Cynicism, Criticism and San Diego's Redevelopment

In a flurry of activity, San Diego’s Centre City Development Corporation, a national model for the redevelopment of urban cores, was rocked by a conflict-of-interest scandal at its highest reaches, unleashing a torrent of sharp criticism claiming the organization is fundamentally flawed. What happened to this, one of the darlings of San Diego’s municipal government? And with a glaring black eye, where does it go from here?

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ON A SUNNY SEPTEMBER AFTERNOON, Donna Alm stands in the grass of Tweet Street Park—where Date Street meets Ninth Avenue, at the top of Cortez Hill—and looks out over Interstate 5 and Balboa Park.

“This didn’t exist when I was a kid,” she says, referring to the massive freeway corridor. “You could walk to the park right through the canyon—it was all connected.”

A full-time grandmother, Alm has come out of retirement for the afternoon to conduct a tour of downtown, which is like another child to her. At various times during a 30-year span she was the spokesperson for the Centre City Development Corporation (CCDC), a quasi-public/private entity launched under former San Diego mayor (and later California governor) Pete Wilson. For more than three decades, the agency has operated quietly, mostly beneath the public’s radar, working non stop to transform a downtown that, by 1975, had been written off as a civic slum.

The turnaround of Horton Plaza, the Marina District, Columbia, Little Italy, the Gaslamp Quarter and East Village has been so successful that, until last summer, you’d have been hard pressed to find an informed voice that didn’t throw bouquets at CCDC. And then, on the night of July 23, the Southeast Development Corporation (CCDC’s stepsister agency) fired its president and chief operating officer, Carolyn Smith, amid allegations that for years she’d signed off on fraudulent employee bonuses—including her own tidy share—to the tune of millions of dollars. The following day, Nancy Graham, CCDC’s outspoken leader, resigned abruptly. Graham was later charged by the city attorney with misdemeanor misuse of official position, improperly influencing a municipal decision and failing to file a required state conflict-of-interest disclosure in connection with a multimillion-dollar deal that involved CCDC and a company Graham had worked with in the past.

And so opened the floodgates of cynicism.

A San Diego public already stung by the financially flawed Chargers ticket guarantee, Strippergate and a pension scandal that left the city with a billion-dollar debt let loose with verbal lambastings at public meetings and wondered aloud how deep the corruption ran behind CCDC’s protective covering of 501-c status. Who’s been profiting at taxpayer expense? the critics asked. And do we still need redevelopment agencies in San Diego when downtown’s effectively been revitalized? The press, meanwhile, jumped on the story, and a report from the county’s grand jury was released (mid-maelstrom) recommending more-transparent spending for the agency.

“I think what’s happened at CCDC and SEDC is awful, just awful,” says Peter Hall, Graham’s predecessor (who guided the organization through 10 years of critical success and sustained downtown growth). “Those issues have helped to ruin the culture at CCDC, where everybody had great honor, great pride and incredible enthusiasm for what they did.” Beyond their simple transgressions, Smith and Graham “gutted that,” he says.

“In a lot of ways, the culture and surely the public’s respect for 33 years of doing what is considered nationally to be one of the better redevelopment jobs in the country has been sacrificed. They took away all the shine, all of the self-esteem, all the respect that redevelopment had earned, along with all the people who had worked with it. Former board members, former employees, former executives—everybody has been tarnished by this. My question is: How did we let it happen? It doesn’t happen by just one person robbing a bank.”

ALM, LIKE MOST OF CCDC’s current and former employees, is as loyal to the organization as she is to San Diego. The distinction for her seems almost nominal—CCDC is San Diego. And that detail goes to the heart of the sometimes vituperative controversy that’s embroiled redevelopment since the Graham and Smith debacles. For many, CCDC has always been the favorite son of a cadre of the city’s civic leaders—the old-boys network that, many say, built and maintained the city.

Alm, who retired in 2006, talks about her longtime employer with reverence. CCDC’s mandate—to revitalize downtown and build a new San Diego—was central to her. And, she says, she couldn’t imagine assembling a more capable and determined crew of people for the task. In fact, voices from all sectors—CCDC’s board of directors, former employees, city officials and citizens groups—praise the organization’s dedicated staff.

Former director Hall, a veteran of the U.S. Army, IBM, city government and commercial banking institutions, says CCDC was a unique place to work. It was more a family than a business, and its employees labored zealously to make downtown a better place.

“I loved it a lot,” Hall says. “I was always worn out, and there were long days and long weeks. And it was frustrating from time to time. But whenever I looked around at our city, I thought it was just really, really satisfying to be doing that work.”

Alm, born and raised in San Diego, remembers the pre-CCDC downtown—filled with porn theaters, card rooms and more shore patrolmen than city police. She also fondly recalls a new young mayor with a businessman’s savvy and a knack for getting things done. Pete Wilson, bent on reinvigorating downtown, faced a monumental task when he took the reins at City Hall in 1971. The Union-Tribune Publishing Company, a major downtown player with its San Diego Union and Evening Tribune newspapers, pulled its offices out of what is now Horton Plaza and moved to Mission Valley in 1973, delivering a coup de grace to a district that had suffered a decades-long flight of residents, businesses and capital.

“When I came to office,” Wilson says, “you could fire a cannon down Broadway at five minutes past 5, and the old gag was you wouldn’t hit anybody who wasn’t staggering.”

Alm talks of the young Wilson taking developers to the top of the highest building in San Diego and showing them the view. They were always impressed. Waterfront property, ocean views, a natural bay, a rail line and a fair Mediterranean climate—it was an ideal location. “Do you want to build here?” he would ask.

“Hell no” was the invariable reply.

“You couldn’t pay developers to build downtown,” Alm says.

Today, she talks warmly of the developers who did step up. But they’ve become a point of contention, too. For a small but vocal group of critics, CCDC has, for years, represented developer welfare (or outright government–private sector venality). The fact the agency is run by development-minded people and has such a cozy history with developers is a sticking point. Why, critics wonder, are city funds being used to subsidize development projects in a city that’s seen a development boom?

Richard Rider, of San Diego Tax Fighters, likens the situation to California’s proposed (and contentious) high-speed rail project. The committee put together to study that proposal’s viability and the community’s need for it is composed of train enthusiasts, he says. So is the community going to get an honest evaluation?

Alm’s statement about a time when you couldn’t pay developers to build downtown is ironic, because that’s exactly what the city (by way of state mandate) finally did. In 1945, a group of forward-thinking lawmakers passed a progressive California program aimed at stanching a deleterious social trend—urban flight—that would become more pronounced in the 1960s, leaving city cores around the country bereft. “Blight” is the term used in California redevelopment law, and it’s a controversial one. Because of its broadly interpreted definition, the notion has been applied to a wide swath of socioeconomic conditions. Critics point to upscale Coronado, for example— a redevelopment area that receives what amounts to county and state subsidies (through land grants, tax perks and creative financing) to build, or rebuild, in areas the town leaders say have become run-down.

Despite similar examples elsewhere (there were 764 project areas in 384 redevelopment areas up and down the state, in 2004, and critics say abuses are far-reaching), the impetus behind redevelopment law was honest and its implementation ahead of its time. The idea was to give those areas, largely slums, a chance of rehabilitating through an injection of capital. Given a big enough injection, the thinking went, blighted areas would be able to refire their own economic engines. And to achieve those economic jump-starts, a novel tax-sharing scheme was created: incremental tax financing.

Once a redevelopment area, or RDA, has been declared, property taxes within it are frozen; for the next 40 years, the state takes only that base amount (plus a 2 percent adjustment for inflation). All incremental increases in assessed property tax are kept by the city to reinvest in the RDA. The beauty of the system lies in the fact that as redevelopment efforts take effect, property values theoretically should soar and the tax base increase exponentially. The effect, in theory, is a win-win. The city gets its (healthy) downtown back, and the state, after 40 years of fiduciary sacrifice, has a self-sustaining new taxable entity that should garner higher rates than before.

Additionally, the redevelopment agency has the power to borrow (bond) against the incremental taxes it will be collecting in the future. Frank Alessi, CCDC’s chief financial officer, compares it to mortgaging a house. Almost nobody is capable of saving the purchase price of a new home, so aspiring homeowners take out loans, buy the houses and repay the loans at fixed interest rates. A city, Alessi says, would never be able to keep ahead of inflation if it had to save in advance for all new infrastructure and development costs. Redevelopment allows a city to effectively mortgage its future infrastructure needs.

With the majority of California’s redevelopment agencies, the local city council acts as the RDA board. San Diego’s CCDC was established as a nonprofit corporation (based on an effective model in Baltimore) to advise and guide the councilmembers who didn’t have the time or expertise for city-building.

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