All Star Dodge : “When pigs fly”

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06/02/11 – Let’s assume you have 2.5 million dollars laying around that you didn’t know what to do with. Would you spend your 2.5 million dollars  in exchange for *maybe* getting back $ 600,000 – ten years later ? No you wouldn’t.  Nobody would.   But wait, there’s one exception : the unaccountable Banning City Council  thinks this is a wonderful idea !

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A BRIEF HISTORY OF ALL STAR DODGE

After the dealership went out of business in 2009, Banning’s redevelopment agency decided to purchase the property for 1.2 million dollars – without an appraisal. The purchase was not properly noticed and was labeled an “emergency”. For those of you who have never heard of an “emergency” to spend $ 1.2 million, now you have.

The Riverside Grand Jury faulted the City for proceeding in this manner ( see Grand Jury Report) , yet the City Council’s unanimously responded that they would continue to buy property without appraisal as they see fit ( see response of City Council to Grand Jury).

The purchase price of 1.2 Million dollars was paid via a cash down payment of $ 182,000  (taken from redevelopment bond proceeds), with the remaining  $ 1,020,000 carried by the seller (due in 2016 ) with monthly payments of $  7,307.00.

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823-PAGE AGENDA PACKAGE

Banning must have learned this from the Federal Government :  whether it is the Bailout Legislation,  Health Care Reform or the Patriot Act, hundreds, sometimes even thousands of pages of legislative proposals are being produced, making it practically impossible for anyone to fully grasp the issues at hand. Banning has now followed suit, as it just provided the public with an unprecedented  *823*-page agenda package that was published Friday afternoon, May 20, for consideration on May 24, 2011 (view package).

If you read one page per minute, reading the entire package would have taken you almost 14 hours straight (13 hours and 43 minutes). There are not many people that can devote this amount of time over just a few days – and this includes the City Council members, none of which seemed too familiar with the package.

If the City Council was really looking out for the people of Banning, they would have adjourned the issue, so the public could digest this huge package. But – you guessed it – NONE OF THE CITY COUNCIL MEMBERS VOICED ANY CONCERN : all of them were determined to push the package through –  right then and  right there.

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SO WHAT’S THE DEAL ?

The deal on All Star Dodge was struck between Banning Ventures, LLC , represented by Martin Coyne,  and the City of Banning.  Coyne owns the “Beaumont Cycle” ATV/motorcycle dealership in Beaumont and will move his operation entirely to Banning.

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Mr. Coyne will be awarded the following :

• Free rent for 10 years
• $ 300,000 in cash  up front as a “forgivable loan” *. The cash is taken out of the Roosevelt Williams Public Park Fund (an issue which none of the council members seemed even remotely concerned about)
• an option  to purchase the property for zero dollars* between year 6 and year 10

* under the condition that the City receives a minimum of $ 600,000.00 in sales tax over a 10 year period ( equal to $ 60 million in sales over 10 years). Sales tax not actually achieved can be substituted by Coyne making a voluntary tax payment to the City.

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The City receives :

• potentially $ 60,000 per year for the General Fund, but without guarantees. Mr. Coyne is not committed to this payment.  (Coyne would have to sell three $ 5,500 vehicles every day of the year to meet this figure. Is this realistic or “pie in the sky” wishful thinking ?)

However, in case he fails to meet the sales tax requirements, Coyne will be charged 6 % interest on the $ 300,000, he will also be charged rent and will lose his option to “purchase” the property for free.

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CITY PUTS LIPSTICK ON THE PIG  –  WITH “ENRON” STYLE ACCOUNTING

It is an indisputable fact that the taxpayer has already lost about $ 900,000 on All Star Dodge to date. This is evidenced by a recent appraisal of the property (view), which shows a fair market value of $ 500,000 as of today. This represents  a loss to the taxpayer of $ 700,000 ( based on  a  1.2 Million purchase price in  2009). In addition, the taxpayer has also made payments for 22 months @  $ 7,307=  $ 160.754. Add to that the interest on the down payment amount of $ 182,000 @ 6 % = $ 21,000 , and you’re just short of a $ 900,000 loss.

But the City will not show you these numbers. They do not account for the losses already incurred. Instead, they are engaging in “Enron” Style accounting practices, where those losses are basically wiped off the balance sheet for the purpose of “selling” this  deal to the public. Using this false accounting, the City claims this deal will cost the taxpayer only “about 1 million dollars” total. The truth is, however, this will cost  over $ 2.5 million dollars and here is why :

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• $  160,754 interest already paid since 2009 to date on original seller financed     mortgage   (7,307 /  month   x 22 months = 160,754)
• $  182,000 cash down payment at purchase – (total acquisition cost was 1.2 million).
• $  131,700 interest on cash down payment of $ 182,000  for 12 years
• $  453,034 remaining  interest payment for 5 years on seller financing until seller’s loan is due in 2016 @  7,307/month
• $ 1,020,000 payoff existing financing in 2016 ( presumably with bond proceeds)
• $    306,000 interest on $ 1,020,000 from 2016 to 2021 @ 6 % =  306,000 (may be higher if interest rates rise)
• $    288,000 loss of rent revenue for 12 years at $ 2,000/month

$  2,541,488  =  TOTAL COST TO TAXPAYER

Time to recover investment  :  42 years  *

* based on proposed tax revenue of $ 60,000/year

.None of the City Council members that voted on this deal will be alive if and when it pays off. If everything goes well, the City will start making money after the year 2053.

Banning will get a return on investment   –   “WHEN PIGS FLY”

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THE DEAL MUST BE BAD IF MAYOR HANNA ASKS FOR APPLAUSE

Pathetic Banning Mayor Barbara Hanna has probably never read the agenda package, but tries to sell the public on this ultimate sucker deal, heralding it as a “success” . Watch as every Council member joins in !  Clearly, Banning’s  City Council is made up of compulsive losers – 100 %.   Watch :

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UNFAIR TO ALL OTHER BANNING BUSINESSES

Mr. Coyne got THE sweetheart deal of all sweetheart deals!  – It goes without saying that giving away the farm with deals like this one is not only devastating to the taxpayer, but is also fundamentally unfair to all other businesses. Many of them struggle every day to stay in business, others had to close their doors simply because they were not able to get a sweetheart deal like the one Mr. Coyne secured for himself.

How was Mr. Coyne able to sway the City Council to give him such a wonderful deal nobody else has ever been able to obtain ?

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ZERO NET JOB GAIN

Mr. Coyne will close his business in Beaumont and move it to Banning. Aside from temporary construction jobs for improvements, Mr. Coyne will most likely move his existing staff to Banning, therewith creating no new jobs for Banning any time soon.

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BYE-BYE REDEVELOPMENT –  THANK YOU JERRY BROWN !

One may have varied opinions about the merits of Governor Jerry Brown, but he’s got this one right : Brown sees the abuses in Redevelopment – just like here in Banning – and wants to do away with Redevelopment altogether.

Within the political culture of most Redevelopment Agencies  there is a notion that redevelopment money somehow is not real (taxpayer) money. For some reason, these agencies spend redevelopment funds as if they were some kind of Monopoly tokens. With no measure of success or accountability, the agencies use the money for risky gambles ( like the one described in this article ) and without any concern for a reasonable return on investment and –as this example shows –  with effective payback times of over 40 years.

Redevelopment has turned into a culture of ruthless taxpayer plunder and is nothing more than a Ponzi scheme, or better yet, an act of financial terrorism directed towards the taxpayer. The story is always the same :  money gets thrown around like there is no tomorrow , yet no long term jobs are created nor is there nearly enough tax revenue generated to cover the cost of funds. For an in-depth discussion of this subject, please read : “Redevelopment : The Unknown Government”.

In the future, taxpayers will no longer have to suffer the kind of abuses that Redevelopment Agencies, like Banning, perpetrate on its citizens, day in and day out. THANK YOU, JERRY BROWN !

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WHAT’S THE ALTERNATIVE ?

Many people wonder : what is the alternative to these massive subsidies. The alternative is to let the free market do the bidding. The best way to deal with this issue would have been to auction off the Dodge property ( or better yet, never to purchase it in the first place). If the price was low enough, a highest and best use will always occur.

But instead of letting this happen naturally, the City interfered : they overpaid for the All Star Dodge property during a time it was clear that we had entered a downward spiral in real estate.

The seller is now laughing all the way to the bank : he is said to live on a yacht in Newport Beach and owns many other properties.

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CHAIRMAN DON ROBINSON VIOLATES GOVERNMENT CODE

Last but not least, the behavior of Chairman Don Robinson during this episode deserves scrutiny. When the All Star Dodge agenda item is called,  Robinson removes himself abruptly without giving an explanation. It appears that he has a conflict of interest, yet his behavior seemed to indicate that he feels the public has no right to know what his reason is.  Watch :

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Say what ?  Robinson had a legal obligation to publicly explain his conflict of interest . He was required to “ publicly identify the financial interest that gives rise to the conflict of interest or potential conflict of interest in detail sufficient to be understood by the public, ….” ( Sec. 87105, a,  (1)  Government Code).

But Robinson did not explain anything. He apparently thinks that the Government Code applies to everyone else but him –  and just gets up and leaves. As we have pointed out before, Don Robinson has a long history of disrespecting the law, all across the board : in 2009, he voted to buy All Star Dodge despite then having the identical conflict of interest he has today, (his pet grooming business is located right across the street ).

Previously , the Banning Informer had exposed Don Robinson for being delinquent on his property taxes to the tune of over $ 20,000 ( story), for having bounced checks to the Banning Utility – without any consequences (story), for supporting an unregistered charity and attending events at the Banning “White House“, despite knowing full well that the “White House” operates without a business license (story) . This piece of scum even lied under oath when he falsely testified to having been trained as a Navy Seal (story) !  People with a track record like Don Robinson do not belong in public office.

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CONCLUSION

Is Banning so broke that they can no longer afford calculators ? Or is the City Council giving away the farm just because they can ?  The latest “deal” on All Star Dodge targets the taxpayer in ways never seen before – and nobody’s watching the store. For the taxpayer, the return on investment will come in 2053, the year “WHEN PIGS FLY“ !