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California: Red Light Camera Company Gives City a Ticket
Grand Terrace, California forced to pay Australian red light camera company $72,204 to avoid late fees.

Grand Terrace, California
The Grand Terrace, California city council on Tuesday reluctantly voted to pay Redflex Traffic Systems $72,203.75 after the Australian company threatened to impose a $27,500 late fee on the city if it did not pay up immediately. Redflex operates the red light camera program at two intersections, and as of July 1 the company had mailed out 4283 fines worth $446 each. While Grand Terrace officials expected that the system would be a money-maker, the program to date has only enriched the county, the state, the courts and Redflex, which insisted on the additional cash payment.

"After the meeting between you and members of the Redflex Traffic Systems Team on August 8, 2010, to discuss demand of payment, we acknowledge those figures you have produced as revenues received from the San Bernardino County Court," Redflex Account Executive Jack Weaver wrote in an August 31 letter to the city's finance director. "...your city is delinquent in your payments in the amount of $73,570.32. Further, you are reminded that Exhibit D [of the contract] calls for payment to be made within 30 days, and the revenues due are subject to a late fee if payment is not received within 60 days."

When Grand Terrace entered into the contract with Redflex, the last thing officials expected to do was to make payments. The city has a "cost neutrality" arrangement designed to ensure the city could only make a profit or break even from ticketing operations.

"If the city does not collect enough cumulative fine revenue from red light camera tickets, then the city is not responsible for the difference between the Redflex invoiced amount and the fine revenue received," Finance Director Bernie Simon wrote in a memo to the council. "However, the city would pay Redflex the red light ticket fine revenue received. The Redflex contract states that the city does not owe more than what is collected."

Grand Terrace is only entitled to one-third of the ticket revenue with the state, San Bernardino County and the courts splitting the remaining two-thirds. Grand Terrace "owes" Redflex $12,513 per month out of its third, but the city's average share of the fines is only $7156 (the most ever collected in a month was $11,485 in December 2008). That means Redflex pockets 100 percent of the city's share of ticket revenue generated.

The delinquency problem arose because the city had "computational difficulties" in determining the amount of ticket revenue generated. Last year, the city made payments of $116,072.39 and $52,000 to Redflex from the same error. Officials had hoped to find ways to increase revenue from ticketing.

"Staff will then discuss with Redflex on how to make up the deficit from future vehicle fine revenues received from the court system," Simon wrote in an August 25, 2009 memo.

State law prohibits payments to red light camera contractors according to the number of fines generated or revenue collected. In 2008, the appellate division of the Orange County Superior Court ruled that cost neutral arrangements specifically violated this statute (view ruling). The contract between Grand Terrace and Redflex runs until April 2012.

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