Tuesday, December 21, 2010

CD 10 - WESSONGATE: Report to CRA Commissioners Regarding Questionable Findings of Benefit/Potential Misuse of Funds (A lot of Incorrect Descriptions)

FIRST OF ALL...NOT GOOD TIMING THAT THE PEOPLE OF HERB WESSON'S CD 10 are suddenly crawling out of the (badly in need of repair) woodwork with all kinds of shady-stories about what is allegedly going on in Herb's district. (Some people must have seen my TV commercials and recent blogging and it all snowballs from there, HERB!) NOT GOOD TIMING, cause Herb Wesson is up for re-election on Tuesday, March 8, 2011 -- and I don't think Herb is gonna like the run Austin Dragon will be able to give him when it comes to discussing HARD FACTS. (Something that is KRYPTONITE to Herb Wesson...hard facts, that is.)

BUT BEFORE THE CRA REPORT...Here's something hot out of ZD's email inbox, THIS MORNING:

ZD,

There are widespread allegations of Wesson's staffer, (name withheld FOR NOW), using strong-arm tactics with Korean businesses, such as denying permits to businesses that do not give him a kick-back; walking out on dinners without paying; and blackballing certain non-profit groups from receiving funding. People are scared to speak up publicly over fear of retaliation by Mr. Wesson.

AND NOW THE CRA REPORT:

Concerned Constituent
Los Angeles, CA 90004

July 28th, 2010

CRA / LA
354 S. Spring Street
Suite 800
Los Angeles, CA 90013

Dear CRA Commissioners and Management Team,

Another recent CRA transaction occurred involving the use of Wilshire Center/Koreatown funds
being used outside of the Wilshire Center/Koreatown project area.

The use $1.8 million of Wilshire Center/Koreatown TIF funds was approved for a project that is
more than 1 mile from the southern border of WCK, and is more than 2.5 miles from the center of Koreatown.

The attached report found evidence that the “Findings of Benefit” process was inadequately
performed, contained several factual errors, and included numerous language and rationale
contradictions.

The language and rationale contradictions alone should invalidate the transaction since they
undermine the foundation of the Findings of Benefit process and the intent (legally and ethically) of the CCRL.

I apologize for bringing these issues to the Commissioners and Management Team. It is not my
intention to challenge the CRA and its work. As I have mentioned, I am a firm believer and huge
supporter of the great work the CRA performs. I greatly appreciate the CRA work being done
across our city.

However, many issues needs to be addressed, including (a) increasing the transparency of process, (b) the revision of ambiguous and poorly outlined policies (such as the “Findings” process), and (c) better management to ensure CRA Project Managers are performing in the best interest of all constituents within their respective project areas.

If there is anything further I can help with, or if there are any questions regarding the contents of the report, please don’t hesitate to contact me.

Sincerely,
Concerned Constituent

Report to the CRA Commissioners Regarding Questionable Findings of Benefit/Potential Misuse of WCK Funds

Introduction

I apologize, in advance, for bringing up another situation that I, and many other Wilshire
Center - Koreatown community members, view as being a questionable Findings of Benefit process and inadequate CRA oversight and management.

Last week (7/20/2010), HCED voted and approved the transfer of a property that was acquired
using $1.8 million of Wilshire Center - Koreatown funds. The development project was outside of
WCK (3011-3023 South Western Avenue).

In reviewing the Findings of Benefit process, beginning with the original transfer of $1.8
million of WCK funds to the Normandie 5 project area, to the more recent disposition of the site, it is clear that the findings were not only inadequate, but contained several errors (including major contradictions).

Stated Benefits
Page 2 of the 4/2/09 CRA memo

(see Figure 1) requests a transfer of $1.8 million from the WCK project area to the Normandie 5 project area for the development of a project that “is of benefit to the Wilshire Center/Koreatown project area”. On page 3 of the memo (see Figure 2), the benefit to
WCK was stated as being that the project “will provide affordable housing opportunities for residents of the Wilshire Center/Koreatown Recovery Redevelopment Project Area”.

Figure 1. CRA File No.: 9017, 4/2/2009, Page 2.
Figure 2. CRA File No.: 9017, 4/2/2009, Page 3.

Distances: Property to Wilshire Center - Koreatown

The distance between 3011 S. Western and the southern border of Wilshire Center -
Koreatown is approximately 1.49 miles (Table 1). As with the other four transfers indicated in my last report, it is very unlikely that any “affordable housing” benefits will accrue to Wilshire Center - Koreatown due to the large distance.

Furthermore, as mentioned in my last report, Findings of Benefit cannot be judged by distances
between a property and the project area border from which the funds were generated. Project area centroids (the actual center of a project area) should be used because benefits should accrue to a significant portion of the project area, not to its outermost border.

The distance from 3011 S. Western to the centroid of Wilshire Center - Koreatown is
approximately 2.76 miles. The distance between the property and to residents in some of the furthest parts of WCK is more than 4 miles. Again, it is very easy to see, based on distance alone, that little to no affordable housing benefit will be provided to WCK as a result of this project. Is upper management or the Board supposed to be checking these reports for completeness, appropriate use of funds, and for potential ethics issues?

Nowhere in any of the CRA Findings process is the distance from WCK stated. If this was a
general oversight, please try to find ways to standardize the Findings of Benefit process to include the distance between the requested property to the project area (which generated the funds) is included.

This can serve as a quick measure of reference and will immediately indicate if the project can provide benefits to the project area that is providing the funds.

Incorrect Descriptions
Incorrect Description 1

Figure 3, the opening paragraph of Attachment C, states that the Wilshire Center - Koreatown
project area and the Normandie 5 project area are “adjacent”. In fact, the two project areas, at the closest points, are 1.04 miles apart. The term “adjacent”, especially in mapping terms, means that two areas share a common border but do not overlap. In fact, the common definition of “adjacent” is “immediately adjoining without intervening space”. In either case, by no means should 1.04 miles be considered “adjacent” and therefore Attachment C is inaccurate, incorrect, and misleading. Again, is there a systematic oversight issues that needs to be resolved?

Figure 3: CRA File No.: 9017, 4/2/2009, Attachment C

Incorrect Description 2
Figure 4 states that “the housing project is located less that a quarter mile away from the
Project Area”. This too is incorrect. The project is located within Normandie 5 and 1.49 miles from the Wilshire Center - Koreatown southern border.

Figure 4: CRA File No.: 9017, 4/2/2009, Attachment C

Incorrect Description 3

Figure 5 states “there are limited developable areas within the Project Area suitable for the
development of new affordable housing units…”. This too is inaccurate and incorrect. There are
many parcels for sale within Wilshire Center - Koreatown for small and large affordable housing
projects. In fact, because many previously-entitled condominium projects have not been able to get financing, there is a plethora of land for sale at great prices in WCK.

Figure 5: CRA File No.: 9017, 4/2/2009, Attachment C
Contradiction of Findings of Benefit
Contradiction 1

In the most recent CRA memo to give the land to the developer (Figure 6), the memo stated that the project was “to address the dire need for large family housing in South Los Angeles”. This is in complete contradiction to the rationale behind the transfer of $1.8 million in WCK funds. When the CRA was requesting the transfer of funds from WCK to Normandie 5, they said that the project would benefit WCK residents. Now, one year later, the CRA is saying that the project will benefit South Los Angeles residents. This statement ignores the necessary Findings of Benefit to Wilshire Center - Koreatown.

Figure 6: CRA File No. 9214, 6/17/2010, Page 3

Contradictions 2 and 3

Lastly, Figures 7 and 8 also show contradictions. The first paragraph of Figure 7 is in relation
to Normandie 5, but the second paragraph of Figure 7 states that the CRA has acquired property “in said project area” with “Affordable Housing Trust Funds of the Project Area”. This is not accurate because $1.8 million of the funds came from WCK.

Figure 8 states that the project “will provide housing for low-and moderate-income persons in
the Project Area”, meaning that the project will benefit the Normandie 5 project area. This statement is in complete contradiction to Figures 1 and 2, which attempted to abide by the CCRL (that the funds must be spent or provide benefits to the project area which generated the funds). This project needs to provide benefits to WCK as part of California Law.

Figure 7: CRA File No. 9214, 6/17/2010, Attachment “G”
Figure 8: CRA File No. 9214, 6/17/2010, Attachment “G”

Summary, Conclusion, and Recommendations

This can seem confusing, but it is actually very simple - in summary:

1. When the CRA proposed transferring WCK funds to Normandie 5 to acquire a site for a
project, the CRA said that the project would benefit WCK.

2. When the site was given to a developer for the project, the CRA said that the project
would benefit South LA residents.

One of these statements is false, and given the distance between the project and WCK, I am
inclined to think that statement 1 is false. With that said, here are 2 points to consider (regarding this issue):

1. The total (that I am aware of) of WCK funds that have been transferred to other project
areas is $9 million ($11 million if the merger/consultant contracts are included). When I brought this up in a conversation I had with Michelle Banks-Ordone several months ago, she brushed it off saying that “well over $10 million” has been invested outside Koreatown.

2. To rectify the incorrect findings associated with the project, 60% of the project should
be set-aside for residents who currently reside in WCK. Since 60% of the $3 million
acquisition costs were paid for by WCK funds, 60% of the units in the project should be
reserved for current WCK residents.

Recommendations
The Findings of Benefit process is greatly flawed. I recommended some changes in my last
report, which included standardizing the process, taking steps to ensure there are no “Conflict of
Interest” issues, and that the work performed by the CRA (overall) become more autonomous/less influenced by elected politicians.

In this report, I recommend that a “Distance from Project Area” (which generated the funds)
measure is included in all Findings of Benefits work.

Better oversight is needed to ensure the work the Project Managers are performing is (a) within
their discretion, (b) ethically “in tune” with CRA values and principles, and (c) not making the CRA legally vulnerable.

While it is likely that the documents examined within this report were likely jointly authored by
many CRA staff, it is inevitably the respective Project Manager who should review the documents to make sure they abide by CRA policies, procedures, stated ethical values, and the CCRL.

The likelihood of legal challenges to CRA work, as outlined in this paper, potentially grows
with each inaccurately written memo and with each transaction that results in disregard for the intent of the CCRL. Project Managers must be made better aware of the legal liabilities of their actions.

Furthermore, the CRA needs to take steps to ensure their Project Managers are performing in
ways that abide by policy, ensure CRA process is being followed, and are not performing in ways that increase legal liability to the agency.

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