State finds City of Auburn erred in $1.2M transfer

Auburn official says ‘it’s an administrative issue’
By: Jon Schultz, Journal Staff Writer
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The state controller’s office is requiring the City of Auburn take some corrective action on the “unallowable” transfer of $1.26 million in redevelopment cash and land assets.

The state dissolved all of its redevelopment agencies in February 2012, and the controller’s office was tasked with reviewing each agency’s asset transfers to ensure none were made after Jan. 1, 2011 that had not already been committed to an approved use.

It issued its Auburn report this month and found that the Auburn Urban Development Authority, or AUDA, transferred $2,640,953 in assets and that included $1,258,341 of “unallowable transfers” that must be turned over to the Auburn Successor Agency.

The state required “successor agencies” to handle the dissolution of the redevelopment, and the Auburn City Council handles that role in this case.

“It’s an administrative issue, it wasn’t anything else,” said Andy Heath, Auburn administrative services director. “We don’t owe any money to anybody. There’s no misappropriation of funds or anything like that.”

The $1.26 million had been left over from the former Low and Moderate Income Housing Fund, and it consisted of $908,341 unencumbered cash and $350,000 worth of land off Blocker Drive near the corporate park, Heath said.

The cash had not been committed to any redevelopment projects before June 28, 2011, so it could not be used by the city, and Auburn “inadvertently transferred” it directly from the Auburn Housing Successor Agency to Placer County on Nov. 9, 2012, Heath wrote in his response to the state.

Instead, it should have been transferred to the Auburn Successor Agency, which then should have passed it on to Placer County, Heath said. The county collects and disburses property taxes, and redevelopment funds came from a percentage of property tax revenue.

Redevelopment programs cut into the property tax share received by various schools, public safety and other local services. In Placer County, the greatest benefactor of property taxes is the Auburn Recreation District, Heath said.

With the end of redevelopment, those other areas will eventually see a rise in tax revenue, he said. The city still receives a portion of redevelopment funding to cover its debts related to that program, but the county is in charge of ensuring the rest of it gets divvied up to the other property tax benefactors, Heath said.

“All we have to do is take a memo back to the City Council, which is the successor agency, that says, ‘move this from the housing entity to the successor agency for disbursement to the county, which has already been done.’ They approve it, we take it the oversight board … and they rubber stamp it, and it’s done,” he said.

The city is still waiting for instructions on how to disburse the land asset, Heath said.

The remaining $1.38 million in allowable asset transfers after Jan. 1, 2011 had been used for enforceable obligations to cover redevelopment costs such as the streetscape project, he said.

Auburn’s remaining redevelopment financial obligations consist mainly of paying off the bond issued in 2008 to cover streetscape costs, Heath said. The city has 25 years remaining of $339,000 annual payments on it, he said.

The state department of finance, an independent auditor and the local oversight board all reviewed and approved how Auburn was handling its redevelopment asset transfers and payment obligations, Heath said. The state controller’s office is a separate department from the finance office.

“There was a lot going on, and we thought it was being done appropriately,” he said.

The law requires that all redevelopment assets transferred to a city, county or other public agency after Jan. 1, 2011, must be returned to its successor agency, unless the assets were committed to a private third party by June 28 of that year.

The state controller has completed 35 redevelopment agency reviews so far, and some cities have been found to have inappropriately transferred tens or hundreds of millions of dollars worth of assets.

San Jose, for example, was found to have transferred $148.1 million in assets inappropriately before its redevelopment agency shut down, according to a state press release.

“Other cities are having a much more difficult time. Ours is extremely simple,” Heath said. “Other cities have had significant challenges in getting their things approved. I’ll leave it at that. On the flip side of the coin, there are numerous, probably dozens, of lawsuits being filed by cities against the state related to redevelopment.”


Jon Schultz can be reached at Follow him on Twitter @Jon_AJNews