Sundance Area 8C: A Case Study

The City of Beaumont used Mello Roos Laws to create ‘Community Facilities District 93-1’ (CFD 93-1) and acquired it’s first CFD Bond in January, 1994. Although 12 Development Areas are named in the Bond, two of the development areas, Areas 7 and 8, received no bond debt. K Hovanian, Area 7, choose to pay their Mitigation Fees in cash. At the time Area 8 was owned by the Deutsch Family and although 4,716 dwelling units were planned, the 1994 Bond clearly states that Deutsch did not authorize any indebtedness or special tax levies.

Page 38 of the 1994 Bond clearly states: “Improvement Area No. 8 is owned by Banning Farms and Highland Farms. A special election to incur bonded indebtedness and levy a special tax has not yet occurred.”

From 1994 to 2001 the population of Beaumont grew from 10,400 to 11,700 with a vast majority of the increased population the result of new homeowners moving into the CFD Areas.

In 2001 the City acquired a Wastewater Bond with Union Bank of California as it’s ‘Credit Entity’. In 2002 Union Bank became the City of Beaumont’s Bond Trustee and Pardee Homes came into Beaumont and took over the Deutsch Property.

2007 Series E Bond $6,520,000

2007 Series E Bond for $6,520,000 was the first CFD Bond acquired specifically for Sundance Area 8C.

Page 2 of the 2007E Bond states: “Improvement Area No. 8C was designated by the adoption of Resolution No. 2006-31 on June 6, 2006. On May 1, 2007, the City, pursuant to Resolution No. 2007-25, approved certain amendments to Improvement Area No. 8C and the rate and method of apportionment of special taxes.”

Attached to the end of the Bond is a list of Area 8C houses already sold, property owners’ name, purchase price, and date of purchase. Pardee Homes started selling houses in Area 8C in March, 2007, but property owners within Area 8C were never allowed to vote.

By 2007 the population of Beaumont had grown from 10,000 to 30,000 with a majority of the new residents living within the CFD 93-1. Mello Roos Laws require everyone in the CFD to vote for any bonds, but none of Beaumont’s CFD property owners have ever been allowed to vote on Bond Debt.

The 2007E Bond, page 2, further states “the amended bond authorization amount for Improvement Area No. 8C approved by the qualified electors on May 1, 2007 is $30,000,000.”

A salesman from Pardee Homes ‘votes’ to acquire $30 Million in bond debt to finance its private sector building operation with government bonds using private property as ‘collateral’. The 2007E Bond used the first 100 houses sold as collateral to acquire $6,520,000. Once more houses were sold those houses were also used as collateral to acquire more bond debt in 2012 and 2018 - without the property owners knowledge or consent.

Harris Appraisals estimates the value of the Individual Homeowners’ Property in the 2007E Bond to be $29,100,000.

The Bond lists the Individual Property Owners and the amounts they paid for their houses. All of the houses listed on the 2007E Bond are worth less today than they were a decade ago. Because of Beaumont’s bond and construction scam that pays developers to build houses; developers are flooding the housing market, so houses in Beaumont do not appreciate, they depreciate.

Services Tax:

Page 2 also states “..the Special Tax for Services is set the amount of $265.90 per dwelling unit, increasing by changes in the Consumer Price Index.”

Beaumont also charges every CFD Property Owner a ‘Services Tax’. Mello Roos laws do allow for a service tax to pay for the operation of the facilities, but Beaumont embezzled all the money and never built facilities such as fire stations and regional parks, but property owners are still charged a service tax to operate facilities that do not exist. The amount overcharged used to be $6 Million/year city-wide, but it is now up to $8 Million/year.

When bonds are acquired; the money has to be used for specific purposes. Pages 70 & 71 of the 2007E Bond lists the allocated uses of the bond:

TUMF Facilities - $2,409,840

All of the money from the TUMF Facilities was embezzled as proven when the Western Riverside Council of Governments was awarded a $42 Million Judgement.(CASE NO. 30-2010-00357976)

Regional Park Facilities - $611,047

The City collected a total of $12 Million in Regional Park Mitigation Fees between 1994-2015. After the 2015 Raids the Beaumont-Cherry Valley Parks & Recreation District requested their Mitigation Fees from the City so they could build the needed regional parks, but the City refused. To This Day the City collects Regional Park Mitigation Fees and embezzles all the money.

Westside Fire Station - $124,709

Never built. City emails reveal that CalFires attempted to get Beaumont to build three (3) more fire stations in 2014, but the City refused. Beaumont is willing to build a fire station on the southwest section of the City for the Warehouses, but the City refuses to build the fire station to CalFires’ standards, so a fire station has never been built. Recommended Response time is 4 minutes, but some houses in Beaumont are over 20 minutes from fire and safety protection. Beaumont City Councilmen have recently stated that Homeowners’ Fire Insurance is being significantly increased or canceled because of the lack of fire stations in an area of California with the highest probability of wildfires.

Sewage Treatment Facilities - $345,516

Tens of Millions was transferred out of CFD Bonds and into the City’s 2001 Wastewater Bond where the money was then transferred to a bank account titled ‘Union Bank/Urban Logic Consultants’.

Recycled Water Facilities - $250,000

The City has acquired four Sewer Bonds and has transferred millions out of the CFD bonds for recycled water, but to this day the City can not produce Title 22 Complaint Recycled Water because Staff and Council repeatedly steal all the money.

Engineering and Geotechnical Reports - $75,000

Millions was funneled to Urban Logic Consultants under the guise of engineering fees.

San Timoteo Watershed Management Projects - $25,000

The Cities of Beaumont, Banning, and Yucaipa formed STWMA, which required all three cities to build Title 22 Compliant Recycled Water Facilities. To this day only Yucaipa as recycled water. Both Banning and Beaumont misused/embezzled their bond money. STWMA dissolved in 2010.

Domestic Water Facilities - $200,000

This money was either transferred to the 2001 Wastewater Bond, or transferred to City, then transferred to Urban Logic Consultants.

Prepaid Engineering and Formation Costs - $250,000

Reimbursement of Developer Mitigation Fees.

Prepaid Citywide Fees - $396,000

Reimbursement of Developer Mitigation Fees.

Cherry Storm Drain Channel $2,366,782:

‘Cherry Avenue Storm Drain’ was still used as an excuse to funnel money to Pardee Homes in 2018. Cherry Avenue along Area 8C is only four blocks long.

Beaumont refinanced the CFD 2007 Series E Bond in 2017 by ‘private placement’, so the bond is not listed on EMMA.

2012 Series A $5,650,000

Page 12 of the 2012A Bond states that 318 Individual Property Owners resided in Area 8C at the time the 2012A bond was acquired with a value of their private property listed at $53,170,000 out of Area 8C’s total value of $68,910,000.

A list of the 2018 Property Owners and the price paid for the homes is listed at the end of the 2012 A Bond.

Page 12 also lists the prices of the homes sold in Area 8C. In 2007 the homes in Area 8C were selling at $158.54 sq. ft. By 2011 Area 8C houses prices dropped almost in half to $82.51 sq. ft.

Even though housing values steadily declined, Pardee Homes continues to build because, aside from the City reimbursing Pardee Homes’ Mitigation Fees with Bond Debt; there are also no CEQA EIRs, Labor Laws, or Building & Planning Codes to follow in Beaumont.

Beaumont City Councilman Mike Lara is also the Riverside County Building and Safety Director, so the developers are assured from the County that they do not have to follow any building or safety laws.

The 2012 A Bond was acquired on March 14, 2012. The Bond was so poorly written that it didn’t include a List of Facilities to be Constructed. A Complaint to the Securities and Exchange Commission was filed in March, 2013. The City’s Bond Fund Accounts were frozen before the City could pillage all the money from the 2012A Bond. Up until 2018; over $2.7 Million remained in the 2012A Bond’s Construction Fund Account.

On January 4, 2018 the City of Beaumont issued Requisition 2017-001 to the City’s new Bond Trustee, Wilmington Trust, effectively draining the 2012A Construction Bond Fund Account. The City received $2,789,550.87 on January 5, 2018 and transferred the entire $2,789,550.87 to Pardee Homes on January 11, 2018.

On the Reimbursement Request Pardee Homes states: “Also, this facility construction date started over 9 years ago and vendors have either gone out of business or no long[er] have records relating to this facility/project. Due to the timing, it would be extremely difficult, if not impossible, for Pardee to retrieve such documents and therefore cannot provide documentary evidence of compliance with prevailing wage that applies to the facility.”

California State Laws require public infrastructure to go through the Public Bid process for all Contracts and to file weekly Payroll Reports with the State.

Bond Laws dictate that after receiving a Bond Requisition & verification of expenses from the Issuer (City); the Bond Trustee transfers the bond money directly to the Payee. However, because the infrastructure was never built and Pardee Homes does not have receipts to justify the requested money, the Trustee could not legally release the money to Pardee Homes. Instead Wilmington Trust transferred the bond money to the City of Beaumont, which then transferred the money to Pardee Homes.

2018 Series A $16,915,000 Issued May 31, 2019

Page 7 of the 2018 Bond acquired for Area 8C lists $16,404,065.50 allocated to the Construction Fund. On June 27, 2018, the City of Beaumont sent Bond Requisition No. 2017-005 to Bond Trustee Wilmington Trust. On June 28, 2018 Bond Trustee Wilmington Trust transferred $16,404,065.50 to the City of Beaumont. On June 29, 2018 the City of Beaumont transferred $16,404,065.50 to Pardee Homes.

Pardee Homes submitted reimbursement request summaries for project ‘hard costs’ and ‘soft costs’ of roadways and sewers that are basic needs of the housing development. Attached to the Requisition are documents created by Beaumont City Staff, but not the required Invoices and backup documentation legally required in order for the Bond Trustee to release the money directly to the Payee.

Page 22 lists the Description of Authorized Facilities, which gives a vague description of infrastructure, but no money allocation, and states “Certain facilities are authorized to be constructed..”

CFD Area 8C was completed a decade ago. There are no new facilities being built in Area 8C.

In May, 2018, the City of Beaumont acquired a $16.9 Million Bond levied against 689 Sundance Area 8C Private Property Owners that purchased their homes a decade earlier. The additional bond debt increases the property owners’ CFD bond debt payments another decade to a total of 40 years without receiving any benefits from the bond money.

In 2018 the City of Beaumont transferred over $49 Million in CFD bond money to Pardee Homes and attached the debt onto CFD houses that were built, but the Communities do not have Fire Stations, Schools, Recycled Water, or adequate Parks and Roadways. Pardee Homes can now use the $49 Million to continue flooding the housing market in Beaumont, which will continue to depreciate the property values in Sundance Area 8C and CFD Areas throughout Beaumont.