SAN FRANCISCO (Reuters) - Bell, California, whose former city manager and other top officials have been arrested on charges of misappropriating public funds, had virtually no financial controls and its accounts were in chaos, the state controller said on Wednesday.
State Controller John Chiang cited findings from the first of three reviews by his office of the blue-collar town near Los Angeles that has made national headlines after the revelation former City Manager Robert Rizzo had a salary of nearly $800,000.
News of the salary has spurred a push by authorities to uncover how business was done in Bell’s city hall. It has made public-sector pay and pensions a top issue in California’s gubernatorial race.
Chiang said Bell’s financial and management problems put the city of 40,000 in a league of its own in California.
“It’s a zoo,” Chiang told Reuters in a telephone interview, describing Bell’s city finances as being in a state of “chaos and anarchy”.
Chiang said nobody kept an eye on how Bell’s funds were being used. That created ideal conditions for misuse of public money — including the city council increasing taxes without voter approval and the new revenue being used for raises for Rizzo and his assistant city manager.
“There were no checks and balances,” Chiang said, adding that the city’s general fund was run like a “petty cash drawer” for the use of key city officials.
Rizzo and seven other Bell officials were arrested on Tuesday and charged with misappropriating $5.5 million in public funds. The arrests followed local and state probes into the city’s compensation practices.
The Los Angeles County Board of Supervisors on Tuesday asked Attorney General Jerry Brown to appoint a receiver to take over the day-to-day management of Bell.
Chiang’s audit found Bell spent more than $5.8 million on compensation for its top officials, its city council and mayor in the last year alone, and that Rizzo’s final compensation of $787,000 was 11 times higher than his starting salary.
Additionally, “The city used more than $93,000 of public funds to repay two personal loans taken out by Rizzo, and approved $1.5 million in loans to other Bell employees without any authorizing ordinance or policy on the city’s books,” Chiang’s office said in a statement.
On Monday Fitch Ratings cut and withdrew its ratings on $57.5 million of outstanding bonds issued by Bell. See [nN17148326].
The scandal enveloping Bell increases the city’s near-term credit risk and makes it unlikely investors or others will lend to the city, according to Fitch.
Chiang’s audit found Bell has issued $50 million in general obligation bonds since under its 2003 Measure A to build a sports complex without any documented plan and timeframe for using proceeds or an apparent need for the money.
“In six years, it is unclear what has been accomplished except for acquiring a site that consists of a dirt lot with a masonry wall around it and a water pumping station in the middle,” the audit said.
Reporting by Jim Christie; Editing by Andrew Hay