The city of Bell nearly doubled taxes for sewer, trash and other public services without voter approval — then illegally funneled more than $1 million of the proceeds to then-City Administrator Robert Rizzo and his assistant, a state audit released Wednesday shows.
The long-awaited audit provides the clearest link to date between two of the leading elements of the scandal in Bell — the city's illegal tax increases and the outsized pay and benefits provided to its former leaders, eight of whom were arrested Tuesday on charges of public corruption.
The controller's office earlier had found that Bell overcharged residents and businesses more than $5.6 million in taxes and fees. But the audit was able to trace the flow of the money to Rizzo as well as to then-Assistant City Manager Angela Spaccia.
In 2007, according to the report, Bell increased the amount residents and businesses paid for such services as sewers, recycling and lighting, generating an extra $4.7 million in revenue between 2007 through 2009. The city used $1.1 million of that sum on Rizzo and Spaccia's salaries, according to the auditors, who concluded that the payments were illegal because revenues from those taxes should have been used only for the specific services for which the fees were levied.
"The California Constitution stipulates that charges against assessment district must be directly related to services provided to the district," the report said.
Rizzo made nearly $800,000 in salary while Spaccia made $376,000, according to records reviewed by The Times.
At the city's request, forensic accountants working for state Controller John Chiang spent weeks reviewing thousands of pages of documents, concluding that Rizzo's unchecked control over the city's finances created "a perfect breeding ground for fraudulent, wasteful spending."
Rizzo and other top city leaders stepped down in July after The Times revealed that they were among the highest paid municipal officials in the nation. Since then, The Times has reported on $1.5 million in city loans granted to more than 50 city employees, efforts by Rizzo and others to conceal their high pay and evidence that council members received lavish pay for meetings they never attended.
In all, auditors said, they have found $29.3 million in "questionable costs" that included several bond issues, the loans to city officials and a car dealership, and illegally collected taxes. Officials said they plan to meet with city officials to discuss the costs and determine whether any more money needs to be refunded to taxpayers or bondholders.
The audit raised red flags about the city's financial dealings with two businesses owned by Dennis Tarango, the city's privately contracted planning director. Tarango is also a business partner with Rizzo in a horse-racing venture.
Since 1995, the city has paid more than $10.4 million to Trango's firms. Those payments were made even though a contract with one of the companies, D&J Engineering, expired in 1997 and the city "did not have the legal authority to pay for invoices."
The audit also notes that the relevance and necessity of the work is "highly questionable." Each invoice billed the city a total of $20,000 without identifying what services had been performed, the audit found.
Tarango did not return several calls seeking comment.
The controller's office also took aim at city bonds and how Bell administered the money. In 2003, voters approved Measure A, which authorized up to $70 million in bonds to develop the Bell Sports Complex, which would include a gym, library, performing arts theater, and public safety and civic facilities. But according to the audit, there were no plans, budgets, milestones or timeframes for completion for the project. So far the city has issued $50 million in bonds.
The audit found that $23.5 million had been placed in a non-interest bearing commercial checking account, losing the city about $1.7 million in potential interest income. In 2007, the city issued a second bond for $35 million without any rationale or explanation why it needed the money.
"In six years, it is unclear what has been accomplished except for acquiring a site that consists of a dirt lot with a masonry wall around it and a water pumping station in the middle," the audit states.
The controller's findings come a day after L.A. County prosecutors charged Rizzo, Spaccia and six other Bell officials with dozens of felony counts of misappropriation of public funds, among other charges. Last week, the state attorney general's office filed a lawsuit against several Bell city officials, asking a judge to have them removed from office and pay back some of the compensation they received. Atty. Gen. Jerry Brown is also asking that the city be placed under receivership.
Wednesday's audit is only the first of three, Chiang said. Two additional audits will focus on the city's use of federal and state money and on outside auditors hired by the city to review the books.
"I think it's pretty clear when you have a city out of control that the issues we identified with today's audits should have seen the light of day, especially by a team of so-called experts," Chiang said.
He said he expected to find more problems."When you have a rat's nest, I would not be surprised that there are further bad practices," Chiang said.
Bell's new interim city manager said he welcomed the controller's reports. "This is even more proof that the guy [Rizzo] was manipulating the city," said Bell's interim administrator, Pedro Carrillo. "And we look forward to continuing to work with the controller to make sure that there aren't other irregularities. We have a lot of work ahead of us correcting the mistakes that have been made in the past."