State Auditor to Review Muni Bond Sales

The state auditor has been ordered to investigate allegations of missing funds and trust account irregularities in connection with municipal bond sales by a dozen cities in the Sierra foothills and Central Valley. The review by the California state auditor was prompted by a Dec. 12 letter from Pete Schaafsma, director of the California Debt Advisory Commission, to the Joint Legislative Audit Committee. The committee supervises the state auditor’s assignments. In the letter, Schaafsma suggested “something is amiss” in as many as 12 small cities around the state: Avenal, Coalinga, Waterford, Atwater, Dos Palos, Lake Elsinore, Placerville, Wasco, Selma, San Joaquin, Ione and Oroville. The Audit Committee, in turn, ordered state Auditor Kurt Sjoberg to begin a probe. According to Schaafsma, all of the towns he cited have set up special, multijurisdictional authorities to issue tax-exempt bonds to finance private, speculative real-estate developments under a 1985 law, the Marks-Roos Local Bond Pooling Act. Sjoberg said it’s too soon to say whether Schaafsma’s concerns have merit and added he doesn’t expect to begin his investigation for several weeks.