The shadow of a federal investigation into an unfinished $459,000 daycare paid for by funds with the La Joya Economic Development Corporation reappeared last week during a city council meeting.
Council members met Thursday, Oct. 29 to review and approve the delayed audit for the 2018-2019 fiscal year that was due last March.
Besides a finding pointing out the delay, the audit found the city’s EDC had a total of $585,848 in outstanding loans.
“Of the total amount, over half were deemed significantly delinquent,” the audit stated.
After the meeting, La Joya Mayor Isidro Casanova acknowledged that most of the loans owed were from a failed daycare project led by the daughter of Casanova’s predecessor.
“That’s one of the biggest loans we’re working on but because it’s under federal investigation, we won’t be able to do anything about it until it’s over,” Casanova said. “We’ll just have to wait and see.”
Last February, Casanova confirmed the FBI was investigating an EDC project to build an adult daycare center in the city after the EDC made multiple loan payments to the center totaling $459,000 in 2016 and 2017.
Frances Salinas, the daughter of former city Mayor Jose A. “Fito” Salinas became manager of the project in 2017 to handle all business relating to the daycare. The center never opened.
Frances, the former interim executive director of the La Joya Housing Authority, Mayor Salinas and a third individual, Ramiro Alaniz, were charged with wire fraud for their involvement in a kickback scheme to defraud the city and the EDC, which supports small businesses and economic growth in the city by lending out loans to new businesses.
According to the indictment against all three, Frances applied to multiple EDC loans on behalf of the owners of the Arcoiris LLC daycare project. She hired Alaniz, the maintenance director of the La Joya Housing Authority while she worked there, to serve as the general contractor for the project.
As chairman of the EDC board, Mayor Salinas voted to approve those loans for the project, according to the indictment.
“[Frances] instructed Alaniz to inflate billing invoices and Alaniz instructed some subcontractors to inflate their invoices to hide the fact that [Frances] was being paid kickbacks with money loaned to Arcoiris, LLC from the La Joya EDC,” the indictment stated.
Frances would then write checks to be paid to the subcontractors which would be cashed by Alaniz who would only give a portion of the money to the subcontractor.
All three pled not guilty to charges related to the daycare project last month. Frances, Mayor Salinas and former city of La Joya public relations Director Sylvia Garces Valdez are also charged in a separate fraud case relating to Valdez’s employment contract.
All four are tentatively scheduled for a final pre-trial conference on Dec. 4 and jury selection on Dec. 8 before U.S. District Judge Randy Crane.
The audit noted that the loans owed to the EDC were significantly lower than the $832,016 owed to the organization in the previous audit.
According to City Administrator Jacqueline Bazan, the city hired a specialized debt collection attorney last May to notify those owing loans to pay back the EDC.
“This administration has taken a lot of initiative and have been very proactive in moving forward with collections on those loans as we speak,” Bazan said. “We will continue to have a positive outlook with our next future audits.”
Besides the EDC loan findings, CPA Juan Guerra of Oscar R. Gonzalez, CPA & Associates congratulated the city council and staff members after reporting the audit showed the city saw an increase in its revenue, business type activity, and assets compared to its previous audit.
“In essence, it’s a good, clean audit, the city’s fiscally strong,” Guerra said.
The city has ambitious plans for its EDC. Following the city council meeting, the office of Congressman Henry Cuellar presented the city with a $50,000 check for a grant from the USDA’s Rural Business Development Grants.
According to Bazan, the federal funds will be used for a leakage study to identify how much economic activity is generated in the community and how much economic activity is leaving the community.
“This will be the first time through these monies the city of La Joya will have an opportunity to go ahead and do an economic leakage study to determine what type of economic data will be best suited for our city to bring more retail and commercial development to our city,” Bazan said. “We’re very excited for the grant. It will help us expand and grow.”