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State Spending Raises Eyebrows

news1 1Concerns of government waste surface about the Capitola Career Center

The 12,587-square foot building that houses the Employment Development Department (EDD)’s “One-Stop Career Center” in Capitola seems even larger when you take stock of the amount of empty, seemingly unused space inside. While the $32,659 monthly rent on the building was previously shared with Santa Cruz County’s Workforce Investment Board (WIB), the EDD is now the sole rent-paying entity inside the space.

Ten EDD employees work inside the space on a regular basis, alongside volunteers from partner organizations.

When the economy collapsed in 2008, the WIB left the large building they shared with the EDD program at 2045 40th Ave. in Capitola to meet the county’s new budget restrictions. They moved into the less expensive Watsonville Career Center, where they have been located ever since.

The EDD is part of the Labor and Workforce Development Agency of the California state government, so its monthly rent is paid for by tax funds allocated by the Wagner Peyser Act of 1933, which was amended by the Workforce Investment Act (WIA) of 1998. It was first created by a 1935 California statute and is now one of the largest California departments, with more than 200 locations statewide. (Previous to the economic downturn of 2008, the department boasted more than 400 locations.)

The EDD has 17 mandated partners under the WIA, including the WIB.

While the department has grown over time, the fundamental purpose of the EDD’s workforce services branch has remained the same: to strengthen the state’s labor force by helping the unemployed become employed.

In order to implement the Workforce Investment Act (WIA), regional WIBs were created to direct federal, state, and local funding to workforce development programs in their local areas. WIBs conduct and publish research on needs of their regional economy and local programs. Under the WIA, WIBs are a mandated partner to the EDD and oversee the One-Stop Career Centers.

news1 2The Employment Development Department's local One-Stop Career Center remains in the $32,659 per month, 12,587-square-foot Capitola location it once shared with the Santa Cruz County Workforce Investment Board, which moved out in 2008. On May 14, David Lundberg, the director of the Santa Cruz County WIB, wrote a letter to the director of EDD, Pam Harris, to address concerns he has about governmental spending on the Capitola EDD building.

“It has been four years since July 2008 [when] the WIB and county social services had to downsize and leave Capitola due to budget cuts and staff reductions,” he wrote.

He wrote the letter in response to a note he received from a job seeker, who recommended funds for increased staff at the Capitola EDD office.

“These funds have been paid by taxpayers to use for a specific purpose, and that is to help people,” Lundberg tells GT. “I think it’s really important for local and state governments to make very efficient and effective use of any resources coming in to help unemployed people and people laid off from work.”

Lundberg says he felt obligated to address the issue under the Department of Labor regulations, which state that all parties are to report any “fraud, waste and abuse” to EDD and the Office of Inspector General as soon as they are identified.

Lundberg has reported the situation in Capitola to the state’s monitor from the Compliance Review Office and the WIB’s regional advisors.

“The question is, how does one report waste on a state-operated program?” he writes in an email to GT.

He estimates that the EDD employees utilize 33 percent of the building’s space, leaving 66 percent of the space unused.

“To put the statistics in a Workforce Investment Act perspective, I estimate that 245 people could have received $4,000 in retraining scholarships, equal to the amount spent on rent for unused building space,” Lundberg says.

Lundberg has yet to receive any formal response to his letter from EDD.

GT put in several requests to speak with Rick Deraiche, chief of the EDD in Capitola, or another member of the local EDD branch. However, because all EDD media requests go through its public affairs branch for approval, Loree Levy, director of public affairs for EDD, instead informed GT that a 15-minute phone interview would be arranged with Deraiche’s superior, Dennis Petrie. Petrie is deputy director of the EDD’s workforce services branch in Sacramento.

Petrie, who does not recall ever visiting the Capitola EDD location, says he has read Lundberg’s letter. He says the letter represents a “narrow perspective.”

Because EDD was the master leaseholder on the Capitola site, says Petrie, they were obligated to cover increased costs when the local WIB vacated the site, “until such time as we were able to renegotiate the lease agreement.”

When asked why the lease has remained the same for more than four years, Petrie says that he does not know the details of the agreement. He points out that the Department of General Services in California, which is an independent department, handles lease negotiations with the state and local entities.

Ron Slack is chair of the WIB in Santa Cruz, as well as publisher of Good Times. He says the WIB has attempted to consolidate efforts with the EDD since 2008, met with minimal communication on the part of EDD.

“Part of the problem is that government [offices] have no vested interest in the money that they’re spending, and, therefore, no one’s taking responsibility and saying this is a travesty,” says Slack. “I’m a businessman. … To run a business, you have to take responsibility for revenues and expenses. Apparently for the government and EDD, that’s not important. If it was important, they would have made more than a feeble attempt over a four-year period of time to find a new home at a drastically reduced rate.”

The lease agreement between EDD and the building owners was renewed this April and extended to a month-to-month agreement through December. Petrie says the EDD in Capitola is presently in lease negotiations to reduce their financial footprint, but could not provide specifics.

“We’re doing two things,” Petrie says. “We’re looking for a new site within Santa Cruz that could be acceptable to the wide array of partnerships [we have], and if we’re not successful in doing that, we’re concurrently in negotiations to reduce the terms of our existing lease to be more aligned with the actual space needs we and the other partners, and the influx of job-seeker traffic, requires.”

Petrie says part of the reason the EDD has not yet relocated is that the Watsonville Career Center does not meet ADA and seismic requirements that are federally mandated for any EDD site.

The WIA states that operations partnering with EDD should be co-located or connected to the One Stop in some fashion. The arrangements can be in the form of electronic connectivity, formal referral, or physical connections.

The WIA Section 134, entitled “One-Stop Delivery,” states that, at a minimum, a one-stop delivery system should make all appropriate programs accessible at no less than one physical center in each local area of the state. 

Each partner site must assure individuals that information on the availability of core services will be available regardless of where the individuals initially enter the statewide workforce investment system.

“[EDD] has a presence in Watsonville that cannot exceed 16 hours a week, because that is the regulation we have to attend to given the fact that it’s not seismic,” Petrie says.

Lundberg says the site does, in fact, meet seismic requirements, and he made sure of this by personally arranging for structural engineers to come and review the building.

According to state and federal requirements, EDD must also take several location-based factors into account when selecting a service site under the WIA. These include nearness to transportation lines, and location in relation to businesses and unemployment rates.

While Capitola’s unemployment rate was 7.8 percent in March 2012, Watsonville’s unemployment rate was 27.7 percent. Lundberg says the WIB has prioritized providing comprehensive services in Watsonville for this reason.

However, Director of Public Affairs Levy says that while the EDD takes the unemployment rates of overall regions into account when selecting service sites, they do not take into account unemployment rates of specific cities within jurisdictions.

Until the EDD figures out its future in Santa Cruz, it continues to spend $32,659 a month on the oversized One-Stop Career Center in Capitola.

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