Thursday, May 17, 2012
A sharply worded letter from State Controller John Chiang tells Dan Romero that it's time to start cooperating with auditors.
- GOVERNMENT
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Thursday, May 17
[Editor's note: The following letter from State Controller to John Chiang was delivered to city officials Thursday. It is reproduced below in its entirety. See all of Hercules Patch's coverage on the city's financial meltdown.] Dear Mayor Romero, I Want to thank you for the commitment you made in your May 13 response to my office’s audit, in which you directed municipal officials to search for the records requested by my office. Your statement represents the most solid commitment We have received to date from the City of Hercules to providing records necessary to account for the spending of more than $2 million of state and federal funds. My auditors have made 32 separate requests for 107 documents since September 2011, and only a handful …
Saturday, May 12, 2012
A spokesman for the State Controller said auditors were unable to locate former City Manager Nelson Oliva to discuss their findings with him.
Just how snarled Hercules municipal finances really are may never be known. After months of work by his auditors, State Controller John Chiang concluded in a report issued Thursday that due to what he says was the deplorable condition of the city’s books it was impossible to account for at least $2 million spent during the 2009-2010 fiscal year. The review, which focused primarily upon federal and state grant money flowing directly to the city, did not address the financial operation of Hercules’ now-defunct redevelopment agency that will be the subject of a future report. Auditors did, however, hint that discrepancies uncovered in the city’s accounting for the grant money may very well have extended to other facets of city financial …
Thursday, May 10, 2012
Hercules may have to repay more than $2 million in grants.
A review by state auditors of how financially struggling Hercules handled its money during the final year of former city manager Nelson Oliva’s tenure has concluded the city’s accounting records were such a mess it was impossible to trace the expenditure of more than $2 million in state and federal funds. In a report released today outlining a review of municipal financial transactions during the 2009-2010 fiscal year, state auditors said records related to the spending of state and federal grant money – except for gasoline tax funds – were “unauditable.” “During my time in office, this could be the worst set of city accounting records I have seen,” State Controller John Chiang said in a statement. “The City’s books were so poorly managed…
Friday, February 10, 2012
Society of Professional Journalists bestows award for 100-plus articles and more than 2,000 comments.
- THE NEIGHBORHOOD FILES
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Friday, February 10
The Society for Professional Journalists-Northern California announced Thursday that it is giving its James Madison Freedom of Information Award in the News Media category to Hercules Patch. Every year, the award goes to “individuals and organizations who have made significant contributions to the advancement of freedom of information and expression in the spirit of James Madison, the creative force behind the First Amendment." The SPJ honored Hercules Patch with this award for its coverage of what the judges delicately call Hercules’ “questionable financial management practices.” The SPJ noted that Patch produced 13 investigative stories and more than 100 daily articles to track this complex story. Patch has put the whole collection in …
Wednesday, February 8, 2012
The Hercules City Council met Tuesday to talk about the feasibility of raising some taxes for local residents and businesses.
Hercules is considering using tax hikes as way to remedy its ailing budget. The city council met in a study session Tuesday night, where it discussed the possibility of increasing a transaction and use tax, utility users tax and a less likely parcel tax. “We are in a financial crisis. The facts are there, and we are suffering as a city,” said Mayor Dan Romero. “I don’t want to increase anybody’s tax, but basically its coming down to asking residents” for help “for basic services.” Acting Assistant City Manager Liz Warmerdam presented on the city’s options for increasing taxes. A transaction and use tax, which is a sales tax add-on, and/or utility users tax are the Hercules’ most viable options, Warmerdam said By imposing a transaction and …
Tuesday, February 7, 2012
Standard & Poor’s gives three more bond issues ‘junk’ rating since last week.
Standard & Poors, a leading municipal credit agency, Tuesday slashed its ratings on three Hercules Public Financing Authority revenue bond issues from a respectable “A-“ to junk status of “BB,” and further placed the bonds on negative credit watch. At the same time S&P placed the city’s “A” rated wastewater revenue bonds on a credit watch with negative implications which the agency said reflected the “comingling of wastewater enterprise cash in the city’s pooled cash fund.” “We base these rating actions on our assessment of city officials' statements indicating that Hercules could file for bankruptcy without $4 million of redevelopment agency increment revenue and a lawsuit filed by Ambac Assurance Corp…” said S&P credit analyst Sussan…
Lawsuit, new state law pushes City’s back to the wall.
If an escalating dispute between Hercules and the company guaranteeing payments on $117 million in redevelopment bonds cannot be resolved on terms favorable to the city, bankruptcy will certainly be an option for a municipality short on both money and time. This was the bleak picture painted by interim city finance director David Baum last week in a regulatory filing (see document 1) notifying investors Hercules did not have enough cash to make some of its Feb. 1 bond payments and had to rely on insurance coverage to meet its obligation. Baum’s disclosure, in a document filed with the Municipal Securities Rulemaking Board, a self-regulatory organization that makes rules regulating dealers of municipal securities, came on the heels of a …
Financing redevelopment is more complex than it looks.
At first glance financing redevelopment projects in Hercules appeared simple: The city’s former redevelopment agency borrowed money by selling bonds to Wall Street investors and used a portion of local property taxes to repay the debt. Twice each year the Contra Costa County treasurer would forward tax increment revenue to the city’s RDA, which in turn used 58 percent for its own activities – including setting aside an amount sufficient to make principal and interest payments on its bonds; set aside 20 percent for constructing or otherwise supporting affordable housing, including the repayment of any bonds issued to finance those projects, and passing along the remaining 20 percent to other agencies such as school districts. However the …
Friday, February 3, 2012
The lowered grade came after Hercules defaulted on its bond payment Wednesday.
Rating agency Standard and Poor’s downgraded Hercules Redevelopment Agency tax allocation bonds five notches Thursday, the day after the city failed to make its February bond interest payment. The bonds went from BBB- to B ratings due, in part, to lowered assessed property value in redevelopment project areas, according to a report released by Standard and Poor’s Thursday. "We also base the downgrade on our view of the agency's debt management and its failure to apply any pledged net tax increment revenue to its non-housing debt service payment on Feb. 1, 2012,” Credit Analyst Sussan Corson said in the report. Hercules, which saw a 40 percent reduction in its workforce compared to last year due to dwindling funds, defaulted on a $2.4 …
Tuesday, January 3, 2012
Hercules is next in line for a review of its financial record keeping by the State Controller's office.
After completing audits of cities Bell and Montebello, California State Controller John Chiang’s office is set to release its review of Hercules next. Hercules is third in line, following Bell and Montebello for a financial review. Chiang’s office released its audit of the City of Montebello Wednesday. In its review, Chiang’s office said it “found significant weaknesses with the City of Montebello’s administrative and internal accounting control system…(and)as a result of the significant control deficiencies, the potential for waste, fraud, and abuse of public resources is extremely high…” The state controller’s office said its review of Montebello was performed “to assess the adequacy of the city’s controls to safeguard public assets and …
Susan D.Keeffe
11:06 am on Saturday, May 19, 2012
Kent, Thanks! I think that was one of my better typos! more ›