Riverside County Habitat Conservation Agency Summary of Adopted Budget Revenues Fy 05/06 Fy 06/07

The RCHCA did not obtain its own appraisal or conduct an independent review of the buyer’s appraisal. The appraisal report included as comparable property, land that had closed escrow twenty-nine months prior to this sale. It also included another parcel as far away as seven miles from the subject property. During the period of the sale transaction, property values were increasing in the Sage area. Our investigation revealed a 19.05 acre parcel (APN 470-180-028) contiguous to the subject parcel (See Attachment #1) sold for $500,000 in April 2004. This property was within the parameters, though not included, in the comparable property appraisals.

RCHCA does not have policy and procedure in place for sale of surplus property or any other operational functions of the Agency. Other than a conflict of interest code, the RCHCA did not produce any other rules and regulations as mandated by the JPA at the time of its creation.

On November 10, 2005, Economic Development Agency (EDA) received a Real Property Work Order Request Form to prepare a purchase and sale agreement and open and close escrow to sell the subject land, owned by RCHCA, to a private party. EDA did not follow their own general practice to provide the following services: • Obtain the appraisal and/or conduct an independent review of the buyer’s appraisal to determine “fair market value” • Notify required public entities • Notify adjacent property owners • Post notification to the general public 2

RCHCA did not notify adjacent property owners whose land abutted the subject property (See Attachment #1), denying them the right to purchase the parcel and to participate in competitive bidding in accordance with Government Code §25530.

At the request of staff, the General Counsel reviewed the Joint Powers Agreement, Section 3.3.3, to determine whether the Agency had authority to sell the surplus land. General Counsel’s opinion was that the Agreement specifically authorizes the RCHCA to dispose of property it owns, and that the Agency could proceed with the sale. The JPA further requires under Section 3.9 Rules and Governing Law, “This Agreement shall be construed and enforced in accordance with the laws of the State of California. The laws of the State of California applicable to the general law city of Moreno Valley shall govern the Agency in manner of exercising its powers…” General Counsel gave no advice regarding compliance with state laws or county policies.

The subject property was the first surplus land that was sold by the Agency. Our investigation found that the BOD did not review the transaction of the sale for accuracy and five of the seven directors interviewed were not aware of the transaction, nevertheless they did authorize the executive director of the agency to proceed with the sale. The Board of Directors did not require staff to keep them updated and signed off on incorrect minutes from the meeting on September 29, 2005 regarding the sale of the parcel. The BOD did not require staff to develop a complete policy and procedure manual, including purchase and sale of land. The BOD failed to carry out their fiduciary responsibility to obtain optimal value, therefore depriving the County Agency of significant revenue. 3