09-20 and 09-21-10 Special Called Regular Meeting of Fiscal Affairs Committee

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I. Background The following background is provided by Belt Harris Pechacek, LLLP in an effort to aid users in understanding the sequence of events leading up to this report. It is based on information relayed to us and is only intended to assist the users of this report and to aid in their understanding of it. In early 2008, the City of La Porte Economic Development Coordinator developed a downtown revitalization plan involving the purchase of properties and the building of a town plaza in the area of the intersection of Broadway, Main, and San Jacinto streets known as Five Points (the "Project"). This plaza was to be a centerpiece to further development of adjacent properties in the downtown area. In February 2008, both the La Porte Economic Development Corporation (the "EDC") and the City Council (the "Council") approved the initial planning phase of the Project. The site selected for the Project centered on a triangle shaped property bordered by San Jacinto, Broadway, and A streets known as the Triangle property. This property, along with properties in the Five Points area, were held by a development company owned by Garson Silvers known as East A Development Inc. ("East A"). On October 29,2008, the Triangle property, as well as the adjacent property at the comer of San Jacinto and Main Streets owned by Texas Parks and Wildlife, was purchased by the City in a complex transaction involving the purchase of properties by both the EDC and East A, multiple sellers, and a loan by the EDC to East A to enable them to purchase properties at 109 and 111 San Jacinto. In concert with the Project, East A was to later develop adjacent properties. East A was also given the option to later purchase the Parks and Wildlife property which was the intended site of a multi-story office building. In March 2010, the construction of the plaza was completed. During the process, however, East A did not begin construction on the multi-story office and parking areas as previously envisioned. During and after Project completion, it is our understanding that concerns were raised by citizens and City officials over various actions and transactions related to the Project. The City's Fiscal Affairs Committee (the "FAC") selected Belt Harris Pechacek LLLP ("BHP") to conduct an agreed upon procedures engagement in an effort to provide a central document related to the Project and answer some of these concerns. A summary of our procedures and findings related to these agreed upon procedures follows under "Detailed Report". II. Executive Summary While the City and EDC had a clear picture of the result they wanted to achieve, the Proj ect did not materialize as envisioned. The EDC's portion of the project (the Plaza) was carried out and the end product was nearly identical to pre-project renderings; however, the envisioned office complex and surrounding development has not materialized. Over the course of our procedures, we found no actions by the City or EDC that were in obvious violation of statutes or policies and procedures. However, we noted a disparity in the level of documentation available and other opportunities for improvement as indicated in the detailed report. 1 ~ Robert Belt, CPA Steph:mie E. Harris, CPA Nathan Krupke, CPA Partner of Counsel John R Pechacek, CPA &win 100 Congress Ave., Ste. 2000 Austin, TX 78701 512.381.0222 IillmIi= www.tex3.sauditors.com info@t>..-auditors,com 713.263.1550 fax == Governmental _ Audit Quality Center .. ~ 3210 Bingle Rd., St<. 300 Houston, TX 77055 713.263.1123 !Wlri!k 6100 Windy Hill Lane Bellville, TX 77418 979.865.3169 ~ o S. 0.- S' (Jq () o a "1 ::l 3 n ::l ..... !>) -- ~ Z o ::l 'U "1 o ::n ..... ~ r::: 0.- ..... ..... UJ U) n ~ n 0.- ~ s: ~ n n I;::: n ::l n n