More Debt For Our Children

Last night I wasn’t able to attend the City Council meeting. I needed to be available for my son and daughter. When I don’t have baseball games, swimming meets or Cub Scouts meetings, I will be attending the council meetings.  

I listened to last night’s podcast and reviewed the agenda and found a couple interesting issues I believe warrant discussion.  

First Issue  

The city authorized the issuance of $12 million of Revenue Bonds. The city’s resolution stated the following:  

Whereas, the Beaumont Financing Authority  (the “Authority”) was organized to provide financial assistance to the District.  

Whereas, to provide funds for the acquisition, construction and installation of the Project, or for the refunding of bonds previously issued for such purpose, the Authority intends to issue its Revenue Bonds (the “Authority Bonds”) in an amount not to exceed $12,000,000 to be used in part to purchase bonds issued by the District…

Here is a link to the full resolution - http://www.ci.beaumont.ca.us/DocumentCenter/View/16936  

The “District” the resolution references  is the City of Beaumont Community Facilities District No. 93-1. The developer listed in this resolution is Pardee Homes and it represents the Tournament Hills development north of the golf course.

Here’s a link to the establishment of the district: http://www.ci.beaumont.ca.us/documentcenter/view/15006 

The City Manager, Allan Kampanicas, told the council the reason for selling more bonds was to retire existing debt. He said the homeowners are paying between 6-6 ½ percent interest on the bonds and the city is paying a higher rate. He said this bond sale enables him to go out and shop for lower rates. In an answer to a question from Mr. Castaldo, Mr. Kampanicas said that even if the city finds a lower rate, the homeowners rate will remain the same. Unfortunately those of us obligated by the long term debt when we bought our homes are unable to refinance our obligation on the debt and lower our interest rates but the city will be able to profit on the debt reorganization.

The city’s resolution indicated the proceeds of the bond sale will “be used in part to purchase bonds issued by the District”. What part of the sale will be used to refinance debt? What will be the total cost of the sale and extension of the debt be to citizens? How far out will the det be extended? And, What will the other “part” be used for? None of these questions were asked by our elected council members.

Second Issue 

The city administration also presented a report on the following issue:  

The city received $2,281,846 on January 31, 2012 from the Low and Moderate Income Housing Fund (LMIHF) to develop the Oak Creek Senior Apartments project. The city did not meet the October 15, 2012 submittal deadline to start the project and has been required to repay $2.2 million to California’s State Department of Finance.  

Here is a link to the Department of Finance’s statement to the city: http://www.dof.ca.gov/redevelopment/due_dilligence/LMIHF/documents/Beaumont_LMIHF_DDR.pdf

Mayor Berg indicated the DOF funds repayment won’t affect the general fund in any way.  

My Thoughts

I wonder if “part” of  the refinancing of the bonds from the Tournament Hills development district will be used to pay the $2.2m to the state and the remaining will be “used in part to purchase bonds issued by the District”. It was also interesting to hear Mayor Berg lament that they now wouldn't be able to complete a sewer project on Xenia and 6th. I thought the money was earmarked for low income senior housing and earlier Mayor Berg indicated the DOF funds repayment wouldn’t affect the general fund in any way.    

I wonder if these two issues are related. Is the refinance of the debt extending the city’s obligation to future generations of our children and grandchildren a way to repay debt they are unable to afford right now? This has been suggested by contributors on the Patch. Will the $2.2m the city have to repay to the State DOF be covered by the other “part” of the new debt issuance?

I know Mayor Berg and other council members regularly follow the Patch, would any of you like to comment? 

Record Gazette or Press Enterprise, does this warrant any coverage? I am sure their will be mention in their newspapers about the Dangerous Dog Ordinance the Council passed but nothing will probably be written about the new bonds and repayment to the state DOF. I'll be watching.