Long Beach City Auditor Hasn't Issued Reports On Queen Mary Capital Improvements For Roughly Ten Years
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(June 11, 2021, 3:05 p.m.) -- City Auditor Laura Doud (elected in 2006) performed audits and issued reports in 2009, 2010 and 2011 on payments by the City's then-Queen Mary lessee ("Save the Queen") for capital improvements to the ship. However in the decade that followed -- from 2011 to the present -- we found no evidence on the City Auditor's office website that her office performed reports on Queen Mary capital improvements or addressed the ship's deteriorating conditions. This includes the period under the QM's most recent (now former and bankrupt) lessee Urban Commons.
LBREPORT.com found three City Auditor audits on Queen Mary capital improvements between 2009 and 2011 (details below)...after which such reports appear to have stopped. City Auditor's website doesn't indicate similar Queen Mary capital improvement reports in 2012, 2013, 2014, 2015, 2016, 2017, 2018, 2019, 2020 or 2021 extending to the present day.
2009 "Queen Mary Capital Improvements Phase 1 Audit said the City's QM's then-lessee, "Save the Queen," had fallen behind on some of its lease obligations, completing $2.039 million of $2.8 million in capital improvements required through December 31, 2008. "This audit serves as a warning that Save the Queen has fallen behind on its obligation to improve the ship," said Auditor Doud. "However, they have represented that they will expedite improvements to this important City asset so as to meet the next deadline of December 31, 2009." (In November 2007 the City signed an agreement with STQ in which they agreed to make $5,300,000 of capital improvements through December 31, 2010 in exchange for the City’s waiver of the percentage portion of their rent. The 2009 Queen Mary Capital Improvements Audit was been agendized for the June 23, 2009 City Council meeting.
Capital Improvements Phase 2 Audit. An August 24, 2010 memo to the Mayor and City Council said that as of that date "Save the Queen’s" aggregate capital expenditures were $317,000 less than required per their lease with the City" but said "Save the Queen" represented it intended to make all improvements required under its lease. The City Auditor's office recommended revisiting Save the Queen's capital improvements performance after a benchmark deadline of Dec. 31, 2020. The City Auditor's memo to the Mayor and Council noted that "failure of Save the Queen to fulfill its lease obligations would result in a lack of improvements to the City’s asset, and undermine the City’s goal of improving the visitors’ experience and generating additional operation revenue at the Queen Mary."
Queen Mary Capital Improvements Audit Phase 3; On May 24, 2011, the City Auditor's office sent the Mayor and City Council A report that found Save the Queen had "completed $1,542,000 of capital improvements...bringing the total aggregate amount expended to $5,524,000 through December 31, 2010, thereby exceeding the required amount by $224,000." The audit didn't mention any deteriorating physical conditions; it focused on sums budgeted and spent. Then-Public Works Director Mike Conway responded with an April 26 memo indicating his office was "in general concurrence with the audit findings and results."
We found one early (2008) "Inventory Audit" (that recommended developing "fixed asset management policies" for third party contractors managing the ship's assets.) It made no mention of the ship's conditions.
A 2012 report on "Save the Queen's" financial activities found no fraud and didn't mention the ship's physical conditions. However the City's response to the 2012 audit (a November 7, 2012 memo from Victor Grgas, Manager of the City's Asset Management Bureau) said that after "years of neglect by the former operator of the ship," during the last four years of formal control by STQ (Save the Queen)..."improvements that have recently been made on the ship are extensive and self-evident and are making a significant difference in helping create additional operational revenue opportunities, further enhance the guest experience and prolong the useful life of the vessel."
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In late 2016, City Auditor Doud, with the support of 3rd dist. Councilwoman Suzie Price, offered to review the 2016 city management proposed lease with Urban Commons prior to Council approval. Auditor Doud noted it was a complex transaction and a complex lease but didn't cite the ship's deteriorating condition [although the City had a 2016 marine survey in hand detailing costly needed repairs.]
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The Council majority declined Doud's offer and voted to enter into the 2016 lease transaction (6-1, Price dissenting, Richardson and Gonzalez traveling in China.)
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The 2016 Urban Commons lease transaction relied on a combination of debt bonds and Tidelands revenue to cover roughly the $23 million in city management-listed urgently needed repairs. The $23 million sum was ultimately depleted without completing all of the needed items, with city management acknowledging that costs for fire prevention items ran millions more than initially estimated.
By mid-2019, monthly reports by city's decades-long Queen Mary inspector/professional engineer, Ed Pribonic, had percolated into public view, detailing grounds for concerns over the ship's condition. Mr. Pribonic's critical views irked city management, which sought to mute his public criticism by citing "confidentiality" verbiage in his city contract. When that didn't work, city management retained an engineering firm frequently used by the City (Moffit and Nichol) to "review" Mr. Pribonic's reports. In Dec. 2019 city management ended Mr. Pribonic's contract with the city. (To LBREPORT.com's knowledge, no city official has publicly denied the accuracy of Mr. Pribonic's monthly inspection reports.)
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In December 2019 (after city management alleged that Urban Commons hadn't fully performed certain of its lease obligations), City Auditor Doud began an audit (still ongoing) focused on sums it said were due but not paid. The City Auditor's latest audit (again) doesn't address the big ticket item for taxpayers:: the ship's deteriorating physical condition.
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In a Dec. 2019 release announcing the audit, City Auditor Doud said in part: "Since I was first elected to this office, I have tracked the Queen Mary’s developments, voiced my concerns about the progress of capital improvements as well as City oversight of the ship, pushed for reporting transparency, and conducted a number of audits of the Queen Mary. This latest audit is a continuation of our work to ensure good stewardship of this historical asset." Her release said the 2019 audit would be of the "Queen Mary’s financials and lease compliance" and "will be the sixth audit of the Queen Mary conducted by City Auditor Doud. The previous audits recommended improvements concerning asset management, capital improvements, internal controls and accounting, tenant contract compliance, and the City’s oversight of the lease agreement."
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On June 11, 2021, the City Auditor's media relations staffer told us via email: "Before releasing the most recent investigative report on May 26, 2021 which is still ongoing given the information available, City Auditor Doud had been monitoring the Queen Mary and voiced her concern at the City Council Meeting on November 1, 2016 before City Council approved the $23 million intended to fund 27 critical and urgent repair projects identified in the 2016 Marine Survey." The email also cited the Queen Mary Lease "Financial Activities Audit" [involving "Save the Queen" which found no fraud] at the end of 2012 plus four other audits (reported by LBREPORT.com in our text above.)
Efforts by LBREPORT.com on June 10 and 11 to arrange a telephone conversation with City Auditor Doud to discuss her record re the Queen Mary and related matters have thus far been unsuccessful.
Support really independent news in Long Beach. No one in LBREPORT.com's ownership, reporting or editorial decision-making has ties to development interests, advocacy groups or other special interests; or is seeking or receiving benefits of City development-related decisions; or holds a City Hall appointive position; or has contributed sums to political campaigns for Long Beach incumbents or challengers. LBREPORT.com isn't part of an out of town corporate cluster and no one its ownership, editorial or publishing decisionmaking has been part of the governing board of any City government body or other entity on whose policies we report. LBREPORT.com is reader and advertiser supported. You can help keep really independent news in LB similar to the way people support NPR and PBS stations. We're not non-profit so it's not tax deductible but $49.95 (less than an annual dollar a week) helps keep us online.
