LOS ANGELES — Bell, Calif., which achieved national notoriety after corrupt leaders pilfered city coffers, has turned a financial corner, officials say.
The new start comes with the aid of court settlements totaling $5.5 million and a $15.5 million surplus property sale.
In May 2012, State Controller John Chiang warned in a report that the city could end the year with a $1.1 million general fund shortfall.
Today, the city has $21 million in reserves partly due to settlements with its auditor and a law firm that city leaders alleged both failed to warn about fraud being perpetuated by city leaders.
The city settled its lawsuit against Mayer Hoffman McCann, the accounting firm that formerly audited the city's books, for $3 million.
"We thought it was a better outcome for the city than continuing with the litigation - clearly Mayer Hoffman thought the same thing," said Doug Willmore, Bell's city manager.
Calls to Mayer Hoffman were not returned.
The national auditing firm, which audits dozens of California agencies, was fined $300,000 last year by the California Board of Accountancy and placed on probation for two years.
In a 2010 report, Chiang called the accounting firm, which has 30 offices across the country, a "rubber stamp" on the actions of corrupt city officials.
The number of public entities Mayer Hoffman works for in California has dropped from 67 in 2010 to 25 in 2012, according to information provided by the controller's office.
The city also settled a lawsuit against former City Attorney Edward Lee and his former firm, Best, Best & Krieger, for $2.5 million.
"The same factors applied here," Willmore said. "There are all sorts of risk associated with litigation. We thought this was the best we could do for the city."
Willmore also pointed out that the best defense for the city's former accounting firm and city attorney is "we were lied to - the bad guys were working for the city."
The working-class city of 35,000 hit the spotlight in 2010 following news reports that Robert Rizzo, its former city manager, was collecting a $1.18 million salary counting benefits and Angela Spaccia, the assistant city manager, was receiving $564,000.
Rizzo, who pleaded no contest to corruption charges in October, returns for sentencing on March 12. Spaccia, convicted on 11 felony counts in December, is scheduled for sentencing on Jan. 22. Five former council members were convicted on multiple counts of misappropriating public funds, but are being retried on several other counts that a jury failed to reach a decision on.
A judge will determine how much restitution is owed the city during sentencing, Willmore said.
The city also closed Dec. 6 on an agreement with Dexia in which the city paid the company $29 million, rather than the $35 million owed for principal and interest on bonds that went into default. Recovery in the commercial real estate market enabled the city to sell the property purchased with the bond proceeds at an amount acceptable to Dexia, Willmore said.
Pacific Industrial has started grading on the property and the first building in the 800,000-square-foot development is expected to be completed in October 2014.
"It's a real financial turnaround for the city," Willmore said. "We dug ourselves out of a hole, now we need to rebuild the commercial tax base of the city."
Pacific also purchased a 14-acre city-owned parcel adjacent to the Dexia property for $15.5 million.
To Willmore the real crime committed by Rizzo was that "he let the city crumble for the past 20 years."
But now that the city audits are completed and city leaders are contemplating a balanced budget for 2013-14 for the first time since the corruption came to light, leaders plan to focus on revitalizing the city and growing the tax base.
"We had to triage. We did three years of audits in a year's time," Willmore said. "Now, we are at the point where can start efforts to rebuild the city. That is the focus of 2014."
