By: CASSIE MACDUFF | Original Article at pe.com
People are encouraged these days to think outside the box, to be creative in their problem-solving.
Well, the San Gorgonio Pass city of Beaumont got creative four years ago after the governor announced he would dissolve redevelopment agencies, eliminating a reliable source of revenue for the state’s struggling cities.
Beaumont came up with a plan to capture what it saw as an untapped source of revenue, and approached a local electrical contractor it had been using on various jobs with an unusual proposition:
The city financing authority would purchase electrical supplies wholesale for the contractor, then resell the items to the contractor. The city would reap the sales tax. Voil� , new revenue!
The contractor, Beaumont Electric Inc., went along, even though it required a lot of extra paperwork.
The company still had to order the supplies from its vendors. The Beaumont Financing Authority was making the purchases on paper, but the ordering and record-keeping were done by Beaumont Electric.
Over its nearly four-year existence, the agreement netted the city about $62,000 in sales tax on about $6.2 million in purchases.
“We agreed to this arrangement knowing that it would be financially beneficial to our City,” company President Stacey Love wrote in a June 11 letter terminating the arrangement after the financing authority stopped paying some of the vendors.
Now, the arrangement is raising questions.
Was this favoritism toward the contractor, whose co-owner, Jim Love, was a former member of the planning commission?
Were other city contractors offered the same deal?
Did Beaumont Electric get a price break on the supplies the city financing authority “bought” for it?
And whose idea was this to begin with?
In a written statement to The Press-Enterprise, Stacey Love said the arrangement was approved by and done with the full knowledge of the then-City Council, city manager, city attorney and finance director.
The arrangement is just one of many mysteries the city is trying to unravel. The man who probably knows the answers, estranged City Manager Alan Kapanicas, has been on paid administrative leave since June.