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I e-mailed former voiceofsandiego.org staffer and University of California, San Diego doctoral student Vlad Kogan once I posted our new weekly feature that previews each San Diego City Council agenda. I’ve had discussions about redevelopment with Kogan so I asked for his perspective on the reform proposals for Centre City Development Corp. and Southeastern Economic Development Corp. that are up for first reading at council next week.

In the spirit of getting a discussion going that could last over the holiday weekend, I’ll post what he wrote here. Feel free to comment with your thoughts under this post in my blog, The Hall. I’m especially interested in those with a different point of view. Hopefully, this discussion will provide some frames of reference in advance of the council discussion Tuesday.

Take it away, Vlad!

I think this proposal is very problematic. It certainly addresses some (but by no means close to all) of the problems at the corporation that have emerged in recent years, but in the process of doing so it creates even more new ones. My concerns are on two levels: legal and political.

Legal:

1. The City Attorney’s “alter ego” memo identified the potential problem the current structure creates. On one hand, the corporations are free to do what they want. On the other hand, they are controlled by the city. As the City Attorney points out, this suggests that they are simply “alter egos” of the city, and thus the city would probably be liable for any damages (monetary) they may cause. This proposal makes the alter ego issue more prominent, if anything. With the mayor taking direct control over personnel decisions, the argument that the corporations are just part of the city becomes even more reasonable. Yet, the city still doesn’t have day-to-day control over the corporations. Essentially, this is a blank check: Go out and do whatever you want (as long as it doesn’t get you fired), and the city will cover the cost if you screw up. That doesn’t seem like a financially responsible route. If the city is going to be on the hook financially for the corporations, the city (Mayor and City Council) should be exercising more direct control over what they do. As currently written, this creates the same too-big-to-fail phenomenon as we saw on the financial crisis: No matter what the corporations do, the city is still responsible.

However, the political problems to me are more important.

1. Under the proposed structure, the mayor (and city council) will have all authority over firing decisions. The mayor will also do the annual performance evaluation of the executives. Yet the day-to-day operations, policies, and oversight will still be in the hands of the board. With no firing, performance evaluation, or compensation authority, these boards will be toothless. Imagine having Voice run by a board, but not giving that board firing authority over Scott and Andy. The proposed structure threatens to reduce oversight, not improve it. The executives, knowing that the boards can do nothing to them, will surely have little incentive to cooperate. Imagine that the boards form their audit committees (as the proposal requires) and demand information from the executives. And the executives blow them off. They will have absolutely no recourse, except to run to the mayor and city council to complain and hope that the political incentives are there for the mayor and city council to be on their side (which can’t be taken for granted). I think this is especially worrisome for CCDC, because the corporation also has land use and planning authority over downtown.

2. One of the problems at both SEDC and CCDC is the widespread belief that they look out for the interests of their staff and the development community, rather than the interests of the public. The current proposal does little to address this. In fact, the bylaw changes for CCDC would require that two board members be from development community. While this may be less than currently required, it doesn’t solve the problem. Why don’t we require at least one member from the environmental community? One member from the affordable housing community? One member from a community planning group? Similarly, the open-records provision will give the city a right to inspect corporation records. There’s nothing in there about requiring the corporations to follow the public records act or giving any one else a right to inspect the corporation documents.

Overall, I think this is a cosmetic fix, and the reason that the mayor is pushing this is because this is the only thing that will be accepted by the stakeholders who care about redevelopment (primarily the development community). My fear is that this will make things worse, not better.

PS:

There are three issues/relationships to think about:

1. The responsibility of the corporate executives to their boards, and the ability of the latter to hold the former accountable;
2. The responsibility of the corporations to their shareholder, the city;
3. The responsibility of the corporations to their client, the redevelopment agency, whose money after all is being spent.

The proposal as outlined addresses primarily the second of these, at the expense of the first. There is little in there that addresses what I and many others think has been the key problem here, which is the extent to which the actions of the corporations actually further the objectives of the redevelopment agency.

— LIAM DILLON

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