Auditor: Caltrans Mismanaged Millions for Homes Near 710 Freeway

Monday, August 20, 2012

Sixty years ago, planning began on an extension of State Route 710 to plug a 4.5-mile gap between freeways in metropolitan Los Angeles.

It never got built, but the planning didn’t stop. And neither did property acquisition by the California Department of Transportation (Caltrans) until 1973 when public controversy and a federal injunction brought it to a close. By 2012, the agency was managing 460 parcels along the route, 398 of which were developed as residential. The rest were commercial/industrial (6) or vacant (56).

The California State Auditor took a look at the SR 710 properties and published a scathing report this month accusing Caltrans of “poor management” that cost the state millions of dollars under suspicious circumstances. The report said Caltrans lost $22 million in rental income since July 2007 because tenants are paying about 43% below market value. Fifteen of the tenants are state employees.

The audit does not recommend selling the properties. Their estimated value is $238 million, but they would probably only net the state $40 million because of legal restrictions of the Roberti Bill. The 1979 legislation might be interpreted to require the state to offer the properties at significantly reduced prices to any current tenants who have low or moderate incomes.

From July 2008 to January 2011, Caltrans collected net rental income of $12.8 million, but spent $22.5 million to repair the properties. That works out to about $6.4 million a year for maintenance and repairs, but Caltrans couldn’t document that very many of the projects were necessary or reasonable. The audit was triggered after a story in the Los Angeles Times highlighted a roof replacement on a 710 home that cost $103,443—and then leaked.

While Caltrans contracted out some of the work itself, it often asked the Department of General Services (DGS) for assistance. Caltrans dealt mostly with a DGS handyman group—the 16-person Direct Construction Unit—but didn’t have a contract spelling out terms of service and barely tracked millions of dollars it made available to them.

Four of the five small businesses that sold more than $300,000 worth of goods to the unit were owned by members of a single family. The chief of the unit told the auditor that he was not aware of the relationships. The unit also had four relatives living in the 710 homes.

The auditor’s report appears just as the 710 extension has re-emerged as a prominent issue. Last Monday, the Pasadena City Council voted to oppose three new alternative routes being touted while the Los Angeles Metropolitan Transportation Agency ponders a dozen different options as part of three-year environmental review that runs to 2014.

This isn’t the first time the state has turned a critical eye on Caltrans’ handling of the 710 properties. In 2006, a legislative audit found that Caltrans was negligent in its maintenance of the properties and lacked an accurate surplus inventory. In 2009, legislation was introduced in the Assembly to force Caltrans to sell the properties, but it never emerged from committee.

The state auditor’s report blames the 710 hangup on “a variety of reasons related to the federal environmental review process.” But there have also been intense political struggles between the surrounding municipalities, civil rights issues, property rights issues and the personal concerns of area residents.

And now, a touch of scandal. 

–Ken Broder


To Learn More:

Caltrans Spent Millions on Unjustified House Repairs, Audit Says (by Jack Dolan, Los Angeles Times)

State Auditor Says Caltrans Cost State Millions on 710 Properties (by Lauren Gold, San Gabriel Valley Tribune)

Report on Caltrans’ “Poor Management of State Route 710” (California State Auditor) (pdf)

South Pasadena Official Welcomes Pasadena to the 710 Fight (by Lauren Gold, San Gabriel Valley Tribune)

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