Accounting for 2 Security Issuances from 1 Bond
Because of the way the Bonds are rigged; Beaumont owes $407,003,879.53 on $200 Million worth of Bonds.
Accounting for the Two Sets of Securities Issued from Beaumont’s Bonds on the Financial Statements
All of Beaumont’s Housing Bonds, beginning with the 1994 Series AB Bond, have two separate security sales written into every bond. Beaumont is not the only government agency that has acquired bonds this way and it’s not the only government agency to incorrectly record the bonds on their Financial Statements.
All bonds have a Sources and Uses page to show how the bond money was acquired and how the money will be spent. Beaumont CFD Bonds have two (2) Sources and Uses sections; one for the Securities Issued by the Beaumont Finance Authority and one for the Securities Issued by the Community Facilities District.
The Beaumont Financing Authority and the Community Facility District are both Joint Power Authorities formed by the City of Beaumont.
On the 1st Sources and Uses Statement for the Beaumont Finance Authority: The ‘source’ is the Authority’s Issuance of Securities in the amount listed on the Face of the Bond. The ‘use’ is that the money is deposited into the Authority’s Bond Program Fund Account, less payouts to bond profiteers.
On the 2nd Sources and Uses Statement for the Community Facility District: The ‘source’ is the District’s Issuance of Securities in amount that was deposited into the Authority’s Program Bond Fund Account. The ‘use’ of this money pays for construction of facilities and provides another payout to the profiteers.
Because of the way the Bonds are rigged; Beaumont acquired over $700 Million in Bond Debt and currently owes $407,003,879.53 on $200 Million worth of bonds.
An asset is a resource with economic value. This structure created an illusion of securities/assets that don’t actually exist. For the City of Beaumont; this type of bond structure created $300 Million in Assets. For Union Bank, which was the Bond Trustee to over $2 Billion California Mello Roos Bonds; it created a $2 Billion illusion of assets that didn’t exist.
The list of Bonds provided in the Trustee Transfer from Union Bank to Wilmington Trust in January, 2016, list the Beaumont Financing Authority Bond Debt at $201,340,000.
The list of Bonds provided in the Trustee Transfer from Union Bank to Wilmington Trust in January, 2016, list the Community Facilities District Bond Debt at $205,663,879.53.
California State Controller’s Office Investigative Report Dated November 3, 2015, Page 8: “Transactions relating to Authority, District, and Utility bond issuance totaling $626 Million. We noted the following:
“The Authority Issued $313.09 million in local agency revenue bonds for use mainly in acquiring District bonds and for a sewer enterprise project between 1993 and 2014;
“The District issued $303.12 Million in special tax bonds for use in the various improvements areas within the District between 1994 through 2014; and
“The Utility issued $9.79 million in revenue bonds for a wastewater enterprise project in 2001.
“It should also be noted that during FY 2014-2015, the District issued an additional $44.36 Million in special tax bonds for the refunding of prior bonds. The Authority concurrently issued another $44.36 million in local agency revenue bonds for acquiring the District bonds.”
Every Bond has two sets of Bond Fund Account Numbers; one for the Authority and one for the District. Listed in each Authority’s Program Bond Fund Account (’07 Accts) are the District’s Bond Securities.
CFD Property Owners pay Taxes that are used to pay the District Bonds, which are owned by the Authority. The Authority uses the Premium and Interest Payments received from the District to pay off the Authority’s Securities that were sold in the Private Market.
To Account for the Assets and Liabilities:
Authority: Asset = $205,663,879.53
Liability = $201,340,000
District: Liability = $205,663,879.53
The District’s ‘Assets’ would be the money in the bond fund accounts, which is $22 Million in Construction Funds and $28 Million in Reserve Funds. The value of Infrastructure constructed with the bond money would also be the District’s Assets. Because Beaumont embezzled/misused all of their bond money; they only have $50 Million in Assets to counter-balance the $205 Million Liability.
Beaumont’s bond transactions have never been properly recorded on the Financial Statements. If Beaumont Finance Authority owns $200 Million in bond securities; the Authority would receive $10 Million/year in Interest Payments that should be recorded on the Financial Statements.
But the Beaumont Finance Authority does not receive Interest and Premium payments for the District Securities. When the District pays their bond payments; Union Bank, as Bond Trustee, treated the payment of the two separate Securities as one transaction by transferring the money between the Authority Securities and the District Securities. The Authority and the District are two separate Agencies and should be accounted for separately.
Using Beaumont’s 2015 Audit as an example: http://www.ci.beaumont.ca.us/DocumentCenter/View/29489
Business Activities: Beaumont only lists Transit and Sewer in the Business Activities. The City must also list the transactions of the Finance Authority and the Community Facilities District. Beaumont lists $22,748,722 Restricted for CFD Projects on the Statement of Net Position, but doesn’t record the CFD Debt.
Page 17. Statement of Net Position
Page 18 & 19. Statement of Activities
The Premium and Interest Payments of both the Authority and the District must be recorded.
Page 20. Balance Sheet
Community Facilities Fund must record the $205,663,879.53 Liability.
The Finance Authority must be added and its Assets and Liability Recorded.
Page 23. Statement of Revenues, Expenditures, and Changes in Fund Balances
The Finance Authority must be added and its Revenues from District proceeds and Expenses of payment of Securities must be recorded.
Community Facilities Fund Expenses of payment of Securities must be recorded.
Page 42. Note 2 Cash and Investments
Money Market Mutual Funds = Bond Reserves, which are not accessible within 12 months. The Reserve and the Investment in CFD Bonds should be broken down to show what will mature in 12 months, 2 years, 3-5 years, and more than 5 years.
Page 47. Note 6 Long-Term Liabilities
Both the Authority and the District’s Bond Debt must be recorded separately under Business-type Activities for a total of $407,003,879.53.
Page 50. Note 7 Debt without Government Commitment
The City of Beaumont is liable for the debt they created. Note 7 must be removed and the Bonds included under Note 6 Long Term Liabilities.
The Audit repeatedly states: “Neither the Authority Bonds nor the District Bonds are general obligations of the City nor any other political subdivision and the full faith and credit of the City is not pledged for repayment thereof.”
This sentence needs to be removed. The City is liable for the bonds it acquired regardless of the means of acquisition. Beaumont Staff and Council circumvented State and Federal Laws and Forged Financial Statement to acquire the Bonds. The City is most certainly liable.
And of course the $60 Million in Forged Sewer Machinery & Equipment must be removed.
Beaumont Joint Power Authorities (JPA)
There is no provision in Federal Laws to form JPA’s in order to acquire federal municipal bonds; California JPAs are the creation of the State. In order to circumvent numerous State and Federal Laws the City of Beaumont formed eight (8) JPAs.
The Bonds lists California Government Code 6500 as the City’s ability to be a JPA. However; California Government Code 6502 states: “…two or more public agencies..”
City of Beaumont formed JPA’s with itself without any financial Reserves or accountability.
Cali Govt. Code 6501 requires approval from the Cali Dept. of General Services.
Cali Govt. Code 6503.5 requires the City to file with the Secretary of State and State Controllers’ Office.
Cali Govt. Code 6505 (a) requires strict accountability of all funds and report of all receipts and disbursements and requires annual audits.
The Beaumont Redevelopment Agency (RDA) was created on September 14, 1992, per Cali Health and Safety Code 33100 with oversight from the California Secretary of State. RDA was dissolved by the State in 2012.
The Beaumont Financing Authority (Authority) was created on April 12, 1993 by the City Council’s Adoption of Resolution No. BRA 93-01. The Beaumont Financing Authority is an JPA between the City and RDA.
The Beaumont Financing Authority was also used to acquire a State Resale License in order to steal Sales Tax from other Cities and declare the sales tax as Revenue on the City of Beaumont’s own Financial Statements. (State Controllers’ Report 11/03/2015 pg. 13)
Community Facilities District 93-1 (District) was formed by the City on June 29, 1993 per Cali Govt. Code 53311 et. seq. The District is the 2nd Issuer on all of Beaumont’s Bonds.
Beaumont Utility Authority was created on May 1, 2001 by a JPA between the City and the RDA.
The Beaumont Utility Authority files separate Financial Statements and claims the City’s Sewer Plant on the Utility Authority’s Financial Statements.
ERMAC Self Insurance.
CSAC Excess Insurance Authority JPA created by State in 1979 per Cali Constitution Article 16, Section 6, Cali Govt. Code 6500, and Cali Govt. Code 990.
Principal James Gregg, former Beaumont Risk Manager and Principal of GGMS; Moss Levy Hartzhiem Auditing Firm. Forged City’s Financial Statements and lied about ‘Reserves’ to illegally qualify City of Beaumont for ‘self-insurance’.
Beaumont Transit Authority
Start of Transit Authority unknown. First Audit separate from the City’s Financial Statements was FYE 2014.
Beaumont Conservation Authority
Formed on June 1, 2010 by JPA between City and RDA.
Beaumont Charitable Authority
Formation date unknown. Was removed from the City Council Agenda after December, 2014.