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Report: Caltrans Passed Up $22 Million in 710 Rental Income

The report, requested by Assemblymember Anthony Portantino, states that tenants' rents are on average 43 percent below market rate.

The California State Auditor released a report Thursday confirming Caltrans' mismanagement of 345 homes along the 710 Freeway corridor in South Pas, Pasadena, Alhambra and L.A. 

The report states that tenants' rents are on average 43 percent below market rate—estimating that Caltrans "missed the opportunity to generate roughly $22 million in rental income between July 1, 2007, and December 31, 2011."

Here is an overview of findings in the report:

  • Caltrans has spent an average of $6.4 million per year on repairs to SR 710 properties; however, it could not demonstrate that the repairs for 18 of the 30 projects we reviewed were reasonable or necessary. 
  • To maintain the SR 710 properties, Caltrans has transferred an average of $4.7 million each year to General Services since fiscal year 2005–06. However, Caltrans does not provide proper oversight of the repairs General Services performs.
  • Caltrans also stated that it does not charge market rates for many of the SR 710 properties because in 2002 the former Caltrans director instructed the District 7 office not to increase rents to market rates.
  • Once Caltrans completes the necessary reviews and plans for the SR 710 extension project, it can determine if it requires all of the properties that it currently owns.
  • The sale of these properties will be restricted by legislation enacted in 1979 known as the Roberti Bill, which requires the State to offer the properties at significantly reduced prices to any current tenants who have low or moderate incomes and have not owned real property in the three years prior to the sale.

The California State Auditors gave a slew of recomendations to Caltrans to ensure the following:

  • That the repairs it makes to the SR 710 properties are necessary and reasonable;
  • That it collects fair market rents for the SR 710 properties on the State’s behalf;
  • Only eligible tenants receive the benefit of the affordable rent policythat all taxable fringe benefits or gifts state employees receive are appropriately included in their gross income;
  • That only eligible tenants receive the benefit of the affordable rent policy. 

For the full report, click HERE.

This audit was requested by Assemblymember Anthony Portantino after a Los Angeles Times public records request last year, in which Caltrans provided documentation of roof repairs and replacements between 2005 and 2010 on homes it ownes in Pasadena. 

Patch Asks: Are you surprised by these findings? Do you live in a Caltrans-owned home? Do you think Caltrans should sell these properties? 

Kaleb August 16, 2012 at 11:56 PM
Passed up rents? For years, the rents on these properties were lower than market value BECAUSE they were in what we used to term "The Combat Zone". CalTrans could come in and tell the tenant to move at any time if the project were approved. For years, CalTrans did not do appropriate maintenance because of the potential for construction. Thus, they were low rent on purpose---no one would move into dilapidated properties at full market value rents. CalTrans finally was required to do actual maintenance of the properties because, for YEARS they neglected them. CalTrans' reply was always "the 710 extension will be approved soon, so no sense in throwing money at houses that are only going to be torn down!" and thus, the properties were in vast disrepair, bringing down values of surrounding properties and neighborhoods and rents. CalTrans was in jeopardy of being slumlords for thinking they could charge low rents and subject tenants to horrible conditions just because they were government. CalTrans for decades has not done proper maintenance and only now proponents of the 710 extension are complaining about the cost to maintain these properties as an excuse to get the freeway pushed through. The reality is, CalTrans HAS been a slumlord, thinking they wouldn't have to maintain these properties.
Tom Leonard August 17, 2012 at 12:07 AM
No wonder the state is in such trouble, they have idiots working for them!!! And who hired them??? No one is held accountable!! And We had to pay for these reports that we already knew the answers to. The only ones held accountable are the "tax payers".
Judith Trout August 17, 2012 at 10:11 PM
In the times newspaper it said, several of the tenants were Cal Trans employees. Are these people low income families? They have been alful landlords for way to many years.
Dan Young August 19, 2012 at 02:36 PM
43% below market rates.. for that area. Likely the Democrat machine that runs these housing projects gives their political buddies a kick back by inflating maintenance costs in order to recycle the money back into political party hands. Its the Chicago, err California way.
Kristen Lepore (Editor) August 20, 2012 at 07:12 PM
@Judith: The report says: "Caltrans also rents 58 of the SR 710 properties units under an affordable rent program for certain low-income tenants who originally qualified for affordable rent before March 3, 1981, in order not to impose hardship on them. Our review found that Caltrans charged rents for these 58 properties that were, on average, 26 percent of the rents it identified in its market rent determinations. Based on our comparison of Caltrans’ market rates and the rates it actually charges these tenants, we estimate that this program is costing the State more than $940,000 per year. However, Caltrans has not been performing income eligibility verifications annually for the tenants in the affordable rent program, as its own policies require. Consequently, it cannot be sure that all of the tenants continue to qualify for the program. For those tenants who no longer qualify, the difference between the fair market rental value of the property and the rent they pay—an average of $16,200 per year per property—would be considered a gift of public funds."
scott February 08, 2013 at 04:02 PM
AS Kaleb already pointed out, they passed up on nothing in regards to how they treated or took care of the properties or tenants that have lived in the 710 corridor. Having been a tenant for more than 10+ years, it has become painfully obvious that CalTrans, wants to justify their ineptnesss on the back of the tenants in the 710 corridor. The state audit points out that In addition to being horrible stewards of state owned properties, Caltrans has mismanaged, misppropriated, and just flat out failed as landlords for many hard working, moderate income familes that have endured shoddy workmanship of the contractors that were working for Caltrans,inadequate remedies for dealing with caltrans and often criminal actions taken by caltrans to silence those willing to expose the inequity that many, many tenants feel has taken place for too long. When the audit report came out, Many tenants received a letter from Caltrans stating that they were going to raise our rents by 10% every 6 months Starting march 1st 2013 until the cost of our homes were withing "Fair market Value", the "Value" ONLY caltrans has calculated, or knows how they came about that figure. I know That I have not received a 20 % increase in my pay in 1 year, and I doubt anyone else has either.. This is designed to evict us by way of outrageous rent hikes.

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