HERCULES -- State audits released Wednesday question tens of millions of dollars of expenditures by Hercules' former Redevelopment Agency and slam the city for a lack of internal and accounting controls.
A cover letter from state Controller John Chiang's office singles out, albeit not by name, former Hercules City Manager and Redevelopment Agency Executive Director Nelson Oliva for "serious mismanagement practices" and conflict of interest while blasting the then-City Council for standing by idly.
"Weak oversight and poor management practices invited self-dealing, nepotism, and other public trust abuses that crippled Hercules' fiscal health," Chiang said in a news release.
Oliva, who moved out of Hercules last year, did not immediately respond to an email seeking comment.
The audits cover the period from July 2005 through June 2010. Since that time, voters have replaced the entire City Council, which has hired a new city manager and new city attorney; a new finance director also is on board.
The audits, one looking at the Hercules Redevelopment Agency, the other one scrutinizing the city's internal controls, include responses by the city to each finding. Chiang's office identified nearly $50 million in questionable redevelopment expenditures during the audit period.
Oliva's tenure as city manager ran from April 2007 to January 2011; earlier, he had served as the city's affordable housing consultant and, briefly, as assistant city manager.
In the Oliva years, what once were multimillion dollar surpluses turned into multimillion dollar budget deficits, Chiang found.
The consequences of the state's findings of "unallowable" expenditures by the Hercules Redevelopment Agency were not immediately clear Wednesday. Jacob Roper, a spokesman for Chiang, said in an email that the state cannot order the money to be repaid. "It's the city's issue to resolve," he said.
Hercules City Manager Steve Duran, in an email Wednesday, said: "When the state killed redevelopment agencies, the Hercules Redevelopment Agency died with a negative fund balance of over $8 million, which it owes to the city."
The state abolished redevelopment agencies effective Feb. 1.
Chiang's auditors noted that Oliva steered more than $3 million in city contracts to an Oliva family company, NEO Consulting Inc./Affordable Housing Solutions Group, and awarded loans that appear to be gifts of public funds. Contracts routinely were awarded without a competitive bid process, the auditors found.
"There is no indication that prior City Council members ... ever raised any concerns about the RDA Executive Director's actions," reads a cover letter on the redevelopment audit.
"In essence, the City Council approved all requests submitted by the former City manager without question," reads the other cover letter, on the internal controls audit.
The city has sued Oliva in an attempt to recover some of the money, the state noted. The suit is pending.
"This (audit) boils down to why we have a brand new City Council, a new city manager, a new city attorney and a professional finance director," Mayor Dan Romero said Wednesday.
The longest-tenured of the current council members, John Delgado and Myrna de Vera, were elected over two incumbents in November 2010, mere weeks after an interim city manager, Charlie Long, sounded the alarm over the city's deteriorating finances. The other three council members, Gerard Boulanger, William Wilkins and Romero, were elected in June 2011, replacing two council members who were recalled and one who resigned.
Chiang's auditors also cite $32.8 million in questionable property transfers and purchases that lacked documentation such as appraisals; misuse of city-issued credit cards to pay for excessive travel, lodging and meals -- one example was two hotel rooms billed by a city official for the same night in two different cities during a one-day trip; and $1.4 million of "questionable" spending of housing funds on administration.
Findings of favoritism include a 40-year, 4 percent-a-year, $456,640 mortgage issued by the agency's Homeownership Retention and Loss Mitigation Program to Oliva's secretary.
Councilman William Wilkins, in an email Wednesday, said:
"It's time for the FBI and the state attorney general to get off the dime and file charges against the parties involved."
Boulanger, Delgado and de Vera did not immediately respond to emails seeking comment.
Contact Tom Lochner at 510-262-2760. Follow him at twitter.com/tomlochner
Read the audit reports at ContraCostaTimes.com