(March 8) The California State Controller’s Office put the kibosh on a ploy by the bankrupt city of San Bernardino to convey $108.3 million from its state-abolished redevelopment agency to a newly created municipal adjunct to thwart the state’s seizure of that money.
In a 53-page document released on Wednesday, California Controller John Chang said transferring money to a nonprofit the city charted, the Economic Development Corporation, was an illegitimate  attempt to have the city maintain control of redevelopment money that is supposed to be transferred to the state.
In June 2011, the state legislature at Governor Jerry Brown’s behest passed AB X1 26, which prohibited redevelopment agencies (RDAs) from engaging in new business after June 28, 2011, established mechanisms and timelines for dissolution of municipal and county RDAs, and created RDA successor agencies to oversee dissolution of the RDAs and the redistribution of RDA assets.
In anticipation of the passage of AB X1 26, the San Bernardino City Council on March 17, 2011 approved the transfer of real property assets to the San Bernardino Economic Development Corporation (SBEDC). “This transfer was unallowable,” Chang’s report, which was actually authored by CPA Jeffrey V. Brownfield, the controller’s office’s chief auditor, states. “All of the asset transfers to the SBEDC occurred during the period of January 1, 2011 through January 31, 2012, and the assets were not contractually committed to a third party prior to June 28, 2011.”
Furthermore, according to Brownfield, “The board of directors for the SBEDC is made up of city of San Bernardino council members, who previously acted as the board of the RDA. The city of San Bernardino and the SBEDC share common governing boards and have coterminous boundaries. The city of San Bernardino provides administrative and related business support for the SBEDC.”
Chang ordered that the city of San Bernardino “direct the SBEDC  to reverse the transfers of assets in the amount of $108,372,060.20 and turn over the assets with any outstanding related liabilities to the successor agency. The successor agency is directed to properly dispose of these assets in accordance with [AB X1 26].”
In making his findings and order, Chang rejected the city’s assertion, provided last November, that “The  city does not control SBEDC” and “The city and SBEDC had no relationship at the time SBEDC was formed.”
Chang also identified and ordered properly disposed  $420,512,906.15 in San Bernardino RDA assets that have not  been transferred to any agency.
City officials have not yet determined whether they will contest Chang’s order.