City of Banning 2005 Water/Wastewater Bond SEC Complaint

City of Banning 2005 Water Wastewater Bond

In 2005 the City of Banning formed a Joint Powers Authority (JPA) to acquire a $42,735,000 Revenue Bond. $35,635,000 was acquired on behalf of the Banning Water Enterprise and $7,100,000 was acquired on behalf of the Banning Wastewater Enterprise.

After paying acquisition expenses and defeased the 1986 Certificate; the 2005 Bond allocated $32,000,000 to the Water Project Fund and $5,000,000 to the Wastewater Project Fund for construction of Infrastructure.

The City of Banning can not locate any Invoices or Documentation for the 2005 Bond, but did provide $31.4 Million in Water Project Requisitions and $2.28 Million in Wastewater Requisitions.

The Bond Trustee, U.S. Bank National Association in Los Angeles, transferred the bond money to the City of Banning instead of to the Contractors.

2016 Continuing Disclosure for the 2005 Bond reports no money remaining in the Project Fund and $5,100,000 of the Wastewater Bond Debt Outstanding. The Water portion of the Bond was Refinanced in 2015.

$5 Million Wastewater Project Fund:

Page 10 of Banning’s 2005 Wastewater Bond states that all of the $5 Million allocated to the Wastewater Project Fund would go to construction of a 1.5 MGD Tertiary Treatment Plant. [Recycled Water Plant] Page 30 further states that the City plans to have Recycled Water by 2010.

The 2005 Wastewater Requisitions available show all $2,284,362.50 listed was for ‘Design’. The 2010 and 2011 General Ledger shows money paid to Parsons Water & Infrastructure and to Albert A. Webb and Associates. The Recycled Water Facility was never built.

$32,000,000 Water Project Fund:

Banning’s 2005 Bond only specifically listed $18,445,000 in Infrastructure out of the $32,000,000 allocated to the Water Project Fund for the following uses:

$5,000,000: Briton Reservoir to 8MGD

$7,000,000: Three Water Transmission Lines

$3,000,000: Replace 20” Line in Banning Canyon

$1,920,000: Two Wells with the Beaumont-Cherry Valley Water District

$1,525,000: Two more Wells

The 2005 Bond page 7, Plan of Finance, states that $17 Million will be transferred to the City as an ‘upfront lease payment’. A Police Facility, Public Swimming Pool, a One-Stop Permitting Center, and Skate Park are mentioned, but itemized expenses were not provided.

The cost of the Infrastructure plus transferring $17 Million to the City adds up to $35.4 Million, which is $3.4 Million more than was allocated to the Water Project Fund.

In listing Sources of Water page 30 states: “..the City also plans to purchase 6,574 AFY of State Water Project from the San Gorgonio Pass Water Agency and an additional 5,780 AFY from the Department of Water Resources of the State of California ..”

The above is a fraudulent statement as there are not two sources of State water. The San Gorgonio Pass Water Agency is the Agency that acts as the Broker for the water that is allocated by the State Water Board.

The 2005 Water Requisitions available show $31,448,122.99 was allocated as follows:

$465,647.00: Reservoir Land Acquisition

$166,371.75: City Hall Air Conditioning

$13,840,248.72: Police Facility

$23,808.25: City Hall Security

$45,563.11: City Hall One-Stop

$1,430,376.80: Aquatics Center

$438,336.11: Community Center

$1,250,000.00: Lease Payment

Continuing Disclosure Statement for Banning 2005 Water/Wastewater Bond:

The main purpose of Continuing Disclosure Statements is to report the status of the construction for which the bond was acquired to ensure that the money is not misused.

The last Continuing Disclosure Statement released for the Banning 2005 Water/Wastewater Bond was produced by Willdan Financial Services on March 27, 2017. Willdan Financial Services is also named on Beaumont’s S.E.C. Subpoenas.

Because the Water portion of the 2005 Bond was refinanced/refunded in 2015 the Continuing Disclosure Statement for the 2005 Bond is only required to disclose for the Wastewater portion of the Bond.

The Continuing Disclosure Statement dated March 27, 2017, records no money remaining in the Wastewater Project Fund. Banning’s 2005 Bond Continuing Disclosure Statement neglects to disclose the status of the Facilities being constructed, which is the purpose of the Continuing Disclosure Statement.

Banning 2005 Water Wastewater Bond Audit Packet Contents:

Excerpts from Banning 2005 Bond

City of Banning’s Record of Requisitions (on Legal Paper)

Spreadsheet Summaries of Funds and Expenditures

Wastewater General Ledgers from 2010 and 2011 (Nothing Else Released)

Banning City Council Minutes dated June 14, 2005

Banning City Council Minutes dated November 22, 2005