Huntington Beach will not receive its share of local transportation funding toward repaving roads and other improvements for the next five years after the city failed an Orange County Transportation Authority audit — it’s the second city to have failed an audit in the program in the last year.
An independent audit completed in April said $29,249 of a Huntington Beach city employee’s payroll charges were erroneously set up to come from a street maintenance project funded by Measure M2, the 2006 voter-approved sales tax that funds transportation work throughout the county. The employee does not perform street maintenance, according to the auditor’s findings, and city officials acknowledged the error.
Huntington Beach is the second city in the county to lose eligibility for local Measure M2 funding in the last year. In 2024, Buena Park was declared ineligible for its share of local transportation funding after an OCTA audit determined the city spent $387,576 of the transportation funding on unallowable labor expenses.
The OCTA Board of Directors declared Huntington Beach ineligible for Measure M2 funding for five years at its May 12 meeting. Huntington Beach has previously used the money for repaving roads, rehabbing bridges and building curb ramps in neighborhoods.
Some board directors commented halting funding for the city is a severe penalty compared to the error city officials made, but said the punishment is mandated by law. Measure M2’s language, approved by voters, requires the “strict adherence to the limitations on the use of the revenues,” according to the law, and mandates five years of ineligibility.
The board ordered yearly audits into Huntington Beach’s use of Measure M2 funding as one of the requirements for it to be eligible again in five years.
City Manager Travis Hopkins acknowledged the errors to OCTA’s board and said the temporary loss of funding will have a “large impact” on the city, including its senior mobility program.
Measure M2 levies a half-cent sales tax throughout the county to fund transportation needs — 18% of net revenues from Measure M2 are given to cities for transportation improvements.
Huntington Beach officials had budgeted $5.5 million in Measure M2 funding for the city’s current fiscal year and projected receiving that funding for road projects over the next few years. The city will have to grapple with the funding freeze as it navigates growing projected deficits creating a difficult budget to balance.
Over the next five years, Huntington Beach’s share of Measure M2 funding will be put into an escrow account. Competitive transportation grants the city wins with OCTA will also be put into an escrow account for the five years.
The city will get the money from the escrow account once it becomes eligible again after five years.
OCTA spokesperson Eric Carpenter said Measure M2 local funding allocations are based on population, sales tax generated and the number of street miles in each city.
“The funds can be used for traffic improvements such as street repair and maintenance, which contribute to Orange County having some of the best road conditions in the state,” Carpenter said in an email.
Any money the city has already received can still be used.
The yearly audits ordered by the OCTA’s board of directors will be paid for by reducing the amount Huntington Beach will receive from Measure M2.
In an April letter, city leadership told the OCTA board of directors that the city “will undertake a comprehensive review of its financial reporting protocols and establish enhanced internal controls” for the future and will refund the money.
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