Monterey Still Struggles to Account for Tidelands Expenditures

Monterey Still Struggles to Account for Tidelands Expenditures

Nearly a year after the city announced it had solved the problem, the State Lands Commission has still not accepted the city of Monterey’s Tidelands Audit, finding that rents from Old Fisherman’s Wharf and other Tidelands properties are still being used for restricted purposes.


After State Lands Commission officials met with city staff in Monterey on June 29, the city has been asked to remove expenditures associated with Cannery Row, Fisherman’s Shoreline Park, Recreational Trail Sections A and B, the Marina Parking Lot and Windows on the Bay because these properties are only adjacent to Tidelands Fund properties.


“We asked that they revise the audit because the audit included some areas outside the regions of the granted lands,” said Sheri Pemberton, community liaison for the State Lands Commission, in a phone interview Wednesday.


Parts of Cannery Row, Old Fisherman’s Wharf, Wharf II, the Marina — all the property in Monterey that is below the high tide line — was granted to the city by the state of California in 1919 under the condition that any revenue they generate be put into a Tidelands Fund that can only be used for the purposes of commerce, navigation, recreation or conservation on those granted lands. For instance, rents from Fisherman’s Wharf are to be put in this fund and should only be used for things like wharf maintenance or improvements.


Instead, Monterey has always put the majority of the revenue in its General Fund. This is despite correspondence back and forth with the state since the 1980s to fix it. Over decades, the misallocation has grown from about $280,000 annually to nearly $2 million. The issue was first reported by in 2015 after the city officials began a push for higher rents at Old Fisherman’s Wharf and Wharf II to pay for a variety of municipal improvements, a use that would be illegal. Misuse of tidelands revenue became a big issue statewide in 1982 when the Orange County was sued by the state and found to have used more than $1 million of tidelands revenue for general fund purposes.


“Tidelands funds absolutely cannot be used for municipal purposes,” said Pemberton in a phone interview in June of 2015. “They are supposed to get fair market rent for that property, and can adjust rents as they see fit, but can’t raise rents to use money on unconnected local purposes.”


Pemberton said then that if the city plans to raise rents on its Tidelands Fund properties, the State Lands Commission might investigate and ask what they plan to do with the money. As it turns out, it already had. Emails recently obtained through a Freedom of Information Act Request show that the State Lands Commission was asking for an audit of the city’s Tidelands Fund in April of last year and were told by City Finance Director James Forbis that it was just 90 days away. The State Lands Commission had let the city off the hook for the most of its decades of malfeasance, but still asked for an accounting of the past seven years.


On Sept. 15, Forbis presented the audit to the City Council for review. State Lands Commission Public Lands Specialist Reid Boggiano had asked to speak with Forbis and the City Council in closed session to discuss the findings, which showed about $12 million in expenditures related to the tidelands over the past seven years and $10 million in revenue. Instead, the audit was presented to the public and was accompanied by a press release that was run by the Monterey Herald stating that the city had fixed the problem. But it wasn’t true.


In the days following the meeting, emails from Boggiano make it clear that the city’s audit would not fly.


“Commission staff would also like to discuss the locations of the properties that were included in the audit,” Boggiano emailed Forbis on Sept. 17. “The report states that, ‘for audit purposes, properties (whether whole or partial) were included if staff felt that a reasonable determination could be made to include them in the tidelands, including property immediately adjacent to the upland that benefits the tidelands and is consistent with trust purposes.’ … Tidelands revenue cannot be spent on lands adjacent to tidelands trust properties. We will likely need additional information, including the information used in support of the audit.”


Emails back and forth between Boggiano and Forbis show the city scrambling to find ways to make up the difference. In one email Forbis asks about using Tidelands Funds for public safety expenditures. Another series of emails talks about lifeguards. In December, the audit still had not been completed.


“We have yet to receive the results of the City’s financial audit of the tidelands funds, descriptions of the properties included in the audit, and the justification for expenditures that were charged to the trust. When can we expect to receive the information?” Boggiano emailed Forbis on Dec. 28.


Forbis said Thursday that the city was working with the State Lands Commission and “they are coming up with suggestions on how we can include those properties, how we can spend that money in those areas.”


The emails seem to tell a different story.


On April 4, Boggiano emailed again. “Has the city completed their revision to exclude any expenses that were expended adjacent to the grant?”


More back and forth led the meeting in Monterey on June 29. Pemberton said her office won’t be able to assess how much money the city may or may not have to repay the Tidelands Fund until it gets a revised audit.


It’s unclear whether the City Council has any idea this is happening. No closed session meetings on the topic have been agendized and no public discussion has taken place. No City Council members were present at the June 29 meeting, according to both Forbis and Pemberton.


“We haven’t had anything else to report because there’s been no change to what we’ve done in the audit since September,” Forbis said.


City Council members could not be reached before publication.

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