Mission Viejo staff drops the ball


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Mission Viejo staff drops the ball

The title of this post reads “Mission Viejo staff drops the ball.” No, this post is not about the NBA finals. This story, requiring extensive investigative research, addresses the failure to draft enforceable agreements and follow through on those negotiated contracts in Mission Viejo. Considering the annual contract renewal of our City Manager the following should be included by our council in any compensation deliberations.

Local activists who monitor Mission Viejo politics will surely acknowledge that I retain public records long after the council legally authorizes our city clerk to shred same. In this case I have waited for a response to a Public Record request that is over one year old and counting. It relates to the $550 million dollar expansion of Mission Hospital.

In Nov of 2003 Mr. Charles Wilson, Director of Community Development, received a letter from the law offices of Watkins, Blakely & Torgerson, LLP that addresses the “Mission Hospital Master Plan: Table of estimated Sales/Use Taxes.”

In the opening of this communication it reads: “The table sets forth a rough estimate ($1,880,018.56) of the sales /use taxes which the city may expect to receive during the twenty-five year term of the Development Agreement for the Master Plan.
The Sales/use estimate is made up of (1), the city’s entitlement to 1% of the 7 3/4% sales tax for Mission Hospital’s purchase of furnishings and equipment, and (2), the City’s entitlement to 1% of the 7 3/4% sales tax for construction materials necessary to construct Phase I and Phase II improvements for the Master Plan.”

Without reproducing the entire Development Agreement DA 2003-1, agreed to by Mr. Kenneth D. McFarland, Senior VP and CFO, the Planned Development Permit PDP2003-103 or MV Resolution 04-14 adopted in Jan of 2004, let me simply say we dropped the ball.

On March16th of 2009 I made a Public Records request requesting a copy of all related projected project revenues. On March 25th of 2009 I received a response from our records coordinator that “there are no records on file applicable to your request.”

Based on his response I sent a fax and emails to our city manager, city finance director Bornstein, Chuck Wilson, mayor Ury, city attorney Bill Curley, Mission Hospital CFO McFarland, Mission Hospital CEO Peter Bastone, three other executives of St. Joseph Health System and hospital attorney Paul K. Watkins.

On April 21,2009 Chuck Wilson sent an email to Mr. McFarland, Mr. Bastone and our City manager where he wrote. “At last night’s City Council meeting, Larry Gilbert under Public Comments brought up this subject matter again. Do you have any information you can provide us on this?”

Two days later Mr. McFarland responded stating “I have asked some of our internal subject matter experts to fashion a response.”

Sidebar. Copied on this communication is Peter Bastone, a member of our city Planning Commission.

Sadly the local newspaper does not engage in this form of investigative reporting. The local Register representative may cover fast food restaurant openings and closings but this effort requires persistence. While I have visited the new wing of the hospital and did a favorable Orange Juice post on its state of the art life saving equipment this past January, we need to stay focused on the original development agreement.

After months of exchanges, most recently a June 3rd conference call with CFO Ken McFarland, I have now received a response. The three paragraph letter is dated June 8, 2010. I have waited until after the Primary to post this report as those elections take priority over any aging story. The title of their letter reads “Mission Hospital’s Statement Regarding: Mission Hospital Master Plan (New Tower) Sales/Use Tax.”

Without reproducing the text let me simply share the dollar amounts as provided in that document relating to contractors who were to abide by the terms of the contract. “It appears that only one of them obtained and reported sales tax via a sub-permit of $285,700 for our jobsite. The other three stated that they are consumers of the materials they purchased for our job and thus paid sales tax directly to their suppliers which summed $272,050. This total $557,750 in total sales for these four subcontractors. There were approximately 130 subcontractors used for this jobsite of which many collected and remitted applicable sales tax of which Mission Viejo would benefit from the countywide pool of local tax remitting, which is not known.”

Larry. Let’s wrap this up. Someone in our city should have questioned the hospital attorneys on how they were able to project our receiving a “rough estimate” of $1,880,018.56 from this expansion. I continue to shake my head in reading this figure that ends with fifty-six cents.

A staff member should have monitored this project’s sales/use tax as part of the overall project performance. Why didn’t the city press for an answer on this issue knowing that I was raising this concern? They simply didn’t want to rock the boat.

While this lengthy account may not be relevant to most of our readers, the one thing I can point out is that this is not a fictional story. The documents referenced in this post are locked up in my files.

Who knows what sales/use tax we were able to collect. Surely the city doesn’t know.


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