Chiang says two audits found the city's redevelopment agency was improperly used for items such as dinners in Las Vegas for the city manager and embroidered polo shirts for city councilmembers.
The U.S. Department of Housing and Urban Development found last year that the city had misused federal housing grant money for a project that was never completed. The agency is demanding the city repay $2.2 million.
Montebello is in the eastern part of Los Angeles County. It has a multimillion-dollar budget deficit and could be broke this fall.