San Bernardino Sentinel Covers GT RDA Money

San Bernardino County Sentinel Friday, February 26, 2010

GT RDA Money Funded City Operations for Two Decades

The city of Grand Terrace has accumulated a debt of more than $4.6 million in loans outstanding from the city’s redevelopment agency over that last nineteen years, according to city manager Betsy Adams.

Adams, who took the helm as the city’s top administrator in November, identified the outstanding debt in conjunction with a mid-year budget review that included an independent auditor’s report carried out by the firm of Rogers, Anderson, Malody and Scott.

The practice of borrowing money from the redevelopment agency for use in day-to-day operations at City Hall is one of questionable legality that extends back nearly thirty years. Redevelopment agencies are adjuncts to municipal government that take as their primary function redressing blight and urban decay. State laws require that redevelopment agencies make careful accounting of the funds they utilize, which quite often consist of tax increment routed to the agency from a given municipality’s redevelopment project areas. Those redevelopment funds are required to be kept in a sequestered account that is separate from the city’s other accounts such as its operating, general, enterprise or utility funds.

Adams made the disclosure of the loans from the redevelopment agency to the city’s general fund in an agenda report to the city council dated February 23 entitled "Mid Year Budget Review for Fiscal 2009/2010."

In a section of that report headed "Adjustment to General Fund Reserve," Adams wrote, "The general fund reserve does not include a $4,606,950 ‘advance’ from the community redevelopment agency to the city general fund which is reported in the annual financial report for June 30, 2008 for the city and the redevelopment agency. It was reported then because of a change in general accounting standards board reporting requirements. Staff has done considerable research for available records on this advance so that it could properly be reported in the adjusted budget. In addition to the community redevelopment agency advance in the general fund, staff discovered a general fund loan to the community redevelopment agency for $538,838 made in February 2003 of which $271,216 has been repaid. Property tax increment was misallocated to the general fund instead of the community redevelopment agency during the fiscal years of 1991/1992 through 1996/1997 and only partial repayment was made. Since this time period is past the statute of limitations (10 years) staff recommends the misallocated amount $2,013,628 due to the community redevelopment agency capital payments fund be ‘forgiven’ and written off as an uncollectible debt. Advances from the community redevelopment agency to the general fund were made during the fiscal years of 1990/1991 through 2000/2001. These funds ($2,025,495 from the capital improvements project fund and $300,205 from the low-mod fund) should be repaid with interest. With interest calculated each year a the historical Local Agency Investment Fund rate, the net amount due to the community redevelopment agency from the general fund is $2,609,059. The $2,609,059 due to the community redevelopment agency from the general fund should be reflected in the budget by designating reserves."

Councilman Walt Stanckiwitz said he was taken aback by the report, which indicated a deviation in the intent of the city’s redevelopment efforts, which by charter are devoted to eliminating blight rather than funding city operations, as well as a departure from accepted redevelopment agency protocol pertaining to the use of redevelopment agency money for specified purposes. The sheer length of time the loans had remained on the books without any effort to repay them was disturbing as well, he said.

Most bothersome, however, Stanckiewitz said, was that the loans were made without the full cognizance of the city council, which also acts as the board of directors for the redevelopment agency.

Stanckiewitz, who has been on the council since 2008, told the Sentinel, "I was not informed about this before." It was in reading Adams’ report, Stanckiewitz said that he learned of the loans "This was the first indication I had of this," he said.

Also accepted by the council at its February 23 meeting was the Rogers, Anderson, Malody and Scott firm’s independent financial report for the city of Grand Terrace dated December 10 2009. In a section of that report labeled "Notes to Financial Statements" the auditors wrote, "In April of 1980, the community redevelopment agency of the city of Grand Terrace entered ino a pass-through agreement with the city of Grand Terrace which provided that certain tax increment generated by the agency project area be allocated to the city of Grand Terrace beginning in fiscal year 1981/82. This agreement was in noncompliance with state statutes. As a result $3,680,075 of tax increment was allocated to the city’s general fund through June 30, 1993, of which $737,805 represents amounts which should have been allocated for low and moderate housing set asides as required by state statutes."

Tom Schwab, who was city manager in Grand Terrace from 1989 until 2008, said the city’s practice of borrowing from the redevelopment agency was one borne of fiscal necessity in a town that had limited financial resources with which to work.

"We did it because we didn’t have enough money in the general fund to pay for operations," Schwab said, adding that the practice is an accepted one among California cities in like fiscal circumstance. "It is something that is commonly done. When I was there it was looked at as a straight loan. The city is now looking at it as overhead."

The use of redevelopment agency money to fund that portion of municipal operations relating to staff salaries is entirely justified because city staff functions as redevelopment agency employees during a portion of their time working for the city, Schwab said.

"Paying our employees was something we needed to do," Schwab said. "Our other option was to start paying everyone half their salary out of the redevelopment agency. I thought it was cleanest just to have the city make the payments."

Schwab said the changes that the council is instituting upon Adams’ recommendation are ones of form rather than substance.

"The city is still borrowing from the redevelopment agency, except they are calling it overhead," Schwab said. "They will be taking slightly over $600,000 from the redevelopment agency this year. I’m not sure why they are going to be paying the money back to the redevelopment agency instead of just forgiving the loan. I don’t see any benefit to paying it back when they will need to borrow it again next year."

Schwab conceded that some might have legitimate concerns that utilizing redevelopment money for funding city operations might shortchange the redevelopment agencies function.

"I understand what you are saying," he said. Nevertheless, he insisted that having the city borrow the money from the redevelopment agency to cover the cost of maintaining municipal services served a legitimate purpose. Moreover, he said, using the loans for critical ongoing functions that could not have been paid for otherwise and then closing out the deal by not refunding the redevelopment agency the money forwarded to the city was an entirely legitimate way of putting the city’s redevelopment function to work for the city.

"My intention was to borrow it and never pay it back," Schwab said. "When the redevelopment agency expired, the debt would expire with it."
Schwab said the redevelopment agency was chartered for a set number of years and then would fade into oblivion. The city would then have the option of chartering a new redevelopment agency or going on without one. With the closing out of the existing agency, any money owed to it would become a moot issue.

"When the redevelopment agency ran its course after thirty years, that debt would be forgiven," Schwab said. "The agency still has a few years left. In 2012 the redevelopment agency will cease to exist as a legal entity."
The arrangement was presented to the council and formally accepted,

Schwab said, but flew under the radar for years. "There was a time when the auditors made us formalize it and that was what has brought up all of this attention," he said. But even before the auditors forced the practice to be highlighted, Schwab said, what was going on was there for all to see. "There is no way it would have been hidden unless the council could not read a financial statement, which some of them might have had trouble doing," he said. "But if they read it there was no way they would have not been able to catch it. The mayor’s husband is a CPA and she would have known."

At the February 23 city council meeting, the practice of borrowing funds from the redevelopment agency that went unrepaid for decades was the subject of derision.

At that point, Schwab, who was in attendance at the meeting, came to the public podium to make a defense of the practice.

The criticism of the practice, Schwab said, "seemed to infer the city council was unaware the redevelopment agency was making loans to ths city. In fact the budget we adopted this fiscal year included the same transfers we did the last ten years. We called it a loan. Last year it was called an overhead payment. The city is the redevelopment agency. The city council is the redevelopment agency board of directors. The city manager is the redevelopment agency director. The city clerk is the redevelopment agency secretary and the city attorney is the redevelopment agency council. This borrowing has been going on for many years with every single budget and will continue to go on."

Early in the city’s history, Schwab said, "We never borrowed from the redevelopment agency. We loaned money to the redevelopment agency and it was the other way around. I believe there is no way in the short term you are going to stop that with the economy the way it is."

In response to questions by the council about how the borrowed redevelopment money had been spent, Adams said, "From the research staff was able to do, we know from the agency to the general fund. In terms of what it was used for, we don’t know. We’re not sure we can tie it to specific expenditures."
Finance director Bernie Simon told the council the borrowings constituted "non-specific transfers. It was a decision by the city council to do that. Whether they understood [what they were doing] is a different matter. It is documented in the financial records."

Councilmen Jim Miller and Walt Stanckiewitz, the two most recently elected members of the council, expressed concern over the practice.
"We are not happy about what has gone on and we are trying to fix it," he said..

Stanckiewitz was even more pointed in his comments.
"The council has to deal with things that went back 16 plus years," he said. "Call it mismanagement or slight of hand, it did damage and it now has come home to roost. It is important that we not forget what happened in the past exactly so we don’t do it again. I want an answer as to what happened and how we got here. Staff is struggling to find it in the documentation."

In direct response to Schwab, Stanckiewitz said, "What you did was wrong and I accept your challenge to formulate a budget without raiding redevelopment agency funds."

Also in the Sentinel:

GT Residents Point out Prosecution Discrepancies

Two Grand Terrace residents this week challenged the Grand Terrace City Council to take a more aggressive stand in defense of councilman Jim Miller, who has been criminally charged with violating the state of California government code section relating to conflicts of interest. In making their call, the two residents raised the dual specters of political and selective prosecutions and contrasted Miller’s action with that of other current and former Grand Terrace council members and mayors, suggesting their actions were no less, and in some cases more, egregious than Miller’s.

Miller was arrested on July 15 and charged with engaging in a felony conflict of interest that arose out of his voting, as a member of the Grand Terrace City Council, to ratify the city’s consent calendar.

The consent calendar, in Grand Terrace as in all cities, typically contains multiple items pertaining to the function of the city government, all of which are deemed non-controversial and routine matters and are bundled together so they can be approved in a single yes or no vote of the council. It is unheard of, in Grand Terrace and elsewhere, for the consent calendar not to pass and it is generally approved by a unanimous vote of the city council, although on rare occasion a dissenting vote on a consent calendar vote is registered. In Grand Terrace as elsewhere, the consent calendar contains the city’s check register, that is, a listing of the checks that have been written to the city’s various vendors and contractors.

Among the items that had been certified as routine and non-controversial on the Grand Terrace consent calendars were payments to the Grand Terrace City News, the only adjudicated newspaper in Grand Terrace, which is owned by Jim Miller’s wife, Margaret.

The Grand Terrace City News had published legal notices at the behest of city employees in the city manager’s office and the city clerk’s office. Those ads were purchased without the prior knowledge of the city council.

The district attorney’s office has interpreted Miller’s vote to confirm the city’s payments to his wife’s newspaper as a violation of Government Code Section 1090, which prohibits an elected official from voting on any matter in which he or she is deemed to have a financial interest.

Both Bernardo Sandoval and Patricia Farley came before the city council on Tuesday to propound their view that Jim Miller’s transgression was inadvertent and done without intent. Furthermore, they said, others on the Grand Terrace City Council who had made similar votes had not been subjected to criminal prosecution.

Sandoval came to the public podium and asked for a show of hands of those present to see who among them "support Jim Miller." Nearly all of the roughly 40 members of the public present raised their hands. Mayor Maryetta Ferré responded, "We all support Jim."

"Then what I am requesting will be easy for you," said Sandoval. "Sign a piece of paper as part of a non-binding resolution in asking the DA to drop these charges against Jim Miller."

When none of the council responded, Sandoval continued, first addressing council woman Bea Cortes. "Bea, was there criminal intent on your part when you voted to approve payments to your employer [Terra Loma Real Estate]? Was it worthy of being arrested at six in the morning and having your mug shot plastered across every paper and news outlet on web?"

Sandoval then addressed Ferré.

"Mayor Ferré, when you voted to approve payments to the [Riverside Highland] Water Company, where your husband sits on that board and receives a stipend, was there criminal intent on your part? Were you guilty of a felony?"

Sandoval then answered his rhetorical questions. "No, there was not criminal intent on your part," he said. "There was no intent to defraud on your part. There was no criminal intent on your part. By the same measure, reason and logic, Jim Miller is innocent of these politically motivated charges and you all know it. Everybody in this room knows it. Jim Miller is collateral damage in a war being fought between the DA and the board of supervisors. Do not allow Jim Miller from Grand Terrace to become a campaign slogan for district attorney Mike Ramos in his reelection campaign. Jim Miller is innocent. He deserves more from this council and this council has the authority to support him."

Farley then came to the podium and referenced past votes by previous city councils, including one to make payments to All State Printing, which was owned by then-mayor Byron Matteson, and a vote to make a payment to the Grand Terrace Area Chamber of Commerce that was of personal benefit to council members.

Farley said an effort by the city to convince the district attorney’s office that the charges against Miller were ill-conceived was in order.

After the meeting, mayor Ferré, who was visibly agitated at Sandoval’s public reference to the circumstance relating to her votes to make payments to the company over which her husband presides as a board member, refused Sandoval’s proffering of a petition to the district attorney’s office on Miller’s behalf.

"I am the mayor of this city I don’t believe I have to sign anything," Ferré said. "I am in control of my own person and I am not going to sign it."

(Remember this statement of Ferre when or if the City Council Members are held accountable for their participation of the Financial Shell Game Ex City Manager and Current City Attorney Harper advised them to participate in. She said: I am the Mayor of this city I don't believe I have to sign anything, " Ferre said. I am in control of my own person and I am not ging to sign it.") Then look at Schwab's statement, her husband is a CPA she should have known.....

The SUN TELEGRAM only covers the Fireworks Issue...

Fireworks' fate going on Nov. 2 ballot
G.T. residents have differing views
Stephen Wall, Staff Writer
Posted: 02/27/2010 06:12:48 AM PST

GRAND TERRACE - Residents will decide whether fireworks remain legal in the city. The City Council has agreed to allow residents to vote Nov. 2 on the sale and discharge of fireworks. The election will cost no more than $1,900, officials said.

"Safe and sane" fireworks will be allowed on July Fourth. The council also agreed to create a "safe" zone around the base of Blue Mountain where fireworks will be prohibited.

The San Bernardino County Fire Department, which provides fire services for the city, will determine the areas to be included the safe zone. The council must sign off on the boundaries at a future meeting.

Mayor Maryetta Ferre said last week there appears to be equally strong sentiments from residents on both sides of the issue. "We seem to have as many people wanting them banned as we do wanting to continue with safe and sane fireworks," Ferre said. "This seems to be a good way to go."

Fireworks have been allowed in the city since 1997. Two youth sports groups, Grand Terrace Little League and Grand Terrace Soccer Club, are the only two organizations permitted to sell fireworks. They share a booth in front of Stater Bros. Market on Barton Road. The groups say they rely on fireworks sales to sustain their operations.

Opponents say fireworks pose a public-safety risk. "As an elected official, my first duty is to protect the residents," Councilwoman Bea Cortes said. "I would prefer that the organizations come up with another method of fundraising instead of fireworks. The organizations said they sincerely tried, and it's very difficult to reach that amount of money no matter what type of fundraising they do."

The council has gone back and forth on the issue. Last year, a verbal deal was reached between the city and the presidents of the two groups to stop selling fireworks in exchange for a break on field use and lighting fees charged by the city.

But the board of directors of the leagues never agreed to the deal in writing. Ferre said she wants the issue settled once and for all. "This has gone on for a couple of years," she said. "It's time we solved this problem. Let's make a decision and move on."

Read more: http://www.sbsun.com/news/ci_14483563#ixzz0gr3Uj8Rt

WHY the board of Directors of the Leagues must agree prior to Council action is a mystry. No one asked the residents along Barton Road if they agreed with the City taking their land under the threat of Eminent Domaine for a Shopping Center developed by a Private Developer.

How do we get included in the Safety Zone?

What other efforts at fund raising have they tried? It is known they have made zero effor to replace the Fireworks they are determined to use Fireworks until the last possible moment.