“Beaumont has been requiring DIF Fees to be Paid on Various Releases of our Homes in Improvement Area 8E.”
Below is the $2,799,737 Claim Letter filed by Pardee Homes against the City of Beaumont.
On July 21, 2015 the Beaumont City Council Approved $13 Million Mello Roos Bond Debt for Sundance Area 8E. The Agreement stated that 100% of Pardee Homes’ Mitigation Fees would be paid with Mello Roos Bonds, effectively relieving Pardee Homes of the cost of Mitigation Fees.
There was just one catch; it’s illegal to trade Mitigation Fees for Mello Roos Bonds.
After ‘Council’s Approval’ in July, 2015, Pardee Homes happily starts building houses in Sundance Area 8E fully confident that the money would continue to flow from the heavens.
When John Dyson suggested a slowing down of housing construction in Beaumont until the Infrastructure was built; Pardee Homes brought two dozen people into the Council Meeting to testify that they were only living in Beaumont because of their construction jobs and once the construction was over they would move back home.
Pardee Homes continued to flood the market with houses, dependent and confident of the government subsidies that were promised.
‘Unfortunately’ the City requires payment of ALL Mitigation Fees BEFORE the houses are released.
But the City assured Pardee Homes that the bond was ‘almost’ ready, just go ahead and pay the Mitigation Fees and the reimbursement will be there ‘soon’.
Pardee Homes now wants almost $3 Million in Mitigation Fees reimbursed because they didn’t budget to pay $19,600 per house in mitigation fees.
The City’s entire bond scam is predicated on the developers paying mitigation fees that are spent in the General Fund. Without profiting from the mitigation fees; there’s no incentive for the City to approve the construction.
City Attorney Pinkney and his Law Firm created the Agreement between the City and Pardee Homes, let Pardee Homes sue Pinkney and the Law Firm of Slovak Baron Empey Murphy Pinkney.
Claim Letter from Pardee Homes to the City of Beaumont:
March 4, 2016
Re: Development Impact Fees for Improvement Areas 8E & F
Pursuant to the attached City of Beaumont CFD 93-1 Improvement Area Nos. 8E and 8F Facilities and Fee Credit Agreement dated July 21, 2015, and the recorded Notice of Special Tax Lien there are no Development Impact Fees (DIF) payable at the time building permits are issued. Rather, these fees, pursuant to Recital Paragraph F and Paragraph 13 of the Facilities and Fee Credit Agreement, DIF fees are to be paid at the time the CFD bonds are funded for these two improvement areas.
Paragraph F of the Facilities and Fee Credit Agreement states the following: “The Property is subject to various facility impact fees established or administered by the City (the Fees), as further describe in Exhibit “D” hereto, which shall be fully satisfied with the proceeds of the Special Taxes and Bonds and/or as the result of Property Owner’s construction of Facilities that are include in the Fees program.”
Paragraph 13, City Fee Credits states the following: “The establishment of each Improvement Area and authorization of Special Taxes and Bonds of each Improvement Area shall fully satisfy the obligation of the Property, Property Owner and its successors and assigns to pay the Fees with respect to all development within the Improvement Area.” The establishment was created upon recordation of the Notice of Special Tax Lien dated June 2, 2015.
Unfortunately, the City of Beaumont has been requiring DIF fees to be paid on various releases of our homes in Improvement Area 8E, including Northstar, Skycrest, Flagstone, and Lunetta homes. We believe these fees were collected in error, and we will be seeking a refund of $2,799,737 on fees paid after the recording of the Special Tax Lien Notice.
The purpose of this letter is to formally notify the City of the error in prior fees paid, and moving forward, not have DIF fees owed in these two Improvement Areas and have only the correct building fees requested.
Thank you and we look forward to hearing back from you quickly as we are close to pulling permits on our next phase of homes in Flagstone.
Jeff Chamber,
Vice President Community Development
Copies to: Mike Taylor, Pardee Homes
Kyle Warsinski, City of Beaumont
Laura Vermilion, City of Beaumont
TRANSCRIPT FROM JULY 21, 2015 COUNCIL MEETING
22:15 Pinkney: The Item before you tonight is two-fold. One would be the 2nd Reading, you’ve already voted on three Ordinances that would levy a Tax in the Improvement Areas. The second Item is to Approve Fee Agreements that are contained within your Council Packet. Council, when this Item came up in June, requested that my office review the Development Agreement with Pardee Homes.
23:00 Pinkney: You’ll recall that during the dialogue that occurred here in Council Chambers; the question was asked as to whether it’s an enforceable Agreement. As a result of that question and the discussion that ensued with the Council requesting our office and also two of the Consultants to the City review the development agreement between the City and Pardee Homes and provide you with an Opinion as to whether that is an enforceable and binding development agreement. There is a lengthy history of how the City has financed infrastructure an facilities in this City. There’s a great deal of history to consume.
24:00 Pinkney: My Firm; we don’t sell bonds. Our role is to represent your interests. You’re given us a directive to look into this; we’ve done that. My Associate, Lena Wade, spent a considerable amount of time drilling down on this issue. She’s going to give you an analysis and report on the enforceability of the development agreement.
24:45 Wade: The Developer, Pardee Homes, has approached the City regarding Improvement Areas 8E 8F and 17D. This is for the purpose of bond financing for the public improvements.
25:00 Wade: The underlying development agreement was entered into on August 17, 2004: http://publicdocs.beaumontcare… In the State of California development agreements follow a development agreement law. When reviewing such agreements you make certain that the requirements set forth in the law are followed in the development agreement and that’s what we reviewed here. We believe it is a legal binding development agreement. Let me refer you to an Opinion in the matter of Mammoth Lakes vs Town of Mammoth Lakes. In this case; there was a development agreement between a developer and a city, the Town of Mammoth.
26:00 Wade: In that development agreement they contemplated changes or additions to the air port in addition to the development of a hotel. The Town at some point decided that it no longer wanted to move forward with this development agreement. The Town petitioned the FAA to make some changes, which prohibited the changes to the air port. However, pursuant to the Court’s Opinion, they believed, the Court believed, with retrospect to the hotel, the Town had an obligation to move forward. And because it didn’t the Court actually found the town liable and assessed $30 Million damages against the Town and also $2.4 Million in attorney fees. That’s just by way of background. Upon reviewing the documents in respect to these three particular improvement areas;
27:00 Wade: One thing I want to point out is that some of the documents, inadvertently include four other improvement areas and those need to be excluded because those improvement areas have not been created. The only improvement areas at issue here are areas 8E, 8F, and 17D. So we’re going to exclude those four, they were improperly included. In reviewing these documents and working with the CFD Advisor/Consultant retained by the City, it was our Opinion that the maximum bond allocation were overestimated. After working with your consultant and also engaging in negotiations with developers’ counsel we have agreed to lower maximum amounts and I will tell you what those are:
Improvement Area 17D Maximum Amount $10 Million
Improvement Area 8E Maximum Amount $13 Million
Improvement Area 8F Maximum Amount $9 Million
28:00 Wade: If the City chose to move forward with the facility and fee agreements we would ask that the City do so instructing Staff to amend or edit the documents to reflect these new maximum amounts.
33:00 Pardee Mike Taylor 35050 Canyon Hill Road, Lake Elsinore. I’m an Officer of Pardee Homes, I am an Officer of the Corporation. I have the authority by our articles of incorporation to vote on behalf of the corporation. We vote just as we have since we’ve done our first bond deal with the City. Certainly everyone is concerned about the administration of the CFDs, how bond funds are spent, whether we’re doing things differently here in this City than they’re done in other cities. I totally understand the concerns. I understand new people wanting to take the time to make sure that they understand this process. We understand that having transparency, having clarity, is very very important to you. We want to ensure that happens.
34:00 Taylor: The fact that we’re out building homes and selling homes; we very proud of that. We’ve been doing that in this community since 2000. We will continue to build homes and build out the community. It’s a wonderful place to live and a wonderful place for us to have done business here over the last 15 years. Typically bonds are not sold today in this real estate market until a very large percentage of the homes are actually sold and closed. The comments about lowering the total bond indebtedness, that amount, we have no problem with that. We never set those amounts previously. Those amounts were set by the City Manager at $25 Million to provide the greatest flexibility. But our own Consultants on our Team, they do an approximate bond sizing based on the sizes of the homes.
35:00 Taylor: We’re projecting to build, the sales prices that we’re projecting to build; and that ultimately spits out what we think the maximum number of dollar amount of the indebtedness needs to be. I think the amounts that were talked about are totally within that we have no problem lowering those amounts. Some suggests we’ve thought about that might help the City in terms of administering and making sure there’s clarity and transparency in this process. Make sure that any time bonds are refunded in this City at any future date that the home owners receive the full benefits of those. We have no problem with that. We’re all in favor of that. We think that’s the way it should be. Provide a better understanding of the priority of those funds will be used for.
36:00 Taylor: Absolutely have no problem entering in to facility and fee credit agreements that describe exactly where those funds will be used and more periodic review. We have no problem sitting down consulting team, the auditors, and auditing exactly where those are and what they’re used for. And the City determining the priority. No problem with any of those things.
36:30 Knight: Thank you Mr. Taylor. I want to explain to the audience that our developers get 6 minutes to speak.
37:30 White: We’ve talked a lot about the credit reimbursements and the way the whole CFD process works. Is the City caught up in all the credit reimbursements it owes to Pardee on your current and previous developments?
37:50 Taylor: I guess I’m trying to understand the question.
White: Do we owe you anything from the reimbursement process.
38:00 Taylor: What we’ve done in the past is that we have sold, we have formed districts in Sundance and Tournament Hills that have already been formed. We have been talking with the City at lengths on selling bonds. But again, two years ago those improvement areas are not completely sold out, so we still had a ways to go in terms of selling homes. So when you ask me still owe us proceeds; from future bond sales that we’re anticipating ..
White: Ignore future bond sales. Right now; where do we stand with Pardee?
Taylor: There is likely still funds from prior bond sales that are still sitting in accounts that we are eligible to receive in reimbursement for the facilities. What I would say to that is;
39:00 Taylor: In the process that’s followed in every other city, if there’s money available in the Construction Fund to reimburse the developer for public improvements that have been constructed, there is a normal process that goes through that. We submit bids for the work. We submit the contract that we sign with the contractor to build the facilities. We submit all invoices for those. We submit a certified payroll that it was paid a prevailing wage. Then the facility has to be accepted by the City, by the Public Works Department. We have a number of facilities that are currently eligible for reimbursement. For instance; at Tournament Hills there’s a lift station out there on Oak Valley Parkway that was built almost 15 years ago. We haven’t gotten paid back on that sewer lift station.
40:00 Taylor: It’s an eligible facility. There are eligible public improvements that were constructed. We have bids, contracts, paid invoices, and those facilities have been accepted by the City. Part of our process in the past has been to work with the City to prioritize where those, what… When we sold bonds and there was money available; where those funds should go. That was always a negotiation and I can tell that you that’s no different than it is in a lot of cities. Because the Public Works Department does a Capital Improvement budget and has a list of facilities that are their priority. We’re asking and hoping that this Council will do with your Public Works Staff and through our facilities and credit agreements.
41:00 Taylor: List out the priorities that you feel are most important so that we earmark those funds. As we sell bonds, that those are the first facilities that we build and we can get reimbursed back or that we pre-pay fees and the City can combine that with other money that you have to do a public works project. It’s the way it works in every city that we do business.
41:30 White: Is there or has there been a recent reconciliation between the City and Pardee as to what ..?
Taylor: We’d love to do that.
46:00 Pinkney: The first Item would be Approving the 2nd reading of the three Ordinances that you have in your packet levying the tax.
47:00 Pinkney: This next Item is regarding the two Facilities and Fee Agreements. You heard during Staff Report that the recommendation is to lower the maximum amounts on those so, if you don’t mind, I’ll ask for clarification from Ms. Wade. Is the recommendation to bring this back after we modify the agreement or amend it this evening? Maybe you can explain the Amendments again before they make their Motion.
The request is if this evening is directing staff to remove reference to improvement areas 8G, 8H, 8I, 8J and also to include the maximum bond indebtedness for the improvement areas as follows:
Improvement Area 17D Maximum Amount $10 Million
Improvement Area 8E Maximum Amount $13 Million
Improvement Area 8F Maximum Amount $9 Million
48:00 Pinkney: It’s your decision as to whether you want to approve these agreements or not. But if you’re incline to do so you can make a motion to improve the agreements with those changes and direct the Mayor to sign the agreement with those changes.
Lara: In regards to the CFDs; one of the things the City doesn’t need at this point is another potential lawsuit.
50:00 Motion to Approve the Facility and Fee Agreements with the amendments stated.