Where’s the $9 Million Promised from the State and Feds and $75,000 Promised from Developers for the Potrero Interchange?
Below is the transcript from the September 19, 2016 Beaumont Finance and Audit Committee where City Manager Warne spins stories to the Committee members.
Beaumont Finance and Audit Committee Transcript September 19, 2016
1:20:30 City Treasurer Nancy Carroll: The Audit [FYE 2015] is moving along. There has been some questions that were actually presented to Staff. There was a response last week and so I expect it to continue. We are still hoping to be able to produce the Audit by October, the draft of the Audit.
1:21:00 Carroll: After the VLF Firm is finished with it, it will take time for Staff to write up the Management Discussion letter that is adjoined to the Audit. So we’re expecting that to be done in October. We’re hoping. We’re at the point of drawing up the MDA at the end of September, beginning with it. The Trustee progress; we have not stopped with transfer over to the new Trustee. The tri-party Agreement is still in the Attorney’s hands and we’re hoping that will be in place within the next couple of months. We really don’t know how long the Lawyers will go back and forth on the Agreement. We were hoping for an end of September date, but we are now hoping within the next 60 days we may be able to move forward with that.
1:23:00 Board Member Benneke: On Potrero, there were some Federal and State monies out there, and there was apparently a short timeframe for action; at least that’s what’s reported to the public. Did we meet those deadlines? Are those monies going to be forthcoming?
1:23:40: City Manager Richard Warne: We did a Powerpoint presentation and talked about a couple things. It’s on the website.
1:24:00 Warne: But the emphasis of this particular project was potential loss of State and Federal money as well as the fact that the City had already spent $11 Million, and so we are moving forward. City Council did Approve the project. We can answer any questions about it. We’ve been meeting with Caltrans, they’re very supportive. RCTC seems to be happy with the direction the City is going, the fact that the City is being aggressive in prosecuting this project. I can answer any other questions. We didn’t know if there would be enough time. At some meeting if you want us to talk about Potrero and everything about it, I’m happy to do it either at this meeting or another meeting or a special meeting. I don’t want to limit this Committee from fully examining this particular Project.
1:25:00 Warne: The answer is there had been an indication that RCTC was going to put it on the Agenda to Deprogram the money from us and put it to other projects. At this point they are not proceeding to do that. They may do it in the future, we don’t know. And they are monitoring what we’re doing and we’re keeping them informed. The bottom line is they want to progress and if the City is actually doing it.
1:25:40 Councilman Lloyd White: At the last Council Meeting we Approved spending $75,000 for Urban Futures to analyze the Study and Analysis that the Developers promoted, but we never saw, saying that it would make $9 Million/year in Sales Tax Revenue.
1:26:00 White: So as a Council member it was unanimous to authorize this $75,000 to Mr. Busch’s Company [Urban Futures] to do an analysis of that. And that money was all going to come from deposits made by Developers. I have two questions. #1; has Mr. Busch and his Company started that work and #2; have any Developers deposited any money in any Account for the City?
1:26:30 Warne: We have told Busch and Bob Deis to move forward with the negotiations to try to develop a structure to finance Phase II of the Potrero Project and they’re trying to get the meeting set up and go forward on that. They have not signed the Agreement yet and at this point, although they tell me they will as soon as they get the entity formed and they have not made the deposit yet. They tell me they will.
1:27:00 White: But my question is; have we asked Mr. Busch to start an Analysis of that Study that is supposed to be funded by a Deposit from the Developers?
Warne: I’ve authorized them to move forward.
White: So we’re already running up a bill that the Developers are suppose to make a deposit for, and they have not.
Warne: I’m not going to mislead anybody, they haven’t made the deposit yet. I’m confident they will make the deposit. We do need to move forward expeditiously on this project.
White: We don’t have any written agreement with the developers to make that deposit.
Warne: They have not signed it yet, although they told me they would.
Board Member Jennifer Burnett: Is there a timeframe for them to sign?
Warne: No.
White: I bring this up as part of the Treasurer’s Report because I think our City Treasurer should be on top of this. If we’ve authorized this Expenditure based on – I voted for it because the Developers said they were going to deposit money.
1:28:00 White: It’s been a couple weeks and the Developers haven’t deposited money, yet we’ve started the work on it.
Burnett: Have we started the work on it though?
White: That’s what he just said. He authorized Mr. …
Warne: No, I did. I Authorized him to..
Burnett: So we’re still waiting for the authorization to be signed.
Warne: Well you know, i told him to move forward, get the meetings. We really need to have the structure set up and engage in negotiations. $75,000 I believe is sufficient, so I told him; let’s get the meetings, let’s get this thing set up. If I don’t feel like they’re going to perform I’ll tell the Council and ..
Burnett: We have a stumbling block when they put the big money up later and then having to get a whip and chain out to get that money in, so I hope that they’re going to.
Warne: Honestly, and I have to say this; we’re going to hold them to it. Developers made representations in a public meeting about what they were going to do.
1:29:00 Warne: So the time has come and I’ve been very candid with them; boys; you’ve made dictations. It’s now time to meet with us, step up. We’ve got to get this thing step up and structured so that we can move forward and you fulfill the promises that you made to the public.
1:30:25 White: My argument is that if we do not start the analysis study until the $75,000, which is small compared to what they’re promising us – they’re promising us tens of millions of dollars in reimbursements on this project and if they can’t come up with $75,000 to start and we’re supposed to move forward with analyzing their Analysis and their Study and they won’t even come up with the $75,000, I’ve got a problem with that.
Warne: I would to. If they don’t perform, I would too. If they don’t get that money deposit.
1:31:00 Burnett: Isn’t this a legal issue? It’s a contract that needs to be signed or something?
Warne: So we’ll move forward and we’ll get back to you. I’d be happy to come back to the next meeting.
1:33:30 Warne: The CFD Residual Fund transfer, I do have a memo from our Bond Attorneys that explanation of how that worked, but let me give you the Readers’ Digest version. We have a serious problem and that problem is that the previous Administration, the previous Council Members, spent more from the General Fund than they took in.
1:34:00 Warne: And they masked it be using CFD money or Mitigation Money. So the problem is that right now we’re stuck with an accumulative General Fund Deficit. That, honestly, because it’s all pooled cash, that you’re either getting the money from the CFD or the Mitigation Fund. In this accumulative General Fund Deficit, we’re not sure what the number is. We’re hoping we can figure that out in the next 30 days. We’re getting there.
1:35:00 Warne: So here’s the problem. The Constitution of California says that you can’t borrow money in excess of one year without the vote of the people. So what the previous Administration and the Councils are doing is basically borrowing money in violation of the Constitution. How do we fix that problem? One of the things that the Workout Plan says is let’s put a sales tax increase on it, that was one option. Candidly, I think it would be very difficult to pass. We have been searching for various ways to how we’re going to address this Deficit. One of the ways that, in working with our Bond Attorneys and Melana and everybody, that there was a transaction that took place in 2014 where approximately $5 Million was swept out of the residual accounts as an advance to the Wastewater Fund to make a Bond Payment [2001 Wastewater Bond Called]
1:38:00 Warne: We had our bond people look at this and they were able to determine that the money came from the Residual Accounts and was sent. So what Council did was repay that $5 Million back to the Beaumont Financing Authority, which technically is the owner of the Residual Accounts. Once it’s there the bond Indenture says that you can use it for anything lawful purpose, so the money was then Authorized by the City Council to move from the Residual Accounts into the General Fund. So what that does is reduce the accumulative General Fund Deficit.