Caltrans lost $22 million in rent from the homes between July 2007 and December 2011. During the same period, the agency spent $22.5 million to conduct repairs on some of the 499 properties it owns, but only collected $12.8 million in rent, according to a report from the California State Auditor.
The properties are worth an estimated $279 million, but under a 1979 law known as the Roberti Act, Caltrans tenants in Pasadena, South Pasadena and Los Angeles get first dibs on the properties, and qualified residents can buy them at below-market prices if they agree not to sell for 22 to 30 years.
Under the legislation, Caltrans stands to get about 80% less than estimated market value from any sale of the properties, according to the report.
The discounted prices would have long-term ramifications, the audit found, because they would generate only a fraction of the property tax revenues they might otherwise generate if sold at market price.
State officials agreed to probe Caltrans in 2011 at the request of Assemblyman Anthony Portantino (D-La Cañada Flintridge) after the Los Angeles Times reported that roofs installed on more than 30 homes cost taxpayers an average of $71,000, up to five times what most homeowners would pay for similar work.
In a statement Thursday, Portantino seized on the report to bolster his case that Caltrans was in no position to carry out a possible tunnel extension of the 710 Freeway.
“I can’t believe we would trust Caltrans to even consider a project the size of the tunnel when they can’t even manage properties in a fiscally responsible manner,” he said. “It’s a systematic failure on almost every level.”
Responding to the audit, Caltrans acknowledged the management problems and pledged to take corrective action.
“Caltrans understands that its management of the ‘710 properties’ has been poor and unacceptable,” agency spokesman Matt Rocco said in a statement. “To improve our stewardship of these properties, Caltrans is taking immediate corrective actions in line with the State Auditor's report.”
Rocco said the agency would explore alternatives for managing the properties. The audit suggested hiring private contractors to manage the homes while the 710 Freeway extension review is underway. Another option would be for state legislators to establish a joint powers authority between Pasadena, South Pasadena and Los Angeles to manage the properties.
Caltrans missed out on millions in rent because it offers affordable housing for certain low-income tenants, who qualified in 1981, costing the state more than $940,000 annually because the rent is lower than fair market value, according to the audit.
However, Caltrans has not been verifying income eligibility annually for the program, as is required.
Additionally, state transportation officials spent an average of $6.4 million a year on repairs on the properties, but couldn’t demonstrate that work for 18 of the 30 projects auditors reviewed was reasonable or necessary. Caltrans also failed to perform annual inspections and often authorized repairs that “far exceeded” the potential rental income of the properties.
“In fact, for 20 of the 30 properties we reviewed, Caltrans authorized repairs for which it will take more than three years' worth of rental income to recover the costs,” according to the audit’s authors.
Since 2005, Caltrans has allocated $4.7 million to the Department of General Services to maintain the properties with no oversight on how the money is spent. Auditors discovered that General Services has limited justification for the fees it charges clients, such as Caltrans, didn’t monitor its labor charges, and failed to follow state laws on purchases from small businesses.
The California State Auditor also identified about 330 hours of work inappropriately charged to managing the Caltrans homes.
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