County Finally Files Lawsuit Against TCA
Wants Records Kept From Public Eye
Editor’s Note Update: We neglected in the original filing of this story to note that the decision to file suit against TCA was made by the Modoc County Board of Supervisors Oct. 25 in closed session and announced publicly at the end of that session.
Nearly two years after the State Controller’s Office (SCO) declared Modoc County’s audit for the fiscal year ending June 30, 2008 failed to meet government auditing standards -- a decision that led to hiring new auditors at a cost of nearly $1 million -- a lawsuit has been filed in Superior Court seeking damages against TCA Partners of Fresno.
In its complaint filed by John Kenny, county counsel, Modoc County is asking for damages in excess of $25,000, but seeks unknown damages stemming from alleged breach of contract, fraud and negligent misrepresentation.
The legal action, filed Oct. 28, comes within days of the statue of limitations expiring, which would have prevented the Board of Supervisors from any legal avenue of recovering fees paid to TCA, a source who would not speak publicly told the Modoc County Daily News.
In finding that the TCA audit did not meet government standards, the SCO ordered Modoc County to have its books for 2008 re-audited. “TCA Partners received a copy of the State Controller’s Office report and agreed to correct its deficiencies, which was never done,” the lawsuit alleges.
However, the suit states that “County of Modoc hereby requests the clerk of the court not make available to the public records and documents in this action pursuant to Code of Civil Procedure section 482.050(a).
That section of the Code of Civil Procedure states:
“(a)If the plaintiff so requests in writing at the time he files his complaint, the clerk of the court with whom the complaint is filed shall not make available to the public the records and documents in such action before either (1)30 days after the filing of the complaint or (2)the filing pursuant to this title of the return of service of the notice of hearing and any temporary protective order, or of the writ of attachment if issued without notice, whichever event occurs first.”
Kenny did not immediately respond to an e-mail query seeking comment on why he asked that a lawsuit in the interests of the Modoc County and its taxpayers be kept from the public.
Friday, November 4, 2011
Thursday, November 3, 2011
Part 3 of a Series
Fiscal Restoration Plan continued
Securitization of County Assets:
The original plan called for a full securitization. In the previous year the budgeted set aside for debt service was $1,500,000. The county was not able to set aside the full $1,500,000 in FY 10/11. The figure was slightly in excess of $900,000. Further the county had to finance outlays for audit costs in the previous fiscal year. After a rigorous budget process for FY11/12, it again appears that the county can support a debt service level in the order of $800,000 to just under a million.
In order to meet this objective to securitize assets, the county has retained an underwriter and bond counsel. The county has a draft Preliminary Private Placement Memorandum Dated May 10, 2011. This document outlines terms for securitization of county assets. The county also has been provided an "Estimated Debt Service Chart for Modoc County (1)." The original proposed par amount of the bond proceeds was $15,000,000 in order to finance underwriting and issuance costs, a debt service reserve fund, and available proceeds in order to restore the treasury. Review of this chart indicates that financing is not available for the $15,000,000 par amount if interest rates exceed 7%. Current quoted rates to the county exceed 7% total interest charge. Additionally, previous fiscal year's set aside and this year's budget indicate the county general fund can support debt service below $1,000,000, and practically in the $800,000-$950,000 range. If the par amount of the bonds can be reduced to a level where such annual debt service levels is attainable, then a financing may be possible.
The current FY11/12 adopted budget shows proceeds from a partial financing for the treasury based on this chart. In order to reduce the PAR amount of the bonds, the financing assumes that the county saves the debt service reserve fund amount in FY11/12 rather than incorporating this into the PAR amount of the bonds. Similarly, the financing assumes a sale of fixed assets as described above. Since the PAR value of the bonds is reduced by these two measures in the budget, there is a commensurate reduction in the required Debt Service Reserve Fund amount. The estimated amount would be $1,050,000 rather than the previous $1,500,000. This amount is indicated within the FY11/12 budget as a designation under non-general fund expenditures.
In order to fund this designation for debt service reserve fund, the county will have to utilize an approximately $800,000 net increase in general fund balance available and deficit spend some of the existing general fund balance which was saved in FY10/11.
The budget assumes a financing in the late spring near the end of the fiscal year. Currently the county is in a dry period. Secondly, if a financing were to occur prior to saving the debt service reserve fund designation, the PAR value of the bonds would require inclusion of the set aside amount to ensure sufficient Fund Balance Available in the treasury for financing needs. This would lead to annual debt service beyond what the county can afford. Similarly, a financing early in the fiscal year would require inclusion within the budget of the first installment of semiannual interest which would lead to an imbalanced budget.
Finally, the county will continue to evaluate and pursue options that will reduce the cost of securitizing county assets. Options being evaluated beyond the draft preliminary private placement memorandum terms include use of a bond ladder, utilization of a syndicate or individual banks as underwriters for a portion or all of the amount, use of a mixed offering such as incorporating both a taxable and non-taxable transaction, and utilization of a large co-signer in order to reduce interest costs so the county can support the debt service.
Also as the county moves closer to a securitization, closure of outstanding audits and continued improvement by the county staff to meet audit findings will continue to be relevant for engaging in such a transaction.
Fiscal Restoration Plan continued
Securitization of County Assets:
The original plan called for a full securitization. In the previous year the budgeted set aside for debt service was $1,500,000. The county was not able to set aside the full $1,500,000 in FY 10/11. The figure was slightly in excess of $900,000. Further the county had to finance outlays for audit costs in the previous fiscal year. After a rigorous budget process for FY11/12, it again appears that the county can support a debt service level in the order of $800,000 to just under a million.
In order to meet this objective to securitize assets, the county has retained an underwriter and bond counsel. The county has a draft Preliminary Private Placement Memorandum Dated May 10, 2011. This document outlines terms for securitization of county assets. The county also has been provided an "Estimated Debt Service Chart for Modoc County (1)." The original proposed par amount of the bond proceeds was $15,000,000 in order to finance underwriting and issuance costs, a debt service reserve fund, and available proceeds in order to restore the treasury. Review of this chart indicates that financing is not available for the $15,000,000 par amount if interest rates exceed 7%. Current quoted rates to the county exceed 7% total interest charge. Additionally, previous fiscal year's set aside and this year's budget indicate the county general fund can support debt service below $1,000,000, and practically in the $800,000-$950,000 range. If the par amount of the bonds can be reduced to a level where such annual debt service levels is attainable, then a financing may be possible.
The current FY11/12 adopted budget shows proceeds from a partial financing for the treasury based on this chart. In order to reduce the PAR amount of the bonds, the financing assumes that the county saves the debt service reserve fund amount in FY11/12 rather than incorporating this into the PAR amount of the bonds. Similarly, the financing assumes a sale of fixed assets as described above. Since the PAR value of the bonds is reduced by these two measures in the budget, there is a commensurate reduction in the required Debt Service Reserve Fund amount. The estimated amount would be $1,050,000 rather than the previous $1,500,000. This amount is indicated within the FY11/12 budget as a designation under non-general fund expenditures.
In order to fund this designation for debt service reserve fund, the county will have to utilize an approximately $800,000 net increase in general fund balance available and deficit spend some of the existing general fund balance which was saved in FY10/11.
The budget assumes a financing in the late spring near the end of the fiscal year. Currently the county is in a dry period. Secondly, if a financing were to occur prior to saving the debt service reserve fund designation, the PAR value of the bonds would require inclusion of the set aside amount to ensure sufficient Fund Balance Available in the treasury for financing needs. This would lead to annual debt service beyond what the county can afford. Similarly, a financing early in the fiscal year would require inclusion within the budget of the first installment of semiannual interest which would lead to an imbalanced budget.
Finally, the county will continue to evaluate and pursue options that will reduce the cost of securitizing county assets. Options being evaluated beyond the draft preliminary private placement memorandum terms include use of a bond ladder, utilization of a syndicate or individual banks as underwriters for a portion or all of the amount, use of a mixed offering such as incorporating both a taxable and non-taxable transaction, and utilization of a large co-signer in order to reduce interest costs so the county can support the debt service.
Also as the county moves closer to a securitization, closure of outstanding audits and continued improvement by the county staff to meet audit findings will continue to be relevant for engaging in such a transaction.
Vallejo's Bankruptcy Over
Wednesday, November 2, 2011
Bulletin
Rudometkin Resigns
Rick Rudometkin, director of public works and transportation but more recognizable as the controversial chief administrative officer for Modoc County following the disclosure that millions of dollars had been illegally withdrawn from the treasury, has resigned his position.
His resignation, submitted to Modoc County Board of Supervisors Chair Loren “Shorty” Crabtree on Nov. 1, was confirmed by his replacement Chester Robertson. No details explaining the resignation were available, and Rudometkin did not immediately respond to an e-mail media query.
His final day will be Dec. 30, according to Robertson.
Rudometkin, generally considered a temporary fix replaced Mark Charlton who was pushed out after he disclosed that an estimated $20 million had been misappropriated from the treasury.
In Charlton’s wake and supported by Supervisor Patricia Cantrall, Rudometkin even though he did not have minimum qualifications to hold the county’s top administrative job, was hastily hired by the Dan Macsay-led Board of Supervisors.
Last May as it became apparent that Robertson was to be Rudometkin’s replacement or superior, Rudometkin resigned the CAO position and in June returned to the public works department.
Rudometkin Resigns
Rick Rudometkin, director of public works and transportation but more recognizable as the controversial chief administrative officer for Modoc County following the disclosure that millions of dollars had been illegally withdrawn from the treasury, has resigned his position.
His resignation, submitted to Modoc County Board of Supervisors Chair Loren “Shorty” Crabtree on Nov. 1, was confirmed by his replacement Chester Robertson. No details explaining the resignation were available, and Rudometkin did not immediately respond to an e-mail media query.
His final day will be Dec. 30, according to Robertson.
Rudometkin, generally considered a temporary fix replaced Mark Charlton who was pushed out after he disclosed that an estimated $20 million had been misappropriated from the treasury.
In Charlton’s wake and supported by Supervisor Patricia Cantrall, Rudometkin even though he did not have minimum qualifications to hold the county’s top administrative job, was hastily hired by the Dan Macsay-led Board of Supervisors.
Last May as it became apparent that Robertson was to be Rudometkin’s replacement or superior, Rudometkin resigned the CAO position and in June returned to the public works department.
Fiscal Restoration Plan
Part 2 of a SeriesSale of Fixed Assets:
The FY11/12 Modoc County adopted budget was approved on Sept. 30, 2011. This budget includes an estimated sale of fixed assets in the amount of $3,448,083. It is necessary to move forward with alternatives such as sale of fixed assets because the county cannot support debt service of a full restoration of treasury through Certificates of Participation. A budgeted sale of affixed assets is anticipated to reduce the total par value of the Certificates of Participation to a level of annual debt service that the county general fund can support. In addition to assisting in the reduction of the PAR amount of the bond proceeds, the sale affixed assets will serve as an essential measure to ensure a back-up plan to finance cash flow needs.
The county has identified essential cash flow needs that require attention prior to moving into the FY 12/13 budget year in order to meet deadlines correlated with restricted funds. Provided the high estimates and uncertainty of a partial financing through Certificates of Participation and combined with the unapproved status of county audits, the county must ensure alternative measures are in place to support cash flow needs of FY12/13.
The concept of selling buildings in such short order by the end of the fiscal year is an aggressive schedule; however, there is a ready market for facilities with secure government leases given the current adverse climate for commercial real estate. The budget incorporates professional and specialized budget capacity in order to conduct necessary work such as appraisals, pest reports, toxic reports, and legal assistance for negotiation of capital leases. The current revenue estimates in the budget were arrived at by utilizing 70% of replacement value until such appraisals can be conducted. The facilities include buildings that are currently not on the list, or at the end of the list that has been indicated for utilization in the draft Private Placement Memorandum.
CGJA’s Response to DA Brooke’s Silence
Editor’s Note: In the October issue of the Modoc Independent News we ran a front page article about District Attorney Christopher Brooke’s silence when asked by the Modoc County Grand Jury to begin an investigation of the treasury misappropriation.
Readers will recall the Wes Cook grand jury told Brooke in a letter dated June 8 that they had enough information to proceed with the investigation. To our knowledge Brooke has not responded to the grand jury’s request.
To pursue the matter further the Modoc Independent News asked the California Grand Jury Association (CGJA) what recourse the Modoc County Grand Jury or the general public had in dealing with a recalcitrant district attorney.
The following is the CGJA’s reply.
“You specifically ask what recourse the public and the press have in making the district attorney accountable for the situation you described. As a support organization for grand juries in California, it is beyond our purview to opine on what the public or press could do in these circumstances. However, we can tell you based on our experience with grand jury law in California what the law provides a grand jury can do.
“First of all, the law does not provide for a grand jury communicating with the public by an “open letter.” A grand jury communicates by its final report containing findings and recommendations.
“A current or a subsequent grand jury can under the California Penal Code institute an investigation of its own of any local public official’s conduct and make findings and recommendations in its final report of that investigation. In such circumstances, the public official is compelled by law to make a written response to the presiding judge of the superior court.
“However, there is no obligation for a public official to make a response to an “open letter.” Nor does the law authorize a judge to conduct an investigation of misconduct or control a district attorney’s prosecutorial discretion.
“We want it to be clear that we are neither commenting on the substance of the situation you described nor what the grand jury should do in the situation. We hope the foregoing is helpful.”
Editor’s addendum: The CGJA’s opinion was written by William E. Trautman, chair of the association’s legislative affairs committee. It should be noted that a misunderstanding may have occurred. The Modoc County Grand Jury did not write an “open letter” to DA Brooke. It wrote a private letter to Brooke which was obtained by the Modoc Independent News.
Editor’s Note: In the October issue of the Modoc Independent News we ran a front page article about District Attorney Christopher Brooke’s silence when asked by the Modoc County Grand Jury to begin an investigation of the treasury misappropriation.
Readers will recall the Wes Cook grand jury told Brooke in a letter dated June 8 that they had enough information to proceed with the investigation. To our knowledge Brooke has not responded to the grand jury’s request.
To pursue the matter further the Modoc Independent News asked the California Grand Jury Association (CGJA) what recourse the Modoc County Grand Jury or the general public had in dealing with a recalcitrant district attorney.
The following is the CGJA’s reply.
“You specifically ask what recourse the public and the press have in making the district attorney accountable for the situation you described. As a support organization for grand juries in California, it is beyond our purview to opine on what the public or press could do in these circumstances. However, we can tell you based on our experience with grand jury law in California what the law provides a grand jury can do.
“First of all, the law does not provide for a grand jury communicating with the public by an “open letter.” A grand jury communicates by its final report containing findings and recommendations.
“A current or a subsequent grand jury can under the California Penal Code institute an investigation of its own of any local public official’s conduct and make findings and recommendations in its final report of that investigation. In such circumstances, the public official is compelled by law to make a written response to the presiding judge of the superior court.
“However, there is no obligation for a public official to make a response to an “open letter.” Nor does the law authorize a judge to conduct an investigation of misconduct or control a district attorney’s prosecutorial discretion.
“We want it to be clear that we are neither commenting on the substance of the situation you described nor what the grand jury should do in the situation. We hope the foregoing is helpful.”
Editor’s addendum: The CGJA’s opinion was written by William E. Trautman, chair of the association’s legislative affairs committee. It should be noted that a misunderstanding may have occurred. The Modoc County Grand Jury did not write an “open letter” to DA Brooke. It wrote a private letter to Brooke which was obtained by the Modoc Independent News.
Tuesday, November 1, 2011
Fiscal Restoration Plan for Modoc County
Adopted by Board of Supervisors Oct. 25, 2011
Adopted by Board of Supervisors Oct. 25, 2011
Editor’s Note: The following is the word-for-word fiscal restoration plan adopted by the Modoc County Board of Supervisors. We have reformatted some paragraphs to meet newspaper style and facilitate ease of reading.
It is our intention to run this fiscal plan as a series, breaking it down by subject to allow our readers to comment on each segment of the series. As you will see in reading the series we have added questions and answers (Q&A with CAO Chester Robertson) in an effort to clarify statements that otherwise might be either vague or incomplete as it applies to each topic.
The Q&A will be in italics to set it apart from the general text of the fiscal plan at the end of each series.
Part 1 of a Series
Fiscal Restoration Plan
Background:
This plan is intended as an update to the "Assessment and Strategic Plan Relative to County of Modoc Financial Condition" as outlined in a letter to the State Controller's Office dated April 13, 2010. The current plan to address the treasury deficit was submitted to the State Controller's Office in a letter, dated April 13, 2010. The letter was reviewed and approved by the Board of Supervisors on April 13, 2010.
The letter states that the county is "pursuing a plan to issue Certificates of Participation ... If the county is unable to sell the full amount of Certificates of Participation we will notify your office. Other possible options will be considered such as a partial re-funding of the treasury by a lesser amount of bond proceeds. We would consider other pay-down plans that your office, other state and federal agencies, and other county treasury participants could form an agreement on terms, conditions, and amounts. Also, we would consider the potential of drafting special legislation to allow Modoc County Treasury cash deficits until repayment of cash deficits is accomplished."
Approximately 19 months have transpired since this letter was approved and sent to the controller's office. To date the county still is in the process of approval of its audits, and a financing through securitization of county assets has not occurred to address the treasury deficit. The county has worked towards meeting this goal, and in the process it has been found that a full financing with its associated levels of debt service is not sustainable.
There have been additional pressures placed upon the county due to the economy such as declines in tax revenue, increases in interest costs, challenges of the reduced staffing levels, and costs associated with meeting audit requirements. The county continues to have a hospital fund in which there is projected approximate $13,500,000 negative balance. A hospital district was voted in by the voters, and the terms of that vote leave the county with this negative balance. The hospital facilities were transferred to the district.
It is often stated that the simplest solution to a complex problem is a complex solution. The following is a list of objectives in order to continue further progress on the goal to restore the Modoc County treasury. This list lays out a complex multifaceted approach to restoration of the treasury.
In order to meet the objectives outlined below the county is reliant upon both revenue enhancements and cost reductions in an environment that challenges the county with many revenue declines and cost increases. This multifaceted approach to restore the treasury relies heavily on a partial financing preceded by the sale affixed assets. To assist in reducing the par value of the financing; it will necessitate not only the sale of affixed assets, but diligent pursuit of the supporting objectives following these two primary goals.
Q. Does this plan include taxes as a way to raise revenue?
Robertson. The “Fiscal Restoration Plan” doesn't pre-suppose new taxes. Instead it says methods of voter-initiated taxation will have to be evaluated. This is because absentee-owner tax payers are defaulting on their property taxes. We have to figure out a way to bring tax revenues back to historic levels, in other words, back to where they were before these defaults.
Q. Has this plan been sent to the SCO? If so when. If not, when?
Robertson. The plan has not been sent to the SCO. Elements of the plan have been discussed with affected stakeholders, and still in that process before distribution to the SCO.
Q. Does the county need a stamp of SCO approval to proceed with the plan? If so, have you any idea of when the SCO will respond?
Robertson. It is a wise courtesy to provide the plan, and the original plan submitted states that the county would provide an update if a full financing did not occur. The SCO office’s responsibility is to ensure compliance with certain elements of the Government Code, not governance of counties and cities. Therefore, I would not expect a response unless there are particular elements they feel violate the government code.
Q. Do you have any idea of when the SCO is going to act on the state-ordered audits?
Robertson. I do not have any information regarding timelines in this regard. You may want to contact the County Auditor's Office to see if she has any recent correspondence in this matter.
More on Montebello and the State Controller
http://latimesblogs.latimes.com/lanow/2011/11/audit-slams-montebello-for-self-dealing-misused-funds.html
Modoc National Forest Sponsors “A Gathering of Veterans”
“A Gathering of Veterans” will be held on Thursday November 10th at 11 a.m. at the Veterans Hall in Alturas. The event will celebrate the contributions and sacrifices of local veterans and their families to our freedom. The celebration will be sponsored by the Modoc National Forest with support from Post 3327 of the Veterans of Foreign Wars.
The public is invited to join us in honoring veterans from our community including those who work for the U.S. Forest Service. Speakers will include Kimberly Anderson, Forest Supervisor of the Modoc National Forest and Harry Hitchings from the Modoc County Veterans Services Office, among others. A social time will follow the ceremonies.
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