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WAV Condos in Ventura

Water Funds Diverted to WAV Project

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“I am not a crook”[1]
—Richard Nixon

“There are no direct (City) tax dollars in the WAV” —Bill Fulton, former mayor (5-13-2011)

 

 

 

 

 

THE WAV REVISITED

In August, 2011 we suggested that you take a walk and visit the WAV, located at 175 South Ventura Avenue, Ventura.  If not, take a virtual tour by clicking here.

This is a subsidized housing project consisting of 54 residential units for low income artists, 15 units for the homeless, 13 market rate condominiums and 6,000 square feet of commercial space.  The projected cost was $57,000,000, but when it was completed in October, 2009, the real cost was $65,000,000 — all tax payer money in one form or another.

Chase holds the note on Ventura’s WAV Condos. The city stands to lose $2.0 million if the WAV condos do not sell by 2016

The 13 condominiums, at the corner of Thompson Boulevard and the Avenue, did not sell and the commercial space along Ventura Avenue remains vacant to this date.  The condos and the commercial side of this development failed.  Last year, to avoid a foreclosure by CHASE of their senior construction loan of $4,000,000 the  Ventura Redevelopment Agency, which holds a promissory note of $2,000,000, secured by a second trust deed on the condo portion of this project, received a reprieve and dodged a bullet by obtaining a 5-year extension of the CHASE  loan.  If the condominiums do not sell by 2016 the probability is that this $2,000,000 will be lost.  In the meantime the 13 condos have been leased.  It is unknown if these leases are producing a profit, or not, since operating statements have not been provided by the company operating the units.

Our former Mayor, Bill Fulton, at every opportunity proudly announced that this project would “produce 25,000 visitors a year and would stimulate the local economy, resulting in $75,000,000 in new investments”.  We do not know the basis for his prediction, but there is scant evidence, if any, to support such prognostication.   As for the sources of funds here is what he said about the use of general fund tax money at a public event:

“…city invested a mere $1.5 million in affordable housing set-aside funds–funds that could only be used for affordable housing (there are no direct tax dollars in the WĀV).”

—Former Mayor Bill Fulton, As quoted by Liveworkworld. com  (5-13-2011)

When Res Publica suggested that money from the general fund of the City of Ventura was used on this project the Mayor stridently asserted that the only money used to build this project was from the Federal Government, the State of California and the Ventura Redevelopment Agency.  The City Manager, noted for his numerous blogs to “clarify matters” or to achieve “transparency”, was silent.  Well, it turns out that City funds were in fact used to the tune of $2,581,858.

First there is the $2,000,000 referenced above.  One-half of that money came from the RDA; however the other $1,000,000 was taken from the Capital Improvement Fund of the Water Department, transferred to the Public Art Fund then loaned to the RDA to make up the $2,000,000 loan.  That promissory note says – “Holder (the City) does not currently need the funds which are unencumbered.  The Loan proceeds will be used by the Borrower (RDA) to help facilitate the construction of the Working Artists Ventura (“WAV”) development in the City of Ventura”.

The city Council approved this loan on February 4, 2008.  The loan was to have been repaid and placed back in the Water Department funds on January 26, 2010.  That did not happen.  What the Council did do however is extend the due date twice with the result that the loan is not due to be paid back until March 1, 2016.

City Councilmembers approving money for WAV building conflicts with their role on the RDA.

This was a major mistake. The folks on the City Council are the same people that act as the RDA.  This transaction was not arms length and drips of conflict of interest.  Who was watching out for the interests of all of the citizens of this community in making the loan and/or obtaining payment of this loan?  It certainly wasn’t the City Council because they, acting as the RDA wanted to claim fame and create their dream public housing (art?) project.  Now it is too late to obtain payment.  The RDA has no money, it is defunct and all we can do now is list this loan on a long list of other RDA loans that the State of California may or may not pay someday.  Just remember this transaction when the City Council asks to increase your water rates claiming that “we” do not have enough money.

Another twist in this Byzantine financing scheme centers on the Planning Department and Building and Safety.  When a builder or homeowner wants to build anything they must obtain permits, which are only issued after scheduled fees are paid for the project.  These permit fees are used to pay for the salaries and benefits of the personnel in these two departments, and are a major budget line item.  In the case of the WAV however the City Council, on August 2, 2007, voted to defer payment of $1,581,858 in permit fees to be paid over a period of 55 years bearing interest of 3%.  Having foolishly given public funds to accomplish their pet project it is little wonder that the City Council found it necessary in the last four years to impose greater and greater planning fees and costs on anyone who wants to develop or build in this City.

USE OF PUBLIC WORKS MONEY, WATER RATES, “ART”AND WAV PROJECT

[“How many legs does a dog have if you call its tail a leg?—A. Lincoln]

Using public works money for the WAV building violates Prop 218

Government Code § 5499.7 [Proposition 218] requires that in providing water and wastewater services to the citizens of any community the amount billed for those services may not exceed the funds required to provide the service, and that the fee may not exceed the proportional cost of the service provided to the individual owner upon which the fees is imposed.

Seems clear.

During a series of hearings before a Citizens Rate Advisory Committee, conducted between October 12, 2011 and January 25, 2012, to consider a City staff proposal to raise water and waste water rates to fund $265,000,000 in new projects over a ten (10) year period, what was discovered is that the City staff, under the direction of the City Manger, interprets Proposition 218 in a most liberal manner.

First, there is the $1,000,000 taken from the Water Department and channeled through the RDA.  This money came from the homeowners and property owners who pay their water bills and waste water bills.  That should not have happened and is ostensibly contrary to the provisions of the Government Code.  We can thank the Howard Jarvis Taxpayer Association for having obtained a court ruling on what this money (utility charges) can and cannot be used for, and public housing projects are not one of them.

“…the fee or charge revenues may not exceed what it costs to provide fee or charge services…the key is that the revenues derived from the fee or charge are required to provide the service, and may be used only for the service…”

—Howard Jarvis Taxpayers Ass’n v. City of Roseville (2002) 97 Cal. App. 4th 637, 647-648.

This committee next learned that not only had this loan been made to the RDA, but that the City Council had taken the position that the water and waste water funds were fair game for any “art project”, and that they were entitled to extract 2% of any money used for capital projects to provide the citizens with water and waste water services.

As of January 2012 the accounting department set aside (extracted) $3,145,620 for the Public Art Program from the water and waste water money collected through water bills.  They reported the following:

VENTURA WATER

PUBLIC ART PROGRAM STATUS JANUARY 2012

Budget for Administration $   432,207.94
Budget for Art Projects $2,713,413.03
Total Sums set Aside for Art $3,145,620.97
Sums spent for Administration $   432,207.94
Art Projects completed – spent $   581,351.86
Total Sums spent for Art Projects $1,013,559.80
Cash in the Bank for Future Art Projects $2,132,061.17
WAV Loan – receivable $1,000,000.00

 

The City Attorney, Ariel Calonne, provided a written opinion to the Citizens Rate Advisory Committee, that the Ventura City Charter, Section 1406, provides the legal basis for the City Council allocation of 2% of all money used for water projects to art.  He further argued that “as the City’s ratemaking authority, (the Council) has determined that the public art program constitutes a reasonable cost of service for capital improvements attributable to Ventura Water”.  The Citizens Advisory Rate Committee did not agree.   On January 25, 2012, this citizen committee rejected the 2% for art allocation as part of any water rate increases, stating “It is time to rethink all public funding and priorities.  This is an opportunity to effect some needed change”.

On Monday, February 27, 2012, at 6 P.M. the City Council will take up the matter of increasing water and waste water rates.

Editors Comments:    

Diverting funds from public works for housing borders on unethical

A plain reading of Proposition 218 and common sense dictates that water and waste water funds should not serve as the slush fund to pay city administration costs or building costs unrelated to the costs of operating our water and waste water departments.  So when your water rates are increased by 30-40%, or another tax increase is placed on the ballot, remember that here is another $2,581,858, squandered.

Actions by our City Manager are not without approval and acceptance by our City Council. If our elected representatives lack the understanding, the capacity to ask the deeper questions or political will to stop these types of actions, we need to make fundamental changes.

Editors:

B. Alviani          K. Corse          T. Cook

J. Tingstrom    R. Mccord       S. Doll

[1] Nixon denied that any of his re-election campaign funds were used to pay   the Watergate burglars, or that a  slush fund has been created for this purpose. In July 1973 Nixon admitted he had attempted to cover up the break-in to hide the fact that funds were diverted from one source to another for an  illegal use.

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Failed Investment, Failed Policies Make Ventura Like Greece

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“Rebellion to tyrants is obedience to God”
—Motto on THOMAS JEFFERSON’S seal.

CALIFORNIA: AMERICAN GREECE

Tim Cavanaugh of an on-line news company called REASON has written a good analysis of the dilemma facing California. He writes:

“What do Europe’s most bankrupt state and America’s most bankrupt united state have in common, aside from being bankrupt?

In what is undoubtedly a coincidence , noticed only by free-market fundamentalists, it turns out that Greece, that sun-drenched paradise on the Aegean, and California, that sun-warmed El Dorado on the Pacific, are the worst places to do business in their respective economic zones.”

VENTURA’S VISIONARY?

[Investment In People Too High]

The city Manager recently announced that we are in a “war for jobs”.   He is right, but know this. We will be competing with every city in the nation for those same jobs.  The winner will be the public entity that realizes that the jobs we lost in the 2008 depression are not coming back. We have to create new opportunity and new jobs.

The city needs private enterprise now more than ever, so please City Council when a new project developer or businessman comes through the door give him a hug, and not a bill for all of the costs and fees that you have piled onto such projects.  A happy face and lower fees, as an incentive to come to Ventura, will work wonders.

The Ventura City Council says they are going to “Live Within Our Means” and stay within their budget, but they wince when it comes to the thought of layoffs. The closing of a fire station proposed by the City Manager, as expected, has heightened the emotions of several adjacent neighborhoods and the Fire Department folk.  These citizens and the firemen need to wake up and realize that this is not about saving a fire station, but the financial well being of the entire City.  We must keep in mind that  City government has been entrusted to provide  “basic governmental services” to its citizens within its means, but does not have an obligation to keeping individuals employed so that they can retire with life with lavish pensions and benefits.

Any business owner knows that to reduce services diminishes their value. They also know that the single highest AND controllable expense is labor. Maybe the theme of “Living Within Our Means” needs to be better defined. Reducing services and programs should only come after a reduction of staff levels reached the bear minimum.

Five years ago, the claim was “we have cut expenses to the bone and there is no where else to cut.” Today, the City has reduced the workforce by 16% AFTER they made that claim. Sounds like the story of the “boy who cried wolf”. Enough on the budget for now. All we know is the reduction of services has long been a ploy to get the citizens to sympathize with public employees.

WAS IT $10,000,000 or $20,000,000 LOST?

[Monetary Investment Too Risky]

In March and April 2009, VREG discussed the loss of $10,000,000 in Washington Mutual and Lehman Bros. investments.

The City  father’s took refuge [seemed proud?] that they only lost $10 million in investments in 2008, they defend their loss by comparing the loss to the average citizen’s 401K losses.   Hardly a realistic comparison given that the investment policy for a municipality is and should be much be more conservative and restrictive.  Some at the City make it sound as if it is heresy to suggest that they should not have lost anything.

The City Attorney on the other hand is crying “fraud” on the part of Lehman Brother and WaMu — a distraction at best.  The decision to invest in these financial institutions was made by a committee of four. None of the four members of the Investment Committee has investment licenses, nor the experience and qualifications to oversee a $200 million portfolio in this current financial market. Months before the Lehman and WaMu debacle, the City had a prior warning of problems due to a potential $10 million loss they had invested with Bear Stearns.  It turned out that the Bear Sterns was acquired by JP Morgan and thus avoided bankruptcy, however at this writing we do not know how much JP Morgan is willing to pay the City of Ventura on that investment.

How is the recovery of the loss of $20,000,000 by the City of Ventura with their investment in Bear Stearns, Washington Mutual and Lehman Brothers going? We do not know. Was anyone fired for losing $20 million?  Nope. And we predict no one will not be fired.  What the Council should do is appoint people who are qualified AND do not have a potential conflict of interest in making investment decisions to insure that income from the investments will be available to feed the general budget.

THIS FROM A READER OF THE LAST EDITION

[CalPERS Investment Underperforming]

It is interesting that when I attended the PERS conference in Los Angeles at the Convention Center in February, the strongest criticism of PERS [CALPERS] came from the representative of the Governor’s office, who had been a former member of the CalPERS Board. His critique was focused on two  things:

  1. That PERS consistently and incorrectly utilized a projected return of investment (7.75%) that was grossly overly optimistic of their likely actual long-term results
  2. That PERS was virtually impenetrable and as dark as a lead lined coffin when someone attempted to secure information from it.

I reported this critique to both the Compensation Task Force and to Council Members…I have also reported repeatedly on the losses that PERS has incurred in their investment portfolio, that they are the subject of criminal investigations over potential fraud and kick-backs form their relationships with placement agents (former Board members using their old connections to get rich), and that at least several current Board members have incurred serious fines because of their consistent failure to report publicly on their investment holdings and sources of income as required by law… Needless to say, our union representatives constantly run with the official PERS line that PERS is sound and in good health.”

—Neal Andrew

EDITORS’ COMMENT: 

We have previously reported on the failed investment policies of PERS.  This organization invests our pension dollars using failed economic models and fallacious investment return calculations. It is easier said than done, but the sooner we can distance our City from this organization the sooner we can be on the path to economic recovery.

Editors:

B. Alviani           S. Doll                 J. Tingstrom

K. Corse              B. McCord         T. Cook

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