As Bond money is used to build infrastructure; the Cash Assets are reduced and the Capital Assets are increased, but Not in Beaumont.
Beaumont’s 2016 Audited Financial Statements received an ‘Adverse Opinion’ because the City does not list any Capital Assets on their Financial Statements.
The City does not/can not list any Capital Assets on their Financial Statements because of the way the City’s Bond and Construction scam operates; it leaves the City with no Capital Assets to record on their Financial Statements. All the Capital Assets belong to the Developers.
In a normal government; Infrastructure such as roads and sewers are owned by the government. An example is the Potrero Interchange. Beaumont and Developers can spend their money to build the Interchange, but upon completion; the Asset must be transferred to the State because Highway 60 is a State Highway, so the Potrero Interchange will become the State’s Asset.
If Developers build Capital Assets within a city; the Capital Assets should be transferred over to the City. A ‘private community’ such as Four Seasons or Solera is private to the extent that it doesn’t allow outside people to enter, but they are still part of the City and the City should own the infrastructure.
Beaumont City Council December 19, 2017, Agenda Item 7: Notice of Completion and Exoneration of Performance Bonds for Streets, Storm Drains, and Sewer Improvements to K. Hovanian: https://beaumont.civicweb.net/…
The Staff Report states:
“The streets on this tract will be private roads and will not be maintained by the City.”
“The storm drain system will be maintained privately by an HOA and will not be maintained by the City.”
“Fiscal Impact: There is no fiscal impact.”
The Capital Assets completed by K. Hovanian for the Four Seasons Development Area will belong to K. Hovanian, not the City. The Developers hold the Receipts and I’m guessing that they record the Assets on their own Financial Statements. “No fiscal impact” is code for: “no Capital Assets for the City to claim on their Financial Statements”.
Mello Roos Bonds are specifically designed to build infrastructure. When a bond is acquired the money is recorded as a Cash Asset. As the money is used to build infrastructure; the Cash Assets are reduced and the Capital Assets are increased to reflect construction of the new infrastructure.
In Beaumont; Developers like K. Hovanian and Pardee Homes are building their developments’ Infrastructure, but keeping the Assets instead of turning the Assets over to the City. This leaves the City with no Capital Assets and the Developers with Capital Assets that I don’t believe the companies can legally claim.
The definition of Capital Assets is: “capital assets are represented by the property, plant and equipment figure. Examples include land, buildings and machinery.”
It’s most likely that Beaumont’s Developers are recording Beaumont’s Capital Assets as their own because the Developers are holding the Receipts, but I don’t think it’s legal for the Developers to claim a City’s roads and sewers as their own Assets – regardless of any deal they made with corrupt governments because roadways and sewer lines not the developers’ assets.
On August 22, 2017, the Securities and Exchange Commission finally Issued the Beaumont Financing Authority a Cease and Desist after the SEC had spent over four years attempting to get the City to comply with Federal Securities Laws.
In 2015 former City Manager Alan Kapanicas attempted to comply with the requirement to list Capital Assets by creating a Capital Asset list ‘Kapanicas style’. Kapanicas’ Capital Asset spreadsheet claimed 100-year life expectancies for buildings and 30-year lifespans for the Sewer Lift Stations.
On Kapanicas’ Capital Asset Spreadsheet he listed $194.6 Million in Paved Roads and $22.7 Million in Sewer Pipes, but Kapanicas highlighted the items in blue to signify that the roads and sewer lines were in the City; the City didn’t actually own the roads and sewer lines.
The SEC Order gave the City six months to set their books and re-file Financial Statements and Bond Certificate of Completions that are not Forged because it only takes six months to set books.
But in order to set the City; Beaumont has to stop their Bond and Construction scam and hire qualified Staff. The current City Council has held their positions for three years, but has not fired or disciplined anyone and has refused to stop the criminal activity.
Finance Director Melana Taylor has held her position for two years, but has no ability to perform the duties of a Finance Director and has yet to ‘advise’ the City Council that the bond and construction scam is detrimental to the best interest of the City.
City Manager Todd Parton has held his position for over a year, but apparently never noticed that the City has no Capital Assets nor has Parton ‘advised’ the City Council that the bond and construction scam is detrimental to the best interest of the City.
On December 19, 2017, the Beaumont City Council will ‘Approve’ Agenda Item 7: Notice of Completion and Exoneration of Performance Bonds for Streets, Storm Drains, and Sewer Improvements to K. Hovanian as the Council has done numerous times in the past three years without having any understanding of the consequences of their actions.
Between 2002 to 2015 Beaumont acquired $300 Million in Mello Roos Bond Debt under the pretense of building Capital Assets. Some of the money from the Bonds was used to reimburse Developers for Mitigation Fees and the Infrastructure they constructed, and the rest was either embezzled or wasted.
Beaumont continues to ‘promise’ Developers reimbursement for Mitigation Fees and Infrastructure constructed, but the City is been locked out of the Bond Industry until it files factual Financial Statements and Bond Certificates of Completion.
Beaumont is now trying to get ‘private loans’ from small banks, but the requirement to produce an Unqualified Opinion on their Financial Statements remains the same. The City will continue to receive an Adverse Opinion on their Financial Statements because Beaumont’s bond and construction scam has left the City without any Capital Assets.