2. Understanding PART of the Above Graphic — and Yes, This WILL Hurt
Let’s start at the bottom left, the one legal entity with which you’re already familiar: The City of Anaheim, which is governed by its City Council. All of the other yellow ovals in the graphic are different organizations that are, essentially, “The City of Anaheim” wearing different hats. Putting on one of these different hats is supposed to give the City Council different superpowers that it doesn’t normally enjoy.
The first of these magic hats to be created was the Anaheim Redevelopment Agency (“ARA”) — an example of a Redevelopment Agency (“RDA”) in the graphic above. (I’ll explain what a “Successor Agency” is below.) Redevelopment Agencies were supposed to direct state money towards areas of greatest need within a community; through some mysterious process they ended up making cronies of City Council members wealthy and not doing a whole lot to help the poor. (More on that latter.) The City and the ARA were able to use a law called the “Joint Exercise of Power Act” (“JEPA” in the above graphic) to enter into a Joint Powers Agreement (“JPA”) to create a new organization called a “Joint Powers Authority” (“JPA” in the graphic) some special powers differing from either the City and the ARA.
(You may note that the acronym “JPA” is used twice; once for a new legal entity and once for the agreement, authorized by the JEPA, that creates that entity. This is unfortunate, but you can usually tell which someone is talking about by context. OJB apologizes if all of this is killing you.)
The JPA (“Authority”) that was created by the JPA (“Agreement”) between the City of Anaheim and the ARA was called the Anaheim Public Financing Agency (“APFA”). Again, the RDA and the APFA were designed to be governed by the same people, just wearing different hats.
The APFA has had the ability to, among other things, issue municipal bonds for big projects that big donors want. The whole idea of allowing a City to create a JPA with, essentially, itself was to give the City Council the ability to do things like issue those bonds without a public vote — that is, a vote by the people who will be on the hook to repay them — that the City Council cannot do while wearing its own hat. This arrangement was peculiar and ill-advised — but in the late ’90s the Supreme Court of California held it was not illegal. (Whether that has changed given the elimination of Redevelopment is one of the issues in the lawsuit.)
Because that’s not enough — and because it was concerned that it might lose a lawsuit against CATER and IOC (described below) — Anaheim has also set up a separate JPA with the Anaheim Housing Authority (“AHA”), creating a new entity called the Anaheim Housing and Public Investment Authority (“AHPIA”). On the chart above, “AHA” has the same status to enter into a JPA with the City as a Redevelopment Agency had had, while AHPIA is another example of a JPA created by such an agreement. And, again, the ARA, SA, APFA, AHA, and AHPIA are all governed by the members of the City Council, wearing different hats.
(OJB apologizes if it is hurting your head. It did not come up with this sort of scheme; it is just reporting the news. Don’t worry — this section is about to get more interesting.)
The new wrinkle here is this: Due to rampant corruption deployed by special interests that wanted to tap into these huge pots of money, Redevelopment Agencies were scuttled beginning in 2011. Then-newly elected Governor Brown got the legislature to eliminate the system of Redevelopment Agencies (“RDA” in in the graphic above) and replace them with Successor Agencies (“SA” in the graphic above.) Successor Agencies did not have the ability to create new projects, such as issuing new bonds, but solely to “wind down” the activities of the Redevelopment Agencies. A Successor Agency was also just the City Council wearing a different hat. One power it retained was that it would now become the counterparty to the City in the JPA (Agreement) governing the JPA (Authority) after the RDAs were eliminated.
Why did Redevelopment Agencies get eliminated by Governor Jerry Brown, with an uneasily unified Democratic Party joined by some honorable anti-Redevelopment Republicans such as Chris Norby? It’s because there was a tendency for municipal (i.e., city, county, special agency) governments to abuse Redevelopment funds. So many people stood to make so much money by arranging approval of lucrative projects that it was corrupting municipal governments. Those interests could spend so much money not only to lobby candidates, but to make independent expenditures on campaigns to elect candidates who wouldn’t even need to be lobbied, but would just do as they were told — that serving the greater public good just went out of the window. And so Governor Brown pulled the plug — which Anaheim wants to stick back into its socket.
Just in case that this is news to anyone: Lots of people stand to make a lot of money on these major public construction projects if they go through. For really big projects — such as the proposed expansion of the Anaheim Convention Center, which led to the lawsuit discussed here — the two primary winners are (1) Wall Street investment bankers, such as Citigroup, whose clients just live for this sort of huge sale of tax-free municipal bonds, and (2) the construction company (in this case Turner Constructors) who got the (no-bid, of course) contract to build it. (Major construction projects in Anaheim tend to be divided up between Turner and Clark Construction, whose name you may have seen on the $200 million ARTIC rail terminal on the 57 between the Honda Center and Angels Stadium.)
Other people stand to make money as well. Any middlemen involved in creating the deal — and especially in steering it through the passages of the City government — get a healthy cut. The middleman in this case is apparently Curt Pringle’s group, Pringle and Associates — who either directly or with the Anaheim Chamber of Commerce or by some other path funds and populates Anaheim Blog, managed by Matt Cunningham and reportedly directed by Pringle and Associates’ VP and chief lobbyist, Todd Priest. Anaheim Blog, largely led by what is believed to be Priest himself writing as “Anaheim Insider,” which takes regular potshots at both CATER — the Coalition of Anaheim Taxpayers for Economic Responsibility, of which your humble author is General Counsel which will feature prominently in the next installment of this series — and Orange Juice Blog and Anaheim Mayor Tom Tait. (Those three entities are far more different than the City Council and its different personae; CATER’s Board and Staff — the latter being me — literally does not talk to the Mayor about litigation matters other than in open sessions of the City Council.)
Construction unions also want to see the Convention Center expanded, because that creates jobs, and even when I have challenged them to their faces they have literally refused to apply any sort of cost-benefit principles to their analysis. “How many jobs must a half billion dollar commitment of public funds create for it to be worthwhile?”, I have asked (probably not using those exact terms). “This project CREATES JOBS!“, is the (non-)answer.
In my experience, the service unions are a little more sophisticated, because after the Building Trades workers are gone they are the ones who will be working in the expanded Convention Center — or not, if it turns out to be a bad economic bet. And the public employee unions have to be even more sophisticated than that — because if the City commits too much money to too many projects that bring too little money into the City — convention centers are generally understood to be loss-leaders — then public employees are going to be cut (and possibly, depending on how the law looks in the decades ahead, pension obligations as well. The recent Stockton Bankruptcy decision gives real cause for concern on that point.)
So the policy concern is: “This project may DESTROY JOBS.” Of course, those jobs belong to the future, and people in the future don’t necessarily get represented well in the present.
In summary: this reform took a lot of money — and a lot of opportunity for corruption — out of the system. Ever since Redevelopment money went away, some cities — Anaheim being one of the leaders statewide — have been trying to figure out a way to GET IT BACK!
However, until Redevelopment money comes back — and it may never come back given the historic degree of corruption in the system — Anaheim’s City Council majority wants to be able to keep on spending money to enrich its cronies anyway. If they can’t get that money from the state, it will get it from its own people. That is, mostly from its future people — the ones that mostly aren’t yet voting in the current election.
And if the weight of today’s dumb and short-sighted deals means that no taxpayer in their right mind would want to in Anaheim given its budget collapse, and the City’s flatlands turn into mostly slums that one can evade by taking the bullet train to Angels Stadium or to the streetcar to Disneyland or the Convention Center — a small enough portion of the Resort District that it can be well-guarded by police — then maybe, some people seem to think, that will be good enough.
There’s one thing that they have to do to make that dream come true: they have to keep people from voting on these big-budget proposals! So it’s finally time to talk about the lawsuit.
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