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

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CITY OF LA PORTE, TEXAS Agreed Upon Procedures - Five Points Town Center Project (Continued) September 21, 2010 11. Review Real Estate Transactions Between the City. Board. and Developer: Multiple real estate transactions taking place on one day, along with various liens on the properties in question, and multiple parties involved make the real estate transactions complex. Because of the overall complexity of the transactions between the City, Board, and East A, many questions have arisen surrounding these transactions. In an effort to clarifY these transactions and answer some of these allegations, we performed procedures related to the real estate transactions. Several questions related to these transactions were raised in our citizen interview as well as F AC and Council minutes. Among these were: · The possible sale of a portion of property on San Jacinto Street to East A by the City. · Payment of property taxes on the property purchased despite the EDC being a nontaxable entity. · Questions surrounding the payments made by the City to all parties on the October 29, 2008 closing of the Triangle property. · The possibility of the settlement statements (HUD-l) being improperly filled out or including improper charges. · Questions regarding the title histories on the various properties. In an effort to clarifY these transactions and evaluate them, we performed procedures related to each including reviewing documents and interviewing staff to find evidence of a sale of land by the City, reviewing property taxes paid by the EDC on the Triangle property, gaining an understanding of the various payments made by the City during closing on the property, reviewing the HOD-I documents related to the purchase of the Triangle property, and reviewing title documents provided by the City attorney. Based on a meeting with the FAC on September 20, 2010 we modified the scope of work to include researching the appraised value of property held by East A at 109, 111, and 117 San Jacinto Street as listed with the Harris County Appraisal District. The sale of a portion of San Jacinto Street to Developer We viewed no documents that appeared to refer to or substantiate any sale of land to East A. Also, per interviews with City staff, no such transaction took place. Payment of property taxes on Triangle property We reviewed the payment of property taxes on the Triangle property. These property taxes were delinquent at the time the property was purchased. At the closing for the Triangle property, an estimate of $324.44 was credited towards the purchase price on the HUD-l (Exhibit 37) by showing the amount being deducted from the seller in line 511 and credited to the buyer online 211. The actual amount of taxes paid was $311.92 as can be seen in Exhibit 38. It is common for the buyer to be credited for the amount of property taxes owed, and to subsequently pay the actual taxes due. Review of evidence of payments made by City to all parties at closing on Triangle property On October 28, 2008, the City transferred money for two transactions. The first of these transactions was for the purchase of the property known as the Triangle property from East A. The second transaction was the loan to East A. Both amounts were transferred on October 28 for an October 29 closing. We will address each item individually. 21