State Finds Redevelopment Accounting Mess

In a follow-up to a report issued last year, the state controller's office has determined that K-12 school districts understated the amount of pass-through payments received from redevelopment agencies by $105 million in the 2005-06 fiscal year, and community college districts underreported by $8.2 million. The errors caused the state to backfill $17.8 million to K-12 districts and $3.9 million to the colleges that the state did not owe.

Mostly what the state controller has found is a complicated system that is implemented inconsistently by schools, redevelopment agencies and counties. In fact, community college districts "currently have no means to separately identify pass-through payments" in reports to the Community Colleges Chancellor's Office. The controller also found that some redevelopment agencies failed to make required pass-through payments. One result of all this is an unnecessary hit on the state's general fund.

Aside from the school district pass-through discrepancies, the state controller also found some redevelopment agency projects "incurred obligations that cannot be repaid with the projected revenue sources, thus potentially creating significant liability for the localities." For example, based on reported revenues, one project area in Vallejo a city already flirting with bankruptcy would need until 2184 to fully repay a debt reported at $255 million in 2006, according to the controller's office.

The report on distributing and reporting local property tax revenue is available on the state controller's website: www.sco.ca.gov/eo/pressbox/2008/05/pr08024report.pdf.