Area No. 5 is part of the original 1994 Mello Roos Bonds. Area No. 5 received $2,345,826 or 23% of the original $10 Million Bond Debt and was also assigned another $266,569 for 'Facility Design'.
In the 1994 bond debt agreement the ten developers/owners of the property agreed to pay the bond debt themselves if there was not enough property tax revenue derived from the homeowners. Page 22 states:
“The District (will) levy in each Fiscal Year the Special Taxes in each Improvement Area in an amount sufficient to pay the debt service on the applicable series of District Bonds and the cost of providing certain Administrative Expenses of the District, Authority, and City.”
The reason the City has to fill out bond debt tax forms every year is because the property owners are supposed to pay for the cost of the bond debt each year.
The Rate and Method of Appropriations for Area No. 5 lists the steps to collect the Special Taxes as:
First: The Special Tax shall be levied in equal percentages on each Assessor's Parcel of Developed Property up to 91% of the applicable Assigned Special Tax for such Assessor's Parcel.
Second: If additional monies are needed after the first step has been completed, the Special Tax shall be levied in eual percentages on each Assessor's Parcel of Undeveloped Property, up to 100% of the Maximum Special Tax for Undeveloped Property.
The Property Owners of Area No. 5 and every other original property owner were responsibility for the Bond Debt and expenses incurred.
Area No. 5 was also a $350,000 beneficiary on the 1996 Sewer Enterprise Bond. On this bond the City is the Purchaser, is piggybacking (refunding) off the 1994 Bond Debt, and the debt is expected to be paid solely from Fee and Tax Revenue.
Page 29 states that a portion of the Sewer Fund bond will be used to refund the 1993 Bonds and specifically states: “ The Purchased Securities are issued on a parity with the 1994 Bonds for Improvement Area No. 5. Currently, approximately $2,111,000 of the 1994 bonds remain outstanding, of which approximately $64,000 are capital appreciation bonds maturing between September 1, 1999 and September 1, 2005.”
This tells us that at least for the first couple years Heartland LTD did pay the Special Taxes on their portion of the bond debt. But who is 'Heartland Beaumont LTD' ?
The 1994 Bond Debt states that Heartland Beaumont LTD is a company based Seattle, Washington with 50 employees. Heartland was established in 1984 and purchased Area No. 5 in 1987. Stephen P. Walker, III is listed as Founder and Managing Partner.
On the Warehouse Project the property owner is listed as 'LV Heartland LLC. The Signatory for LV Heartland is Anthony Barsanti - Managing Director representing Lehman Brothers.
The Sewer Fund Account lists the following checks under 'Contract Services' issued to Lehman Brothers:
Transaction # 75435 - 01/30/07 - $2,983.94
Transaction # 85473 – 06/30/07 - $3,050.99
Transaction # 95951 – 01/17/08 - $3,084.52
Transaction # 106279 – 06/30/08 - $3,042.66
The payments continue in the Sewer Fund, but in 2009 the checks are issued to Barclay's Capital, Inc.
The 1994 Bond Debt is mentioned in the Heartland Warehouse Project. Item 23 changes Section 4.2.5 of the Original Agreement to give LV Heartland free Wastewater Facilities because Area No. 5 was part of the Original 1994 Bond Debt: “The City guarantees that the number of units of wastewater treatment plant capacity so financed shall be reserved and available to the Owner (Heartland) without further payment.”
Item 26 changes Section 4.10 to relieve Heartland of all past bond debt if they pay $1 Million. The Contract further states the City will use the $1 Million not to pay off the old bond debt, but to fund the Potrero Bridge Project.
The City still has another 10 years to pay on the 1994 Bond Debt with a $9,743,000 payment due in 2023. Area No 5 portion is 23%. Payment amounts for the past two years are as follows:
September 2010 Interest + Premium = $366,141.30
March 2011 Interests Only = $210,045.46
September 2011 Interest + Premium = $382,545.90
March, 2012 Interest Only = $203,036.49
September 2012 Interest + Premium payment = $403,460.41
In the next decade the City will pay another $18 Million for the $10 Million 1994 Bond Debt. Area No. 5 received 23% of the proceeds, but will walk away from the debt by paying $1 Million cash that will be used on the Potrero Project.
Warehouses are traditionally located in areas with low property values because they pay by the square foot. It was never feasible to have warehouses on Redevelopment Property because of the additional taxes, but the City of Beaumont releases Heartland LV of past Bond Debt. Releasing LV Heartland of their 1994 Bond Obligations will result in a $3 Million loss for the City of Beaumont.
Beaumont City Manager repeatedly tells the Citizenry that personally paying off their bond debt is the only way to relieve themselves, yet he cuts Heartland a deal that allows them to pay $.25 on the $1.00 if they put the cash in his hand.
If the Warehouse Project goes through Heartland will pay the City $1 Million and the City will spend the money in a month. But the $4 Million Bond Debt is still be outstanding with no means to pay and no acknowledgment from the City that the debt exist.
The City's Heartland Warehouse Promotion states that Beaumont needs to 'get in now' because a warehouse boom is coming in 10 – 15 years. In 1994 the same people projected that Area No. 5 would be completely built and sold by 2010.