By: Richard Montenegro Brown | Original Article at pe.com
Beaumont authorized up to $32 million in new bond debt to build water, sewer, streets and make other public improvements in three undeveloped areas where new homes are planned.
The debt will be repaid through a tax on future home owners.
In a process that stems from a development agreement inked in 2004, the City Council on Tuesday, July 21, approved creating three community facilities districts. The often controversial districts allow the city to tax property owners for the development of infrastructure to support new development, said Shane Spicer, the city’s interim special tax consultant with Albert A. Webb Associates.
The council approved the second reading of an ordinance establishing the districts in areas to be developed by Pardee Homes, which has long built in the Beaumont area.
The decision comes as internal audits of the city’s practices found that, since 2009, money advanced from prior districts has been moved to the city’s general fund to cover basic city services, instead of the intended use for infrastructure, according to reports by MGO certified public accountants.
MGO was hired by the current City Council to investigate the city’s internal practices under the former city administration.
The audit found that by June 2014, the capital fund was owed more than $10 million, and it must be paid back, the report said.
Tuesday’s decision unfolded in two parts: the approval of the districts and the ability to levy the tax that will ultimately pay off the bonds taken out for the infrastructure by the city and developer at a future date. The second part amended the community facilities district agreement to lower the maximum amounts that can be bonded for the construction work in each area.
Both votes were 4-1, with City Councilman Lloyd White dissenting.
In Beaumont, the city approves issuing the bonds for a future date, the developer makes the improvements, and the developer is reimbursed by the city through the bond proceeds, according to city officials. A portion then goes to additional development of the district by the city. The bonds are not taken out by the city until “substantial development” has occurred on the sites, Spicer said.
For White, the districts being approved represent a larger problem with the way Beaumont has approved and bonded them in the past.
“I think CFDs divide a city between the haves and the have-nots,” he said, referring to areas that get upgraded streets and such, while older areas go without.
“They are not in the best interest of a city,” White said.
White questioned Beaumont’s practices, citing how the districts work in other communities, where the cost of paying back bonds are folded into the purchase prices of new homes. He said the result is homes with higher property values and higher property taxes for those cities.
The process to establish the three districts in question dates to an August 2004 agreement to build new subdivisions by Pardee Homes. City Attorney John Pinkney said it was legal and required action on the districts.
About 30 days ago the move to create the districts was put on hold when the council delayed a second reading to get more information and for the legal staff to look into the agreement, including whether it was binding.
What came before the council Tuesday was a modified agreement that set lower limits on the maximum amount that could be bonded by the city for public capital improvements, which include sewer, water and street infrastructure. Under the previous city administration a maximum of $25 million in bonds was spelled out in proposed district documents. However, the maximums were lowered by staff and agreed upon by Pardee representatives.
Community Facilities District 17D was lowered to a maximum of $10 million in bonds, 8E was set at $13 million and 8F was lowered to $9 million. District 17D is bordered to the south by Oak Valley Parkway and sits to the immediate west of Straightaway Drive, Buffey Court and Stableford Court in the western end of the city. District 8E is between Brookside Drive and Cougar Way in the eastern end of the city. District 8F is adjacent to 8E, on Cougar Way and to the immediate east of Cherry Avenue.
Pardee Homes Division President Mike Taylor expressed his company’s willingness to work with the city, saying he understood and agreed to the lower maximums.