City’s woes include probes, legal battles

The Securities and Exchange Commission and State Controller’s Office have also investigated the city, which is embroiled in a lawsuit appeal over unpaid fees to a regional agency.

While a corruption probe from the Riverside County District Attorney led to charges against seven former Beaumont city officials on Tuesday, May 17, there have been three other investigations into the city’s fiscal activities as well as a lawsuit over regional transportation fees in recent years.

Here’s a look at the other investigations and a legal appeal involving the city:

Beaumont vs. the Western Riverside Council of Governments

Beaumont may owe more than $60 million over its past failure to collect regional transportation fees.

The city is appealing a judge’s 2014 ruling that resulted from a lawsuit by the Western Riverside Council of Governments, a regional agency that manages funds cities charge developers to pay for improving roads.

The suit alleged that Beaumont didn’t pay the money, known as Transportation Uniform Mitigation Fees — or TUMF — from 2003 to 2009. Instead, the city issued bonds to pay for road projects and allowed developers to add assessments to the property taxes of new home buyers, which paid off the bonds.

Orange County Superior Court Judge David R. Chaffee ruled the city not only owed $42.9 million in transportation fees, but retroactive interest of $14.8 million as well. Meanwhile, interest on the penalty continues to add $8,246 to the potential tab per day until the money is paid or the suit is overturned on appeal.

Steve DeBaun, the regional agency’s legal counsel, said the appeal is pending and while Beaumont and the group have had discussions, they haven’t yet reached any kind of agreement.

State Controller’s Office

A review of Beaumont’s finances began in May 2015 after the discovery of significant differences between the city’s financial transaction reports to the controller’s office and its audited financial reports.

The State Controller released a report in November saying that accounting controls were effectively nonexistent, making it impossible to know whether hundreds of millions of dollars were spent for their intended purposes.

In response to the findings from the State Controller, the City Council has undertaken several measures to improve fiscal management policies.

Among the improvements: studies on internal controls; adoption of stringent purchasing policies; and the use of a transparency portal on the city’s website to ensure the public has access to city documents and financial information.

Securities and Exchange Commission

The U.S. Securities and Exchange Commission, the agency that enforces laws governing the nation’s stock and bond markets, served the city with subpoenas April 22 as part of a formal investigation.

The city has released copies of the subpoenas and is conducting its own investigation.

“The city views the SEC’s investigation as consistent with the current City Council’s goals of understanding past city financial dealings and holding individuals accountable if wrongdoing occurred,” according to a Beaumont news release issued Wednesday. “The city is committed to fully cooperating with the SEC’s investigation.”

Among the information sought in the subpoenas are documents related to more than $39 million in bonds issued over a six-year period, agendas and minutes from meetings regarding the bonds, and documents that show how money financed by the bonds has been spent.

Union Bank

In March, Beaumont served legislative subpoenas on Union Bank for spending records, hoping to learn how hundreds of millions of dollars in bond funds were spent. The Los Angeles bank served as trustee for more than $270 million in city bonds over a period longer than two decades to build waterworks, sewers, streets, parks and other amenities.

After stating they received incomplete information, Beaumont voted in April to seek a state investigation into the bank, saying it should be more forthcoming with bond spending records.

Staff writers David Danelski and Alicia Robinson contributed to this report.

Contact the writer: 951-368-9086 or cs*****@pe.com