OnTrac’s woes dog Placentia
Grossly incompetent bookkeeping that plagued the failed OnTrac rail project is making it difficult for Placentia officials to determine the financial health of the city, the new finance director for the city said Wednesday.
Although Terrence Beaman said he had found no indication of accounting fraud by former or current officials, his downbeat assessment only underscored the city’s difficult situation.
Placentia is about $30 million in debt and faces a $2.7-million shortfall in its $26-million annual budget.
Two former city officials, OnTrac executive director Christopher Becker and City Manager Robert D’Amato, are facing trial in May on felony conflict-of-interest charges in Orange County Superior Court.
The city’s former finance director, Steve Brisco, now a consultant for the cities of Lynwood and Anaheim, could not be reached for comment. He left Placentia a year ago as controversy surrounded OnTrac, a $650-million rail project that drained municipal coffers before it was canceled last year.
The ambitious plan would have rebuilt the Burlington Northern Santa Fe Railway Corp. corridor through the heart of Old Town Placentia.
“Due diligence was not done. There were poor accounting processes and a lack of strong internal controls,” said Beaman, whose main task is to untangle the city’s books. “OnTrac has made for a very difficult situation. I look forward to the day when we are going in a new, correct direction.”
Because of the complications, Beaman said his office could not meet a Dec. 31 deadline for completing the city’s annual financial report. He added that the comprehensive assessment would be done by the end of the month.
Beaman said progress on the report had been hampered by incomplete records, double entries in balance sheets, ledgers that had not been updated and accounts that needed to be reconciled with bank statements.
Also complicating the work are recent changes in the city’s auditing procedures and the resignation of accounting manager Carolyn Chu, an 18-year veteran of the finance department.
“This has been a bigger challenge than I anticipated,” said Beaman, who worked for Monrovia and Los Alamitos before coming to Placentia in July. “The goal is to have a good clean audit report for 2006-07. I think we can do it. Things are changing.”
OnTrac called for 11 new bridges along city streets and the lowering of five miles of track into a concrete trench. Planners hoped to accommodate the increase in cargo from the region’s ports and spark a renewal of the aging city core.
But the project derailed several years ago because of a $12-million shortfall in state grants, a stable of high-cost consultants, and uncertainty over federal funding. To keep the project going, officials mortgaged city property, auctioned parkland, cut services and sold $22 million in bonds.
To help pay some of its current bond debt, Placentia will use $500,000 to $600,000 a year for the next five years from Measure M, the county’s sales tax for transportation projects. The city’s share of the revenue is typically used for street repair and improvements.
Beaman first discussed delays in the annual financial report at Tuesday night’s City Council meeting. During the discussion, Councilman Greg Sowards, an OnTrac critic who was elected in November as a reform candidate, asked whether “it was fair to say that gross incompetence and shoddy bookkeeping was largely the cause of the city’s current financial situation.”
“Ditto. I have no problem saying that publicly,” Beaman told the council. “We need to do a much better job with our accounting records.”
Because of the collapse of OnTrac, the council recently established an audit committee to monitor city finances. If such a panel had been set up as little as two years ago, Sowards said, the city would not be facing some of the problems it has now.
Veteran Councilwoman Constance Underhill, an original OnTrac supporter who later questioned the project, said she was pleased that Beaman had not found any indication of fraud in the city’s books.
“There was sloppy bookkeeping and a lot of inaccuracies,” Underhill said. “The problems are hindering the staff from getting an accurate picture of our finances.”
But Craig Green, a community activist who co-founded Citizens for a Better Placentia, questioned whether the city’s accounting problems reflected unintentional errors.
“Can anybody be that incompetent?” Green said. “At what point does this apparent gross incompetence and shoddy bookkeeping become fraud?”
Beaman said his staff had been looking for wrongdoing while reviewing city accounts. Rather than fraud, he said, it appears the city’s finance department did not have the ability to handle the OnTrac debacle and was overwhelmed.