WRCOG, TUMF, CFDs And Beaumont’s Future - Part 2

Why?

Why did City Manager Alan Kapanicas and the City’s consultants, Urban Logic, advise the Council to not collect the TUMF and instead advised them to construct their transportation projects by going it alone using CFD fees? This post lays out my theory on the motives for Kapanicas and UL.

The Beaumont Financing Authority is the agency set up by the city council to manage the CFDs. The following is from the Beaumont Financing Authority documentation. This was when Kapanicas was contracted as a consultant, not as a city employee as he is now.

The City Manager, as the principal of General Government Management Services, is serving as the District's Special Tax Consultant with respect to the Improvement Area. The Special Tax Consultant, among other things, will be responsible for preparing a cash flow certificate showing that sufficient Special Taxes will be available to pay debt service on all District Bonds. Fees paid to the Special Tax Consultant are contingent upon the sale and delivery of the Bonds.

The City's Public Works Director, as a principal of Urban Logic Consultant Inc., is serving as the City's Project Engineer with respect to the District. The Project Engineer will be responsible, among other things, for engineering estimates with respect to the Project. The fees paid to the Project Engineer are contingent upon the sale and delivery of the bonds. 

General Government Management Services (GGMS) is Alan Kapanicas’ firm, well technically it is Mrs. Kapanicas’ company but it is clear Alan Kapanicas is “the principal”. GGMS specializes as a tax consultant on Mello-Roos/CFD taxes for new subdivisions. In the early years of CFD 93-1, including the formative years for TUMF, as the CEO of General Government Management Services, Alan Kapanicas was the paid Special Tax Consultant as well as the Consultant City Manager. GGMS was a party on all the early bonds and was compensated for the role Kapanicas played as special tax consultant. 

The following article from the Imperial Valley Times confirms that in 2005, Mr. Kapanicas was the CEO of GGMS and was hired to act in the same capacity for Imperial City that he was already on contract for in Beaumont.

Imperial hires Alan Kapanicas as interim city manager

By BRIANNA LUSK, Staff Writer | December 8, 2005 

The Imperial City Council voted 4-0 Wednesday to hire Alan C. Kapanicas, chief executive officer of General Government Management Services of Rancho Mirage, as interim city manager. Councilman Geoff Dale was absent from the meeting. Vincent Long, Imperial city manager for the past five years, resigned from his position after accepting a city manager position in Cloverdale. Kapanicas has worked with the city continually from December 2003 on the establishment of the community facilities district and has provided oversight on the special tax for new subdivisions being built in the city.

Urban Logic’s consultants have been leading Beaumont’s Public Works, Planning and Economic Development departments since 1994. Unlike Mr. Kapanicas who is now paid as a city employee, UL’s consultants are still compensated with a percentage on every public works project in Beaumont. At least they were up until last year.

UL’s Contract has been in place since 1993 and was recently “modernized” last year with no open bid process for Beaumont’s consulting services contract. At that time we were told the terms hadn’t changed from the last amendment in April of 1994. The Council changed the way UL would authorize jobs and they changed the process the staff would follow for project approval.

The following are the terms from the 4/94 contract: 

• Monthly Compensation = $15,000 (to be renegotiated annually) – I have found no verification this has changed
• Added compensation of public improvements not to exceed 4.5% for "Plan Checking" and "Construction Inspection
• Additional compensation not exceeding four and one-half percent (4.5%) of the bid price awarded by the city for each project 

I wrote about UL’s 20 year contract in May 2013 in a post entitled Just the Facts Ma’am. In that post I provided links to the original contract and two amendments. I was going to include the links to the early contracts here but when I tested them, I realized the City has pulled down the original contracts and replaced the April 94 contract with the “modernized” contract. This latest contract makes no mention of any compensation schedule per project but does reference an hourly pay schedule. I am sure there are still guidelines to the limits of UL’s compensation, at least I hope there are. I find it curious I couldn’t find any limits in the latest version.

Here is the link to the latest contract, let me know if I am missing something:

 http://www.ci.beaumont.ca.us/DocumentCenter/Home/View/2146

You are going to have to take my word for the terms of the UL contract that were in place since 1994 and throughout the entire period in question regarding TUMF and up until late last year. I have seen the documents and I know they are available through a public records request.

I think it is clear that Alan Kapanicas as CEO of GGMS had a financial incentive to fund regional transportation projects using the CFD bonds instead of being a fee collector for WRCOG. And, Urban Logic had a financial incentive to keep the “regional” transportation projects under local plan checking, contract inspection, and to maintain a cut of every bid price. It is hard for me to imagine that the Pass Zone planning managers, city/county managers and elected from Banning, Calimesa, and Riverside County would have been comfortable with Beaumont’s consulting fees.

The earning capacity of Beaumont’s consultants was directly related to the number of new homes built. By not charging developers any transportation fees up front and financing all the infrastructure on the 30 year, annually increasing, debt obligations of future homeowners – CFDs - Beaumont had a significant advantage over the rest of the IE in attracting developers. WRCOG, TUMF and the Pass Zone would just have been in the way.

Managing a small city of about 8,000 with consultants is done all over the state and makes practical sense. UL and Alan Kapanicas are good at what they do, developing subdivisions. My concern is that they have shown us this may be all they know how to do. At some point a city grows up and it is time to move in a new direction and hire experienced, independent department heads. A city of 40,000 should be ready to take the next step, IMO.

Citizens must rely on their City Council and legal advisor, the City Attorney, to make sure consultants don’t put their own interest above those of their citizens.

Where was our City Attorney, Joe Akulfi?

I have no answer for this one.

Next...

Where was the city council and what are they doing now?