LEGISLATIVE ANALYST REPORT

TO: The Honorable Board of Supervisors
FROM: Office of the Legislative Analyst, on behalf of the Clerk of the Board
HEARING: Board of Supervisors, March 25, 2002
DATE: March 8, 2002

ISSUE: Redevelopment Agency Governance Structure

Summary of Request

A motion passed by the Board (File 020238) directs the Clerk of the Board to cause the preparation of any report or reports or proposals, as are necessary to substantiate and explain the findings in the proposed ordinance (the "Ordinance") on file with the Clerk of the Board of Supervisors, supporting the Board of Supervisors" determination to declare itself the governing body ("Governing Body") of the San Francisco Redevelopment Agency (the "Agency"). Specifically, the Clerk of the Board directed the Office of the Legislative Analyst (OLA) to study whether adoption of the Ordinance will serve the public interest and promote the public safety and welfare in a more effective manner than the current manner of governance of the Agency, as enumerated in California Health and Safety Code, Section 33200.

Conclusion

This report provides a factual basis for the Board of Supervisors to rely on in (I) declaring itself to be the governing body of the Redevelopment Agency, (II) replacing the existing members of the Redevelopment Agency Commission, and (III) establishing a new community redevelopment commission (pursuant to Section 33201 of the Health and Safety Code) because the characteristics outlined in the Ordinance and the Proposal section below are collectively in the public interest and more effectively promote the public safety and welfare of the City and County of San Francisco than the current manner of governance of the Agency.

Specifically, the Ordinance will ensure (1) that, through the utilization of a new community redevelopment commission, Agency decisions are made by a broadly qualified, autonomous and professional body, (2) residents of Redevelopment Project Areas and Survey Areas have broader participation and influence in redevelopment, (3) improved coordination between redevelopment activities and Citywide planning and policy making, and (4) greater fiscal and legislative accountability to the City"s legislative body. Whether the Board of Supervisors chooses to take the action is a policy matter for the Board of Supervisors.

Current Practice

The OLA gathered the information below primarily from materials generally available to the public, including information on the Agency"s website. The OLA contacted the Director of the Redevelopment Agency regarding current practices who referred the OLA to the City Administrative Code, the California Community Redevelopment Law (Section 33000 et seq. of the Health and Safety Code and hereafter referred to as the "Community Redevelopment Law"), and the Agency"s bylaws.

Redevelopment activities in the State of California are carried out pursuant to the Community Redevelopment Law, and redevelopment agencies can exercise only those powers that are granted to them by the Community Redevelopment Law. Section 33020 of the Community Redevelopment Law defines redevelopment as "the planning, development, replanning, redesign, clearance, reconstruction or rehabilitation, or any combination of these, of all or part of a survey area and the provision of such residential, commercial, industrial, public or other structures or spaces as may be appropriate or necessary in the interest of the general welfare, including recreational and other facilities incidental or appurtenant to them."

The Redevelopment Agency of the City and County of San Francisco was activated in 1948 by the Board of Supervisors of the City for the purpose of eliminating blight as defined and set forth in the Community Redevelopment Law. The Agency is an entity legally separate from the City, but exists solely to perform certain redevelopment functions for and by authorization of the City. The Agency operates primarily in Redevelopment Project Areas and Survey Areas¹.

The redevelopment process generally seeks to increase the City"s affordable housing stock and strengthen the City"s tax base while accommodating needed public projects. Relocation assistance is provided to residents and business owners affected by redevelopment activities. Active Redevelopment Project Areas include: the Federal Office Building, Golden Gateway, Hunters Point Shipyard, Hunters Point, India Basin Industrial Park, Mission Bay, Rincon Point - South Beach, South of Market, the Western Addition A-1 and A-2, and Yerba Buena Center.

Authority and Personnel

Under the Community Redevelopment Law, most of the powers of a redevelopment agency are vested in its "Members." In San Francisco, the powers of the Agency are vested in the members of the existing Redevelopment Agency Commission, the current governing body of the Agency. The existing Redevelopment Agency Commission is comprised of seven members, appointed by the Mayor with the approval of the Board of Supervisors.

The appointed members of the existing Redevelopment Agency Commission, together with their principal occupations, the years of their first appointment to the Commission and expiration date of their terms are as follows:

Name Occupation Appointed Term Expires

Ms. Chantel Walker Program Officer 12/3/01 4/2/03

Ms. Kathryn C. Palamountain Attorney 6/5/00 9/3/04

Mr. Benny Yee Real Estate Broker 10/11/94 9/3/02

Mr. Leroy King Retired , ILWU 8/19/80 9/3/02

Mr. Mark Dunlop Community Activist 5/2/97 9/3/04

Mr. Ramon Romero Attorney 3/17/98 9/3/01

Mr. Darshan Singh Business Owner 10/10/95 9/3/03

The Agency currently employs approximately 130 persons. The Executive Director, Marcia Rosen, was appointed to that position in July 2001. The other principal full-time staff positions are the Senior Deputy Executive Director, the Agency General Counsel and the Deputy Executive Director, and the Director of Finance. Each Redevelopment Project Area has a project management staff supervised by a project area Director or Coordinator. There are separate technical divisions for Housing Production and Management, Economic Development, Architecture, Engineering, Planning and Real Estate. The Agency has its own fiscal, legal, administrative and property management staffs.

The Agency exercises governmental functions in carrying out projects and has broad authority to acquire, develop, administer and sell or lease property, including the power of eminent domain and the authority to issue bonds, with the approval of the City, and expend their proceeds.

Proposal

On February 19, 2002, the San Francisco Board of Supervisors passed a motion (File 020238) which directs the Clerk of the Board to cause the preparation of any report or reports or proposals, as are necessary to substantiate and explain a Board of Supervisors" determination to declare itself the governing body of the Agency as set forth in the Ordinance. Under the Ordinance, the San Francisco Board of Supervisors would declare itself to be the governing body of the Agency pursuant to California Health and Safety Code Section 33200 and thereby replace the existing Redevelopment Agency Commission. This ordinance would create a new community redevelopment commission (the "CRC") pursuant to and as authorized under Section 33201. The ordinance would then delegate (pursuant to Section 33202) to the CRC certain of the Board of Supervisor"s functions as the governing body of the Agency, and reserve to the Board of Supervisors certain other powers and functions as the governing body of the Agency. Other than as stated in the Ordinance, the Ordinance would require no other structural changes to the Agency.

1. CRC Composition. The composition of the CRC, the terms of office of the members of the CRC, and the method of appointment and removal from the CRC would be as follows:

The CRC would consist of 11 members, who would serve staggered three-year terms of office. CRC members would be limited to two consecutive terms.

All CRC members would be required to be residents of the City and County of San Francisco throughout their tenure.

The structure and method of making appointments to the CRC would strive to achieve a membership that is broadly representative of the City"s various communities of interest and neighborhoods, and diversity in ethnicity, race, age, gender and sexual orientation. The diversity criteria under the Ordinance are similar to those found in the Charter, §4.101(1).

The Mayor would appoint seven members, three of whom must be residents of Redevelopment Project Areas or Survey Areas nominated by the elected Project Area Committee (PAC) for such Redevelopment Project Areas or Survey Areas. If there are fewer than three PACs in existence at the time of an appointment, the appointment must insure that at least one member is seated on the CRC from the nominees of each PAC. If there are three or more PACs in existence at the time of an appointment, the appointment must insure that no more than one member is seated on the CRC from the nominees of each PAC. Of the Mayor"s remaining four appointments, one must have land use experience, one must have community redevelopment experience, and one must have affordable housing experience. The appointment of the four non-PAC members would be subject to Board of Supervisors" approval.

The Treasurer would appoint one commissioner, who would be required to have a background in municipal finance and familiarity with tax increment financing. This member would be subject to Board of Supervisors" approval.

The Board of Supervisors would appoint three members: two members of the general public, at least one of whom must have community redevelopment experience; and one who is a member of the California Bar with specific experience with the Community Redevelopment law and/or land use law.

Members appointed by the Board of Supervisors may be removed by a 2/3 vote of the Board of Supervisors. Members appointed by the Mayor may be removed upon written request by the Mayor and a 2/3 vote of the Board of Supervisors. The member appointed by the Treasurer may be removed upon written request of the Treasurer and a 2/3 vote of the Board of Supervisors.

2. Practice of Commissioners: No Abstentions and Non-Interference. Members of the Board of Supervisors acting as the governing body of the Agency and the CRC who are present at any regular or special meetings would be required to vote on all agenda items, except where conflict of interest law or regulation precludes voting. Members of the Board of Supervisors acting as the governing body of the Agency and the CRC would be prohibited from interfering in the day-to-day administration of the Agency.

3. Consideration of Project Area Committee (PAC) Recommendations. The CRC would give "great weight" to the written consultation and advice of PACs in redevelopment decision-making regarding matters (including contracts, leases and development proposals) affecting the Redevelopment Project Areas or the Survey Areas of such PACs.

The CRC would be required to promptly notify the appropriate PACs of any pending matter concerning the PAC"s Project or Survey Area that may come before the CRC for action, and the PAC would have within 30 days to provide written consultation or advice to the CRC unless otherwise specified by State law. The CRC would not be able to act on the matter until the 30-day comment period has elapsed unless otherwise specified by State law. The CRC"s failure to follow a PAC recommendation within 30 days of submission to the CRC or the PAC recommendation, would mean that the matter at issue together with the PACs written consultation and/or advice would be sent to the Board of Supervisors sitting as the governing body of the Agency for consideration and decision.

4. Fiscal Oversight and Plan Review. The ordinance would reserve to Board of Supervisors acting as the governing body of the Agency the right to review and approve certain contracts, leases, and conveyances of title to property. The following contracts would be subject to that approval after a financial analyst review and report: (i) contracts having anticipated revenue to the Agency of one million dollars ($1,000,000) or more, or the modification, amendment or termination of any contract which when entered into had anticipated revenue of one million dollars ($1,000,000) or more; (ii) contracts or agreements having a term in excess of ten years, or requiring expenditures by the Agency of one million dollars ($1,000,000) or more, or the modification or amendments to such contract or agreement having an impact of more than $500,000; (iii) any lease of real property for a period of ten or more years, including options to renew, or having anticipated revenue to the Agency of one million dollars ($1,000,000) or more; and (iv) any sale or other transfer of real property owned by the Agency. All leases and contracts would require competitive bidding procedures and a financial analyst"s report prior to approval. A 3/4 vote of (a) the Board of Supervisor"s Acting as the governing body of the agency for those contracts requiring Board of Supervisors" Approval or (b) the CRC for those contracts not requiring Board of Supervisors" approval could waive the competitive bidding procedures requirement.

5. Application of Local Laws. All redevelopment plans adopted on or after the effective date of the Ordinance, or amendments to those plans, would have to adhere to all City zoning ordinances, except that a 3/4 vote of the Board of Supervisors acting as the governing body of the Agency could waive this requirement, subject to the approval of the Board of Supervisors acting as the "legislative body of the community" as set forth under the Community Redevelopment Law.

Additionally, the Board of Supervisors acting as the governing body of the Agency and the CRC would follow the provisions of the voter-approved Sunshine Ordinance, except where the California Redevelopment Act preempts that ordinance.

An approved redevelopment plan would be subject to review every five years, to consider whether the plan should be updated to comply with any changes in City"s zoning laws: the City Planning Commission and the CRC shall confer and provide a report and recommendation to the Board of Supervisors sitting as the governing body of the Agency for this purpose. This review may be coordinated with the five-year implementation plan for each Redevelopment Plan. If, after reviewing the report and recommendation of the Planning Commission and the Community Redevelopment Commission, the Board of Supervisors acting as the governing body of the Agency determines that an amendment to such Redevelopment Plan would more effectively carry out the purposes of the Community Redevelopment Law, the Board of Supervisors acting as the governing body of the agency may direct the CRC to prepare an amendment to such Redevelopment Plan together with all other reports and documents necessary to amend a Redevelopment Plan in accordance with Community Redevelopment Law. This process will not, however, modify existing California law regarding the rights of property owners and/or developers who have rights to use and develop land in a Redevelopment Project Area pursuant to a duly approved owner participation agreement, disposition and development agreement, or other similar agreement that is consistent with a duly approved redevelopment plan or plan amendment.

6. Delegation of Authority. All delegable Redevelopment Agency responsibilities not specifically identified and reserved to the Board of Supervisors acting as the governing body of the Agency above will be delegated to the CRC.

Timeline for Ordinance Implementation. Assuming the Ordinance passes in April 2002, the Board of Supervisors will declare itself to be the governing body of the Redevelopment Agency as of June 15, 2002. The CRC will take office July 1, 2002, with CRC appointments made no later than July 1, 2002.

Proposal Substantiation

This report demonstrates that the structural and procedural changes contained in the prior section are in the public interest and will more effectively promote the public safety and welfare of the City and County of San Francisco than the current manner of governance of the Agency. The primary change in the existing structure of the Agency proposed by the Ordinance is a change in the governing body of the Agency. The existing governing body of the Agency would simply be replaced by the Board of Supervisors who would delegate most of its functions as the new governing body to the CRC. The requirements for the composition of the CRC imposed by the Ordinance, as discussed individually below, will help to ensure that the CRC remains highly qualified, representative, inclusive and accountable. Additionally, the Ordinance would further improve the coordination between redevelopment activities and citywide planning and policy making for economic development by placing the ultimate decision-making authority for both bodies under the Board of Supervisors, as is the practice of most jurisdictions in California.

1. Composition and Procedure

A) Qualifications. The Ordinance establishes certain specific qualifications for the composition of the CRC, which will provide greater assurance that the CRC will serve the public interest in making effective policy decisions regarding redevelopment. Currently, the existing Redevelopment Agency Commission has no professional requirement for membership or any requirement that any members of the Redevelopment Agency Commission be a resident of any of the Redevelopment Project Areas or Survey Areas. Under the Ordinance, minimum qualifications would be set for the composition of the CRC, including requirements that the CRC members include three residents of Redevelopment Project Areas or Survey Areas, one member with land use experience, two members with community redevelopment experience, one member with affordable housing experience, one member with expertise in community redevelopment, one member with experience in tax increment financing, and one member with experience in California Redevelopment Law or land use law.

B) Representation. The Ordinance assures a greater diversity of appointing authorities and reflective membership. Term limits would also increase diversity by ensuring that there will be opportunities for other residents of the City and County to be appointed to the CRC. The Ordinance also ensures that there will be representation from those residents of the City and County who are most directly affected by redevelopment activities, the residents of the Redevelopment Project Areas and the Survey Areas. A more diverse membership will promote a CRC with a wider variety of interests and autonomy from one particular appointing authority.

The Mayor currently appoints the members of the existing Redevelopment Agency Commission with the approval of the Board of Supervisors in accordance with the more general provisions of the Community Redevelopment Law, which provisions will not apply to the appointment of members to the new CRC if the Board of Supervisors declares itself to be the governing body of the Agency as stated herein. The Community Redevelopment Law does not expressly require diversity of representation on the existing Redevelopment Agency Commission, whereas the Ordinance builds in assurances that the appointment of members of the new CRC will be subject to diversity provisions similar to those contained in City Charter Article 4.101(1).² Under the proposal, the Mayor"s office, the Treasurer and the Board of Supervisors would share appointments to the new CRC. This balance of appointing power reduces the possibility that only one perspective will be represented on the CRC. Furthermore, increasing the size of the CRC by four commissioners increases the opportunity for diverse representation as outlined in City Charter Section 4.101(1). Term limits may also allow for increased opportunities for the public to serve as members of the new CRC.

2. Role of Project Area Committee

Decision-Making. The Ordinance increases and formalizes the opportunities and procedures for PAC to consult and advise on matters (including contracts, leases, and development proposals) that affect the residents of that PAC"s Redevelopment Project Area or Survey Area. Currently, pursuant to Section 33385 of the Community Redevelopment Law, PACs are formed when either (i) a substantial number of low or moderate income persons live within a Redevelopment Project Area and the redevelopment plan for that area allows the Agency to use eminent domain powers to acquire occupied residential property, or (ii) the redevelopment plan for that area contains public projects that will displace a substantial number of low or moderate income residents. The Community Redevelopment Law sets up a process and formal role for PACs in the review and approval of proposed redevelopment plans, and the Community Redevelopment Law requires the Agency to consult with and obtain the advice of a PAC on policy matters that affect the residents of the Redevelopment Project Area for that PAC. However, as to such policy matters, there is no formal process for obtaining the PAC"s input. The Ordinance would establish such a formal process by requiring that PACs be regularly notified in writing of any pending matter concerning that PAC"s Redevelopment Project Area or Survey Area that may come before the CRC for action. Each PAC will have a maximum of 30 days (unless shortened by a 3/4 vote of the CRC for health and safety reasons) after such notification to provide written consultation or advice to the CRC before the CRC may act on that matter. If the CRC either fails to act or acts against the PAC"s advice on a matter for which the CRC has received the PAC"s written consultation and advice, the matter will be considered directly by the governing body of the Agency. The Ordinance therefore ensures that those who are most directly affected by redevelopment activities and who may be most knowledgeable of the affected Redevelopment Project Area or Survey Area would be given an enhanced ability to participate in the redevelopment process.

3. Increased Legislative and Fiscal Review and Application of Local Laws

(A) Financial Accountability. Requiring financial analyst review of contracts or leases and applying competitive bidding procedures serves the public interest by seeking to incorporate good financial practices beyond those required by State law. The Community Redevelopment Law does not currently require competitive bidding procedures for all Agency contracts. Competitive bidding procedures provide greater assurances that the most qualified parties will obtain Agency contracts and serve as a convenient check as to the reasonableness of the contract price. Apparently the Agency currently has no written policies or guidelines on when competitive procurement of such services is appropriate. Competitive procurement procedures help to ensure that the Agency obtains the best service for an appropriate cost from qualified and experienced parties as well as giving all interested parties the chance to compete for Agency business.

(B) Citywide Planning and Policy-Making. The Ordinance requires all redevelopment plans adopted on or after the effective date of the Ordinance, or amendments to those redevelopment plans, to adhere to all City zoning ordinances, except when a three-fourths vote of the Board of Supervisors acting as the governing body of the Agency or the CRC waives this requirement. The Ordinance also requires the Board of Supervisor acting as the governing body of the agency to review redevelopment plans adopted before the effective date of the Ordinance at least once every five years to consider whether the redevelopment plan should be updated to conform to any changes in City zoning ordinances. This approach to decision-making serves the public interest by ensuring coordination of redevelopment activities with City-wide planning and policy-making and other economic development activities.

Findings

Financial Considerations/Sunshine Ordinance:

Accompanying the Sunshine Ordinance Amendment G in November of 1999, the Controller issued the following statement on its fiscal impact:

In my opinion, should this ordinance be adopted and implemented it would increase the cost of City government by an amount that cannot be fully estimated at this time, but may be substantial.

Consideration of the financial impact of applying the Sunshine Ordinance to the Redevelopment Agency may be outweighed by the public benefit it may serve. Should the Board of Supervisors wish to consider the financial impact of applying Sunshine Ordinance to the Redevelopment Agency, it may ask the Controller"s Office or the Budget Analyst to conduct such an analysis. There are no other anticipated financial considerations except the incremental increase in compensation to additional Commission members for meeting expenses, which are not substantial.

Environmental Considerations:

None

Policy Considerations:

The proposed changes to the Redevelopment Agency are consistent with the goals of (1) a broadly qualified, autonomous and professional Community Redevelopment Commission, (2) broader resident participation and influence in Redevelopment, (3) improved coordination between redevelopment activities and Citywide planning and policy making, and (4) fiscal and legislative accountability. The determination whether to declare itself the governing body of the Agency and to establish and delegate powers to a new commission are policy decisions for the Board of Supervisors.

¹ A "Survey Area" is an area under study to determine the feasibility of a redevelopment project designation. A "Redevelopment Project Area" is an area designated for redevelopment upon the adoption of a Redevelopment Plan approved by the Board of Supervisors.

² This section states that all commissions must "be broadly representative of the communities of interest, neighborhoods, and the diversity in ethnicity, race, age, and sexual orientation of the City and County and have representation of both sexes."