San Bernardino Wrongly Transferred Cash, California Says

Bankrupt San Bernardino, California, improperly transferred $108.4 million in property, cash and invested funds from its redevelopment agency as the agency faced extinction, state Controller John Chiang said.

The inland Southern California city’s redevelopment authority, one of about 400 eliminated last year by a law intended to shore up California’s finances, shouldn’t have handed over its assets to the nonprofit San Bernardino Economic Development Corporation, Chiang’s review concluded.

San Bernardino filed for Chapter 9 bankruptcy in August, citing a $46 million shortfall that city leaders blamed partially on the loss of redevelopment funding. The city of 209,000 is the second-largest U.S. municipality to seek court protection from creditors.

“I’m working to make sure redevelopment assets go where they belong: to retiring RDA debt and paying for critical services at the local level,” Chiang said today in an e-mailed statement accompanying his review.

The Democratic controller also identified $420.5 million in redevelopment assets that haven’t been transferred to any agency. Those should be delivered to a successor agency that repays redevelopment bonds, the review concluded.

In the city’s response to Chiang’s review, the then-acting city manager, Andrea Travis-Miller, wrote that the transfer of redevelopment assets was legal. In any case, she wrote, the city can’t force the nonprofit to return the funds.

Travis-Miller also wrote that the $420.5 million in redevelopment assets already have been transferred to the city’s successor agency.

Travis-Miller resigned from her San Bernardino job in January.

To contact the reporter on this story: James Nash in Los Angeles at jnash24@bloomberg.net.

To contact the editor responsible for this story: Stephen Merelman at smerelman@bloomberg.net.