City officials in Montebello hope their recently approved budget will show lenders and residents that the city is moving in the right direction after experiencing some low points on its financial record, such as threats of insolvency and a downgraded credit rating. Lead interim city administrator Larry Kosmont commented that “That’s part of the discipline that we bring now,” when referring to increased transparency and greater disclosure of the city’s financial position. That being said, officials have pointed out that the public will likely experience a reduction in city services and possibly more fees due to the very strict and conservative budget that city leaders had to enact to address the city’s fiscal woes.
In other Montebello news, the city is now subject to an investigation by the FBI and federal prosecutors over allegations of misuse of funds and fraud involving federal housing money. City records on HUD money have been subpoenaed. The Chronicle points out that “In April, the federal Housing and Urban Development agency suspended all funding to the city and demanded that $2.2 million in federal housing grant money be repaid after a project was never completed.” At the heart of the matter is what happened to $1.3 million in HUD funds that Montebello paid a developer to build affordable housing---a project that was never completed. An initial examination of the issue revealed that the city released the funds without any valid written agreement or approval from the council. The city has now filed a lawsuit against the developer. The LA Times reports:
“It is not legal for the city to disburse those funds without council approval and a valid agreement. Kosmont said he did not know who in the city authorized issuing the check. Eight months after disbursing the money to Ku, according to the audit, the city finally signed a loan agreement with him, but still without council approval. The City Council never formally authorized then-city Administrator Richard Torres to sign off on the loan, according to the city's lawsuit. Torres said he was unaware of the lawsuit and had not been contacted by federal authorities. Asked whether he signed the contract with Ku's company without council approval, Torres said, ‘I don't know anything about [that].’”
The Los Angeles County District Attorney’s Office has also been investigating the city over” off the books" city bank accounts. In recent months it was also announced that the State Controller’s office would conduct a "Bell-type" audit to investigate financial irregularities. Back in April, we relayed that the cash-strapped city was in quite a fiscal crisis, as it had been reported by former interim city administrator Peter Cosentini that Montebello would be unable to pay its bills in the course of a few short months. Consentini ended up resigning his position due to frustration over the lack of “immediate corrective action” and his disagreement with the council’s approach to municipal finance.