Regulators, Documents Counter Monterey’s ‘Wharf Subsidy Myth’

Regulators, Documents Counter Monterey’s ‘Wharf Subsidy Myth’

MONTEREY — State regulators in Sacramento Monday refuted the city of Monterey’s claim that Old Fisherman’s Wharf and other properties on its shoreline have been benefiting from the city’s General Fund.


“I believe that the city’s General Fund actually owes the Tidelands Fund a little bit of money,” said Reid Boggiano of the State Lands Commission in Sacramento Monday.


Boggiano was referring to an audit of the city’s Tidelands Fund recently performed by the city itself. All properties below the tide line in Monterey were granted to the city by the state under the condition that all revenue generated by those properties be used to improve them. For decades, Monterey has been mixing Tidelands Funds with the General Fund. After being audited, Monterey claimed that its General Fund was actually owed more than $2 million. That audit was rejected more than six months ago and the city has sent another, but it continues to claim the issue is settled.


“We asked them to remove some expenses attributed to lands adjacent to the Tidelands,” Boggiano said Monday, adding that the latest audit, given to the SLC, showed a roughly equal balance and is still under review.


City representatives, however, have continued to claim that the original audit, presented to the public more than a year ago, was accepted by the SLC and that the Tidelands Fund actually benefitted from the city’s malfeasance.


In August, the same month the city had submitted the corrected audit, City Councilwoman Libby Downey repeated the false claims of the original audit during a debate over spending $31,000 from the Tidelands Fund for a rent appraisal on the Monterey Bay Aquarium.


“As far as the Tidelands Fund money, we had used our General Fund previously and used more in our General Fund for things along the tidelands than the tideland amount of money could have funded. So we may have pulled it out of the wrong slot, but the tidelands profited. So I just wanted to clarity that,” Downey said in the afternoon session of the Aug. 16 City Council meeting.


“That’s true,” Haffa chimed in behind her.


Emails obtained through Freedom of Information Act requests show city officials fully understood the original audit was rejected well before then. Emails between December 2015 and January show the State Lands Commission questioning expenses attributed to areas outside the Tidelands Zone. In February 2016, a conference call was scheduled between the State Lands Commission and city officials to discuss the audit. Then, in April, the SLC emails to ask the city if it needs help with the changes.


“Has the city completed their revision to exclude any expenses that were expended adjacent to the grant? Are there are any areas that we can assist with jurisdiction? Without a survey there won’t be a definitive boundary, but I believe most are apparent,” wrote Boggiano to City Finance Director Jimmy Forbis on April 20.


The storyline supported by Councilmembers Downey and Alan Haffa, that the General Fund has been subsidizing the wharf, continues to be repeated by local media as well. In a story printed in the Monterey County Weekly “Monterey Cleans Up After Years of Improper Accounting” on Sept. 29, Monterey Finance Director Jimmy Forbis is interviewed and the paper concludes “in practical terms, the city Monterey has subsidized the wharf tidelands by $2 million.”

Forbis has since left his job at the city. His last day was Oct. 14.

Councilman Timothy Barrett publicly broke from the city’s position last week and presented a position paper refuting what he termed the “wharf subsidy myth.” Pointing to financial documents, Barrett wrote, “From 2007 through 2014, Wharf 1 alone generated $7,551,079 in revenue to the City. During the same 7 year period …the City reinvested a mere $166,439 of those funds augmented by only $1,000,115 of CIP funds into Wharf 1 related expenditures. That means that Wharf 1 generated $6,384,525 more in revenue to the City than the City reinvested into Wharf 1.”


Boggiano said he had received the document, but had not thoroughly reviewed it. “I think, technically, he could be right, but that’s what the audit is trying to correct,” he said. “And then going forward, for it not to happen anymore.”


The latest audit sent to the State Lands Commission still contains many questionable expenses. For instance, last year more than $215,00 was spent on administration fees for those Tidelands properties, on top of more than $155,000 in property management expenses. An additional $258,000 was spent on administration fees for the harbor and another $350,000 on maintenance and security. According to the audit, the city loses about $600,000 each year on the harbor.


By law, Tidelands Funds are not supposed to be used for General Fund activities. The lands, which belong to the public trust because of their position below the tide line, are granted by the state to cities, counties and other entities on the promise they will be improved upon with any revenue they generate.


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