues" are the property tax increases stemming from growth in property value due to redevelopment.

The 2001-2002 Grand Jury reviewed the 13 cities in San Mateo County that together have 19 RDAs, the oldest dating from 1977. The Grand Jury wanted to see if the RDAs were setting aside 20% of their tax increment revenues, if they were spending the money, what the overhead and administrative costs were, and what housing had been built or renovated
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Issue: Is there sufficient monitoring, oversight, and publicity in San Mateo County of the housing element in the 19 Redevelopment Agencies (RDAs), with respect to the 20% set aside tax increments for low and moderate income housing required by state law?

Affordable housing in San Mateo County is on center stage today. The San Mateo County Board of Supervisors recently made a one-time contribution of $3 million to the Housing Trust Fund. Many young adults are challenged by the high cost of housing. Many others, including doctors, nurses, teachers, firefighters, and police, are also negatively affected. A measure of the need comes from the California Budget Project that reported (September 2001) that a family of four, with both parents working and an annual income of $68,479, is eligible for low and moderate income housing. This figure will strike many as surprisingly high.

San Mateo County has 13 cities with a total of 19 redevelopment agencies. Several cities have more than one redevelopment project. The city council typically serves as the RDA's governing board.

The Grand Jury, to more fully understand RDAs and their workings, contacted staff at several RDAs, the County Manager's office, County Counsel, County Housing Authority, Housing Leadership Council of San Mateo County, and the Mid-Peninsula Housing Coalition.

The Grand Jury read: (1) the Public Policy Institute of California's Subsidizing Redevelopment in California, by Michael Dardia, 1998; (2) the Peninsula Interfaith Action's August 2001 report: A Housing Trust for San Mateo County; (3) the Redevelopment Fact Sheet, September 1998, prepared by A.C. Lazzaretto & Associates, Burbank, California; and (4) materials from the California Redevelopment Association.

RDAs are created to alleviate urban blight, provide affordable housing, develop downtown property and stimulate economic growth. Examples of what redevelopment has accomplished are Sequoia Station in Redwood City, Miramar Apartments (formerly the Port of Call shopping center) in Foster City, and East Palo Alto's Gateway 101.

RDAs are financed through the incremental property taxes generated by the improvements made. The goals of RDAs - creating both affordable housing and income-producing redevelopment properties - often conflict. In 1976 California created the Low and Moderate Income Housing Fund (AB 3674, Montoya) in an effort to accommodate both goals. That legislation required all new projects to set aside a minimum of 20% of their tax increment revenues for affordable housing. Each RDA must send financial reports to the state annually, but these reports are not readily available to the public or disseminated locally.

In 1994 AB 1290 established a requirement related to the 20 percent set aside, directing that RDAs "use it or lose it" (Health and Safety Code, Section 3334.12).
A complex formula determines how much money an RDA can hold and for how long, before the funds must be turned over to the County Housing Authority. Although no RDAs in San Mateo County have, to date, forfeited funds, the Grand Jury was unable determine if there is appropriate oversight and auditing of the use of these tax revenues.

RDA 20% housing set aside funds have been used by many cities to provide affordable housing. The Grand Jury asked each RDA in San Mateo County to provide its total housing fund expenditures for FY 2000 and FY 2001, with a breakdown of administrative and professional expenses for these years. These figures, which were not compared with audited statements or compared with their tax increment revenues, appear in Table 1.

The total housing set aside funds available in San Mateo County in FY 2001 were approximately $19.7 million. These figures should be tracked annually and include not only total housing units produced but details that would help the public appreciate the size and nature of the units. In past years the Legal Aid Society monitored these funds in the county, but it no longer does so. As no other agency provides this service, the Grand Jury believes that the San Mateo County Board of Supervisors is in the best position to monitor these funds and expenditures countywide and should do so.