The troubled city of Montebello, Calif., took another financial hit last week when federal housing officials suspended funding to the city and demanded repayment of $5 million in grants, according to local news reports.
U.S. Department of Housing and Urban Development officials told the city last week it must pay back $2.7 million on top of $2.2 million already owed to the federal agency. HUD also froze Montebello’s access to affordable housing funds, citing 31 violations, according to the Los Angeles Times.
The Los Angeles County city, with more than $100 million in debt, may go bankrupt if it is unable to get a bridge loan in the next six months, according to a city official.
Interim city administrator Peter Cosentini said in a memo to City Council members last week that the city will go bankrupt if it is unable to get a loan by this fall and make massive cuts, local news reports said.
Montebello, which has $126 million of outstanding bond debt, has seen its financial problems intensify this year, including a rare audit by the California controller announced last week.
State Controller John Chiang sent a letter to city officials earlier this month notifying them his office will audit Montebello’s finances because it has reason to believe that its annual reports are “false, incomplete, or incorrect.”
Last year, the controller audited the scandal-plagued city of Bell after press reports broke that it was paying former city manager Robert Rizzo about $800,000 a year.
Chiang’s letter cited concerns about two “off-the-books” bank accounts that have been open for more than 10 years, the use of $15 million of redevelopment funds used to pay restricted fund loans, and Montebello’s use of HUD funding.