$21.5 Million Redevelopment Debt Beaumont Needs For Solvency

How will the City of Beaumont collect the $21.5 million debt that is keeping them out of a $4 million hole from the State of California when they aren't even requesting it?

I found 9 letters on the State's Department of Finance website (http://www.dof.ca.gov/). Links to these letters and a brief summary are listed below. 

John and I talk about the City's efforts to collect the $21.5 million debt the City is claiming as an asset on the 2011-2012 audit they will be ratifying tonight, Tuesday November 6, 2013. Click here to listen.

It is my opinion the City hasn't made any real efforts to collect the $21.5 million but since the Council isn't willing to allow anyone else to look at the City's internal controls, we have to depend on our council members to know. When you see one of them, ask.

Here are some acronyms that are important to know to follow my research:

RDA - Redevelopment Agency

ROPS - Recognized Obligation Payment Schedule

LMIHF - Low and Moderate Income Housing Fund

DDR - Due Diligence Review

HAT - Housing Assets Transfer

OFA - Other Funds and Accounts

RPTTF - Redevelopment Property Tax Trust Fund

 

Beaumont ROPS - April 25, 2012

State tells Beaumont the ROPS they submitted to cover the period from January to June 2012 did not include January 2012 and is therefore not approved.

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Beaumont HAT - April 30, 2012

The State tells Beaumont they objected to an asset the City was asking the State to approve for transfer from the RDA to the City of Beaumont. Following is from the letter:

Exhibit D, Item 1 - This is a loan the City issued to the former Beaumont Redevelopment Agency and is not a current valid receivable. Therefore, it is not a transferable asset.

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Beaumont May ROPS Approval Letter - May 30, 2012

The State notifies Beaumont they approved all of the items on their ROPS for a January 2012 - June 2012 and July 2012 - December 2012. The letter references the following link for the amount of RPTTF that was approved by Finance: www.dof.ca.gov/assembly_bills_26-27/documents/Exhibit-12.xls. This file will show that the City was approved for a total of $125,000.

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Beaumont ROPS III - October 13, 2012

The State approves all the items listed on the City's ROPS covering  the period of January to June 2013. The State allowed $125,000 in administrative costs but since the city didn't request approval for any enforceable obligations for this period, none were approved.

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Beaumont LMIHF DDR - January 31, 2013

The City of Beaumont's Succesor Agency (Agency set up by the city to manage the assets and obligations of the former Redevelopment Agency) submitted an oversight board approved Low and Moderate Income Housing Fund (LMIHF) Due Diligence Review (DDR) to the California Finance Department. The purpose of the review was to determine the amount of cash and cash equivalents available for distribution to the City. Based on the State's review, the following adjustments were made:

Assets transferred to the City of Beaumont (City). Cash of $2,281,846 was transferred from the LMIHF to the City's Mitigation Fund on January 31, 2012 for the development of the Oak Creek Senior Apartments project. Our review indicates the obligation has not been reported on the Recognized Obligations Payment Schedule and the project is contingent upon certain tax credits granted by the state. Since an enforceable obligation for the project does not exist, the transfer is not allowed. Therefore, the amount reported has been adjusted by $2,281,846.

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Beaumont LMIHF DDR MC Determination - March 8, 2013

This letter is in response to the Meet and Confer session the City had with the State to appeal the decision in the previous rejection letter concerning the $2,281,846. The City claimed that the City Council, sitting as the redevelopment agency approved the use of these funds for low-moderate income housing projects to offset the waiver of development impact fees. Therefore the funds were earmarked for infrastructure improvements associated with these projects.

The State says the City still has not secured the tax credits the Oak Creek Senior Apartments project as of the review date and their initial review indicated the total amount of $2,281,846 transferred on January 31, 2012 from the LMIHF to the City's Mitigation Fund. The State responds with: "Finance continues to maintain its position since there is no contract in place for this obligation and financing has not been secured." The State also pointed out that "HSC section 34163 prohibits a redevelopment agency from entering into a contract with any entity after June 27, 2011"

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Beaumont Other Funds DDR - March 9, 2013

This letter addresses an asset transfer in the amount of $561,582. The State's review "indicates that the $561,582 obligation was paid during February through May 2012; however, the obligation was not on a Recognized Obligation Payment Schedule (ROPS). Additionally, the obligation is a contract between the City of Beaumont and Christensen Brothers General Engineering. Since the former RDA is neither a party to the contract nor responsible for payment of the contract, this item is not considered an enforceable obligation."

The letter goes on to say the City is required to transmit the funds to the county auditor-controller. 

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Beaumont Other Funds DDR MC Determination - April 2, 2013

After receiving the above rejection letter, the City exercised their option to a "Meet and Confer" session with the State where the City argued the former RDA approved the use of the funds for the project. However, the State pointed out that the Resolution the City was pointing to, "does not specify or estimate a dollar amount for the project nor does it state that the City would be contracting on behalf of the RDA and the funds would be used to reimburse expenditures incurred by the City. Furthermore , the City entered into a contract with a third party in December 2011 and the staff report provided states the project is to be funded from transportation funds and School District funds. Therefore the item is not an enforceable obligation of the Agency and the balance to be remitted is being increased $561,582."

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Beaumont ROPS 13-14A - April 15, 2013

In this letter the State is notifying that all the items listed on the ROPS 13-14A for the period of July through December 2013 are approved. However, Finance notes the oversight board has approved an amount that appears excessive given the number and nature of the other obligations listed in the ROPS." The amounts approved were $317,416 requested for obligations and $125,000 administrative costs for a total of $442416.

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Every letter indicates the amount available from the RPTTF is the same amount of property tax increment that was available prior to the enactment of ABx1 26 and AB 1484 (The end of the RDA programs). This amount is not and never was an unlimited funding source.