The Stetson CFD Letter

This weekend we received the letter from the City Council of Beaumont addressing our concerns. I believe the letter addresses almost every one of our concerns. I still feel there is a lot they aren't telling us and I'm not comfortable with the way they are using the CFD funds and I have more questions. Here are some of my concerns. 

Here are links to the three pages of the letter. 

Master Plan and Fair Share Costs

The letter explains the City and other agencies determined in the early 90s that they needed to support nearly 30,000 new homes anticipated in the City's master plan. They went on to detail their method of determining the rate each home would pay which they referred to as Fair Share Costs. "Fair Share Costs include facilities that benefit residents citywide (Citywide Facilities), locally (Neighborhood Facilities) and certain facilities that are provided by other government agencies (Other Agency Facilities)."

The City Council estimates about half the Fair Share Costs are Citywide Facilities and are shared by all new homeowners and each home contributes roughly 1/30,000th of the total Citywide costs. The Neighborhood Facilities are funded only by specific neighborhoods and vary form neighborhood to neighborhood, much of it determined by the distance of the development community from existing facilities at the time of construction. This is why Three Rings Ranch is at the lower end of the scale and Fairway Canyon is at the higher end.

Are The Fare Share Costs Fair?

We have about 30,000 new residents since the CFD district was created, not 30,000 new homes. How many new homes are there now and how long will it take to get to 30,000 new homes? For twenty years now and who knows how many more years, a significant portion of Beaumont residents aren't paying their "fair share" of new Citywide Facilities and Other Agency Facilities. The homes outside the district are sharing the benefit of the new facilities and services but are paying the standard property tax all the CFD owners pay in addition to their CFD fees. I realize the City has neglected much of the upkeep and repair of the roads and facilities in the non-CFD areas because of lack of funds. It is easy to tell when you are in "The District" and when you aren't. While it's true these areas are not receiving necessary improvements, they are benefiting from many of the new facilities and will benefit from the future facilities that will be built almost entirely with CFD fees.

The primary problem I see with the CFD strategy of building our communities is the division in the quality of life as well as the unequal division of costs.

Should CFD Fees Build Freeway Interchanges?

The costs of new freeway interchanges such as the one planned for Portrero will be in the tens of millions, maybe more than a hundred million when completed. Was it the intention of state legislators to enable cities to finance the construction of freeway interchanges and other regional projects without voter approval and only paid for by a portion of the residents? I can't find any place in any of the CFD/Mello-Roos legislation that there was intent to fund huge capital projects. Even in legislation last summer which provides Finance Authorities new powers to manage their districts, there is no mention of freeway interchanges or other large capital projects. The intent of Prop 13 was that voters would have a say in these types of projects. Mello-Roos laws were passed to help cities find alternative revenue resources but, again, I can't find anywhere in the documentation that they were intended to circumvent voters' rights.

Where Do Stetson Homeowners Go From Here?

I believe I have done all that I can without more guidance from my Stetson neighbors. The City Council has assured us our payments won't increase and they won't increase our debt beyond the amount originally authorized by the Developer. They have also said there will be no new debt authorized without Stetson homeowner approval.

I have proof the administration, with the approval of the City Council, is using financial tools, all legal as far as I can tell, to extend other improvement areas' debt beyond their CFD payment schedules. Our developer authorized $6,000,000 in debt of which $4,750,000 has been realized. The City has said they will fully realize the authorized amount and, in my estimation, that will be done this year. We are legally within our rights to stop this and limit the authorized amount to the amount realized so far, $4,750,000. I believe we should for two reasons. 

First, I believe we are already paying our fair share and since there are no new improvements planned for our community, our Neighborhood Facilities Cost of our "Fair Share" has been satisfied. Any new debt would be used for facilities which I believe should have voter approval and be shared more "fairly" by all residents.

Second, and in my opinion more importantly, we need to send a message. CFDs are no longer good for Beaumont and the future of our community. They divide the City into communities of have and have not. They allow politicians and administrators to reward developers and contractors, many who contribute to their campaigns, to build large capital projects without voter approval. And, finally, their current strategy is unsustainable.

With every refinance in which the City moves to fully "realize" the authorized debt, the City shifts the debt from bonds governed by the Mello-Roos laws to bonds with no such oversight. These new bonds are extended beyond the payment obligations of the property owners of the assigned improvement areas. These new bonds represent a significant amount of the district's debt and are paid back in balloon payments in the amount of millions, years after the property owners' payments have stopped. This is an unsustainable strategy.

Finally, Where's The Accounting

The one issue we brought up that the City Council failed to address is the accounting and reporting of our debt. This was probably the easiest issue for them to address since they are already required by law to perform audits and report on each improvement area's debt annually to the bond holders. I believe having easy access to these reports will help to provide us, the property owners whose homes are used as security, the oversight no one else seems to be doing.

This is Now in the Hands of the Stetson Property Owners

I will be reaching out to my neighbors to determine what we should do next. I'll keep you posted.