Caltrans is auditing funds used for OnTrac

Caltrans is auditing $36 million in state funds given to Placentia’s controversial OnTrac project -- the troubled rail plan that has pushed the northern Orange County city to the brink of bankruptcy.

Department officials said they were reviewing OnTrac’s funding to determine if it was properly spent. They declined to comment in detail, saying it was Caltrans policy not to discuss ongoing audits. The inquiry began in 2005.

“They are looking at the whole thing,” said City Councilman Russell J. Rice. “If we have to pay back 6 million to 7 million bucks, we would be in a world of hurt.”

The $650-million OnTrac project was shelved last year after it failed to receive federal funding and the city ran out of money to keep it afloat.

Former Placentia public works director Christopher Becker and former city manager Robert D’Amato are facing felony conflict-of-interest charges surrounding their work on the project. Both have denied wrongdoing.

City planners wanted to build 11 new overpasses and lower five miles of Burlington Northern Santa Fe Railway tracks into a concrete trench. They hoped the project would revitalize the city’s Old Town district and improve the movement of cargo to and from the ports of Los Angeles and Long Beach.

Placentia, which faces a $2.7-million shortfall this fiscal year, plans to write off $16 million in municipal funds it loaned to the project, an acknowledgment that it won’t get the money back. The city’s annual budget is about $26 million.

A large chunk of the state money was used for the $18-million Melrose Street underpass and to buy private property to make room for the project. The city also spent more than $9 million for a passel of consultants, including video producers, lobbyists, public relations experts, the project director and various advisors.

“The state has a right to find out how its money is spent,” said Mayor Scott P. Brady. “We’ve been audited by one entity or another over the past two years. I don’t think there’s one piece of paper in the city that hasn’t been looked at.”

Placentia officials said that Caltrans was looking into, among other things, whether the state paid too much to reimburse OnTrac for at least 13 private parcels.

Caltrans records show that in seven of the deals, the city paid more than $4.2 million in 2001 and 2002. The total price reflected the costs of relocating property owners, the purchase of businesses that could not relocate, and keeping goodwill in the community.

Department documents show that OnTrac officials then asked the state to reimburse the project for all acquisition costs. But Caltrans rejected the requests, stating that the city could be repaid only for the property’s appraised value.

In two deals, OnTrac paid more than double the appraisals for properties with a coin-operated carwash and an auto-repair shop.

Caltrans records show the city paid $612,425 for the carwash property on South Placentia Avenue and $849,438 for the auto-repair property on Melrose Street. City records state that the businesses needed to be purchased along with the land because no suitable relocation sites could be found. But the auto-repair business later reopened two blocks from its old site.

Brady said the city mistakenly thought it could seek full reimbursement for the land deals and was corrected by Caltrans. He defended OnTrac’s acquisitions, saying they were “aboveboard” and conducted with the help of consultants.

“This is not just Chris Becker,” Brady said. “We had counsel and experts looking at these.”

But Councilwoman Constance Underhill said there were still questions about the land deals and other expenditures the Caltrans audit could answer.

“The big thing is tracing where the money went,” Underhill said. “Did we get taken when we didn’t need to be?”

Some community activists and project critics have questioned other OnTrac deals, such as the purchase of land and an equipment-rental business on Placentia Avenue owned by George Ziegler, a former Placentia councilman.

An eminent-domain consultant recommended a purchase price of $989,285, but the city bought the land and business for $1.3 million in 2002 after Ziegler contended he could not find a new site for the rental company.

Municipal records indicate that the city sought state reimbursement for the deal.

The Orange County Grand Jury, which reviewed the purchase, concluded in 2004 that the sale was reasonable and conducted without favoritism.

But grand jurors said the city made no effort to confirm reports that underground tanks from an old gas station were on Ziegler’s property. If tanks were on the land, the jury said, the price might have been lower and the city could have avoided potential responsibility for future cleanups.

Craig Green, a community activist and co-founder of Citizens for a Better Placentia, said the city probably paid too much for the property and that the former owner should pay for cleanup if storage tanks are found.

“We sounded the alarm several years ago about the city getting ripped off by paying too much for property,” Green said. “This is just another way that taxpayers’ money has been wasted on OnTrac.”

In a formal response to the grand jury, city officials acknowledged that no review was done and that they planned to remove any tanks when construction of a new Placentia Avenue overpass began. The bridge project has been postponed.

State Assemblyman Todd Spitzer (R-Orange), who, along with Orange County Supervisor Chris Norby, asked Caltrans in March 2004 to audit the project, said he welcomed the review.

But Spitzer added that he was disappointed the inquiry did not begin until July 2005 and only after the Orange County district attorney’s office began investigating the project.

Spitzer said Caltrans had indications years ago that OnTrac improperly sought millions of dollars in state reimbursements for private property it had purchased.

“Caltrans was aware of Placentia’s inappropriate billings and would not approve the reimbursements,” said Spitzer, a former Orange County prosecutor. “It’s inexcusable that they did not allocate resources to look at this. Common sense indicates that there might be foul play.”

David Anderson, a Caltrans spokesman, said Spitzer made his audit request to a then-director and that the agency could not speak for him. He added that the review has taken so long because of the complexity of the city’s administrative and accounting operations.

dan.weikel@latimes.com