Mission Viejo staff drops the ball
The title of this post reads “Mission Viejo staff drops the ball.” No, this post is not about the NBA finals. This story, requiring extensive investigative research, addresses the failure to draft enforceable agreements and follow through on those negotiated contracts in Mission Viejo. Considering the annual contract renewal of our City Manager the following should be included by our council in any compensation deliberations.
Local activists who monitor Mission Viejo politics will surely acknowledge that I retain public records long after the council legally authorizes our city clerk to shred same. In this case I have waited for a response to a Public Record request that is over one year old and counting. It relates to the $550 million dollar expansion of Mission Hospital.
In Nov of 2003 Mr. Charles Wilson, Director of Community Development, received a letter from the law offices of Watkins, Blakely & Torgerson, LLP that addresses the “Mission Hospital Master Plan: Table of estimated Sales/Use Taxes.”
In the opening of this communication it reads: “The table sets forth a rough estimate ($1,880,018.56) of the sales /use taxes which the city may expect to receive during the twenty-five year term of the Development Agreement for the Master Plan.
The Sales/use estimate is made up of (1), the city’s entitlement to 1% of the 7 3/4% sales tax for Mission Hospital’s purchase of furnishings and equipment, and (2), the City’s entitlement to 1% of the 7 3/4% sales tax for construction materials necessary to construct Phase I and Phase II improvements for the Master Plan.”
Without reproducing the entire Development Agreement DA 2003-1, agreed to by Mr. Kenneth D. McFarland, Senior VP and CFO, the Planned Development Permit PDP2003-103 or MV Resolution 04-14 adopted in Jan of 2004, let me simply say we dropped the ball.
On March16th of 2009 I made a Public Records request requesting a copy of all related projected project revenues. On March 25th of 2009 I received a response from our records coordinator that “there are no records on file applicable to your request.”
Based on his response I sent a fax and emails to our city manager, city finance director Bornstein, Chuck Wilson, mayor Ury, city attorney Bill Curley, Mission Hospital CFO McFarland, Mission Hospital CEO Peter Bastone, three other executives of St. Joseph Health System and hospital attorney Paul K. Watkins.
On April 21,2009 Chuck Wilson sent an email to Mr. McFarland, Mr. Bastone and our City manager where he wrote. “At last night’s City Council meeting, Larry Gilbert under Public Comments brought up this subject matter again. Do you have any information you can provide us on this?”
Two days later Mr. McFarland responded stating “I have asked some of our internal subject matter experts to fashion a response.”
Sidebar. Copied on this communication is Peter Bastone, a member of our city Planning Commission.
Sadly the local newspaper does not engage in this form of investigative reporting. The local Register representative may cover fast food restaurant openings and closings but this effort requires persistence. While I have visited the new wing of the hospital and did a favorable Orange Juice post on its state of the art life saving equipment this past January, we need to stay focused on the original development agreement.
After months of exchanges, most recently a June 3rd conference call with CFO Ken McFarland, I have now received a response. The three paragraph letter is dated June 8, 2010. I have waited until after the Primary to post this report as those elections take priority over any aging story. The title of their letter reads “Mission Hospital’s Statement Regarding: Mission Hospital Master Plan (New Tower) Sales/Use Tax.”
Without reproducing the text let me simply share the dollar amounts as provided in that document relating to contractors who were to abide by the terms of the contract. “It appears that only one of them obtained and reported sales tax via a sub-permit of $285,700 for our jobsite. The other three stated that they are consumers of the materials they purchased for our job and thus paid sales tax directly to their suppliers which summed $272,050. This total $557,750 in total sales for these four subcontractors. There were approximately 130 subcontractors used for this jobsite of which many collected and remitted applicable sales tax of which Mission Viejo would benefit from the countywide pool of local tax remitting, which is not known.”
Larry. Let’s wrap this up. Someone in our city should have questioned the hospital attorneys on how they were able to project our receiving a “rough estimate” of $1,880,018.56 from this expansion. I continue to shake my head in reading this figure that ends with fifty-six cents.
A staff member should have monitored this project’s sales/use tax as part of the overall project performance. Why didn’t the city press for an answer on this issue knowing that I was raising this concern? They simply didn’t want to rock the boat.
While this lengthy account may not be relevant to most of our readers, the one thing I can point out is that this is not a fictional story. The documents referenced in this post are locked up in my files.
Who knows what sales/use tax we were able to collect. Surely the city doesn’t know.
Thanks Larry:
I am waiting for the great windfall from this tax exempt entity.
Of course the administrator of this tax exempt entity just continued the exploitation of the community with his anti citizen by HIS support for the defeat of zoning control.
The side stepping of documentation and reporting as reported by Larry is the norm. This is not untypical of the City Staff.
One questions if this is just purposeful or what.
Joe.
Having copied every member of our council and staff it will be interesting to see if I receive any feedback.
My sense is that Mission Hospital CFO Ken McFarland will get a call from CEO Peter Bastone chastizing him for responding to me when the city has been blindsided by this Juice report. They may also get calls from city hall as they did not have any documentation as previously requested by me.
i.e. Why are you talking to Mr. Gilbert? He doesn’t work for the city of MV?
No, but he surely can write about it’s lack of oversight, something the Register representative seems to overlook as he covers pizza joints this week. If we had a legitimate local newspaper I could spend more time improving my golf game or working on my large “honey do” list.
It is surprising how few comments there are on this subject. Perhaps the city and the hospital are waiting for it all to just go away and not deal with it like so much in the city. Larry is right, when we were trying to figure out how we were going to pay for a great many of the improvements on Crown Valley, and all around the hospital, they did indeed come to a meeting and very specifically tell us that even though the city gets no property tax from the hospital, and only sales tax on the gift shop, that they would ensure us that all of the purchases made for the expansion/improvememt would be made so that the city would receive the sales tax on those purchases.
The city staff totally dropped the ball on this and the hospital wasn’t watching out for us. Thank god they give better health care than they do accounting.
Most distressing of all is that while this was taking place their CEO has been Ury’s appointee to the city Planning Commission. Did he make any decisions that benefitted the hospital? Then he got right in the middle of Measure D using his name and position to sway voters. Residents need to ask why these things have happened. Especially since his benefactor, Ury was the writer of the NO on D argument.
Also, there is city owned property near the hospital which could be used for the hospital’s workforce housing. Something that all parties have complained about for years. By the way, it is right next to the animal shelter.
Thank you again Larry for sticking with this issue. I know how hard it can be to get answers from staff and our contracted employees. Just asking questions runs the risk of getting residents sued. They have the power of three. And they use and abuse it. Next election November 2010.
Madame Mayor.
I wish I was a fly on the wall listening in when someone inside city hall contacted Mission Hospital CFO McFarland lambasting him for speaking to me on this issue. The current budget is $2 million short yet we fail to inquire about $1.9 million in projected sales/use taxes attributed to this expansion.
And to think that our city manager is/was being reviewed in Closed Session this week.
Let’s not overlook his promoting our spending $300,000 to $400,000 on a Rose Parade float while he is a member of the Tournament of Roses Committee.
These half baked stories without real reporting or analysis get tiring. A number of problems with this post: 1) the sales tax calculated by the City under the development agreement was based on taxes collected through 2028 – unless I am missing something it is not 2028 yet and therefore more taxes will be collected, 2) the tax number estimated by City staff included both direct and indirect collection of sales tax and your story admits that “there were approximately 130 subcontractors used for this jobsite” and yet you fail to track down whether the sales taxes paid by these subcontractors constitute the bulk of the taxes flowing back to the City, and 3) the story seems to accuse the staff of corruption and that is simply not the case. I do appreciate watchdog reporting but this is nothing more than noise in the wind without real reporting.
Geoff,
Thanks for correcting the record.
We don’t always get it right, but quite often we do. And may I remind you that this blog played a major role in the recall of Lance MacLean.
Thanks for reading our blog!!
Mr. Willis.
While the development agreement with Mission Hospital extends beyond today the second Tower, representing a huge chunk of their expansion, has been open for months.
The only reason I spent over a year chasing this down is that the city staff ignored that source of revenue. This story is not to be interpreted as any allegations of “corruption.”
Mr. Willis. Let me suggest your going to page 2 of the Minutes of the April 20, 2009 council meeting which you can find on-line where it reads:
“Larry Gilbert, M.V.: requested that the city get compliance from Mission Hospital for the expansion related sales and use taxes as outlined in Development Agreement D2003-01.”
Go ahead. Shoot the messenger rather than questioning the lack of oversight by our city.
Art. My story is not half baked as council candidate Willis charges.
Furthermore he has not corrected any record.
Larry,
Aha! Well thanks Larry for correcting the attempted record correction. Perhaps Willis will jump back in the pool and explain himself?
Not shooting the messenger – just the accuracy of the report. The City does not “collect” any of these taxes directly and its oversight of this tax collection is simply to make sure that payments are accurately reimbursed from the collecting agencies. If there has been a problem here (of which there is no evidence that I have seen), it is only that the state has not appropriately distributed Mission Viejo’s correct portion of the taxes (which would apply to every sales tax transaction within the City – not just the hospital). Again, I am not of any such evidence.
Mr. Willis.
Do you have a copy of the June 8th letter sent to me by a Vice President of Mission Hospital that contains the data which was included in this story?
Sorry to inform you but I did not fall off the back of a turnip truck. I know that sales taxes are not sent directly to the city.
Have you entered our blog to make points with city staff? You haven’t turned in your candidate papers yet.
You miss the entire point of this report. Let me help you out. My issue is the failure of someone in our city to confirm whether or not we received any of the sales taxes that was projected by the hospital attorney firm of Watkins, Blakely and Torgerson, LLP.
We are not talking about chump change.
We did not require the services of a partner in a major law firm to have monitored compliance to this agreement.
While I may not always be correct, your picking a fight with the wrong person on this documented story.
Mr. Gilbert
Unfortunately your response is all rhetoric and insult and no facts. The fact that you have sent out a one page for Public Records Act Request is not really very impressive and you have missed the point. 1)The development agreement has not run its course and has another 18 years to run before we know whether expectations were met, 2) You have identified about $550K of taxes that can be accounted for and another “approximately 130 subcontractors” that have bought things that create tax that will come back to the City. If I have picked on the wrong person on this well documented story the please answer on simple question – what is the amount of the shortfall from the original projections that the City will suffer when this deal expires in 2028? You don’t know because it can’t be calculated yet. Sorry that you find the living conditions in Mission Viejo so intolerable – I really like the City.
Geoff,
I don’t think Larry finds the living conditions in MV to be intolerable. He just dislikes it when local polticians waste taxpayer money. Hard to blame him as that goes on a lot in MV.
Geoff.
Once again you lack the facts. I did a lot more than send out a one page Public Records request.
You have no idea of the numerous communications that took place between the city, the hospital and myself including a personal visit to meet with a member of their staff on this issue. I am not trying to impress anyone. My only agenda covering our city is to look out for my neighbors when I see abuse or staff failure to do one’s job.
The Development Agreement is similar in ways to a redevelopment agency project area where some projects never get off the ground due to changes in economic conditions while others are completed long before the typical 30 year lifetime. As such looking at a calendar is irrelevant.
The same applies here. The new Tower at Mission Hospital has been added along with the parking structure and another building. Don’t let the outside date limit early completion of the expansion.
Living conditions. What does that have to do with sales taxes?
Let me repeat that you are welcome to join the discussion so long as you stay on topic.
Perhaps you need to look at the web site that members of the Committee for Integrity in Government created several years ago in which we did our part to promote this city with an emphasis to “retain, sustain and gain” business for Mission Viejo. Ask Dennis about it. We offered it to the city at no charge yet they didn’t want us to be seen doing anything positive for this city and passed on that opportunity.
Geoff.
Looking at dates I overlooked a perfect example in which I have personally met the victims.
June 23rd is a date I will not forget. I spent a weekend in DC with Susette and Michael Kelo on the 1st anniversary of that Supreme Court decision. Also in attendance at that event were their neighbors whom you do not read about who were also pressured to leave their property. Their names. Mike and Anna Cristofaro.New London, CT. created a redevelopment project area that we have all read about. Obviously it had an expiration date. Pfizer R&D has packed their bags and pulled out. The project area is a dust bowl.
So much for expiration dates which you continue to harp on in making your weak argument.
Geoff.
As its Friday let me leave you with an easier illustration.
I just had the oil changed in one of our cars. Did I have that performed before or after the 3,000 mile recommendation? It’s simply not important to keep revisiting the end date of the agreement.
Geoff; I was smack in the middle and on the dais during these votes. This is not rhetoric, this is fact. If you wish to research, city meetings are archived on the city web site As For me, I have tapes of every meeting for 8 years. Also, I have volumes of notes, not only the agenda packet for the meetings, but my questions and notes for these meetings. It is more likely than not that the city manager did not reply to my requests for information as was his pattern with me. However, that did not stop me from asking questions and I believe that much of our decision was based upon the representations made to us by the hospital. If in taking them at their word, consider me guilty. Is this the last time we should take the hospital at their word?
To simplify the debate on this one, this is not a question of whether the City did anything nefarious but rather does it adequately audit all of its tax allocations and whether it follows the requirements of conditions imposed on a project. If it is a matter of whether the City separately accounts for tax payments because of the hospital that seems to be making a big deal out of nothing. I haven’t yet seen any argument or facts supporting the contention that the City is actually failing in its obligations.
Geoff.
According to my files I have published 8 new Orange Juice stories since that post.
The message was simple. When the city is looking to close a $2 million hole, not in the Gulf of Mexico, I started digging into a major completed project in which the city mandated reports on revenue that they did not follow up on.
Our trash gets picked up every week. My old newspapers are already in the recycling bin.
“Huff and Puff” will now be Geof Willis’ new moniker.