Placentia officials vowed Friday to fight claims by Caltrans that the small north Orange County city owes the state more than $36 million. The money was spent for a controversial rail corridor project that devastated the town's finances.
"Our understanding of the contract is that the state has no legal right to ask for money back unless there is an erroneous or mistaken payment," Mayor Scott Nelson said during a news conference at City Hall.
Placentia officials, he said, are meeting with Caltrans attorneys to dispute a new state audit concluding that the city improperly spent $36,255,632 in state funds to pay for the now-defunct OnTrac project.
The state, Nelson said, was at least partly responsible because Caltrans approved work orders, disbursed funds and neglected its oversight duties.
"This is not good news for Placentia or for any small city doing business with Caltrans," Nelson said of the state's claim. "Why should the city be held hostage?"
The $650-million OnTrac project was shelved in 2006 after it failed to receive federal funding, dragging Placentia deeply into debt and forcing city officials to cut services and sell park land to recoup some of their losses. Planners had wanted to build 11 overpasses and lower five miles of railroad tracks into a concrete trench to help revitalize the city's Old Town district.
Former Public Works Director Christopher Becker and former City Manager Robert D'Amato are facing felony conflict-of-interest charges involving their work on the project. Both have denied wrongdoing.
In addition to claiming $36 million in questionable expenditures, Caltrans auditors designated Placentia a "high risk recipient of state and federal transportation funds." As a result, Caltrans will increase its oversight and restrictions on any Placentia transportation project that receives state and federal funding.
Of the total being sought by the state, auditors say, $7,063,818 is due to the alleged conflicts of interests involving Becker and other consultants.
Caltrans says another $4,305,379 in state funds was misused to purchase right of way for OnTrac. Among other things, auditors said the city overpaid for property, bought land it didn't need and made payments to property owners based on inaccurate or incomplete valuations.
The state says it is owed the $36,255,632 for a variety of reasons, including poor record-keeping and a lack of supporting documentation for billings and payments to subcontractors. Nelson said the city was trying to provide more documents to Caltrans to justify OnTrac's expenditures. He said he hoped Placentia and the state agency could reach a compromise.
"Caltrans has offered to work with us," he said, "though we don't feel this has been a fair process."
Caltrans Director Will Kempton has assured the city of the agency's desire not to disrupt daily operations. In a letter to officials, he said Caltrans would set a repayment schedule that would not overburden already strained finances, and would convene a team of accounting experts to help Placentia take corrective actions and adequately document how OnTrac used state funds.
"I hope this reconciliation effort will lead to a reduced amount of reimbursement to Caltrans for disallowed costs," Kempton said.