Misappropriated Bond Funds

Your CA Taxes At Work

STATE BOND FUNDS and THE SANTA MONICA MOUNTAINS CONSERVANCY

 

STAFF REPORT FOR:    State Senator Bob Huff

BY STAFF MEMBERS:    Junay Gardner, Gary Neely

DATE:                          November 1, 2010

SUBJECT:                     State Bond Funds, State Conservancies and

                                   their Related Joint Powers Authorities

 

Until recently, this November's ballot was scheduled to include a Proposition 18 that was being marketed as an $11 billion "Water Bond"[1].  Although not the primary author of the legislation leading to Prop 18, a major player in negotiating the political compromises required to bring this measure before the voters was a Sacramento-based consultant and lobbyist named Joe Caves.

In the past, Mr. Caves has represented the environmentalists' interests to a much greater degree in the development, drafting and organizing of the successful political campaigns for June 2000's Proposition 12 ($2.1 billion statewide bond marketed as a "parks & water bond")[2], June 2000's Prop 13 ($1.79 billion statewide bond marketed as a "water bond")[3], March 2002's Prop 40 ($2.6 billion statewide bond marketed as a "park bond")[4], November 2002's Prop 50 ($3.44 billion statewide bond marketed as a "water bond")[5], and November 2006's  Prop 84 (a $5.388 billion statewide bond marketed as a "water bond")[6]

On his current firm's (Conservation Strategy Group, LLC) website, Mr. Caves’ bio includes a claim that he was the "principal author" of Props 50 and 84[7].

That same webpage states that Conservation Strategy Group (CSG), formed in 2003, "provides advice and assistance to clients in obtaining project funding from numerous state agency programs including but not limited to those managed by the Resources Agency, Department of Fish and Game, CALFED Bay-Delta Program, Wildlife Conservation Board, Coastal Conservancy, Department of Conservation, Department of Parks and Recreation, Department of Water Resources and the State Water Resources Control Board.”

Curiously, CSG's published client list includes the County of Los Angeles[8] and, until just recently, the Watershed Conservation Authority[9].

The Watershed Conservation Authority is a Joint Powers Authority between the Los Angeles County's Flood Control District and one of the State Resources Agency's State Conservancies, the RMC (otherwise known as the Lower Los Angeles and San Gabriel Rivers and Mountains Conservancy).

The Executive Summary of a State Auditor’s recently released audit of the RMC’s, and WCA’s handing of $34.5 million in Proposition 40 and 50 State Bond funds[10] expended as of June 30, 2008 (out of a total of $60M allocated) states the following:

“The Conservancy Has Not Exercised Adequate Fiduciary Oversight of Bond Funds.  The audit identified a significant number of recurring audit findings from 2006 related to the Conservancy and its joint powers entity, the Watershed Conservation Authority (Authority). We also found instances of questionable practices and expenditures at the Authority. Collectively, these issues demonstrate the Conservancy’s inadequate fiduciary oversight of bond funds.”

The RMC was also allocated an additional $51 million from Proposition 84, but the current audit did not include a review of those funds.  They will be included in a later audit.

The postponed Prop 18’s $11 Billion “Water Bond” includes a minimum of $75 Million direct allocation to the RMC and, at least $100 Million in direct allocations to another State Conservancy, the Santa Monica Mountains Conservancy[11].  Both State Conservancies also stand to benefit directly from the passage of another proposition that is still on November’s ballot (Proposition 21) for which Mr. Caves served as the primary author and which establishes an $18 Annual Vehicle License Surcharge in order to fund even more park activities[12].

One of the RMC/WCA expenditures questioned in the current audit was the use of State bond funds for the purposes of funding Mr. Caves’ activities totaling $24,000/yr.[13]

Apparently, Mr. Caves is paid to ensure that a number of government agencies are included in the language of these propositions that identifies the recipients of the State bond funds, as well as for explaining those same propositions such that these same government agencies can then secure funding both for and from themselves.  It’s difficult to tell, actually, if the State bond funds that Mr. Caves collects as his retainer fees is payment for including these government agencies in the list of the last proposition’s State bond funds recipients, or to insure that they will be on the next proposition’s list of recipients.  Either way, however, it’s unlikely that this was what the voters even in support of these propositions had in mind as being appropriate expenditures of “water bond” or “park bond” funds, as the case may be.

Interestingly enough, however, Mr. Caves’ creative revenue generating techniques aren't even close to being the most egregious abuse of taxpayers' money associated with these six State bonds covering over $52.6 billion in taxpayer funds (including Prop 18 and all the interest on the bonds). But, they are related.

This requires some explanation.  The State Resources Agency is the governing body for the Department of Fish and Game, Department of Parks and Recreation, Department of Water Resources and various other departments, boards and commissions including the 10 State Conservancies.  The largest of those State Conservancies is the earlier mentioned Santa Monica Mountains Conservancy (SMMC), which was established by the State Legislature in 1980.

The SMMC was specifically targeted to receive State bond funds in all of Mr. Caves previously and currently crafted propositions.  It received $35 Million from Prop 12[14], $5 Million from Prop 13, $40 Million from Prop 40[15], and $40 Million from Prop 50.

The SMMC's stated mission[16] is to "strategically buy back, preserve, protect, restore, and enhance treasured pieces of Southern California to form an interlinking system of urban, rural and river parks, open space, trails, and wildlife habitats that are easily accessible to the general public." 

Because this is a State Conservancy, it isn’t unreasonable to assume this mission statement is referring to the taxpayers as being the beneficiaries and the eventual owners of these “treasured pieces of Southern California” that the SMMC was planning to “buy back, etc.”  However, this mission statement does not actually say who would end up owning these purchased, preserved, protected and restored properties.

Presumably, to help accomplish their mission on behalf of the taxpayers, in 1985 the SMMC established The Mountains Recreation and Conservation Authority (MRCA)[17], which is a local government public entity created pursuant to the Joint Powers Act.  Over the years, the SMMC has helped establish a total of nine such Joint Powers Authorities (JPA’s)[18].

In truth, one wonders why a State Conservancy would ever need a JPA’s assistance to do anything.  The laws governing JPA’s clearly state that the created JPA is not allowed to do anything that each and every member of that JPA could not do independent of their membership in that JPA[19].

The MRCA JPA, a partnership between the SMMC, the Conejo Recreation and Park District and the Rancho Simi Recreation and Park District  (both of which are local park agencies established by the vote of the people in those communities.) is special, however.[20]

In the past, the SMMC’s personnel frequently referred to the MRCA as an “arm of the SMMC”[21], the "negotiating arm of the SMMC"[22] , led people to believe that property given to the MRCA had been given to the SMMC [23]  and misrepresented properties for which the MRCA held title as being owned by the SMMC[24].  Further, although the MRCA isn’t the only JPA formed by the SMMC for which the Executive Director of the SMMC also serves as the JPA’s Executive Director, the MRCA has uniquely been the recipient of over $96 million in grants from the SMMC, or more than 95% of the all the grant funds awarded by the SMMC from State bonds between 2000 and FY 2007-08[25].  All told, during that period, the SMMC awarded 142 grant contracts to the MRCA (73 contracts from Proposition 12, 56 from Proposition 40 and 13 from Proposition 50).[26]

Since its creation, the MRCA has also passed an ordinance that created its own police force[27] and formed, using a mail-in ballot procedure, two open space preservation benefit assessment district taxing authorities[28].  By taking advantage of court rulings that "assessments" are not "taxes" and the MRCA is an "independent" agency, the MRCA's creation of these taxing authorities essentially becomes a case of a State Conservancy using a subordinate entity with no directly elected Board Members to circumvent both the state laws that preclude State Conservancies from levying taxes and the federal laws guaranteeing no taxation without representation.  SMMC Executive Director, Joe Edmiston, however, prefers to think of this as "....government agencies (getting) together and pretty much do(ing).....write(ing) their own agenda....and write(ing) their own powers...........(without having) to go through all the government rig-a-ma-roll that binds so many of us down."[29]   

This seemingly incestuous relationship between the SMMC and the MRCA has been questioned on quite a few different occasions since its creation and, in 2004, actually led the State Legislature (with language inserted into a State Budget bill) to require that all SMMC grants awarded to the MRCA obtain the prior approval of the State Attorney General.  As a direct result of this legislative mandate, both entities currently claim an arms-length relationship and the total independence of the MRCA from the SMMC.

This additional “oversight” criterion in the SMMC’s grant approval process mandated by the State Legislature has not convinced everyone, however, that the MRCA serves any independent purpose beyond providing the SMMC a means of circumventing the law[30] and/or of obfuscating the records documenting the SMMC’s use of the taxpayers’ money. Some groups have even suggested that actions of the SMMC related to the State bond funds threaten the tax-exempt status of the State bonds[31].

SMMC/MRCA detractors point to transactions that have all the earmarks of a money laundering scam such as the one in 2003 in which the SMMC provided a $110,945 grant and the MRCA provided a $65,662 grant to another of the SMMC-created JPA’s, the Whittier Puente Hills Conservation Authority (WPHCA), to cover cost overruns on the Arroyo Pescadero Trailhead project.  Both the SMMC and the MRCA received grants from L.A. County’s 1996 Proposition A funds in order to make their grants to WPHCA.  The WPHCA in its only financial transactions over a two year period, then coupled those two grant amounts and awarded another JPA, the Puente Hills Landfill Native Habitat Preservation Authority (PHLNHPA) a grant totaling $176,607 so that they could re-route all of the funds back to the MRCA, which it says “built the trailhead” and incurred the cost overruns.   Its impossible to determine what the MRCA used those funds for at that point, but it is unlikely that any restrictions upon their use that would have been a part of L.A. County’s Proposition A grants remained.[32]

These skeptics’ concerns were also fueled, in part, by the State Department of Finance's Office of Audits and Evaluations 2004-05 audits that said that the SMMC had misappropriated a number of grants collectively totaling more than $6.8 million to the MRCA from Proposition 12 and 40 State Bond funds (Nearly 10% of the $75 Million total allocation that the SMMC received from Props 12 & 40)[33].  The series of events that have occurred since the State Auditor’s initial report on this matter have done little, if anything, to allay those concerns.

These State Auditor reports, the first in 2004 and the second in a follow-up audit conducted the following year that added the SMMC/MRCA’s handling of Prop 50 funds, detailed how the over $6.8 million had come from a total of 19 different findings, or specific instances of various dollar amounts the SMMC paid to the MRCA, each of which they concluded constituted the SMMC’s misappropriation of State bond funds.

The SMMC and MRCA, in fact, conceded the Auditor’s position relating to one such instance in which the MRCA had used Prop 12 funds to pay for the cost of a study on forming a Benefit Assessment District and the MRCA subsequently repaid the money ($50,000) in question.  Over time, the SMMC and MRCA also took steps to correct most of the procedural weaknesses identified in the State Auditor’s management letters such that the State Auditor subsequently reported that, “operating procedures and organizational structures were modified to enhance independence and oversight of bond expenditures.” 

However, in 18 of the 19 instances, the SMMC and MRCA continued to dispute the Auditor’s findings or, in a few instances, simply refused to comply with the Auditor’s required corrective action. [34]

It is important to understand that, in instances where the State Auditor finds mistakes made or identifies any kind of wrongdoing by the state agencies he/she has the responsibility to audit on a regular basis, the agency in question is always given plenty of opportunity to correct their mistake or arrange to make right whatever wrongdoing may have occurred.  There is seldom if ever any kind of “rush to judgment” involved in these matters and, even in the most egregious and unmitigated offenses, true punishment of the specific offenders comes at what can only be described as true glacial speed, if at all.  Every opportunity conceivable to make things right is thoroughly investigated and afforded the wrongdoers before the Auditor’s conclusions are considered final.  For that reason, problems identified by audits conducted in 2004, can take as long as six years or more before their conclusions are considered final.

In the case of the 2004-05 SMMC/MRCA audits, after an untold number of communications failed to provide the State Auditor with a persuasive enough explanation of their reasons for the fund transfers, the SMMC/MRCA petitioned the State Attorney General’s office to have the AG simply overrule the State Auditor's conclusions. 

That’s a curious potential adjudicating entity since the State Attorney General has two representatives that attend every SMMC Board meeting as the Conservancy’s official legal advisors.  One could easily conclude that, had the Attorney General’s representatives deemed a particular grant inappropriate, one of them would have so advised the SMMC’s Board at the time they initially approved it.  Further, having the State Attorney General rule on such matters begs the question as to, in making their ruling, whose best interests would the AG be looking to protect?   The Taxpayers’?  The SMMC’s?  The MRCA’s?

Apparently, in this case it was the MRCA’s, because after a series of discussions, a little coaching of the SMMC staff on how to retroactively rephrase the descriptions used for some of the grants in order to comply with the letter of the law[35], the construction of some curiously convoluted legal logic to justify an acceptably defined purpose for a couple more of the grants in question[36], and simply claiming attorney-client privilege in lieu of explaining any real reason for having come to their conclusion that some of the other grants were okay, the same person (Deputy Attorney General John A. Saurenman) that sits as one of the AG’s representative on the SMMC’s Board also provided a ruling that whittled down the Auditor’s list of findings[37] until, as a result, the MRCA needed to repay the taxpayers considerably less than the over $6.8 million in  “misappropriated bond funds” originally identified by the State Auditor.  Clearly, it was the MRCA, not the taxpayers, that was the big winner in that exercise.

On 12/7/04, the Attorney General informed the MRCA that they had to return a misappropriated $1.7 million as per the terms of the grants to which they agreed when the MRCA initially applied for the funds[38].   Subsequent to the State Auditor’s 2005 follow-up audit’s additional Finding #9, this dollar amount was increased to $2,115,114.00[39]

And, it was with this AG ruling in hand, that the MRCA’s Executive Director, (Joe Edmiston), notified the SMMC’s Executive Director, (the same Joe Edmiston), the MRCA planned to simply refuse to repay even the remaining funds.

Instead, the MRCA petitioned the court for declarative relief.  The court refused and, alternatively, sent the two parties (or, Joe) to a court appointed arbitrator to settle the matter (with himself.)

At this point, the SMMC’s Executive Director (Joe Edmiston) and their legal counsel (Sr. Asst. Attorney General J. Mathew Rodriquez and Supervising Deputy Attorney General John A. Saurenman), the MRCA’s Executive Director (also Joe Edmiston), the MRCA’s legal counsel (Mitchell Abbott of Richards Watson and Gershon), and the court appointed arbitrator went behind closed doors to hammer out a compromise.  When they came out it was announced that the two principle parties (which were really both Joe Edmiston) had agreed that the MRCA would make an irrevocable offer to dedicate property in fee title to certain properties totaling 2,650 acres, worth more than $6.6 million, over to the SMMC in lieu of repaying the misappropriated $2.1+ million of bond funds in cash.[40]  Part of the reason for this particular settlement was that it was agreed the MRCA did not have any other source of income from which to repay this debt….. even though in fiscal year 2006-07 the MRCA had total available revenues of over $33 Million[41], and in fiscal year 2007-08 had total available revenues of over $55 Million[42].

And, on 4/25/06, the Attorney General’s office (again, Deputy AG Saurenman) approved this “arbitrated” settlement offer, in spite of the fact that at least $714,394.00 of the over $6.8 million in originally identified misappropriated funds had never been accounted for[43], and summarily declared that all of the State bond fund monies identified by the State Auditor as having been misappropriated in their 2004-05 audits had officially therefore been repaid[44].

It was not explained either in the court ruling or in the Attorney General’s ruling as to why anyone, especially a wholly independent entity, would agree to pay off a $2 million debt by relinquishing ownership to what they claimed was over $6.6 million ($2,500 per acre) in real property. 

Further, none of the decision documents mentioned the fact that the taxpayers already owned the property identified to be used in lieu of cash to repay the taxpayers’ their misappropriated funds.  (One wonders why nobody in the arbitration hearing knew that, or knew it but neglected to mention it.  How did those individuals in that arbitration hearing think the ownership of that property came to be in the MRCA’s name?)

As it turns out, The Ahmanson Company had originally relinquished title over to the taxpayers for the 2,650 acres in question a few years earlier in return for the development entitlements granted to them on the remainder of their property.  The MRCA had dedicated the property as parklands/open space at that time.  As the recipient of the relinquished property, the MRCA was the agency that dedicated it as parklands/open space,[45] so they should have been well aware when they agreed to the arbitrated settlement with the SMMC that they were reimbursing the taxpayers for misappropriate funds by giving them title to property that had already been given to the taxpayers once before.

The developers’ remaining property, known as The Ahmanson Ranch and nearly the same size acreage as the property relinquished, was coincidentally later sold to the taxpayers as well, via the MRCA’s and SMMC’s use (once again) of State bond funds.  In that case, however, the taxpayers paid an (development-entitlement-included) enhanced price of $150 million[46] ($61,305.00/acre).  Although initially held under the ownership of the SMMC, Mr. Edmiston has indicated his intention to transfer ownership of this property to the MRCA as well.[47]

That’s a pretty good deal.  Give the government half your property worth $6.6M and in return the government gives you the right to develop the other half which means you can then sell that other half to that same government for $150,000,000.  Makes you wonder why the government didn’t just buy all the property for $14M to begin with, doesn’t it? 

The fact that the 2,650 relinquished acres ended up in the ownership of the MRCA rather than the SMMC brings up an entirely new set of questions regarding the SMMC’s relationship with the MRCA.  This is especially true once one also reads the numerous news accounts documenting how Joe Edmiston, the Executive Director of both agencies, was a very active participant in the negotiations between Ventura County and the Ahmanson Ranch Company from the very beginning of this property’s proposed development, and during that time the SMMC had been initially targeted as the property’s eventual owner[48].

So, when Ventura County originally extracted the relinquished property from the Ahmanson Company as per the provisions of the Quimby Act and, then, turned to Mr. Edmiston to take ownership of the 2,650 acres to hold as parkland/open space in perpetuity on behalf of the California taxpayers, why did Mr. Edmiston choose to direct this property into the MRCA’s ownership rather than the SMMC’s?  Whose interest does Mr. Edmiston represent when this kind of situation arises?  The MRCA’s?  The SMMC’s?  Certainly not the taxpayers.  Not in this case.  And, it would seem, not in other cases as well, because over the years the MRCA has transferred ownership of taxpayers’ property in a rather large number of instances.

The MRCA has, for instance as of 1/11/10, “sold” the National Park Service a total of nine properties for a total of $23,016,500.00[49].  One wonders what that $23 million in proceeds was used for and where the funds came from for the MRCA to purchase these nine properties in the first place.

Another instance, not included in the $2 million list of misappropriated SMMC grants to the MRCA, has to do with the property known as the Hormel Trust property.  

The details of this transaction are as follows[50]

This 23.11 acres of property located on the west side of Mulholland Highway in the north-central portion of the Santa Monica Mountains was originally owed by the James C. Hormel Trust.  Apparently, somebody (more than likely the Trust for Public Lands) put together an appraisal that said the property was worth $1,050,000.00 ($45,434.88/acre).  This property was zoned agricultural at the time, which for some strange reason, apparently allows for development of one dwelling unit per acre in L.A. County. 

The Hormel Trust graciously agreed to sell this property (at a price that was supposedly $160,000.00 BELOW market value) for a total of $890,000.00.  Having secured this agreement, the County of Los Angeles and Joe Edmiston (it isn't clear which organization Joe is meant to represent here) then set about to cobble together the requisite $890K.

To accomplish this, first the County took $546,890 from its Prop A Park Bond funds and gave it to the SMMC.  These funds were meant to provide $486,890 toward the property's purchase price and $60K for "escrow fees and reimbursement of MRCA's administrative and acquisition expenses" which, by the way, all parties agreed should be handled "outside of escrow." 

Why the County didn’t give these funds directly to the MRCA isn’t explained, but after the SMMC received LA County's Prop A money, it shipped it to the MRCA[51], who took their cut, added $200,000.00 of Quimby Funds (Where these Quimby funds originally came from or how they came to be in the possession of the MRCA isn't explained, but they are clearly described as Quimby funds.), added an unidentified amount of money only referred to as "to cover escrow costs," to the $486,890 and put it into an Escrow Account. 

Earlier, in anticipation of this purchase, the County was awarded a $210,500.00 grant "from the State" out of a fund called the "State Habitat Conservation Fund". It is unclear who it was "at the State" that awarded this grant, but one of the requirements for receiving an HCF grant is that there be a 50 percent matching amount contributed from non-State sources.  In this case, the County counted their Prop A funds as meeting the match prerequisite and gave their entire $210,500.00 HCF grant to the MRCA.

Why these funds were not given to the SMMC first, as they did with the L.A. County Park Bond funds, is not explained, but it might have something to do with the fact that the Attorney General isn’t required to approve any grants that the MRCA chooses to award.

The MRCA subsequently gave the County Department of Public Works back $7,390 of those funds to do what looks to be "make work", and then deposited $203,110 of the County's HCF grant funds into the same escrow account as the Prop A and Quimby Fund monies for a total deposit of $890,000.00.

 That met the Hormel Trust's selling price, so the Trust sold the property to the MRCA.

Now, supposedly "simultaneously", the MRCA records a conservation easement on the property (as if that was necessary given the rules associated with the funds they used to buy the property), and then "sold" the property to L.A. County, which the County curiously decides to list on its books as having been purchased for same amount as the grant they received from the State Habitat Conservation Fund ($210,500.00, for property that actually sold for $890,000.00 and was appraised at $1,050,000.00.)

Outside of the County’s curious bookkeeping practices, the most glaring problem in all of this is why the MRCA is involved in this transaction at all.  Its sole contribution was the Quimby funds and it isn't even clear whether LA County didn't actually arrange for the MRCA to be the recipient of those funds to begin with.  If so, the MRCA actually contributed nothing, ended up owning an unnecessary easement on the property and made at least $60K or so for their trouble - or, what some might refer to as money-laundering services.

In another case, the Avatar Properties purchase, both the Resources Agency and the SMMC gave the MRCA grants of State bond funds; the MRCA purchased the properties and then “sold” the property to the State DP&R. 

The question here is what the MRCA did with the proceeds from the sale of the property.  Both grant agreements indicated that if the property was sold, the amount of the grant, the fair market value of the property or the proceeds of the sale, whichever is higher, could be used by MRCA for another purpose that was consistent with the statutorily approved uses of Proposition 13 funds, but only if approved by the grantees, which were the Resource Agency and the SMMC.  These assertions were subsequently made by the SMMC and Resources Agency but were never independently verified by State Public Works Board staff when they recommended approval of the DP&R purchase[52].

Did the MRCA repay the taxpayers’ money they received from the State bonds, or did they slip it into their “General Fund” or some slush fund thereby effectively laundering any State bond fund-related strings the money originally came with?

Or, perchance, they used it to pay that $7,000/month retainer fee for Joe Caves that was identified, but not formally questioned by the Department of Finance Audits and Evaluations in their original 2004 SMMC audit.  Given the manner in which the SMMC and its various subordinate JPA’s provide the official record of their actions, we may never know the answer to that and many other questions pertaining to these government entities.[53]

The bottom line and major concerns in all of this, boils down to four primary points:

1.  The taxpayers have not been made whole.

The MRCA presents itself as “the local representative of the State”[54].  As such, any property owned by the MRCA is already owned by the State’s taxpayers.  Paying the taxpayers back the misappropriated bond funds by giving the taxpayers property that they already own does not seem right.

Also, an irrevocable offer to dedicate fee title to real property does not effectuate a transfer of any real dollar value to the offer's recipient until such time as the offer is formally accepted.  The MRCA Offer to Dedicate states that it "may be accepted ONLY by the SMMC and that such acceptance shall be effectuated by recordation by the Conservancy of an acceptance of the Offer to Dedicate in a form acceptable to the Conservancy." 

To date, more than four and a half years later, the SMMC has still not recorded any formal acceptance of this Offer to Dedicate.  There has been no transfer of real property in lieu of, or cash repayment of the misappropriated State bond funds identified by the Department of Finance Office of Audits and Evaluations in their 2004, or any subsequent, audit of the SMMC/MRCA.

The fact remains that the taxpayers are still owed millions of dollars and if the SMMC/MRCA just wait long enough for everyone to forget what happened, a tactic recommended by the State Resources Agency's representative (Mr. Cash) which is currently being used by the RMC as they ignore almost two million dollars worth of misappropriated funds findings by the Department of Finance Auditor relevant to their own most recent audit, the SMMC can just choose to quietly not accept the offer one day in the future, in which case the ownership of the 2,650 acres of property will remain in the hands of the MRCA without so much as a blemish on the property's title and, the MRCA will have successfully potentially stolen millions of dollars in taxpayer money.

2.  As documented in the 2006 Settlement Agreement, it was originally argued that the reason the MRCA was "forced" to repay the money as fashioned in the arbitrated settlement agreement was because it had no independent and unencumbered stream of non-bond revenue sufficient to meet the cash demands from the SMMC.  

MRCA FY 06-07 budget documents show total budgeted revenue of $33,500,000.  MRCA FY-07-08 budget documents show total budgeted revenue of over $55,000,000.  (Neither figure is all bond funds.)    And, it has just recently been estimated that the MRCA will be grossing more than $2,000,000 per year from the fact that it is now the only agency in the entire State of California legally allowed to mail $175 tickets to registered car owners for having supposedly blown one of seven automatic camera enforced stop signs, not lights, located within MRCA owned properties.

3.  The historically consistent (intentional?) mismanagement of State bond funds by the State Conservancies and their subordinate JPA’s would certainly seem to be placing the tax exempt status of these State bonds in serious and needless jeopardy.  (Should these bonds lose their tax-exempt status; the State taxpayers will be on the hook for the additional taxes that will then be owed by those that purchased these bonds in good faith.)  

And, finally;

4.  Should State Conservancies even be allowed to form JPA’s that effectively act as their “operational arms” when their only real purposes seem to be nothing more than to provide a means for the conservancies to circumvent the laws and launder taxpayers’ money?  Governor Schwarzenegger’s California Performance Review recommended that these State Conservancies be “devolved” into JPA’s between just local governments.  We believe it is time to implement that recommendation.

 


 

 FOOTNOTES:

[1] http://www.sos.ca.gov/elections/ballot-measures/pdf/sbx7-2-ch-3-stats-09.pdf

[2] http://primary2000.sos.ca.gov/VoterGuide/pdf/12.pdf

[3] http://primary2000.sos.ca.gov/VoterGuide/pdf/13.pdf

[4] http://www.sos.ca.gov/elections/viguide_pe02/bp_pe02.pdf

[5] http://vote2002.sos.ca.gov/2002-vig/propositions2_id=221.asp

[6] http://vote2006.sos.ca.gov/voterguide/props/prop84/prop84.html

[7] http://www.csgcalifornia.com/about.html

[8]   http://www.csgcalifornia.com/clients.html

[9]   See attached document file entitled, “Joe Caves.pdf

[10]  See attached document file entitled, “Bond Fund Audit for RMC-WCA June2008.pdf”.

[11] http://www.sos.ca.gov/elections/ballot-measures/pdf/sbx7-2-ch-3-stats-09.pdf

[12] http://ag.ca.gov/cms_attachments/initiatives/pdfs/i869_initiative_09-0072.pdf

[13] As of the RMC’s meeting held on 7/26/10, the RMC’s response to the State Auditors’ conclusion that the RMC made inappropriate use of State Bond funds is that they disagree with the Auditor’s opinion and consider that matter closed.

[14] http://primary2000.sos.ca.gov/VoterGuide/Propositions/12text.htm

[15] http://www.sos.ca.gov/elections/viguide_pe02/bp_pe02.pdf

[16] http://smmc.ca.gov/mission.html

[17] http://www.mrca.ca.gov/

[18] http://smmc.ca.gov/partners.html

[19] See Paragraph 6502 of attached document file entitled, “Government Code Sections re JPAs.doc

[20] A short explanation about JPA's may be in order here:    California Government Code 6502 says that

"two or more public agencies by agreement may jointly exercise any power common to the  contracting parties".  California Government Code 6509 states that a JPA "is subject to the restrictions upon the manner of exercising the power of one of the contracting parties, which shall be designated by the agreement." (In the MRCA's case, the JPA designates those restrictions placed upon its Recreation and Park District members.)  Those two statements in law may seem to some to be conflicting statements.

They are not.  6502 limits the powers the JPA may exercise to only those held in common to the contracting parties.  That means if one of the three members of the MRCA does not have the power to do something, then neither will the JPA.  6509, however, speaks to those instances where all three contracting parties have the power to do something independent of the others.  In those cases, the manner in which the COMMONLY HELD power would be exercised would be as defined for (in MRCA's case) Recreation and Park Districts.  For instance:  Both State Conservancies as well as Recreation and Park Districts are permitted to purchase land.  The rules governing the manner in which each of the two types of government agencies are permitted to purchase land, however, are different. (State Conservancies, for example, need legislative approval to mortgage land whereas R&PD's do not.)   Therefore, the manner the MRCA must use in the exercise of their COMMONLY HELD power to purchase land is subject to the restrictions placed upon Recreation and Park Districts rather than State Conservancies.  This is how the SMMC circumvents the laws that would otherwise preclude it from mortgaging property and is one of the primary reasons the MRCA was formed.

[21] See attached document file entitled, “2005 MRCA ARM OF SMMC.doc

[22] See attached document file entitled, “1992 MRCA Negotiating Arm of SMMC.doc

[23] See attached document file entitled, “1998 Deal 2650 Ahmanson Acres to SMMC.doc

[24] See attached document file entitled, “Rorie Skei, SMMC We have all the hope property.mht

[25] See attached document file entitled, “SMMC07-08_Annual Report Part 4.pdf

[26] See attached document file entitled, BondFundsReview_6-04-7-05.pdf”, page 9.  In their 2007-08 Annual Report, however, SMMC reported original appropriations of $39,664,000 in Prop 12, $5,000,000 in Prop 13, $36,518,000 in Prop 40, $37,000,000 in Prop 50 and $17,000,000 in Prop 84.

[27] http://www.mrca.ca.gov/MRCA_Ordinance_3-3-10.pdf, and See attached document file entitled, “authorityofparkrangers.pdf”

[28] http://www.preserveopenspace.org/pressrelease.html

[29] See YouTube video at http://www.youtube.com/watch?v=D-8bd4KPPLo , in which Joe Edmiston essentially admits he uses JPA’s to circumvent the law (“get around the government rig-a-ma-roll”) and advocates non-profit organizations – (such as the Sierra Club?) -- pursue forming their own MRCA-type JPA's except, in their case, with the NPO acting in place of the SMMC as the JPA's "Administrators".  Assuming these aberrant quasi-government creations of Mr. Edmiston's imagination have the same powers as the JPA he's created in real life; this would be the first instance in the history of this country wherein a NPO would have a legal means to levy assessments.  Of course, the NPO would only be "administering" this "wholly independent" JPA, and therefore, could not actually be held directly responsible for levying these assessments.  And, even if they could be held morally responsible, those being taxed would never be able to hold them, or anyone else for that matter, ultimately responsible by voting any of the individual board members out of office.

[30] See attached document file entitled, “BWFLettertoDianaAntony05132010.doc

[31] See attached L.A. Times news articles included in file named, Misuse of State Bond Funds by Santa Monica Mountains Conservancy Alleged.doc”

[32]  See attached document file entitled, “Laundered.doc

[33]  See attached document file entitled, “Conservancy Spending Assailed.doc."

[34]  See attached document file entitled, “FinalSMMC-MRCAMgmtLetterProp124050May2006.doc

[35]  See attached document file entitled, “AG Opinion 1-19-06.pdf”

[36]  See attached document file entitled, AG 12-1-09 advice letter legalfees.pdf”

[37]  See attached document file entitled, “AG 12-23-09 Letter opinion1.pdf”

[38]  See attached document file entitled, “AG 12-7-04 $1_7M demand letter.pdf

[39]  See attached document file entitled, “AG 12-21-05 Letter Opinion2.pdf”

[40]  See attached document file entitled, “DGS $6-6M Ahmanson Appraisal & Offer to Dedicate.doc”.

[41] See attached document file entitled “MRCA Budget 2006-07.pdf

[42] See attached document file entitled “MRCA Budget 2007-08.pdf

[43] See attached document file entitled, “Disposition of Questioned Grants.doc

[44] See attached document file entitled, “AG 4-25-06 letterrefullreleaseofMRCA(2).pdf

[45} See attached document file entitled, “Case Law re Dedicated Park Space.pdf”

[46] See attached document files entitled, Ahmanson Final Press Release.pdf” and

              8.25.03MRCAagenda_50.pdf”

[47] See attached document files entitled, “2003 Ahmanson $150M property future discussed by Joe.doc

[48] See attached document file entitled, “Merger of Mountain Developments Studied.doc

[49] See attached document files entitled, “MRCA&SMMCAcquisitions(byNPS)0001.pdf” and 

SAMO-MRCA&SMMCTractsList0001.pdf”

[50] See attached document file entitled, “Hormel Trust info.pdf

[51] On January 25, 2010, the SMMC adopted a resolution retroactively authorizing assignment of all SMMC designated funds, including excess funds, from both the L.A. County’s Safe Neighborhood Parks, Gang Prevention, Tree-Planting, Senior and Youth Recreation, Beaches, and Wildlife Protection Act of 1992 and the L.A. County Safe Neighborhood Parks Act of 1996 (Prop A)  to the MRCA.  See attached document file entitled, Memorandum regarding Agenda Item 15.pdf”, which states that, “Soon after the passage of the 1992 measure, the MRCA, in accord with the Santa Monica Mountains Conservancy’s Acquisition and Improvement Work programs, (has) expended all of the subject Proposition A funding. All of these funds have been expended by the MRCA through formal Project Agreements with the Los Angeles County Regional Parks and Open Space District.”

[52]  See attached document file entitled, “AVATAR.doc

[53]  See attached document files entitled, “WCCA minutes_254.pdf” and 

SMMC MRCA 6-28-10 Minutes.pdf

[54]   See attached document file entitled, “mrca tax faq.doc”, paragraph #3.

 

Listen Carefully

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