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When voiceofSanDiego.org reporting exposed the corruption, questionable executive bonuses, and the role of a clueless board in oversight surrounding the president/CEO of the Center City Development Corporation (CCDC) in 2008, the corporation was hanging by a thread. The downtown business establishment and developers worked to rescue it, rather than have it dismantled like a similar entity, the San Diego Data Processing Corporation. As a result of this effort, on Monday, the city will be bathing the sins of CCDC in the holy Ganges, by amending the operating agreement, bylaws and articles of incorporation.
There is no question that redevelopment has transformed downtown in the past three decades. The question really is whether CCDC is the goose that lays golden eggs for San Diego’s economy. The distinction is important, and the two are often conflated. One is about the benefits of redevelopment, the other about the performance of a service contractor that was exploited by the likes of Florida developer, Nancy Graham.
In these economic times, it is fair to evaluate the economic gain that CCDC claims from spending (on behalf of the redevelopment agency) more than a billion taxpayer dollars.
First, the corporation claims $9 private investment, for every $1 public investment. The spending claim is supported by the agency budgets, but tempered with the reality that the public dollars (tax increment) will continue to accrue and be spent in downtown whether or not CCDC exists. Nevertheless, a multiplier effect of nine is theoretically impossible, with a typical multiplier of 1.6 for public infrastructure spending. So really CCDC is taking credit for all private development in downtown, no matter what the externalized cost may have been on our freeways, our schools and our city services, or the opportunity cost of revenue diversion on the geography beyond downtown.
The public-private ratio ignores the public investments by CalTrans, SANDAG, MTS, SDUSD and host of other public agencies that have to foot the bill for impacts of downtown development.
Second, the corporation claims an annual yield to the city of 12.3 percent. It would be amazing to get half that yield in this economic climate, if it were not an actual yield that CCDC paid in net to the city every year since its existence. This number includes current revenues to the city through its tax structure independent of the corporate agreement, and does not include expenditures by the city. For example, it assumes that hotels generate transient occupancy tax (which is a city tax, not a centre city tax), but do not consume city services like police and fire. Try selling a real investor with the CCDC yield formulae, disclosing the assets and hiding the liabilities, and you’ll have the FDIC tapping on your shoulder.
Third, the corporation claims almost 50,000 jobs in construction and 26,000 jobs that are “permanent.” This is important, since under state law, a fundamental purpose of redevelopment is expand employment opportunities for jobless, underemployed, and low-income persons.
Since CCDC has not the tracked the actual number or type of jobs, it is difficult to verify this claim. However, it is safe to assume that the construction jobs were temporary ones that mostly evaporated when the regional employment in construction shrank to a little over 65,000 last year. In terms of actual workers, it may as well have been the same 1,000 construction workers on 50 different job sites over several years.
The permanent jobs claim is backed by economic models that also show that these are poor quality jobs. There are two reports commissioned by CCDC, one for the ballpark, and one for the Community Plan that provide estimates on the numbers and types of jobs. The SANDAG report in 1999 for the Ballpark estimated a little more than 7,000 permanent jobs primarily in hotel and retail.
The agency report shows that 77 percent of the occupations would make less than $30,000 annually and concludes that “on balance, the pay levels of project employees are forecast to be lower than those earned by workers in the San Diego region.” In other words, the project had a depressing effect on the average income for wage-earners in San Diego. It further found that only 41 percent of employees would receive health insurance from their employers, that this was subpar with regional performance in healthcare coverage for workers.
In 2004, CCDC commissioned a study by an economic consultant to examine the kinds of jobs the new community plan update would be creating. The little-publicized draft report did not paint a pretty picture, and never made it to the redevelopment agency. It shows that almost a third of the jobs created in the next two decades in downtown will be low-income, with almost 80 percent of hotel workers, and 69 percent of retail workers having a household income below the low-income mark (at 80 percent AMI).
Put in the perspective of redevelopment, demand created for affordable housing by low-income jobs was seven times the rate of affordable housing for low-income households created in downtown.
Fourth, the role of CCDC in the housing bubble, however minimal, cannot be ignored. Even if it did not blow the bubble, it definitely added soap to the water.
The corporation actively promoted downtown development projects in 2005-06 with an advertising campaign on downtown living. Nothing wrong here, but they were quite successful in generating unsustainable demand that made the market-rate housing portfolio unaffordable for working families. The 2006 downtown community plan themed “Rising on the Pacific” epitomized the soaring prices and speculative returns in the bullish market.
Now, even with rising unemployment and falling wages, there is little contrition. Prominently located near Horton Plaza on Broadway, the taxpayer-funded Downtown Information Center, a CCDC operation, continues to market condos for developers, rather than be a resource for good jobs with careers for San Diegans.
Finally, the Performance Audit of CCDC by an independent auditor, Sjoberg Evashenk found that the corporation was not as engaged in economic development activities as were other peer redevelopment organizations, like Los Angeles CRA, and as required by redevelopment law. The auditors recommended that CCDC should consider activities to encourage economic development, and create a strategic plan that links organization performance related to employment and job creation. The corporation has thus far ignored these recommendations.
The record shows that CCDC has had the power and resources of a redevelopment agency, but with its poor performance on economic development, bears some responsibility for the crises of falling incomes, eroding healthcare and job insecurity for San Diego’s middle class.
Baxamusa is the director of research and policy at the Center for Policy Initiatives. You can give him feedback email@example.com.