(Santa Barbara Co) Council to revisit its proposed response to Grand Jury report

By Carol Benham/Contributing Writer, LompocRecord.com -

The City Council will try again Tuesday to approve a response to the Santa Barbara County Civil Grand Jury’s findings and recommendations stemming from the failure of Lompoc Housing and Community Development Corporation.

A second LHCDC item —the long-awaited comprehensive report prepared by a consultant on all funds given to LHCDC —has been postponed until Sept. 18.

On Aug. 21, councilmembers rejected a proposed response to the Grand Jury, criticizing both the tone of the staff’s language and the rejection of all recommendations made by the Grand Jury in its report, “A Failure of Oversight: Lompoc Housing and Community Development Corporation,” released in June.

The response to the Grand Jury’s report is due Thursday.

The revised response includes a policy suggested by council members during their previous discussion that nonprofits that receive more than $50,000 a year in city funds must submit an independent financial audit at their own expense. The policy would also apply to nonprofits that receive less than $50,000 a year from city funds, but have an annual budget in excess of $100,000.

Last October, Councilwoman Cecilia Martner asked staff to prepare a policy establishing procedures to monitor city contracts, loan requirements and compliance with federal and state regulations governing the use of public funds. Martner also asked that the policy include clear steps the city would take to enforce compliance. The policy was originally due in December 2011, but has yet to be presented to council.

In the new response to the Grand Jury, staff included requirements that that the council wanted incorporated into the policy. The response lists possible repercussions for agencies that fail to comply with audit requirements, including the repayment of grants or loans previously awarded by the city, and the forfeiture of grant or loan amounts already approved but not disbursed.

The Grand Jury report documented years of notifications from the county and the city, primarily by the city’s Redevelopment Agency, that LHCDC was not complying with financial audits, loan terms and affordability standards for its low-income housing properties.

The revised response to Grand Jurors acknowledges that oversight of LHCDC was inadequate, and places the blame on past City Councils.

“The City Council regrets inactions by Lompoc City Councils that have diminished the public trust. In light of that and as a result of the recent very unfortunate situation regarding LHCDC, the Council is taking steps to improve its procedures to protect those expenditures and ensure that accountability,” the draft response states.

The comprehensive report on the history of all loans granted to LHCDC scheduled that will presented Sept. 18 has now been delayed three times. The previous delay was at the request of the city, because Councilwoman Ashley Costa would not be in attendance when it was scheduled to be presented Aug. 21.

The consultant hired to produce the comprehensive report, Urban Futures, Inc., requested a delay in May, explaining more time was needed due to the complexity and number of LHCDC’s loan arrangements with the city and refinancing of properties that required the subordination of the city’s existing loans to new lenders.

If the comprehensive report is presented on Sept. 18, it will be two weeks shy of one year since the report was initially requested by Costa, on Oct. 4, 2011.

The initial report prepared by city staff was presented in December, but failed to include significant information the council had requested, including information on LHCDC’s loan defaults and its compliance record with housing covenants and reporting requirements.

The initial report also omitted outstanding loans on two foreclosed vacant lots the nonprofit had failed to develop, and did not disclose that the city was ordered to repay the U.S. Treasury $140,000 for one of the two loans.

Tuesday’s agenda also includes a recommendation by the Planning Commission that the zoning ordinance for the Old Town Commercial District be amended to allow professional office uses in ground floor buildings.

The Council meeting begins at 7 p.m. in Council Chambers, 100 Civic Center Plaza.