State Redevelopment Letter Makes No Mention of Oakland’s Kaiser Center or Coliseum City

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Oakland’s receipt of a warning letter from state Controller John Chiang on the use of redevelopment funds last year has been making headlines over the past week. Chronicle columnists Matier and Ross have repeatedly made a big deal out of the letter, contending that Chiang is demanding that Oakland pay the state more than $30 million for redevelopment expenditures involving the Henry J. Kaiser Convention Center and the proposed Coliseum City project. However, the letter from Chiang, obtained by the Express, makes no mention of either the Kaiser or Coliseum City, nor does it demand that Oakland pay the state any money. Instead, Chiang’s missive is merely a form letter that he sent to cities and counties throughout California. In fact, the letter is not even specifically addressed to Oakland.

Chiang_Letter.pdf

John Chiang
  • John Chiang
Chiang’s letter, dated April 20, begins: “Dear City, County, or Public Agency.” It goes on to say that the Controller’s Office plans to “review and audit cities, counties, and public agencies” in the coming weeks to determine whether they should have to pay the state any money for redevelopment deals made after January 1, 2011. Chiang ends his letter by stating: “If you have any question as to whether a particular asset must be returned, you should place such assets into a reserve pending our review.”

In Oakland’s case, the city council last year effectively did just that, placing far more than $30 million or so in question from redevelopment deals into the city’s reserve fund. In fact, the City of Oakland’s reserve fund is flush with cash. As a result, the city will have no trouble paying the state $30 million — if Chiang ultimately decides it must, which he has not yet done. “Even under the worst-case scenario, we have $45 million in reserves,” Mayor Jean Quan said in an interview. “We can cover this.”

However, it’s still an open question as to whether Oakland will have to cover it. Because Chiang is targeting cities and counties throughout California, the issue of redevelopment deals approved last year could end up in court. And if it does, Chiang does not have the best litigation record when it comes to challenging expenditures made by public agencies and officials.

Just last month, Chiang lost a key court ruling against the state Legislature. A Sacramento County Superior Court judge said Chiang violated state law when he withheld paychecks from California legislators. Chiang had contended that legislators had failed to pass a budget on time last year and so they didn’t deserve to be paid. But the court indicated that Chiang had overstepped his authority.

In Oakland’s case, the Kaiser Center deal involved Oakland’s redevelopment agency purchasing the center from the city for $28 million. The Oakland City Council unanimously approved the deal last spring. The council then put most of the money from the transaction into the city’s general reserve fund.

Coliseum City
  • Coliseum City

The Coliseum City project, meanwhile, involved Oakland using $3.5 million in redevelopment funds to study the proposal. The project would include new stadiums for the A’s, Raiders, and Warriors, amid a housing, retail, and entertainment district. City officials view the project as their best hope for keeping their sports teams from leaving town.

Matier and Ross, however, have portrayed Chiang’s form letter as representing a major blow to the Coliseum City proposal. But it’s hard to see how that’s the case because Oakland has plenty of money in reserve to cover the $3.5 million for the Coliseum City studies — and the $28 million from the Kaiser deal — should Chiang and the courts eventually rule that it must do so.

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