RDA Debt

RDA - Where Is The Money?

The Highland RDA we believe maybe another Beaumont in that all of the $37,609,031 needs to be accounted for (See the home page and below).  We are not saying the situation is another Beaumont, but unless this money can be accounted for, it is another Beaumont. 

First let’s start with the area the city has designed as “blighted.”  The yellow area on this map RDA Map shows that nearly half the city was designated as “blighted.”  We are not sure what constitutes a “blighted” area, but the bigger the area the more property taxes will be collected by the RDA.  The reason for this is simple.  When an area is designated as a "blighted" area, the property base is frozen and the associated taxes are collected and used as before.  However, when the property values increase in these "blighted" areas, the associated property taxes that result from the increase in property values goes to the RDA. The property taxes associated with the frozen property values are used as before.  This is referred to as “tax incremental financing.”  This Wikipedia article explains how this works: https://en.wikipedia.org/wiki/Tax_increment_financing. 

With the property taxes now flowing into the RDA in future years, these can be used as security to issue bonds.  And this is exactly what was done by the current council. They issued the following bonds (from page 76-78 of the 6/30/2015 comprehensive financial report RDA Loans):

Jun-04	17,525,000
Dec-04	3,690,000
Jun-07	42,645,000
	63,860,000

RDAs have been around for a long time, but in 2012 the state closed all of them.  The assets, loans, and property taxes were turned over to successor agencies.  The property taxes that went to these RDAs should have been used for schools, but instead they were wasted in cases like Highland’s RDA.

According to the city’s Comprehensive Annual Financial Report for 2015 and 2011, the following amounts were collected in property taxes, and paid in principal and interest (RDA Taxes, Principal, and Interest):

For	RDA Tax	Debt Service
Jun 30	Increment	Principal	Interest
2005	4,702,074	160,000	917,715
2006	6,590,809	410,000	989,086
2007	8,964,742	425,000	980,351
2008	10,342,684	400,000	2,790,022
2009	10,484,840	975,000	2,913,593
2010	9,381,837	1,085,000	3,306,338
2011	8,208,111	7,151,420	3,061,165
2012	4,759,252	1,170,000	1,405,454
	63,434,349	11,776,420	16,363,724
	Taxes	63,434,349
	Principal	(11,776,420)
	Interest	(16,363,724)
		35,294,205

Highland collected $63,434,349 in taxes, paid $11,776,420 in principal, and paid $16,363,724 in interest. Collected property taxes exceeded principal and taxes by $35,294,205.

So now the question is what was purchased with all the $63,860,000?  Well per Chuck Dantuono, City Treasurer the following assets were purchased:

If this list was not so sad it would be laughable.  Of the $63,860,000 in bonds issued and the $35,294,205 in excess property taxes collected, this is ALL there to show for it! So lets do some very simple math.  If we collected, roughly, $63,860,000 in bond proceeds, collected $35,294,205 more in property taxes than paid in principal and interest, spent $3,092,164 for assets, and have per the 6/30/2011 Comprehensive Annual Financial Report (RDA Balance Sheet) $58,453,010 cash on hand, we need to account for $37,609,031 ($63,860,000 + $35,294,205 - $3,092,164 - $58,453,010).

What is interesting looking at the RDA's balance sheet is why did city loan money to the RDA when the RDA is flush with money?  What is worse, when the city tried to have the RDA repay the loan, the state disallowed this transfer: Loan Payment Returned.  Other unknown amounts is why did the RDA spend in 2011 $7,431,970 in "Community Development" (Statement Of Activities 6/30/2016), $2,217,792 in "administration costs", and $9,754,692 in "project costs" (RDA Government Funds Activities)?  We will get to the bottom of these amounts, and if we find fraud, we will report the city to appropriate agency.  We are waiting for numerous public records requests.

WE WILL GET THE 2012 - 2015 Successor Agency Financials.  As of 5/23/2016, the city has not provided them. Here is the RDA's 6/30/2011 complete financial statements: Complete RDA 6/30/2011 Financials.  What is interesting is the city does not publish neither the RDA nor Success Agency financials on the city's website.  They must be specially requested.

CONCLUSION

Even if there is no fraud found, the current council should be thrown out for massive and complete incompetence.  To put in debt its citizens this amount is treasonous, i.e. we were sold out.