By: Libi Uremovic | Original Article at patch.com
A Perfect Example of Beaumont City Council being Led Down the Rabbit Hole.
Beaumont July 21, 2015 City Council Agenda Item 4.a:
Pardee Homes Areas 8E, 8F, 17D
On May 19, 2015 the City of Beaumont held a mock election in which Mike Taylor, an employee for Pardee Homes, ‘voted’ to approve Mello Roos Bond Debt to be attached to land he does not own. The Bond Debt will be paid by attaching liens on houses that do not exist and for which Mike Pardee has no ownership.
At the May 19th Council Meeting Mike Taylor, with support from City Attorney Pinkney, assured Beaumont City Council that that the Action before them was only a Formation and “We’re at a point where we wouldn’t be able to issue or go out for selling of any bonds on these Improvement Areas until a bunch of homes are sold, so we’ve got the time.”
Beaumont Council Approved the results of the mock election.
One month later, on June 16, 2015 Gregg Ulman from Pardee Homes stood before Beaumont Council and proclaimed the urgency to acquire bond debt. Pinkney continually referenced a 2004 Agreement and repeated “we adopted an Ordinance”.
The original Hearing on May 19, 2015 was only for Areas 8E, 8F, and 17D and the July 21st Staff Report only lists Areas 8G, 8F, and 17D. However; page 15/49 lists a Facilities Fee Agreement for Areas 8E, 8F, 8G, 8H, 8I, 8J: http://www.ci.beaumont.ca.us/DocumentCenter/View/26068
1) The City has no legal way to assist Pardee in financing their infrastructure. Beaumont’s current system is a textbook of how to violated State and Federal municipal financing laws.
2) The City’s obligation and sole duty is to provide infrastructure and services to the current 40,000 residences of Beaumont, not to subsidize the private sector.
3) Pinkney is not representing the City of Beaumont; he is representing the developers and bond salesmen.
Pardee Homes’ Tournament Hills Area 17C is less than two years old. The sidewalks are already buckled and worn. It is not possible for a fire truck to reach Tournament Hills in less than 15 minutes. The City of Beaumont and Pardee Homes have an obligation to property owners that the houses sold meet State and Federal health and safety standards; which they currently do not.
The housing market in Beaumont in flooded, so there is no guarantee that houses will ever be built on the property, but the City will still be responsible to pay the bond’s premium and interest. The current Beaumont City Council has approved four bonds in the last three months, but neither Union Bank nor the City can produce the bond fund accounts showing the money distribution.
May 19, 2015 Transcript: Agenda Item 8.b: Public Hearing Formation of Areas 8E, 8F, and 17D:
263:30 Mike Taylor, Pardee Homes: I want to make sure that everyone understands that tonight we’re asking to do a Formation on these three Improvement Areas; two of them in our Sundance Community and one of them in our Tournament Hills Community. We’re not asking for any bonds to be sold, debt to be placed on the property. I understand the concern that everyone has here about wanting absolute transparency when any bond debt is issued on this property that you’re 100% sure of #1 what is cost, what are the formation costs. What does everyone get paid, and exactly where is the money going to be used for what facilities in the City. We totally understand that, totally understand that we want to bring in a Facilities Agreement that goes with the Issuance of any bond debt and we can be very specific. We can be as specific as the Council wants. If the Council wants a specific priority of exactly what those dollars need to go for and be authorized to be used for; whether it’s to pay Impact Fees or go towards a specific improvement in the City – that’s fine. We totally want that.
265:00 Mike Taylor: We’re at a point where we wouldn’t be able to issue or go out for selling of any bonds on these Improvement Areas until a bunch of homes are sold, so we’ve got the time. These are the areas that we are just beginning to sell homes. In order for these bonds to become salable we have to have home closings and we have to have values on those homes to see what they sold for. So we have plenty of time to identify the facilities that you want to be very specific about when we come in and ask the Council for to sell bonds.
269:00 City Attorney Pinkney: Issuance of bonds is not before you tonight.
June 16, 2015 Transcript: Agenda Item 4.b: Formation of CFD Areas 8E, 8F, 17D:
94:00 Gregg Ulman Pardee Homes: The urgency for us is that we’re actively selling homes in this area and disclosing based on the 1st reading that we had that this process is going to continue for home buyers. The issue for us is; if you continue it, if you continue to disclose that, or what our process is, we’ll have to circle back with our Counsel as well as the City Manager. For us; we’ve never been stopped at the 2nd reading. Usually the 1st reading, then the 2nd reading happens.
95:00 Pardee: We’ve put together disclosures, we’ve leaned our property, this is going to occur and the facilities agreement that we have in front of you would allow the pooling of your road and bridge fees to go toward the new interchange if that’s what you want it to do. It’s a pooling of your development impact fees. It’s at your discretion when we come to the point where we’re
going to sell bonds. The facilities fee agreement is just that; here’s a list of eligible facilities, you can amend it at any time. We’re not asking to sell bonds tonight, we’re asking for a 2nd reading of formation so we can disclose to our home buyers that are in this area. At some point in the future, as Mr. Spicer pointed out, once a certain number of homes are sold, or a certain level of improvements are made, then the bond market feels comfortable in issuing bonds. We’d come back, we’d have a discussion about it administratively. You can go back, you can reduce the total indebtedness to match the total bonds that’s in our phase as I understand it today.
96:00 Pardee: I think there’s lot of things that are in the documents in front of you now that allow you to do the things you do in administering the program appropriately.
White: When we passed the 1st reading we were told that there would be no bonds issued. And there hasn’t been. Now we’re being told on the passage of this 2nd reading that it’s important in order for you to disclose to your homebuyers that there will be bond issuance. So if you’re going to start disclosing to your homebuyers that there’s bond issuance or that there’s bond payments due; you’re now going to come back to us at the next point and say: “well, you’re already approved the 1st reading, you’ve already approved the 2nd reading, we’ve already disclosed to our homebuyers that there are bond debt.”
97:00 White: We’re getting ourselves into a position like we are with the EIR’s and the track maps and everything else. Our actions have predetermined how we can or can not act in the future.
Pardee: We have a development agreement that’s in place right now with the City that set a lot of these programs up for us. We’ll be investing in..
White: Does the development agreement require that the financing for this project be done exactly as we’re doing it here?
Pardee: As we requested; the City shall follow.
White: The development agreement says that you tell us how we will finance?
Pardee: No, at our request the City shall assist us in financing.
White: Okay. I looked at the development agreement that you emailed me. I’m not an attorney. Lots of stuff to read there, but I couldn’t find it.
98:00 White: I saw a mention of financing, but I couldn’t see where the CFDs in improvement areas. Maybe that’s another reason we need to put this on hold; to get a full review of the …
Pinkney: I’ve actually reviewed the development agreement and here’s what it provides Section 10.5. “Mello Roos CFD’s, other assessment districts, and financing mechanisms.” Page 6, Section 10.5 “The developer may, at his sole election, petition the City Council of the City or Joint Powers Authority in which the City is a member, to establish a communities facilities district in accordance with the City’s policies in existence on the effective date…. If so requested by the developer, the City SHALL cooperate with the developer or for matters beyond its control shall use its best efforts in taking all steps necessary to cause the CFD or alternative financing mechanism to issue bonds for such purposes.”
99:20 Pinkney: This development agreement was entered into back on August 17, 2004. So that’s the language that I think is responsive to the question that you’re..
White: in your opinion; would assessing development fees per house as opposed to doing the financing and having that costs passed on in the purchase price of the home. Would that be considered an acceptable financing alternative? I think that’s the way most cities that don’t do CFDs finance their homes.
101:00 Pinkney: Let me look at the language here. I’m not sure that it would be appropriate to answer that publicly what my opinion is on that. Candidly; this could end up in a dispute between the developer.
White: In 2004, we made an agreement with the developer that they can dictate to us how to finance their developments.
Pinkney: The City, in 2004, entered into a development agreement, a binding agreement. Now, there may be some arguments as to why it’s not binding, which I’m not going to go into. This isn’t the appropriate time to do that.
Pinkney: It’s a 25 year agreement. This was entered into in 2004. It was a different time, in terms of what was going on in the market place. Now the question you ask a lawyer is; is it a binding agreement? And as a lawyer I’d tell you that there may be some arguments, but I’m not prepared to and I don’t think it would be appropriate for me to express my opinion on that in this setting as to whether it’s a binding agreement.