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Explaining Project Phoenix

Munoz, McCleary and Warne Helping the Council Understand Project Phoenix

This Project Phoenix Bond Scam thing has consumed a huge hunk of time over the last couple of years and disrupted lives of the City Council, Staff, A. Patrick Munoz, and the Bloggers here at CactusThorns.

The present Council took a solvent, and  well healed city with a reserve of several Million dollars in banks on a 2 year game of 3-Card Monty. Redevelopment was a $1.5 Million dollar a year slush fund that had been contributing to puffed up salaries, lavish junkets for Council and Staff and a huge war chest that like any government account became a feed trough for lawyers and Consultants. At the end of the journey, the City is $30 Million Dollars Plus in debt, will loose the tax money that would have gone to the cities coffers to the repayment of the unneeded and unwanted RDA Bonds for at least the next 9 years and possibly 30 years. Along with this loss we end up with nothing in the way of the town being a damned bit better or a single family living in a better house or apartment. We end with nothing but debt and bad feelings. The single dumbest stunt this city has ever pulled.

The original Project Phoenix was a modest $2 Million dollar face lift of the 4-Corners Area that was talked about since 2008.  New Curbs, a Paseo or two, and some free money for storefront face lifts.  While it had its questionable purposes it was in essence a do-able  project with money that the the RDA had in its accounts. Then Came the dissolution of Redevelopment Agencies by the State. Then the RDA floated Two Bonds with the idea that would lock up the RDA funds from the state and force the State to pay for the Bonds and the Project.  The little project turned into a huge project that included Eminent Domain of 6 City Blocks and a huge Theater Building/ Community Center that could have cost as much as $15 Million.

In 2010 Jerry Brown was Re-Elected  as Governor of the State of California. The  State was billions in debt and Bankruptcy was breathing down the neck of the legislature. Brown pushed his campaign promise to do away with the Redevelopment Scam that had yearly bled the State of more than $5 Billion Dollars a year in the way of being required to back fill those dollars to the other agencies that were affected by cities hoarding that money for themselves. Cities, Twentynine Palms included hoarded that money from Schools, Hospitals,  Cemeteries, Fire Departments and County Service Areas. In effect in our case, the City was skimming off $1.5 Million right off the top from our property taxes to pay bloated salaries and play God with the rest of the money, whilst the State was forced by law to back-fill what they skimmed and make whole the other agencies cheated from their share of funds.

After a failed attempt to close down RDAs outright, Brown and Legislature came up with AB 1x 26 and AB 1x 27. 26 was to close down RDAs and 27 was an alternative plan to keep RDA going in a modified form. Many Cities at the advice of Rutan and Tucker, who happen to be our city’s lawyers decided to Sue the State and petitioned the State Supreme Court. The Court heard the Arguments and on December 29th 2011 the Supreme Court said that it was Constitutional to dissolve RDAs and unconstitutional to come up with  a modified system as proposed in AB 1x 27.

Here is where it gets dicey and almost surreal. The Supreme Court ruled that the State could shut down RDAs and that it was illegal for RDAs to float bonds,  transfer property and assets to their associated Cities and  to enter into contracts. Depending on the issue that date to stop all activity could be December 29, 2011, January 1, 2011, or another date where additional legislation went into effect of June 28, 2011.

Not only does the City/Successor Agency have to contend with The California Department of Finance but the California Controllers Office. We all  have been following the Department of Finance and the City of Twentynine Palms where they closed the door to Project Phoenix but now the demand of the Controller has even more devastating demands. Demands and orders from the State in direct conflict to the misguided advice of by both A. Patrick Munoz of Rutan and Tucker and  Matt McCleary of RSG.

Three times City Manager Warne, City Attorney A. Patrick Munoz and RSG Matt McCleary appealed. Three times the Department of Finance decision was that since no construction contracts were signed before June 28, 2011,  Project Phoenix was not a Obligation to be paid out of Tax Dollars. In other words, the State refuses to fund the project. Not only does the State refuse to Fund the project but the City/Successor Agency can not use the proceeds from the recently floated Bonds to pay for the project either. Three times the city appealed, three times the city was told no. Three times the City Manager hid the information from the Council.

Further the Department of Finance has told the City/Successor Agency that they can not expect the State to pay over a million dollars in salaries and city expenses out of the Subject Tax increment. (here and here) Again the State has told these guys THREE times no. No we will only pay you $250,000 a year for overhead to wind down the RDA’s business. That is it. The City Manager hid this information from the Council.

On April 20, 2012 the California State Controller sent a letter to the City of Twentynine Palms demanding the following:

“If your city, county or agency, directly or indirectly, received any assets from a redevelopment agency after Jan. 1, 2011, your city, county, or agency hereby is ordered to immediately reverse the transfer and return the applicable assets to the successor agency of the relevant redevelopment agency.”…

This is the next shoe to drop, all that property and money transferred to the  city must be returned to the RDA account and given to the County Auditor/Controller for disbursement to the other  effected taxing agencies. This adds up to additional Millions.

Our little city put itself up for being made the example of and the example of small town stupidity and blind arrogance is what fellow California Cities are seeing.

The city manager wants to sue the State. Here is what is going to happen. The moment A. Patrick Munoz files a Lawsuit the Department of Finance and the Controller will want to protect the funds in contention (29 Palms Property Tax money) and put those funds into a protected account for safe keeping until the Court decides the issues of the case. This might last for years all the while our share of the property tax piles up into an account with the State Treasurer that the city can not spend. How long do you think we can survive in that scenario?

The Council needs a new Attorney and Consultants. Like the Emperor and his new clothes these guys have put the Council and the City in an embarrassing public position.

The City Council needs to cut its losses or We the People Will cut our losses for them.





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