In 1993, the City of Beaumont was in serious financial trouble, and considering bankruptcy. The City Council hired Urban Logic, a consulting firm from Temecula, to take over control. UL's 3 principals, Dave Dillon, Ernie Eggers and Deepak Moorjani assumed the roles as directors of Planning, Public Works and Economic Development. They hired the City Manager of Calimesa, Alan Kapanicas, to serve as a consultant City Manager for Beaumont.
Beaumont's leaders told the 8,000 plus citizens they were going to grow Beaumont out of its financial crisis by building homes. The council created a city-wide Community Facilities District, CFD 93-1, made possible by the State's Mello-Roos law. The plan was to enable developers to build infrastructure for housing projects and be reimbursed by bond proceeds paid for by future homeowners' fees. This meant developers enjoyed lower investment risk and higher return on their investment than they could achieve in neighboring cities. Home development in Beaumont boomed until the housing crisis and recession of 2008.
UL's contract guaranteed the principals could charge the city up to 9% of the cost of each public project in Beaumont for "Plan Checking", "Construction Inspection" and "Public Works Construction Management". Developers would build their projects, UL would charge their fees, and once new homeowners were paying their Mello Roos taxes, proceeds from bonds would reimburse developers. This was all approved by the City Council.
The city wide CFD 93-1 was a first of its kind and may still be the only one in the State. Not only did it allow for low risk investment for developers, it provided access to funding for regional type transportation projects not specific to individual housing projects without voter approval.
UL and Kapanicas promised to provide infrastructure, sewer service, recycled water, fire and police service financed with development impact fees (DIF) and CFD taxes. UL's and Kapanicas' greed led to overpriced, non-competitive bid projects and directed millions of dollars in business to their private companies. Recycled water wasn't a priority; fire stations weren't built; and no fees were established for police services. However, UL still received inflated design and management fees for the infrastructure that was built.
In 2002, the voters of Riverside County approved an extension of the Measure A .5% sales tax for Transportation, passed in 1988 and set to expire in 2009. Along with extending the ½ percent sales tax, voters also approved a new program, the Transportation Uniform Mitigation Fee (TUMF). In order for a city to receive the additional ½ percent sales tax, it would have to participate in TUMF. Beaumont's city council agreed to participate and directed staff (Kapanicas and UL) to comply.
The WRCOG (Western Riverside Council of Governments) is charged with the administration of the TUMF program. A fee on new development, residential as well as non-residential is collected to assist in the building and improvement of the County’s regional arterial system to deal with the increased traffic from new development. Cities are responsible for collecting the TUMF fees from the developers and passing the revenue on to WRCOG.
UL and Kapanicas decided not to follow the council's direction; they did not collect the TUMF fees. UL retained local control of the transportation projects and continued to receive their fees. This lead to the WRCOG lawsuit resulting in a $43 million-dollar judgement against the city, about $60 million with interest.
The judgement was the catalyst leading voters to replace 3 incumbents in the 2014 election. The new council ordered independent audits which revealed the city had depleted its reserves and had been running multimillion dollar deficits for several years. The raids by the District Attorney's office soon followed and a year later Kapanicas, Dillon, Eggers and Moorjani, along with the former Finance Director and former City Attorney, were arrested.
In the two years following the raids, the City Council has hired a new City Attorney and new City Manager; reached a termination settlement with Kapanicas; settled the WRCOG lawsuit; resolved an SEC investigation; and referred one of its own members to the DA for illegal activities. This council has cleaned up corruption in Beaumont.
We still have many challenges facing us. Our sewer plant has reached 75% of its daily capacity and the Water Board has required a $100 million-dollar expansion to be completed and producing recycled water in less than 5 years. Our roads desperately need repair and our transportation networks are not able to handle the needs of the residents in what is still one of the fastest growing cities in California.
The actions of the previous administration under the oversight of previous councils left the city with no reserves and monumental challenges. Over the last two years we have started rebuilding financial reserves and working on needed transportation projects.
Many in our community are angry, I am too. They believe their hard-earned tax dollars have been wasted, misappropriated and embezzled. The recent plea deals by the criminals responsible prove they are right. So, what do we do now? We know what we need to do, we need to continue to rebuild Beaumont. Rebuild its infrastructure, its finances and its community's trust in its elected officials.
We recognize that the only way we move forward is by using the tools available to us to finance the projects our community needs to continue to move forward. We need to protect our city from stagnation. Our citizens moved to Beaumont because they believed in its potential. They made the largest investment most Americans make in their lifetimes, purchasing a home. Without sufficient infrastructure and responsible management of our resources, property values will evaporate and so will our families' futures.
Some voices on social media and on internet bulletin boards claim rebuilding Beaumont by asking its citizens to continue to invest in infrastructure that its city leadership should have already built makes us criminals. Is it criminal to recognize what needs to be done and finding solutions to get it done? I believe it would be more criminal to give up.
This council will continue to move forward despite being called corrupt, dishonest and criminals. Every one of us knew what we were getting into when we volunteered to serve. We know it isn't going to get any easier but we know what we need to do. We will rebuild Beaumont.