By: Richard Montenegro Brown | Original Article at pe.com
An 11-year relationship between Beaumont and a private contractor is in the crosshairs of the City Council and city critics in what the business owner called a “witch hunt.”
For six years of the relationship, Beaumont bought millions of dollars in items tax-free at wholesale prices on behalf of a private business, Beaumont Electric Inc. The city turned around and sold the equipment to the company to capture about $62,000 in sales tax revenue on $6.2 million in purchases over the six-year arrangement, a city report states.
The arrangement allowed Beaumont to mark the sales as having occurred in the city, resulting in 1 percent of state sales tax – the amount the state redistributes to cities – directly into the general fund.
It’s not clear whether such an arrangement is legal, but an auditing firm questioned the practice. The company’s owners say they did nothing wrong.
The concerns come as a local and federal probe continues into the city’s relationship with a consultant whose employees helped run City Hall for more than 20 years.
Community members have questioned the arrangement and myriad contracts with Beaumont Electric dating to 2003. They ranged from streetlight projects to inspection and engineering services. The contracts have paid the business nearly $12.5 million. For at least two years, Beaumont Electric co-owner Jim Love sat on the city Planning Commission while some contracts were in place.
Several City Council members elected on a wave of city reform in 2014 have joined the chorus in asking questions about what auditors described as poorly documented agreements and questionable relationships.
Beaumont’s city manager, who is on administrative leave, has been a key figure in some of the relationships under investigation, including the probe by the Riverside County District Attorney’s Office into city dealings with consultant Urban Logic Inc. City Hall and Urban Logic offices were raided by prosecutors and the FBI in April.
The state Controller’s Office is looking into city finances, including its practice of borrowing against restricted funds to balance ongoing general fund deficits. The city owes about $10 million to those restricted accounts.
BEAUMONT ELECTRIC BUYS
An independent audit presented Aug. 11 to the city council questioned the methods used to bring sales tax revenue into the city through purchases for Beaumont Electric.
On Aug. 18, the Council saw documents and contracts with the company requested by City Councilman Lloyd White, elected in 2014 as a reformer.
The paperwork lacked documents on the purchasing arrangement or what supplies were bought. However, the city included a summary of the purchases made – $6.2 million – and the six companies with which the city worked on Beaumont Electric’s behalf.
Equipment was bought from Stresscrete, which manufactures concrete streetlight poles, for $155,158; and King Luminaire, which makes streetlights, for $200,744. More than $866,220 – the largest total expenditure – went to Graybar, an electrical component supplier. Further details on each supplier and how long the city made purchases were not in the documents.
MGO Public Accountants, hired by the city this year to delve into its financial and other practices drew attention to the sales tax issue and whether the city followed state tax law.