That Time in 2005 When The City of Los Angeles Briefly Investigated BID Financial Shenanigans And Contract Violations Instead Of Pretending They’re Powerless In The Face Of Them Like They Do Now

Former Los Angeles City Controller Laura Chick (right).
Former Los Angeles City Controller Laura Chick (right).
Here’s the situation these days. BIDs have a standard contract that they sign with the City of Los Angeles. It has a lot of requirements in it, and BIDs routinely ignore all of them but a few, known as the “reporting requirements.” I’m skipping the details, but they’re mandated to report various things to the City, and if they don’t then Rick Scott or another one of Miranda Paster’s minions in the Neighborhood & Business Improvement District Division (N&BID) of the Clerk’s office will fire off a threatening email like this one telling the negligent BIDdies to cough up the report or they don’t get paid. On the other hand, there are plenty of clauses in that contract, e.g. the ones on record retention and on abiding by the Public Records Act or the Brown Act, that BIDs not only violate with impunity, but which the City Clerk’s office in the persons of Miranda Paster and Holly Wolcott actually just refuses to enforce. I’ll be writing about that more in the future. Tonight I’m just looking at how it came to pass that N&BID staff even enforce any parts of that contract.

You see, this was not always the case. Take a look at Section 7.2 of that contract:

7.2. The records maintained by Corporation shall include, but shall not be limited to, all invoices and receipts for District related expenditures incurred and must include supporting documentation for the activities or programs described in the District budget or Management District Plan. City reserves the right to perform a contract compliance audit at least once annually. Corporation shall provide any records or reports requested by the City regarding performance of this Agreement. Corporation agrees to keep all receipts and other supporting documents available for inspection and as specified in Section 7.1 of this Agreement.

This means at the very least that when Holly Wolcott and Miranda Paster claim that they have no power to audit BIDs or to require them to comply with their contracts, they’re being disingenuous at best, although things were worse in the past. And it’s not just in theory that things were worse.

In 2005, when Laura Chick was the L.A. City Controller, she actually audited a couple of BIDs. And not just for financial matters, but for general contract compliance. The duties of the Controller are described in the City Charter sections 260 et seq. See especially section 261(k), which grants the power to:

conduct performance audits of all departments and may conduct performance audits of City programs, including suggesting plans for the improvement and management of the revenues and expenditures of the City.

The relevant bit here is that the Controller “may conduct performance audits of City programs.” BIDs are City programs, they’re auditable by the City due to their contract, and the Controller can audit them.

So this is just what Laura Chick did in 2005. She performed in-depth audits of the Central City East Association, which manages the Downtown Industrial District BID, and of the Westwood Village BID. At that time she found that the Office of the Clerk was completely ignoring its duty to ensure that BIDs performed their contracts and suggested that they get on the ball. In particular, with respect to Westwood Village (WVCA), Chick found that:

The City Clerk, as the City’s BID program coordinator, did not properly monitor WVCA’s operations and did not provide adequate monitoring oversight over the contract with the City. The City Clerk did not diligently enforce WVCA’s compliance with contract requirements. As a result, WVCA did not fulfill some of the key contractual requirements, such as annual reports filing, budget modification approval, and safeguarding of assets, as specified in the contract.

In particular, the Westwood BID didn’t submit its reports, overspent its budget, kept everyone in the dark about how money was spent, and so on. Meanwhile, the Clerk

did not take a proactive approach in administering BID programs Citywide. The City Clerk believed that their role was limited to assistance in organizing BIDs, billing and collecting assessments on behalf of BIDs, gathering quarterly and annual reports for the disbursement of assessment funds, and reporting to the City Council. It was up to each BID to determine how each BID would spend its funds in the Management District Plan. The City’s contract with WVCA did not state specific monitoring oversight to be performed by the City Clerk. The City Clerk did not have clear monitoring guidelines for its staff to follow to ensure that all contractual requirements were met and that BID funds were spent in accordance with contractual, budgetary and City regulations and procedures.

This, of course, was a bad thing. Chick recommended that the Clerk cut the crap and start monitoring the BIDs. One legacy of this seems to be the fact that, if BIDs are late with their annual or quarterly reports, the Clerk will send an email like the one linked to above, probably because Chick singled out the failure to do this regularly as one of the Westwood Village BID’s most egregious transgressions. But that’s about as far as their oversight goes. If BIDs ignore other key provisions, the Clerk will refuse to enforce them. And not just refuse by default, but literally, explicitly refuse. Like stating publicly that they don’t have the power to do anything.

NOTE: This is part one of a series. Upcoming topics will include a discussion of specific contract clauses that BIDs violate but which the Clerk will not enforce; an example of how in 2016 not only will the Clerk not oversee BIDs, but the Controller also refuses to audit them, even when handed absolutely clear evidence of the misuse of more than hundreds of thousands of dollars since January 2015 by the Central City East Association; a look at how other City agencies, specifically tasked with making sure that City contractors perform their obligations, refuse to do so with Business Improvement Districts; regulatory capture and bribery of N&BID and Clerk staff by the BIDs they’re meant to oversee; and much, much more.

Image of Laura Chick and Karen Bass is freely licensed per its Flickr page.


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