Since the $43 million WRCOG judgment was announced, I have been researching, Googling and asking questions. I am unable to get any information from our city leaders but I have learned a lot from people who have been following the trial first hand. There are a number of complex issues and they can’t all be adequately covered in a single post. This first post I hope will explain what the lawsuit was about? And, Why $43 million?
What was the lawsuit about?
On November 5, 2002, the voters of Riverside County approved an extension of Measure A which imposed a .5% sales tax to be levied within both the incorporated and unincorporated areas of the County. This was an extension of an existing .5% sales tax for Transportation, passed in 1988, that was supposed to expire in 2009. The extended Measure A wouldn’t become effective until April 1, 2009. Along with extending the ½ percent sales tax, voters also approved a new program, the Transportation Uniform Mitigation Fee (“TUMF”), patterned after Coachella Valley’s TUMF program. In order for a city to receive the ½ percent sales tax, it would have to participate in TUMF.
The WRCOG (Western Riverside Council of Governments) is charged with the administration of the TUMF program, a developers’ fee on new development, residential as well as non-residential. This fee 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.
The WRCOG member cities are responsible for collecting the TUMF fees from the developers and passing the revenue on to WRCOG. After administrative costs and Multiple Species Habitat Conservation Plan (MSHCP) mitigation allocations are extracted from the revenues collected, WRCOG allocates revenues as follows:
- 46.39% is allocated for regional improvements to the RCTC (Riverside County Transportation Commission).
- 46.39% is allocated back to the 5 geographical zones from which the fees are collected.
- 1.64% allocated to the RTA (Riverside Transportation Authority) for regional transit projects.
Membership in WRCOG and the TUMF program is voluntary. The Beaumont City Council directed the City staff to comply with the TUMF program. This meant the city should impose and collect TUMF on developers for each unit they built. For single-family residential, the current fee is $8,873 per unit. All of the cities (originally 15 now 18) in western Riverside County chose to participate.
Beaumont’s City Manager, Alan Kapanicas, with approval from City Attorney Joe Akulfi, decided not to impose the TUMF fees and advised the Council to build the local transportation projects with CFD, Mello-Roos fees. Mello-Roos fees are eventually paid by future homeowners, not developers, in essence, giving the developers a free ride.
WRCOG provided for a grandfather process that allowed for cities to use existing CFD revenue to qualify for TUMF projects. There were two main requirements to qualify the CFD funds for TUMF that would need to be met including the general TUMF requirement that TUMF projects add true road capacity.
The first requirement was that the Community Facility District had to have been in place before the TUMF program. Beaumont’s CFD 93-1 was established in 1994, the first requirement was met. The second requirement was that the city would have sold bonds, prior to the beginning of the TUMF program that were dedicated for specific transportation projects. The bonds were supposed to have been sold with language indicating the specific project.
The purpose of Beaumont’s CFD bonds and whether or not the City’s projects were TUMF approved were the primary issues of contention in the $43 million law suit brought by WRCOG against Beaumont. CFD revenue from bonds sold after TUMF was established, or revenue from bonds that were not designated for specific transportation projects would fail to qualify for TUMF approval. Also, projects that did not add “true roadway capacity” regardless if the financing method was TUMF approved, would not qualify for TUMF funding. For example, widening to four lanes a road that had an existing two lane bridge did not add “true roadway capacity” and would fail to qualify.
The following excerpts are from the statement released by the judge presiding over the lawsuit, David Chaffee, regarding the two issues I’ve highlighted:
- In the court's estimation, CFD 93-1 could have been, and, indeed, should have been, Modified to exclude regional transportation projects, while Continuing to cover other local projects, including water, sewage, and local transportation. Instead, the city opted for what one could call the, quote, willful child, end quote, syndrome. Indeed, the evidence reflects that contrary to TUMF ordinances, City staff tried repeatedly to make the TUMF program Conform to the CFD 93-1 program, rather than conform the CFD 93-1 to TUMF.
- At bottom, the court finds that in no instance did the city's claimed construction of transportation Improvements satisfy the TUMF requirements to add true Roadway capacity. If anything, the evidence shows poor Local transportation planning and execution, resulting in Bottlenecks and delays that impair the necessary added Capacity.
Why $43 Million?
The amount of the law suit is based on the estimated fees the city should have collected during the time they claimed to be participating in the TUMF program. As far as I can tell, that would be from 2003 to 2008. The estimated number of units, residential and non-residential, developed during this time would be multiplied by the required fee. The current fee for a single-family residence is $8,873.