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Capitol Area Development Authority Mismanagement

    Subject of Investigation

    In 1978, the California Legislature, under the authority of Article 1 of Chapter 2.8 of Division 1 of Title 2 of the State of California Government code, established the Capitol Area Development Authority (CADA).

    Reason for Investigation

    The 1995-1996 Sacramento County Grand Jury initiated an investigation of CADA based on testimony presented at a meeting of the Sacramento City Council. The Council and CADA representatives discussed concerns related to the management of the agency. The Mayor and Council pledged their commitment to increase communication and oversight, but many questions remained regarding the effectiveness of the agency and certain of its actions.
    The Grand Jury investigation sought to determine if CADA is being properly
    administered. The investigation included the following concerns:

    · Misuse of Public Funds
    Investigation of staff and management
    Payment of sexual harassment claims without Board approval

    · Violation of the Brown Act regulating Public Meetings
    Lack of proper notice of meetings and actions

    · Inappropriate and Ineffective Management of the Board and Agency Investigation of staff by the Board Animosity between the Board and staff Procedures

    Interviews were conducted by the Grand Jury of current CADA Board members, former Board members, a community representative and CADA staff to determine the facts and obtain information related to the scope of the investigation.

    An extensive review of the record including Board meeting minutes, correspondence and reports was completed. The review covered
    records of the last two calendar years and historical documents dating from the enactment of the enabling legislation and joint powers act.

    The Grand Jury also reviewed an investigation report prepared by a private consulting firm which targeted CADA executive personnel and the management of the agency.


    CADA is responsible for the management of 44 blocks of downtown real estate. The Legislature created CADA in a joint powers agreement between the State of California and the City of Sacramento, which share responsibility for its oversight.

    CADA is responsible for the implementation of the Capitol Area Plan, the dual purpose of which is development of state office space and the preservation of affordable housing. Included in CADA's management portfolio are:

    · 773 residential apartment units
    · 60 commercial retail spaces
    · 187 land leases with homeowners in three condominiums
    · 25 percent of all residential units are set aside by statute for low income tenants
    · One co- operative project

    The CADA Board is made up of two state appointees, two city appointees and one representative at large. The appointees serve at the pleasure of the Director of General Services or the Mayor. The fifth member is appointed by the other four to serve a four-year term. A Board-appointed ombudsman assists in providing input from the CADA residential property tenants.

    The Board retains the services of the CADA Executive Director who serves at their pleasure. The Executive Director is responsible for all business activities and personnel. CADA personnel are members of the state retirement system. CADA operations and expenditures follow Sacramento City's fiscal policies.

    Use of Public Funds
    An annual expenditure plan is prepared by staff and submitted to the CADA Board for approval. Management responsibility is delegated by the Board to the Executive Director. Delegation of authority is at the discretion of the Executive Director. Payments are authorized by CADA senior personnel.

    At the outset of the Grand Jury's investigation, it found that historical practice rather than specific, written procedures guided activities. No Board procedures existed to follow up on directions to the staff.

    Public funds must be identified, approved and accounted for through public meetings and actions of the Board. In at least one case, payment for a sexual harassment claim was not specifically approved by the Board. The Board approved referral to the insurance company for payment, but the payment was made with CADA funds. The amount of payment was $20,000. CADA legal counsel later negotiated an insurance payment which was not specifically reported to the Board.

    During the period reviewed by the Jury, the Board received information regarding possible illegal activities by the CADA Executive Director. The Board, in closed session, took action to retain the services of an investigation firm for $15,000. The Board also authorized hiring special counsel at $250 per hour. These expenditures were neither approved by Board resolution nor reported in the Board meeting minutes.

    The investigation expanded into management practices and exceeded the scope of confidential personnel matters. Investigation was terminated without completion of the process at an ultimate cost of $18,000. To date, the report has not been made public in spite of the fact it was paid for with public funds, and portions of its contents critical of staff were quoted in a public Board meeting and by the media.

    Brown Act Issues
    The purpose of the Brown Act is to insure the public's right to know. The California State Legislature expressed its intent as follows:

    . . . the public commissions, Boards and councils and the other public agencies in this State exist to aid in the conduct of the people's business. It is the intent of the law that their actions be taken openly and that their deliberations be conducted openly.The people of this State do not yield their sovereignty to the agencies which serve them. The people, in delegating authority, do not give their public servants- the right to decide what is good for the people to know and what is not good for them to know. The people insist on remaining informed so that they may retain control over the instruments they have created.

    The provisions of the Act assure notice at least 72 hours prior to a public meeting, the body can only meet in closed session under specific conditions, a record must be made available for immediate inspection, public documents must be made available, and members shall not meet or confer privately to establish consensus.

    The Board is responsible for CADA's compliance with the Brown Act. Staff and counsel have followed procedures established in conjunction with the Board. Historically, CADA conducted regular public meetings every month in the same location and with the proper notice.

    In 1995, CADA began conducting an unusual number of special and executive closed meetings. The purpose of the meetings was to discuss potential or actual litigation and a personnel investigation. Meetings were held in a private office not generally available to the public. Notice was posted in a private office building prior to the start of the meeting. Reports of these meetings were not routinely reflected in the minutes.

    City-appointed members of the Board were not noticed in advance of at least one meeting where the agenda called for replacement of the Executive Director. The Board acted on personnel matters without giving proper notice to the employees involved. Committee meetings, phone consultation and meetings between state officials and by two or more members of the Board occurred with no notice or record. These meetings went beyond personnel matters to the investigation of the management of CADA without public disclosure. Staff individuals involved were not made aware of accusations nor given an opportunity to address them before the Board.

    Management Practices
    Policies and procedures of the CADA agency were first established in 1986. The original document focused strictly on personnel matters. The structure and content were derived from the Sacramento Area Housing Authority. Day-to-day operational procedures are generally undocumented and communicated by staff in an informal fashion. At the time of the Jury's investigation, policies and procedures were not routinely presented to nor approved by the Board.

    The CADA Board of Directors has vested complete authority with the Executive Director for hiring, terminating and evaluating staff as well as management of the agency. When the Grand Jury conducted its investigation, the Executive Director and the Board had no formalized duty statements or agency procedures and practices. Board resolutions document specific actions. There was no central record of Board resolutions.

    CADA staff and Board members have differing opinions of their respective roles. There is no clarity nor consensus as to whether the Board should focus on policy and the staff on implementation or whether the Board should actively engage in operational issues and decisions. This creates conflicts and ambiguity resulting in poor outcomes and ineffective use of public resources.

    In 1994 and 1995, the Board actively pursued the dismissal of the Executive Director. The Board can terminate the services of the chief officer by simple vote and without cause. A number of management criticisms and other charges were leveled at the Executive Director without informing him or properly evaluating his performance. As a result a great deal of time and resources were utilized to resolve the matter. Disclosure of the Board's criticisms about the Executive Director and the staff was limited to the reading of critical items from an unpublished, incomplete investigative report. When the CADA staff was allowed to respond to the items made public, they were able to satisfactorily explain and resolve the Board's concerns.

    Additionally, the Grand Jury found that CADA:

    · Maintained basic fiscal records which have been audited by the city with no significant findings

    · Has maintained a core staff of dedicated employees and managers

    · Lacks a functional inventory system of CADA equipment and furnishings

    · Had a marked increase in the number of employee complaints and lawsuits resulting in payment of public funds

    · Permitted purchase and use of computer equipment at home without a policy on telework or proper disbursement of electronic or other CADA resources

    · Provided incentives, bonuses and perks to employees without approved policies and documentation

    · Did not take proper and timely action when staff observed and reported specific acts of sexual harassment


    The Grand Jury recommends:

    · CADA revise its bylaws relative to the selection of the fifth Board member to increase public input. It is the opinion of the Grand Jury that this member should be a CADA area resident. This representation would assure the public, state, city and downtown interests are reflected in all deliberations

    · CADA make public all expenditures and budget plans including staff salaries and perks

    · CADA develop a Board-approved internal, fiscal policy manual

    · The CADA Board make public all investigation reports, audits and inquiries

    · CADA establish procedures for addressing allegations made against CADA or its personnel, and for allowing those affected to respond

    · CADA operate in a manner consistent with other public funded agencies and establish clear roles and responsibilities, annual and long-term goals and objectives, and an updated mission statement

    · CADA adhere to a regular schedule of Board and Board committee meetings held at a consistent place and time to enhance the public's ability to attend and participate

    · CADA establish a mechanism whereby tenants are afforded an opportunity to voice their concerns and air their views on area issues

    · The City and State monitor CADA's fiscal and management practices for adherence to clear policies, procedures and plans. Regular reports should be issued to the public on their findings

    · CADA, state and city officials join with the public, in the spirit of the Brown Act, for discussions about the future of CADA and downtown Sacramento

    Response Required

    The Penal Code requires responses to the recommendations contained in this report be submitted to the Presiding Judge of the Sacramento Superior and Municipal Courts by September 30, 1996, from:

    · Capitol Area Development Authority Board of Directors
    · Sacramento City Council

1995/96 Sacramento County Grand Jury - Final Report (Internet Version) June 30, 1996

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