California state auditor Grant Parks has sued the city of Huntington Beach for refusing to comply with an audit into the controversial Pacific Airshow settlement.
Parks filed suit on Orange County Superior Court on Oct. 22. The city and city treasurer Alisa Backstrom are named as defendants.
Parks said in the suit that Huntington Beach has a "mandatory duty" to comply with his requests for access to city staff and records, as well as a subpoena issued to the city requiring the attendance and testimony of Backstrom. He is seeking the production of records, permits and contracts between the city and Pacific Airshow LLC.
In May, the California Joint Legislative Audit Committee voted 10-2 to seek review of the city's multimillion-dollar settlement of a lawsuit that had been filed by Pacific Airshow LLC over the cancellation of one day of the 2021 airshow due to an oil spill off the coast of Huntington Beach.
State Sen. Dave Min (D-Irvine), who is currently locked in a too-close-to-call battle with Scott Baugh for a seat in California's 47th Congressional District, initiated the audit request in January.
"It's time for Huntington Beach city leaders to take the high road and comply with the state auditor," Min said in a statement Friday. "Taxpayers deserve a fair and transparent process. They deserve answers. The purpose of this audit is to restore public trust, and hiding the ball from investigators only serves to further undermine any good faith on behalf of the city."
Huntington Beach City Atty. Michael Gates said the conservative City Council majority advised him to fight the audit, though Gates himself also believes it is faulty.
"It's just another example of state overreach," Gates said in an interview Friday. "There's literally no authority for the state to audit the city's books, or any transaction which involves a local matter, which is the settlement of a lawsuit. No state money was used. It was not a state affair. It was purely local."
Huntington Beach has again asserted its authority as a charter city, an argument Gates has also made in fighting state housing mandates.
In the lawsuit, however, Parks said that over the last 30 years, the state auditor's office has audited 27 different charter cities in 35 separate audit reports without issue.
The auditor issued a subpoena on Oct. 1, according to the lawsuit, asking the city to produce Backstrom for an interview and records related to the air show. On Oct. 16, Gates responded to Stephanie Ramirez-Ridgeway, the chief legal council for the auditor, confirming the city's position of noncompliance.
Also at issue is Section 8546.7 of the California government code, which provides that a "contract involving the expenditure of public funds in excess of $10,000 dollars ... shall be subject to the examination and audit of the California State Auditor ... as part of any audit of the public entity, for a period of three years after final payment under the contract."
Parks contends that the text specifies the latest date the settlement may be audited -- any time before three years have elapsed after the final payment. Gates contends the text states that the settlement can't be audited until three years have passed since the final payment.
The last payment of the $4.99 million due to Pacific Airshow LLC won't be made until 2029.
"They're not on firm foundation to even begin this audit, so we're going to challenge them in court," Gates said. "You don't audit anything midstream. Audits are supposed to be retrospective."
The full settlement with Pacific Airshow LLC was released in July, after Ocean View School District trustee Gina Clayton-Tarvin won her lawsuit against the city for its refusal to do so.
Gates said prior to the settlement's release that he was withholding it due to possible litigation against Amplify Energy related to the oil spill. He announced last month that the city would receive $5.25 million from Amplify, in a settlement reached without litigation.
Gates endorsed David Clifford and Keith Jorgensen in this year's OVSD board race and actively campaigned against Clayton-Tarvin, who won reelection. With two spots available, she had 15,430 votes as of Thursday evening, with Keri Gorsage in second place (12,638), narrowly ahead of Clifford (12,367).
"It doesn't surprise me at all that [Gates] has been brought to task by the state of California in having to prove why that settlement was even made and that our tax dollars weren't used as a gift of public funds," Clayton-Tarvin said. "They're going to be doing an audit, whether he likes it or not. He's only prolonging the pain to come. The good people of the state of California will not be duped, that's the bottom line."