Report 97119 Summary - July 1998

Los Angeles County: Millions Spent on Courthouse Projects That May Never Be Built

Results in Brief

Since 1988, Los Angeles County (county) has spent $79 million on eight incomplete courthouse construction projects financed through its Robbins Courthouse Construction Fund. Five of these courthouse projects have scant chance of being built, yet the county spent $18.6 million on them-$9.9 million for planning and design, money from which it will derive no benefit, and $8.7 million for land that now sits idle.

Following approval of its master courthouse construction program in 1988, the county started eight courthouse projects. However, it predicated its ambitious program on revenue projections that, because of subsequent changes in law, proved to be overly optimistic and cost projections that were too low. In addition, the county failed to perform comparative needs assessments and did not prioritize the courthouse projects to determine where construction funds could be most effectively spent.

To compound these problems, the courthouse projects have been plagued by significant delays. Some of the delays, such as those caused by the Northridge earthquake and relocation of one courthouse, were out of the control of the county. Other delays have resulted from the county's poor control over the projects.

Three years into the program, an outside consultant warned the county that it could not finance the entire courthouse construction program, but the county continued to purchase land and develop plans for all eight projects. The county was finally forced to defer six projects in 1994 due to insufficient funding. Had the county reacted promptly to the consultant's warning, it could have prevented spending as much as $7.8 million of the $9.9 million it spent on planning and designing projects it eventually deferred, and $8.6 million on unnecessary land purchases.

Until revenues increased recently, the county lacked sufficient funding to complete any of the projects it deferred. However, the county now projects that if the current revenue levels continue, it will have sufficient funding to complete one of the deferred projects-the Antelope Valley courthouse. Nevertheless, the county must proceed with caution. These revenues are subject to sudden changes, and even small decreases in revenues or increases in costs could jeopardize the county's ability to fund the project. Unfortunately, the county has not identified the factors that account for the recent increase in revenue. Thus, it has no assurance its projections are based on realistic assumptions. As a result, the county risks repeating its past mistakes by spending money on projects it cannot complete.

Nonetheless, the county has taken steps to improve its project development process. In 1995, the county reorganized some duties and in 1997 it adopted a capital projects management process. Although these actions appear to address its main problems, changes are too recent to evaluate in practice.

Recommendations

To ensure it maximizes scarce resources for courthouse construction, the county should conduct a countywide comparative needs assessment and continue projects based on the greatest need.

To ensure project funding is realistic, the county should monitor factors that will affect revenues or costs, revise cash flow projections, and recommend changes to the courthouse construction program whenever warranted.

Agency Comments

The county generally agreed with the recommendations and provided additional comments.