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CRA Problems in Southern Florida
Monday, September 16th, 2013
Robert Wechsler
This is the third blog post on the West Palm Beach Community Redevelopment Agency (CRA) matter. This post considers the matter in the context of a wide range of problems affecting CRAs throughout southern Forida, which can be seen in reports in the area's newspapers and blogs. Several CRAs have
also been investigated by various offices and commissions.
A CRA is, as described in the Lake County Fiscal Rangers blog, "A legal entity allowed by Florida law to be created usually by a city or county to divert normal future property tax revenue to a separate fund used for renovating older downtown or residential areas." The usual term for such areas is "blighted area." CRAs are not meant for development of normal business areas. They are meant for areas that are doing very badly.
On April 18, the Broward County inspector general filed a report on the "Gross Mismanagement" of public funds by the city of Hallandale Beach and its CRA. There is also a status report dated July 16. And just last month, the IG's office filed a memorandum on allegations relating to procurement violations by the Dania Beach CRA.
According to an article in the Daytona Times this June, the Volusia County Property Appraiser said that some cities in the county have used the CRA designation more as an economic development tool than as a fix for blighted areas. There have also been allegations about this and other problems, such as self-dealing, with respect to New Smyrna Beach's CRA.
There are likely many more problems with CRAs than are known to the public, because they are independent organizations that are not regularly monitored. The Lake County Fiscal Rangers blog has a good list of potential and actual CRA problems:
The question is, does there need to be a separate fund for redeveloping blighted areas? Can't this be something a city or county does as part of its normal operations? What is the advantage to the public or even to blighted areas if a pool of funds is created and spent without sufficient oversight and, therefore, not necessarily to benefit blighted areas?
These issues are not new. CRAs were created by state legislation in 1969. In 2004, an MPA student named Keely N. Brown at the Askew School at Florida State University wrote a paper entitled "Community Redevelopment Agencies: An Analysis of Policy Options." The paper was sent to the Florida Redevelopment Association, with clear recommendations for reform, and was posted online. The executive summary of the paper notes many CRA problems, as well as their recognition by state legislative committees:
These problems must not be ignored. If the state legislature and executive branch are unwilling to respond to the problems, this might be a good opportunity for southern Florida's ethics commissions and inspectors general to work together to prepare a report on the CRAs' problems and potential solutions. Such a report would be hard to ignore.
See the first two parts of this three-part look at CRAs:
The Timing and Contact of Withdrawal from Participation
Post-Employment Government Contracts
Robert Wechsler
Director of Research-Retired, City Ethics
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A CRA is, as described in the Lake County Fiscal Rangers blog, "A legal entity allowed by Florida law to be created usually by a city or county to divert normal future property tax revenue to a separate fund used for renovating older downtown or residential areas." The usual term for such areas is "blighted area." CRAs are not meant for development of normal business areas. They are meant for areas that are doing very badly.
On April 18, the Broward County inspector general filed a report on the "Gross Mismanagement" of public funds by the city of Hallandale Beach and its CRA. There is also a status report dated July 16. And just last month, the IG's office filed a memorandum on allegations relating to procurement violations by the Dania Beach CRA.
According to an article in the Daytona Times this June, the Volusia County Property Appraiser said that some cities in the county have used the CRA designation more as an economic development tool than as a fix for blighted areas. There have also been allegations about this and other problems, such as self-dealing, with respect to New Smyrna Beach's CRA.
There are likely many more problems with CRAs than are known to the public, because they are independent organizations that are not regularly monitored. The Lake County Fiscal Rangers blog has a good list of potential and actual CRA problems:
1. They divert future property taxes (based upon taxes on increased property values from the current values) from properties within a defined "CRA boundary map" to uses not approved by voters.The big problem is the lack of oversight. It is always dangerous to create independent agencies funded by taxes and yet without sufficient transparency or accountability. However, it can be equally problematic when a city treats a CRA fund as just another fund, when its expendtures are not clearly described in the budget. This was the problem in Hallandale Beach. In either situation, a fund such as this can be seen, and used, as a slush fund for the benefit of officials and of those seeking special benefits from the government.
2. The State of Florida has absolutely no oversight system on these CRAs or on how the funds are spent by the governing committee. Some people believe the spending really benefits downtown Chamber of Commerce objectives and subsidizes property maintenance of building owners.
3. Excessive abuses could include use of eminent domain to seize land or buildings belonging to small business owners, in order to sell them to favored realtors, officials' relatives, or big box stores.
4. Funds could be used to subsidize new businesses.
5. Long time CRAs in high-growth areas divert funds, leading to the reduction of funding of schools, fire departments, libraries, etc. This has happened in California.
6. Funds are used to buy land for parking lots, etc. from officials' relatives at prices much higher than market prices.
The question is, does there need to be a separate fund for redeveloping blighted areas? Can't this be something a city or county does as part of its normal operations? What is the advantage to the public or even to blighted areas if a pool of funds is created and spent without sufficient oversight and, therefore, not necessarily to benefit blighted areas?
These issues are not new. CRAs were created by state legislation in 1969. In 2004, an MPA student named Keely N. Brown at the Askew School at Florida State University wrote a paper entitled "Community Redevelopment Agencies: An Analysis of Policy Options." The paper was sent to the Florida Redevelopment Association, with clear recommendations for reform, and was posted online. The executive summary of the paper notes many CRA problems, as well as their recognition by state legislative committees:
Unfortunately, the adoption of CRA legislation has raised a number of issues including, but not limited to: improper delegation of authority to the CRA commission, insufficient number of the findings of blight, overly broad blight definitions, lack of intergovernmental relationships, lack of public influence, lack of accountability, housing and business gentrification, and the straying away of the intended uses of the CRA designation (Florida Legislative Committee on Intergovernmental Relations, 2003; Chapin, 2003; Man, 2001; Florida Senate Committee on Community Affairs, 1991). As a result, these issues have caused disputes between city and county governments, taxing authorities, and citizens. In addition, these unsettled concerns have caused the lack of redeveloped communities and the inappropriate use of limited funds (Florida Legislative Committee on Intergovernmental Relations, 2003).When there are so many real and potential problems with an institution, the best way to deal with the problems is not singly by different boards or offices. Some are within the jurisdiction of an ethics commission or inspector general, others within the jurisdiction of a council or board of county commissioners, and yet others within the jurisdiction of the attorney general or state legislature. The institutional problems fall between the many cracks.
These problems must not be ignored. If the state legislature and executive branch are unwilling to respond to the problems, this might be a good opportunity for southern Florida's ethics commissions and inspectors general to work together to prepare a report on the CRAs' problems and potential solutions. Such a report would be hard to ignore.
See the first two parts of this three-part look at CRAs:
The Timing and Contact of Withdrawal from Participation
Post-Employment Government Contracts
Robert Wechsler
Director of Research-Retired, City Ethics
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Robert Wechsler says:
Wed, 2013-10-16 15:17
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Below is a response to the above blog post by the Florida Redevelopment Association, a not-for-profit organization dedicated to assisting Florida professionals and volunteers in community revitalization efforts:
Discussion and discourse about Community Redevelopment Agencies in Florida is welcomed, because a lot of people are unfamiliar with them. I am not familiar with the “Lake County Fiscal Rangers”, but I just had to write to let you know that their information is inaccurate. In your article above, you repeated those inaccuracies.
The Florida statutes that govern CRAs outline an extensive and very public procedure by which Community Redevelopment Agencies in Florida operate. To say that the voters do not approve projects is true, but Florida voters rejected that statewide constitutional amendment, then called Amendment Four, as something that would further kill the state’s economy and ineffectively wreak havoc on planning for public projects.
Florida statutes make one thing clear again and again: since not one dollar of state funds go into CRAs, the local programs must determine their own destiny, but they must do it publically. To infer under any circumstances that this is not required is misleading. If someone has an opinion about how a CRA is operating, that is owned by them. But the facts should be shared by your organization in the same breath.
Please for the future include www.redevelopment.net as an educational resource. There is a lot of information posted about CRAs – what they do, who they are, resources, and other links. On that site, there is a tab at the top called Reporting Requirements. It outlines the five annual reports at a minimum that Community Redevelopment Agencies (CRAs) in Florida must complete. Two are to the state- Annual Financial Report and an Annual Audit – another is a registration report and fee to the state, the fourth is a requirement to comply with all the provisions of Chapter 189, F. S. concerning dependent special districts (including the requirement that budget detail must be posted 30 days before and after adoption online) and the last one is a CRA annual report to the citizens on activities, financials, and sources of funding.
If the state reports are not filed timely, the Joint Legislative Auditing Committee (JLAC) of the Florida Legislature can issue penalties, investigate further, and refer to the Florida Attorney General for investigation. There is no history of this happening to date in Florida, as most issues are administrative, resolved at the lower levels, or resolved locally. Please understand that when a (sometimes large) lump sum of money is involved for public projects, it is not uncommon for disputes to arise about the effectiveness or propriety of the use of those funds. And any and all disputes should be and are required to be in public and resolved in the public. It is the hidden agendas and horrendous headlines that get us all to pay attention, but also, to not dig deeper for the real story.
The State Auditor General (AG) has audited at least 20 Florida CRAs in the last 6 years – all their reports are online, including the city responses and final determinations. The Auditor General also has statutory authority to send anything they find that is worthy of referral to the Joint State Legislative Auditing Committee (JLAC), which is comprised of House and Senate members of the Florida Legislature. Several cases have come before this committee (all related documents and public hearing videos) are also available online. Again, JLAC can send audit issues as well on to the Attorney General. If there are continued concerns, the legislature can amend the law to disallow, clarify or add to the statutes that govern CRAs: Chapters 163, Part III; Chapter 218, Chapter 189 and to a lesser degree, other chapters that cross reference CRAs.
We have hosted countless educational and financial seminars for our CRA practitioners, elected officials, and others on the requirements, and the State Auditor General is always a panelist. We have fully supported CityEthics.org as a place we can refer our members to, as an educational forum and resource.
Further and MOST IMPORTANTLY, Florida statutes were changed in 2006 to completely prohibit the use of eminent domain for redevelopment, from any funding source.
We would hope that blogs would not be the primary source of information used on these issues. CRAs’ statutory mandate is to leverage public dollars, in a transparent and fully accountable manner, with private sector investment to improve blighted areas. The blight requirement is set by statute, not Webster’s dictionary, or someone’s opinion on any given day. Like a home remodel, our communities need renovation, but just because it looks good after the government oversees and succeeds with the remodel. we cannot cease our payments to repay the remodel loan. This is why long term redevelopment activities and funding - and sustainability of projects - is so important. This is accomplished through a funding source, over thirty years old in Florida: CRAs.
Carol Westmoreland
Executive Director
Florida Redevelopment Association
PO Box 1757
Tallahassee, FL 32302-1757
850-701-3608
www.redevelopment.net