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The Southeastern Economic Development Corp., the public redevelopment agency previously plagued by a bonus scandal that forced out its president, is facing a new problem: Its finances are weak.

SEDC is running a $3 million deficit, agency documents show. That amounts to almost 20 percent of the annual budget for the nonprofit, which manages redevelopment in four southeastern San Diego neighborhoods.

The deficit is so large that it’s raising concerns about the solvency of the agency, whose former president was ousted in 2008 after voiceofsandiego.org revealed she’d been clandestinely awarding herself bonuses without oversight.

“The real issue is do we have enough money to operate,” said San Diego City Councilman Tony Young, who represents most of the area governed by the agency.

Young, who strongly supported reforming SEDC rather than disbanding it after the bonus scandal, is now taking a different stance about its future. Redevelopment in southeastern San Diego is his main concern, he said, not whether SEDC is the one doing it. If SEDC was disbanded, its duties could be folded under the auspices of the city’s existing Redevelopment Agency.

“The primary issue for me is: How do we provide the best redevelopment services we can in these areas?” Young said.

Young also said in a memo to Mayor Jerry Sanders and Independent Budget Analyst Andrea Tevlin that “suspect accounting practices” under the agency’s past president, Carolyn Y. Smith, papered over the deficit.

In an interview, Young said the agency had combined money used for construction projects with money used for actual operations — obscuring the dire state of its balance sheet. Young said he understood that the national economy and state grabs on redevelopment dollars have cut SEDC’s revenue. But he believes the problem is larger than that and wants to see a plan for fiscal recovery.

SEDC’s interim head, Brian Trotier, said the agency’s difficulties are the same as what’s happening in redevelopment agencies across California: Tax revenue is decreasing because of declining property values and the state is taking redevelopment money for education.

Trotier said he briefed Young’s staff on the agency’s financial difficulties so that the councilman would understand the challenges the organization faced. No money has been misspent and no money has gone missing, Trotier said, but the accounting practices did create a rosier financial picture than was real.

“Councilman Young overreacted slightly to information we gave him prior to our meeting, which we wanted to do so that there wouldn’t be an overreaction,” Trotier said.

Trotier also bristled at suggestions the agency was near insolvency, and suggested the city’s budget deficits should be a greater concern.

“Technically if insolvency is the question, I think the city is a lot closer to that than we are because of their unfunded pension liability,” he said.

SEDC’s board will address its budget at its monthly meeting Wednesday. In the meantime, there’s been a flurry of activity about SEDC among other city officials. Tevlin, the independent budget analyst, requested SEDC’s 2009 audit be pulled from a City Council Audit Committee meeting this week and referred to the city auditor, along with Young’s memo, for review. She said she wanted to make sure SEDC didn’t operate at a deficit last year. Young is planning to meet this week with city Chief Operating Officer Jay Goldstone about the agency.

Mayoral spokeswoman Rachel Laing said Sanders wants to keep SEDC independent, but with the increased influence the Mayor’s Office has pushed for since the bonus scandal broke.

“This is exactly why we want to have some oversight or accountability over their finances,” she said.

Please contact Liam Dillon directly at liam.dillon@voiceofsandiego.org and follow him on Twitter: twitter.com/dillonliam.

Dagny Salas

Dagny Salas was web editor at Voice of San Diego from 2010 to 2013. She was an investigative fellow at VOSD from 2009 to 2010.

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