By: Libi Uremovic | Original Article at patch.com
58:30: Aylward: The first question; why does the City Manager feel that the WRCOG lawsuit judgement including interest will be paid by the “past and future developers” of the City if the City loses its appeal? What mechanisms are in place to make this representation about past and future developers and who are these by name? This sounds very weak as an explanation. The legal costs are accruing along with interest. If you think past and future developers are the problem then why name them as the culprits and sue them? Wouldn’t WRCOG had named the past and future developers as part of the lawsuit with Beaumont if they were part of the problem? Our City Attorney, Mr. Wysocki, will answer those for us.
Wysocki: All four relate to the first phase of the WRCOG trial in which Judge Munoz, not Judge Chaffee, had indicated that he felt that WRCOG’s lawsuit was not a lawsuit for a Judgement, but it was a lawsuit for an Order requiring the City of Beaumont to somehow or WRCOG to bring the developers who should have been assessed the fees that WRCOG alleged were not properly assessed by the City of Beaumont. As for the names of the developers; there’s too many for me and I really don’t know the names of the developers that would be involved. But theoretically; upon reversal of the judgement, depending on what the Court of Appeals would do, this part of the Trial and the Decree that was issued by Judge Munoz would be revisited because Judge Chaffee completely ignored it.
The point was that Judge Munoz felt that it wasn’t something that the City had to answer for in terms of monetary damages, but rather it was something that the City and perhaps WRCOG should jointly go after the developers and assess the past and present developers’ fees or WRCOG fees that WRCOG said should have been assessed by the City instead of the credits.
101:00 White: What about future developers? If the City loses its appeal that the judgement including interest would be paid for by future developers. What kind of mechanism do we have in place to do that?
Wysocki: There’s no mechanism in place right now for either past or future. It would require additional court action depending upon on how the Court of Appeals fashioned its Opinion. If and when it reverses the judgement. So it’s something to be determined in the future, but it would be judicial action.
White: We as a City couldn’t make a suggestion through a settlement agreement? Something like that. We could do it I’m not asking you to make a settlement agreement tonight, but it doesn’t have to be a court action to determine a mechanism for future developers to pay.
Wysocki: I think that’s possible.
White: Future developers paying means that your residences are paying because it gets passed on to the future residences?
Wysocki: Yes
White: We have them pay for our mistakes?
Wysocki: That’s possible.
102:30 Carroll: If we were to go back to the developers, because that’s the thing that we need to do because the judgement, let’s say, if we didn’t win this appeal. So we do have to, under those circumstances, go back to the developers. That means that the money was owed to WRCOG, if that happens, so we reach back to the past developers to pay that settlement, is that correct?
Wysocki: That would be the goal.
Carroll: So if we win the appeal and we don’t owe WRCOG any money, then there is no money that has to go back to the past developers to ask money of?
Wysocki: That clarifies it. My answers to all of you actually presupposes that we somehow have to collect the fees in order to collect the judgement. If the judgement is reversed there isn’t anything to collect because the judgment is gone.
Carroll: So that means there was no real money owed ever if the judgment goes away.
Wysocki: I think that was always the City’s position because the City issued credits for work that was done by the developers and during the course of the trial that evidence was presented and I think that judge Chaffee just ignored that evidence. That’s our position. The work was done by the developers, so they got a credit. WRCOG’s position was no, shouldn’t have done it that way, you should have collected the TUMF fee from the developers, we (WRCOG) didn’t authorize any credits. That was their position, so they got a judgement.
Judge Munoz, before that, took the position that they’re not entitled to a judgement. At most they’re entitled to an order that the City should have collected the TUMF fees and because it didn’t it needs to devise a mechanism by which it will collect the fees from past and maybe future developers. Judge Munoz didn’t decide that’s what we should have done. Judge Munoz merely decided that this is what WRCOG is seeking, so they didn’t have to file a claim, this is a whole lot of information, so they didn’t have to file a claim for damages against the City of Beaumont because they really weren’t seeking damages. Judge Chaffee converted the lawsuit into something entirely different.
Carroll: I’m concerned about a time risk. If i picked a date on a calendar that it’s all decided and the appeal comes to florision and it’s denied. Then we would owe money, to speak, on that particular date that the appeal is denied. It seems like we need to do ahead of time to get a process in place. If on December 3, 2017 the appeal is denied, then we can’t go hat-in-hand on December 4th and say to those developers “now would you pay up because this whole credit thing didn’t work out?”. If I was the developer I would say, in some instances, “I’m just going to argue with you for a really long time and that means I get to hold on to the money longer”. So it seems that we need to have a risk mitigation in place to be ready for that particular place in time if the appeal gets decided on a date where we’re not in favor. In other words; we can’t show up at the starting gate and say “everyone show up and pay your bill”.
106:50 Wysocki: I think that’s correct. It’s complicated by the fact that if the judgement is upheld WRCOG can’t simple get a writ of execution, which is a court collection devise, and give it to the Sheriff and start seizing the City’s assets. A judgement against a public agency can not be acted on. it’s dependent upon the courts and the public agency that is the judgement debtor to fashion away in paying that debt. And it can be done over a 10 year period of time. Of course there is the option of stopping everything and filing bankruptcy. So that’s the other option that’s available to us.
108:00 Orozco: So we don’t have to wait for the judgement, the appeals court, for us to come up with a plan B in terms of preparing ourselves. We can do that now and whatever happens, if the appeal does go in our favor, we can always reevaluate that fund or mechanism if we need to return the money we can. But going ahead and creating a system in place now to prepare ourselves.
Wysocki: Yea, we can start formulating a plan, that’s correct. It can include a way of collecting fees from developers to help pay for the anticipated judgement. It can also include exploring the possibility of a bankruptcy filing. It can also include the possibility of paying it over a 10 year period.
Orozco: We were told that bankruptcy wouldn’t excuse the WRCOG lawsuit. We’re still going to have to pay for it down the road. We’re going to have to pay for the WRCOG lawsuit no matter what.
Wysocki: I’m not a bankruptcy expert, but I have looked into it, and it could very well permanently impair that debt because the WRCOG judgement is nothing more than an unsecured debt of the lowest priority. The only lower priority would be shareholders, but we don’t have shareholders.
White: If we’re going to collect from past developers, we’re going through more lawsuits, right?
Wysocki: I would bet on it.
Knight: Is it feasible? A number of these developers during out downturn are no longer around.
Wysocki: That’s right.