A state review of asset transfers made by the former Hercules Redevelopment Agency prior to its abolishment last February has found that $35.4 million in property and tax revenues were made improperly and that an additional $15.6 million in affordable housing funds have yet to be transferred.
The review was released Thursday by State Controller John Chiang. According to Chiang, during the 12 months before the Hercules RDA was abolished on Feb. 1, the agency transferred $124.1 million in assets directly to the city. The state law abolishing the state’s 425 RDAs required redevelopment assets to be transferred to successor agencies and their Oversight Boards, established to wind down RDA affairs and insure all debts were paid.
In January, the city designated itself as the RDAs successor agency and a few months later an Oversight Board was appointed.
Chiang’s office is required to examine assets transfers by all former RDAs, a task that will take months. Hercules is one of four RDAs examined so far.
See all of Patch's coverage on the financial problems in Hercules.
Of the total transfers made, Chiang said $31.4 million in property – including and the former Yellow Freight property – were improper. In addition, the Controller said $4 million in property tax increment revenue received last December was improperly diverted to pay other bills.
That diversion forced a default on RDA bond payments, forcing Ambac AssuranceCorp., the agency’s bond insurer, to make the debt service payments on $116 million in bonds. Ambac subsequently sued to get its money back, litigation that was resolved earlier this year.
In addition, the Controller said his review found that some $15.6 million in assets held in former RDAs Low and Moderate Income Housing Fund were never transferred and must be handed over to the successor agency for disposition by the Oversight Board.