CITY OF RIVERSIDE: AUDITING FIRM, BAKER TILLY, GIVES RIVERSIDE A C- ON NORTHSIDE PROPERTIES TRANSACTIONS

Posted: February 9, 2016 in Uncategorized
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Hissom_Russ

RUSS HISSOM, PARTNER AT BAKER TILLY VIRCHOW KRAUSE LLP, THE AUDITOR THAT DID THE AUDIT WITHIN THE AUDIT, OF THE ALREADY AUDITED NORTHSIDE PROPERTIES, THAT I HAVE A FEELING, WILL BE AUDITED AGAIN…

Bringing the truth to the North Side…….Vote Vivian Moreno Mayor 2016…..

Riverside hires Russ Hissom, Partner at Baker Tilly Virchow Krause, LLP, to perform an audit (another outside auditor paid for by the ratepayer) of the Northside properties that the City, the Redevelopment Agency, and Public Utilities made a mess of.

This blog post examines the 5th or 6th audit (we think) conducted on the Northside properties that were once owned by our Water Fund; that were sold to the Redevelopment Agency, General Fund and Electric Funds; a portion of which were subsequently given to the General Fund; all financed by the Sewer and Electric Funds; and with one property sold back to the Water Fund.  Did you get all that?  We may have missed a transaction or 2.  These deals are to transparency what Miley Cyrus is to propriety…and both smell fishy.

About 2005, the City needed money and property to get into the full swing of Redevelopment and they had their eyes set on the Northside of Ward 1.  This was easy pickings:  apathetic Northside residents, surplus utility property, outsized utility reserves, and a staff all-too-ready to violate the law and City policy in the name of advancing their careers.  The endgame was simple: special interests and the City wins and the average taxpayer and ratepayer would be left looking for the license plate of the vehicle that hit them.

Today, we look at one piece of the Northside goulash: the former Riverside Golf Course.  The dialog starts in 2010 around the water cooler that we need a soccer stadium and it should be in the Northside, and the City just happens to have the “perfect” piece of property. Council Member Andy Melendrez started selling it to the community. Then, we get a new Community Development Director (CDD), Al Zalinka, who starts planning for a beautiful new soccer stadium with all the bells and whistles. The CDD spends about a year and a half putting this project together. Hundreds of thousands of dollars, if not millions, goes into planning, designing and developing this stadium.

Let’s set the stage: the City has selected 2 main development teams to bid for this project. The Council is ready to hear the proposals from both teams.  The Council Chamber is full that afternoon with developers, architects, contractors, money men, and probably a couple of other scoundrels. Every one of them is dressed in their Sunday Best. The “Big” names of Riverside elitists were sitting there: Yeager, Tavaglione, Rubin, Singletary, Hunt… all ready, willing, and able to cash in on the taxpayer, as in this PE Article on the Soccer Complex back in September 2012.

We had repeatedly advised the Council and the City that this deal could not and should not go forward. But nobody wanted to listen as our electeds were salivating over each other and their proposed plans for futbol-for-all was within arms reach. THEN……….EVERYTHING FELL APART RIGHT BEFORE THEIR EYES.  WE WERE RIGHT, THEY WERE WRONG! (neener-neener)  The charade was turning into a legal liability nightmare for the City,  the integrity of Al Zelinka was in question, and the Council looked foolish.  In the end, nothing was ever done with the property UNTIL….2013/14

So what happened?  We were at the meeting that afternoon because we knew the dirty little deal that was planned to go down and we were dialed in to the State Controller and Department of Finance if it did pass. Everyone in those Chambers that day were all blindsided when they found out that no deal could be made. NONE, NADA, NO-WAY, NO-HOW……The land, at that point, was not owned by the City and was tied up in the dissolution of Redevelopment. Everyone was upset. The selected teams of developers had huge money invested in drawings and plans for the development to present to the Council. The soccer stadium died a slow, painful, very public death that day. . . and now we have another audit.

BACK…TO THE FUTURE: the City hires Baker Tilly to do another audit of the Northside. An audit within an audit — that is what the accountants call it. Mr. Hissom from Baker Tilley starts his comments by saying this site has already been audited by many financial firms and they had been done appropriately by some very highly quality firms. BUT… They were more than happy to take this task on again and perform another audit. Their scope would be looking at 5 issues.
1. Was the property properly recorded under accounting principals and were the rules followed?
2. Were the transactions all approved by council?
3. Was the purchase price appropriately supported by documentation?
4. Did the deed stay with the city?
5 Were the transactions approved by the policy of the City?
The Three main points that I got out of this audit were that:
1. Maybe we need 10 more audits until someone is willing to just tell the citizens the truth and the real reason we got into this fine mess.
2. Riverside Public Utilities recorded this property under OPTIMAL accounting principals instead of Best Practices. So what does that mean? If you grade Optimal vs. Best, Best is an A grade and Optimal is barely passing with a C-.
3. There was no formal appraisal performed on some of the transactions – it was all done by comparing properties in close proximity, if they were done at all.

So did the highly paid, well trained accounting firm of Baker Tilly tell the truth and get to the bottom of this mess? Lets go back and answer their 5 questions as they did:
1. Was the property properly recorded under accounting principals and were the rules followed?
BARELY: These principles were followed under OPTIMAL practices as stated by Ms. Susan Cash, Chairwoman of Riverside Public Utilities Board and the auditing firm.
2. Were the transactions all approved by council?
YES
3. Was the purchase price appropriately supported by documentations?
NO, there were no appraisals in some cases as stated with great concern by Susan Cash, Chairwoman and Andrew Walker, Board Member.  In one instance an $8.5 million property sold from the Water Fund to the General Fund in 2005, was re-purchased for over $9 million by Water in 2009…as if the great real estate crash never occurred.
4. Did the deed stay with the City?
YES
5. Were the transactions approved by the policy of the City?

What’s very interesting here is that this transaction was not a City issue, it was a Public Utilities issue between Water, Sewer, and Electric. So to answer the question its Yes and No. It all depends on what Administrative Manual you are reading, the City’s or Public Utilities’? Auditor, Russ Hissom, stated he was hired by the City and the Administrative Manual appraisal information came from the City’s manual. Board Member Andrew Walcker had no idea that RPU had its own Admin. Manual, and Chair Cash was a little concerned about what she read about appraisals in the RPU manual.  We know one thing: the City did not follow the laws or policy of the Redevelopment Agency.

The question should have been stated like this: Were the transactions approved by the policy of the Riverside Public Utilities and the former Redevelopment agency? The answer to my question would be NO and NO. An audit is only as good as the information provided and in this case the information or the scope had no strength or substance and didn’t address the real issues of this property.
Based on the very weak questions posed to the auditor we end up with three Yes’s, two No’s and a one Barely, or a C-.  At the end of this very short presentation Russ Hissom couldn’t stop praising the City using the City Hall and California League of Cities talking points. He closed his comments by presenting Riverside Public Utilities with glowing praises, so as to deflect from the real problems with this property.

So, what did this audit accomplish? NOTHING!! After all the hoopla, this property is still in the hands of RDA or the Department of Finance and tied up in the City vs. Dept of Finance on appeal. Undoing this property may take years and more audits. As of today, the note on this property is NOT getting paid. So, the ratepayers are getting the shaft AGAIN. Also, the City Council has approved 1.5 million square feet of warehouse space in the North Side which, by the way, was the original plan. It was the vote of Mike Soubrious and Paul Davis that stopped the planned moratorium until a strategic plan was completed. Once Paul and Mike shut down the moratorium, the City couldn’t move fast enough to get those warehouses approved. The Vote passed unanimously. The Northside Saga Continues…….

TMC, RATED RIVERSIDE’S REGIONAL COUNTIES MOST, “NEGATIVE,” “RAUNCHY,” “LOW CLASS,” “VISIONS OF GRANDEUR,” “FULL OF B.S.,” “IGNORANT,” “MISGUIDED,” “BULLYISH,” “FILTHY,” “SICK,” “PERVERTED,” “STUPID,” “PATHETIC,” “DESPICABLE,” “DISAPPOINTING,” “BELOW THE BELT,” “A NEW LOW,” “SHOCKING,” “OFFENSIVE,” “INAPPROPRIATE,” “HURTFUL,” “MEAN SPIRITED,” “DISTASTEFUL,” “EMBARRASSING,” HORIFFIC,” “SLANDEROUS” “FIT TO BE VIEWED FROM THE REAR” AND MEZZSPELLED, “MISSPELLED” AND “OPINIONATED” BLOG SITE!  YES WE ADMIT WE OUR ALL OF THAT AND MORE, WHICH IN CURRENT TERMS IS KNOWN AS “UNPOLITICALLY CORRECT.”  TEMPORARILY BLOCKED BY THE CITY OF RIVERSIDE AT PUBLIC ACCESS SITES WITHIN THE CITY, THEN UNBLOCKED.  I GUESS YOU CANNOT DO THAT ACCORDING TO THE ACLU.  RATED ONE TWO ONE STAR OUT OF FIVE IN TERMS OF COMMUNITY APPROVAL RATINGS..  … AGAIN, THANK YOU COMMUNITY OF RIVERSIDE AND THE CITY OF RIVERSIDE EMPLOYEE’S FOR YOUR SUPPORT!

 

Comments
  1. Ralph from Riverside says:

    “It was the vote of Mike Soubrious and Paul Davis that stopped the planned moratorium until a strategic plan was completed.”

    I’d like to know why these two would do the dirty work for the get-along-go-alongs…

    • Don’t know? Paul was supporting the people that own the land and they should be able to build what they want on their property. Putting a moratorium in place for 1 year to get a strategic plan in place would have been sensible but they are not sensible. They took care of the Riverside ELITE. Not the public!

  2. Tom Hunt says:

    Nice report , and thanks for the shout out , yet to my knowledge , 1.A lZelinka wasn’t with the City as yet although I sure wish he had been so we on the two development teams might have received a straight answer to the pivotal question as to whether Public Financing was an option . Then City Manager Scott Barber, and was that a waste of a title and tax dollars expended with his sorely lacking ” leadership ” refused to clarify the essential question which his point staff person, not Zelinka , had intimated was actual, but in reality we all learned later post expending hundreds of thousands $$ of our own-never Public $$Cash , Barber affirmed would nor be availed . There is no viable project from here to Rhode Island that can be financed where Public lands are leased unless the owner, the Public entity, is willing to back the transaction. Barber wasted the time and private resources of two qualified and quality development teams by his refusal to respond to one simple clarification, and equally Riverside lost out on a development opportunity that arguably would have altered for the good the image of our City and enhanced it’s livability and tourism . To my personal knowledge and other than the few pages of paper wasted printing at taxpayer expense along with the salaries of public employees ” overseeing ” Barber’s complete disastrous leading , no Public funds were expended for the effort to bring a world-class ( not hyperbole ) soccer complex to Riverside.

    Had Zelinka been availed , he came a bit later, I am confident we would have gotten straight answers to Barber, then City Manager at least in title if not effectiveness, opposition to public backing of needed financing and the two teams , one which I led and the other led by Tilden Coil , would not have wasted our precious personal time nor personal/ privaye funds . And Riverside wouldn’t have the black eye he still carries from this aborted project t b at yiu feature here in your missive.
    Just to set the record straight .

    • Thanks Tom, For the clarification. I do believe it would have been a world class project. I believe Riverside could have been a world class city,Wasted staff time has a cost to the taxpayer and incompetent people running our city for years had a huge cost to the taxpayer. Al was hired May 2012 and the RFP for the project went out June 2012. Al and I had this conversation not to long ago about this project.. He said when it went down he felt like he had been sucker punched. Those were his words.Barbers disastrous leading cost the taxpayer dearly. I would like to sit down with you and get your opinion on the Vote of the council to add the additional power to the city attorneys office. Thanks for the dialog…………..Vivian

  3. Roy Bleckert says:

    @ Tom Hunt

    As I understand your above reply , you led one of the development teams ?

    “Barber wasted the time and private resources of two qualified and quality development teams by his refusal to respond to one simple clarification”

    “opposition to public backing of needed financing and the two teams , one which I led and the other led by Tilden Coil ”

    Why would a quality development team like yours , sink any significant time, resources or $$$ without getting the simple clarification your team requested ?

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