Already at the brink of bankruptcy, Placentia may now owe Caltrans millions for the improper use of funds allocated to an ill-fated plan to improve rail corridors.
A multimillion-dollar assessment could be a crippling blow to a city that has already gone $6 million in debt because of the failed $650-million project.
Assemblyman Todd Spitzer, a former Orange County supervisor, was briefed by Caltrans officials Wednesday and said that although he was not told how much the state might seek from the northern Orange County city, he believed it could be enough to bankrupt Placentia if the state asked for the money in a lump sum.
"At the end of the day, I think it's going to be in the millions, and the question is what repayment schedule we're going to work out," said Spitzer (R-Orange). "A lump sum would bankrupt Placentia. They should be given a work-out schedule."
The so-called OnTrac project, launched in 1998 and since shelved, was supposed to reduce the negative effects of busy railways but instead dragged Placentia into a financial tailspin. In the end, it resulted in criminal charges against its former city manager and public works director -- two chief boosters of the rail venture.
"Obviously, we don't have the wherewithal to come up with any money -- let alone [millions of dollars]," said Councilman Scott Brady, who said he had not been briefed on the draft Caltrans audit.
The audit was scheduled to be presented July 24, but has been moved to September, Spitzer said.
In past years, the rail initiative forced the city to sell park land, float bonds and slash city spending. Town leaders even considered eliminating its Police Department. Because of those desperate measures, Mayor Constance Underhill said Placentia would probably be unable to liquidate any additional assets to pay the Caltrans tab.
"I think all our departments are already squeezed as far as they can go," she said.
The OnTrac project was shelved last year after it failed to receive federal funding and the city ran out of money to keep it afloat.
Former Public Works Director Christopher Becker and former City Manager Robert D'Amato face felony conflict-of-interest charges in connection with their work on the project. Both have denied wrongdoing. They are scheduled for a pretrial hearing in October.
City planners wanted to build 11 overpasses and lower five miles of Burlington Northern Santa Fe Railway tracks into a concrete trench. They had hoped the project would revitalize the city's Old Town district, reduce noise and improve the movement of cargo to and from the ports of Los Angeles and Long Beach.
A large chunk of state money was used to buy private property to make room for the project and to fund the initiative's lone success story -- the $18-million Melrose Street underpass. The city also spent more than $9 million for a passel of consultants, including video producers, lobbyists, public relations experts, the project director and various advisors.
Councilman Greg Sowards said the Caltrans assessment -- which he'd heard could be as much as $12 million -- was communicated to the city through a July 6 meeting with City Manager Robert C. Dominguez.
Dominquez left for vacation the same day and could not be reached for comment. A Caltrans spokesman said the audit was ongoing and would not confirm the dollar figure.
City Council members expect the state agency to formally file its draft audit with Placentia by the end of the month, triggering a 30-day deadline for the city to respond.
"At this point, I think we're going to fight it," Underhill said. "If they waited all this time to say, 'Gee, you have to pay us back,' I'm sorry, we could have cut the costs off way back then if we had known."
Spitzer said Caltrans appeared to have missed warning signs along the way and continued to fund or reimburse the city, even though it was clear something was amiss.
"The writing was on the wall that they knew something was awry in the city of Placentia because they were paying in excess of appraised values for property and billing Caltrans in excess of what they could legally bill," Spitzer said. "You would've thought those two factors alone would have caused Caltrans to pause and question what was going on."
Meanwhile, much of the land needed for underpasses has been bought and the lobbyists have been paid, but the train tracks are still above ground. The city has, however, become one of the first in Southern California to win a quiet-zone designation, meaning that train conductors will not have to sound their horns as they approach and cross intersections in town.
Roughly 60 trains a day pass through -- a number that is expected to triple in the next decade -- and the noise has been a long-running irritant.
Still, the OnTrac fiasco has left some jaded.
"We're basically right where started a decade ago," Brady said.