Placentia will lose about $16 million it lent to an ill-fated railroad corridor project that left two city officials facing criminal charges and the small city near financial ruin.
City officials and council members, including the mayor, said Tuesday they were looking at a "$16-million write-off" for the loan, though an exact figure won't be available until an audit of the project known as OnTrac is complete.
"It's a sad day for Placentia," said Councilwoman Constance Underhill.
For months, the cash-strapped city in northern Orange County had known that it stood to lose millions because of the project's collapse.
Because of OnTrac's drain on the city's $39-million annual budget, Placentia has suffered budget cuts, hiring freezes and unfilled potholes over the last couple of years. The city is more than $30 million in debt.
City officials had promoted the $460-million project to replace railroad crossings throughout the city with overpasses and underpasses as a way to revitalize the city's downtown and speed freight to and from the ports of Los Angeles and Long Beach. The proposal included lowering 5 miles of track into a concrete trench.
During the project, the city spent millions for video producers, lobbyists, public relations experts and other advisors, who searched in vain for ways to secure federal dollars for the project.
A year ago, Congress approved $31 million for the project, dramatically less than the $225 million in federal transportation funds that municipal officials and their lobbyists had sought.
Meanwhile, Placentia had racked up $36 million in debt trying to keep OnTrac afloat.
In March, city Public Works Director Christopher Becker, who was in charge of OnTrac, and former City Administrator Robert D'Amato were indicted on conflict-of-interest charges tied to the project.
They have denied the allegations.
"Some of us thought some of the $16 million would be returned because it went for engineering reports or an EIR and were reimbursable," Underhill said. "But that's not true. The rest is pretty much gone."
Mayor Scott P. Brady said city officials had known for months that they weren't going to get the money back so the necessary budget adjustments had already been made.
"There's no financial cost to the city," Brady said, "because we were not going to get it back anyway."
But OnTrac critics said Placentia would continue to pay a steep price for the boondoggle, said Craig Green, a member for Citizens for a Better Placentia.
Before OnTrac, the city had a $13-million reserve and $5 million in debt, Green said.
Now the city finds itself in massive debt, "a public works backlog for jobs like new sidewalks, and zero reserves," Green said.
"They slashed city services, closed City Hall every other Friday, while staffing and summer programs have been cut."
Green added: "Go ahead and write it off, but don't tell me it's not going to hurt."
The city recently hired a new finance director, Terrence Beaman, who has been on the job about a month, said Matt Reynolds, a city spokesman. Beaman has indicated he may not write off the loss immediately in order to explore other options, Reynolds said.
In addition, the council hired a financial consultant to conduct an audit of OnTrac finances, which would provide a detailed accounting of how money was spent.