City of Oxnard: River Ridge Revisited

Conclusions 6

• CL1 Page 5
  In processing the First Amendment to the Second Agreement ambiguous presentations supporting and urging the amendments may have led City Council members to believe erroneously that the proposed amendments were compatible with the recommendations of the 2003 Jury’s report.
• CL2 Page 8
  Contract Confusion C-01. The City was, at the least, negligent in the processing and recording of the River Ridge Original Agreement. (F-05, F-06 F-07, F-11, F-15, F-16, F-17) 8 City of Oxnard: River Ridge Revisited
• CL3 Page 9
  C-02. There was a material difference between the Original Agreement and the Different Agreement, which required a lesser standard of the certified independent audit of High Tide. (F-07, F-08, F-09, F-19) C-03. The City erroneously administered the operation of River Ridge under the terms and conditions of the unofficial Different Agreement. (F-05, F-06, F-07) C-04. In order to justify the erroneous administration of the High Tide River Ridge agreement, the City unnecessarily ratified the expired Different Agreement as the “correct” agreement. (F-14) C-05. Absent further unexplained negligence, the fact that the purported “original intent” of the lesser audit standard was not the standard included in the subsequent Second Agreement calls into question the validity of the assertion that the lesser standard was the “original intent.” (F-18, F-19) C-06. In processing the First Amendment to the Second Agreement ambiguous presentations supporting and urging the amendments may have led City Council members to believe erroneously that the proposed amendments were compatible with the recommendations of the 2003 Jury’s report. (F-22, F-23, F-24, F-30 through F-33) The Account Established Jointly C-07. Regardless of the prior wording, “establish[ed] in the name of the City and [High Tide], jointly,” or the changed present wording of the amended Second Agreement, “City and [High Tide] will establish such bank accounts jointly…” the character and operation of the accounts have remained throughout as commercial corporate accounts solely in the name of High Tide. (F-26, F-27, F-29, F-34, F-36, F-50) C-08. In the opinion of the Jury, the City’s rewording of the contracts in an effort to respond publicly to the 2003 Jury’s report is an engagement in sophistry. (F-30 through F-33) C-09. Though the City has fashioned language that implies or infers that the City has some kind of ownership of the High Tide River Ridge accounts, the City has no ownership of those accounts. (F-29, F-31, F-32, F-33, F-36) C-10. The City in its response to the 2003 Grand Jury report apparently misunderstood the report’s discussion with regard to the purported “joint accounts” as criticism of the City’s failure to establish a “joint account” as required by the agreement. (F-27, F-30, F-31, F-32) C-11. The character of the money deposited in the High Tide River Ridge accounts, public money collected by High Tide as the fiduciary agent of the city treasurer, does not change until it is withdrawn by High Tide when disbursed for High Tide’s own purposes to satisfy High Tide’s, not the City’s, obligations. (F-29, F-34 through F-37, F-40, F-45, F-46, F-50) C-12. Money deposited in the High Tide corporate accounts remains the City’s money until it may be paid out in “monthly minimum payments,” though historically that contractual obligation has been ignored, and at the end of the fiscal year
• CL4 Page 10
  when the additional payment to High Tide is determined based on the amount “base revenue” exceeds stated “minimum base revenues.” (F-29, F-35, F-36, F-39, F-43, F-45, F-46, F-50) C-13. The use of a private corporate account, under the circumstances of the High Tide River Ridge agreement with the City of Oxnard, is inappropriate for the deposit and safe keeping of public money. (F-52 through F-55) C-14. Because High Tide does not pay itself the minimum monthly payment from the account established jointly (as required by the agreement) into another operating corporate account, but pays its operating expenses directly from the “account established jointly” as those expenses arise and become due, High Tide is paying those obligations with City money. (F-29, F-35, F-36, F-37, F-40, F-45, F-46, F-50) C-15. Actual expenditures are unaudited because of the changed language of the audit provisions and the lack of a requirement for bank account reconciliation to include actual expenses paid. (F-07, F-08, F-09, F-21, F-24) C-16. The right to inquire, audit and examine documents and records is an inadequate financial oversight safeguard in the absence of mandatory periodic exercise of that right or the provision for periodic mandatory detailed reports on those matters related to such oversight. (F-08, F-09) The City Treasurer’s Care of Public Monies C-17. The 2004 Jury agrees that the 2003 Jury was correct when it concluded that when the City treasurer appointed High Tide as the treasurer’s agent to collect the revenues of its wholly owned golf course, that agent was acting for the City as agent and, therefore, was the agent of the City for that purpose. (F-37, F-40, F-46, F-50) C-18. The City’s assertion in its response to the 2003 Jury’s report that High Tide is not an agent of the City but is an agent of its wholly owned golf course, though appointed by the city treasurer acting on behalf of and in the interest of the City, is yet another exercise in sophistry. (F-25, F-26, F-32, F-33) C-19. Collection of revenue derived from the operation of a wholly owned City business under an appointment of agency granted by the City treasurer acting for and in the City’s interest, a priori, is the collection of money for the City. (F-37 through F-40, F-46, F-50) C-20. The City treasurer’s analogy of the collection of the City’s money by the City’s agent from a City commercial endeavor to that of a lessee of the City collecting his rents from sub-lessees is a false analogy. In the first case the collected money is that of the principal at all times whereas in the second case the money is the City lessee’s money paid as rents under the sub-lease contracts and is not that of the City. This is so even though the City’s lessee may pay its rent to the City out of the rents collected from the sub-lessees. (F-42, F-43, F-44) C-21. Permitting High Tide to operate its financial business with City money deposited in its corporate accounts appears to the Grand Jury to be improper, contrary to the provisions of the Second Agreement, and avoids reasonable and 10 City of Oxnard: River Ridge Revisited
• CL5 Page 11
  state requirement for handling and safeguarding the public’s money. (F-34, F-35, F-36, F-51 through F-55) C-22. Permitting a fiduciary agent to deposit City money in its own private corporate accounts under these circumstances fails to adequately protect the public’s interest in the security and accountability of its money. (F-08, F-09) C-23. The City’s right to complete access to any and all activity involving High Tide’s corporate accounts and the power to suspend financial activity on those accounts is not sufficient assurance of the accountability and safety of the public’s money to justify this irregular arrangement even if it were permitted under California law. (F-08, F-09) C-24. Permitting High Tide to possess and spend City money without review and audit of those expenditures other than through before-the-fact budgetary approval is patently a bad business practice. (F-53, F-54, F-57, F-63, F-64) C-25. In the opinion of the Grand Jury, responsible officials with the City have not properly carried out their fiduciary duties with respect to their financial management and the accountability of City revenues from River Ridge. (F-15, F-16, F-17, F-20 through F-24, F-34, F-35, F-51, F-52, F-55) C-26. Interest accruing in the High Tide River Ridge accounts should be segregated, paid immediately to the City and should not be included in calculating High Tide’s additional payments. (F-51) C-27. General discussions with various other city and county officials with respect to their duties of collection, care and accountability for public money corroborates the Jury’s misgivings with respect to the financial provisions of the High Tide River Ridge agreement. (F-55) Comparative Golf Course Management C-28. The Five Public Courses of the seven examined by the Jury utilize the lessor- lessee paradigm and have financial arrangements that appear to be consistent with the principles underlying the Jury’s criticism of the High Tide River Ridge financial arrangements. (F-56, F-57, F-58, F-61, F-63, F-64) C-29. The one of the Five Public Courses arrangements that calls for collection of money for the public entity is consistent with the principles underlying the Jury’s criticism of the High Tide River Ridge financial arrangements in that it requires the daily deposit of public money directly into an account of the public entity for which the money is collected. (F-58) C-30. The management-only contract for two courses reviewed by the Jury that does not use the lessor-lessee paradigm presents a greater risk to the public fisc than the preferred lessor-lessee relationship, for it, like the Oxnard relationship with High Tide, results in the deposit of public funds in a private contractor’s bank account. (F-60) C-31. Despite the risk arising from the questionable banking arrangement, the two- course management-only agreement proportionally mitigates the risk and insecurity by requiring monthly payments to the public entity of all net operating income and requiring the monthly reporting of full reconciliation of
• CL6 Page 12
  the accounts including those of expenditures and the provision of bank statements as source documents. (F-61, F-63) C-32. Point-of-sale accountability and unlimited access to the data created by it appears to be the required norm in golf course management contracting. (F-65) Contract Provisions C-33. The City does not perceive the deficiencies called out by the 2003 Jury as significant or requiring of change. (F-65, F-66) C-34. The Present Agreement should be reformed to correct the deficiencies called out in the 2003 Jury’s report with special attention to those specifically identified above. (F-65, F-66) C-35. Should the City refuse to amend the Present Agreement to provide for a more appropriate scheme for collection, deposit, accountability and protection of the public’s money, as recommended herein, a provision for a more detailed High Tide monthly financial report, requiring monthly reconciliations of the River Ridge bank accounts extending to actual expenditures related to budget authority and the provision of bank statements as source documents, should be added to the Present Agreement. (F-61, F-63)

Agency Responses 2

Government agencies' official responses to this report's findings and recommendations. Click on a response to see the structured breakdown.