March 6, 2013 / 10:52 PM / 5 years ago

San Bernardino improperly shifted cash, assets - state controller

LOS ANGELES, March 6 (Reuters) - The bankrupt California city of San Bernardino improperly transferred nearly $110 million in cash and other assets from its redevelopment agency to an entity run in part by the city’s mayor and some council members, the state controller said on Wednesday.

The city, located about 65 miles east of Los Angeles, has also improperly held onto another $420.5 million in former Redevelopment Agency (RDA) assets, according to a review by the controller, John Chiang.

San Bernardino’s RDA was one of about 400 eliminated last year across California as a result of legislation spearheaded by Governor Jerry Brown. The goal was to free up property tax revenues controlled by the RDAs for use in funding schools and other services.

Chiang said that San Bernardino, which declared bankruptcy on Aug. 1, should not have transferred $108.4 million in assets from its RDA to the non-profit San Bernardino Economic Development Corporation (EDC) when the city’s RDA was dissolved.

Chiang, in his report, said the transfer was illegal because the city controls the EDC. According to the EDC’s website, its seven-member board of directors includes San Bernardino’s mayor, and a current and former council member.

Under the law dissolving the RDAs, their assets and debt obligations were to be transferred to “successor agencies,” which in most cases were cities, and overseen by an independent board charged with settling debt and dispersing excess cash.

San Bernardino, in a response in November to Chiang’s initial assertions, had said its transfer of assets was legal.

Andrea Travis-Miller, who quit her post as city manager in January, had said in a letter dated Nov. 21 that Chiang’s assertions were factually wrong and the transfer of redevelopment assets was legal. She also said the city cannot force the EDC to return the funds, and she denied that the EDC was controlled by the city.

Calls to the city were not immediately returned on Wednesday.

Chiang also said another $420.5 million in RDA assets in San Bernardino still had not been transferred to the RDA’s successor agency.

“I’m working to make sure redevelopment assets go where they belong: to retiring RDA debt and paying for critical services at the local level,” Chiang said.

San Bernardino, a city of 210,000, in its bankruptcy declaration cited a $46 million deficit for the current fiscal year and little leeway to pay its day-to-day expenses, such as the city payroll.

Travis-Miller’s resignation and the resignation of the city’s finance chief were not linked to issues involving the RDA, city government sources said, but rather to the stress and frustrations involved in overseeing the city’s bankruptcy application.

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