The Real WRCOG Interest Rate

One of the three goals I will work towards if I am elected to serve on the Beaumont City Council is: 

A government that accepts responsibility for its decisions and conducts its business in a way that commands respect.

The way our city leaders handled the $43 million WRCOG judgment is a good example of where I believe we can do better to gain the respect of our citizens and our neighbors.

In a four part series about TUMF (Transportation Uniform Mitigation Fee), WRCOG and how the City of Beaumont found itself on the short end of the $43m judgment I outlined the issue as I see it and I laid out a detailed plan of how we can move forward.

WRCOG, TUMF, CFDs And Beaumont’s Future - Part 1
WRCOG, TUMF, CFDs And Beaumont’s Future - Part 2
WRCOG, TUMF, CFDs And Beaumont’s Future - Part 3
WRCOG, TUMF, CFDs And Beaumont’s Future - A Plan

The City of Beaumont, directed by the City Council, has taken a different approach. The council decided to avoid a public discussion, immediately decided to appeal the judgment, and added an item on their rumor control page on the City’s website. The rumor control item discounts anyone who expresses concern about the millions in interest the city has accrued and will continue to accrue through the appeal which is likely to take a couple years.

This decision to appeal, without public discussion or input, protects the three councilmen running for re-election from having to accept responsibility for their decisions or even having to discuss the issue. It also prevents them from having to provide a plan to the voters on how to move forward if the appeal fails. I don’t believe this is conducting business in a way that commands respect.

The city argues on their “Rumor Control” page that the annual interest is accruing at about $43,000 a year, about one tenth of one percent interest. They quote Civil Code 3287(c).

The response seemed very official and legal but it had me wondering. At one tenth of one percent interest, why would any city ever pay off a $43m judgment? The opportunity cost of money, the best alternative investment, for the $43m would always be much higher than one tenth of one percent. I couldn’t imagine why a judge would impose such a low interest rate on a judgment.

I went back and read the complete decision by Judge David Chaffee for the second time. I found, in section P on page 24 of the decision, a contradiction to the City’s position. Here Judge Chaffee specifically argues the civil code the City is referencing doesn’t apply to the WRCOG judgment.

Here is what the decision states:

P. WRCOG Is Entitled to Interest at the Statutory and Legal Rate from October 2009 to The Present.

                As stated above the total amount of TUMF required to be remitted by Beaumont to WRCOG is $42,994,879. Beaumont shall also pay interest on that sum at the statutory and legal rate from October 2009 to May 22, 2014. Petitioner shall submit a declaration accompanying a proposed judgment showing the amount of interest and how it is calculated.

                The Court finds and determines that this proceeding is not on “a tax or fee claim against a public entity.” Pursuant to Civil Code 3287(c) (effective January 1, 2014) and City of Clovis v. County of Fresno (2014) 222 Cal. App. 4th 1469, 1485-1486.) “In Assembly Bill 748 the phrases ‘tax or fee claim’ and ‘tax or fee judgment’ mean claims arising from the levy, collection or charge of a tax or fee. They do not include the distribution or allocation of those revenues between public entities.” (Id. At 1485.) In addition, the new language of Civil Code section 3287(c) would not apply in any event to interest accruing between January 1, 2014 and May 22, 2014 (Id. At 1486.)


After reading this section, I was even more concerned. Since the City doesn’t usually comment on pending legal matters, especially without out legal advice, there must be something I am missing. If our City’s legal team approved the language on the “Rumor Control” page, language that appears contradictory to the judge’s decision, I knew I better get another opinion.

The judge’s decision, according to the above paragraph, states the petitioner, WRCOG, will “submit a declaration accompanying a proposed judgment showing the amount of interest and how it is calculated.” I contacted the WRCOG’s Executive Director, Rick Bishop, to get WRCOG’s opinion of the City’s position and to learn WRCOG’s position on how the interest should be calculated.

Yesterday, I received a copy of a letter that summarizes the WRCOG legal team’s position on the interest calculation. It seems to more closely follow the judge’s decision than the City’s position. The City’s annual estimate of $43,000 would put the accrued interest amount around $200,000. WRCOG estimates it is closer to $14,000,000.

I believe the City staff at the direction of the City Council weighed in on this public debate over the interest on the WRCOG judgment in order to distract from the real debate we should be having. The real debate should be about our Mello-Roos economic development strategy and why future Beaumont residents, not the developers who are benefitting the most from Mello-Roos, should bear the entire $43m burden of the decisions made by the council members elected and re-elected by the current citizens.

In my opinion, the debate we should be having is about whether a financial growth strategy, dependent on building as many homes and warehouses as our open space will allow, is sustainable. I believe a city of 40,000 citizens should have a diverse and strong development strategy that works to increase property tax revenue by raising all our property values. We need a strategy that increases sales tax revenue by attracting the retail and service businesses that are in sync with the needs of the community. We need a business community that keeps Beaumontians’ sales tax revenue in Beaumont, not Redlands, Yucaipa, or Moreno Valley.

Here is what I will bring to Beaumont:

A diverse and strong economic development strategy in sync with the needs of the community.

A government that accepts responsibility for its decisions and conducts its business in a way that commands respect.

A better quality of life through improved access to post-secondary education, quality health services and increased public recreation options.