A CFD Conflict of Interest? You Decide

The following is from the Beaumont Financing Authority documentation. The Beaumont Financing Authority is the agency set up by the city council to manage the CFDs. I believe it shows a conflict of interest for our City Manager and our outside consulting Public Works Director.

The City Manager, as the principal of General Government Management Services, is serving as the District's Special Tax Consultant with respect to the Improvement Area. The Special Tax Consultant, among other things, will be responsible for preparing a cash flow certificate showing that sufficient Special Taxes will be available to pay debt service on all District Bonds. Fees paid to the Special Tax Consultant are contingent upon the sale and delivery of the Bonds.

The City's Public Works Director, as a principal of Urban Logic Consultant Inc., is serving as the City's Project Engineer with respect to the District. The Project Engineer will be responsible, among other things, for engineering estimates with respect to the Project. The fees paid to the Project Engineer are contingent upon the sale and delivery of the bonds. 

The City manager is Alan Kapanicas and he is a principal of General Government Management Services. On top of his salary and benefits as the City Manager, his company also earns fees/commission when CFD bonds are sold. I assume this also includes when bonds are sold to refinance existing debt.

The City's Public Works Director is a principal of Urban Logics. Urban Logics also receives fees/commission when CFDs are sold. 

How would their advice to the council regarding CFDs not be influenced in some way by their potential personal financial gain?

How is this not a conflict of interest?

 

By the way, Mr. Kapanicas' company has other CFD clients. Here's a link to a Heber California website's public announcement of an annual report prepared by GGMS regarding their Community Facilities District.