SEDC Questions Multiplying But Answers Slow to Come

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Wednesday, Nov. 21, 2007 | In April 2006, Carolyn Smith, the president of the Southeastern Economic Development Corp., or SEDC, approached a local couple that had sued a developer. Though the lawsuit had little to do with SEDC, for some reason, Smith felt the need to get it settled.

The developer had tried and failed to push through an ambitious project for the San Diego neighborhood whose revitalization is SEDC's mission.

Smith told the couple, Sharon and Mark Petrarca, to drop their actions against the developer and she would ensure that they could still build a new warehouse the developer had promised.

Unfortunately for them, Smith appears to have had no intention at all to actually formalize the agreement with the couple. She never took the proposal she made to them to her board of directors. And SEDC never took it to the San Diego City Council, which has ultimate authority over redevelopment in southeastern San Diego.

Smith's team however, asked the Petrarcas to release their claim over the land so that the warehouse and the rest of the development could go forward under the guidance of a new developer -- a business that just happened to have close ties the chairman of SEDC's board.

Not long after the couple released their hold on the property under the assumption that their deal was being honored, they found out the agency had changed course and would be putting a supermarket there instead.

Smith had never acted on her promise. She appears only to have wanted to persuade the Petrarcas to release their claim on the property in a contentious legal battle. And now another one has started.

This is part of the complex tale voiceofsandiego.org writers Andrew Donohue and Will Carless pulled together over many months of study. It is yet another illustration of the questionable dealings of SEDC.

Just more than a year ago, Donohue uncovered startling evidence that SEDC allowed taxpayer dollars to subsidize affordable housing developers who did little or nothing to ensure the homes they built remained part of a so-called affordable stock.

People who bought these homes at affordable, taxpayer-subsidized prices sold them for vast profits -- taxpayers had subsidized their ride up the housing market boom. And the homes, of course, were no longer affordable. SEDC had not filed the documents necessary to prevent such abuse from occurring. An employee who had warned her boss about what was happening was pushed out of her job.

Later, the city's independent budget analyst discovered that, at a time when City Hall was cutting positions and preaching fiscal austerity, SEDC -- essentially a city department -- had boosted its employees' salaries by 30 percent. SEDC's president, Smith, told the City Council not to worry, they had been misinformed and SEDC's salaries had only gone up 4 percent. But then, in an exhaustive piece detailing the agency's salaries, Donohue revealed that the employees would, in fact, receive an average increase of 13.5 percent.

They may or may deserve such an increase. But the city didn’t deserve SEDC's attempt to mask those increases.

Over and over again, SEDC officials display an aggravation with the concept of public scrutiny and accountability. Its officials have been loath to answer questions about their administration of public funds.

Yet the agency hands out millions in public subsidies every year in a supposed effort to stimulate development in some of the most neglected neighborhoods of the city. That type of mission -- ripe for abuse -- demands the utmost accommodation to accountability measures.

The city's government does have a built-in mechanism for oversight: the City Council must approve all of the actions that SEDC takes.

But, unfortunately for the public, the City Council tends to act like a unified rubber stamp when it comes to approving the recommendations of the agency. The City Council is the city's Redevelopment Agency -- the mayor, its executive director. Yet neither have done everything they can to evaluate SEDC's expenditures and questionable behaviors.

After the affordable housing misdeeds came to light last year, City Councilman Tony Young requested that the city audit SEDC. After the revelation about the agency's pay increases, Young again requested an audit. SEDC -- apparently aware that they may want to influence the direction of that kind of effort -- commissioned the consultant who advises it on development projects to do a performance audit on the agency. The consultant gladly took the job -- essentially an evaluation of how well the agency was spending money on consultants like them.

All this worthless exercise cost San Diego taxpayers was $40,000.

The Mayor's Office, laudably, saw the folly in that and declared that it would commission a more valuable, independent audit. But no contract has been signed with an outside auditor.

Mayor Jerry Sanders' spokesman, Fred Sainz, said that it was only a matter of time. The mayor, he said, believes voiceofsandiego.org's investigations into SEDC had "brought up issues that need to be explored and, if necessary remediated."

By exploring, the mayor means to engage the city's outside auditor on a probe into the way SEDC handles its money.

Another layer of oversight for a city agency like SEDC should be maintained by San Diego City Attorney Mike Aguirre. He reacted to a request by Councilman Tony Young and Donna Frye to investigate the issues raised in Donohue's initial report about SEDC. His office produced a report that largely paralleled part of voiceofsandiego.org's findings about the lack of oversight of supposedly affordable housing.

This is the perfect realm for an independent-minded city attorney to force accountability. But Aguirre has instead focused his time on investigating such pressing problems as the supposed nefarious conspiracy between San Diego's public radio station and editors at a major daily paper. Following up on the questions SEDC's actions continue to raise is, apparently, best left to other people. And these are people the city must independently contract and pay.

Hopefully outside auditors looking at SEDC will draw a thorough picture of how the agency operates and what is behind its recent reckless decision making. We hope, that is, that it won't simply be limited to ensuring that the agency is spending as much money as it is taking in.

There's much more to the story than that and if remediation is needed, we'll need to know the whole tale.

Throughout SEDC's troubles, the city's elected officials have done a wonderful job of making sure that this is someone else's problem. They can't wait for an audit to begin taking responsibility.

voiceofsandiego.org

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