Note: This is the first in a series of several related posts
Sunday, November 16, 2104 – 12:00 p.m.
Unsettling information pretaining to onging civil litigation involving the 2008 sale of bonds related to the construction of four large aircraft maintenance hangars at Victoville’s Southern California Logistics Airport (SCLA) has started to go public.
The pending litigation, filed by the U.S. Securities and Exchange Commission (SEC), following a three and one-half year investigation, alleges Victorville officials, specifically Assistant City Manager Keith Metzler, and outside consultant, KND Affiliates, inflated the value of collateral securing the bonds, which in-turn affected, tax increment estimates. The complaint also alleges KND Affiliates misappropriated funds for its own use without Authority approval.
The stated collateral was valued at $65.4 million. The Assessed valuation was later reduced to $28 million.
Ironically, no one, including the SEC, appears to have ever taken into account a temporary reduction in assessed value under what is known as California Proposition 8.
Voter approved Proposition 8 allows for the unlimited temporary reduction of assessed value of real property due to a percipitous drop in market value. Conversely, when the market value moves higher, which it has, the temporary reduction is removed.
The aforementioned civil complaint, available below, was brought just sixteen days prior to the expiration of the five-year statute of limitations for SEC jurisdiction.
One of the most scathing pieces of information coming to light says that city officials, in particular Former City Manager Jon Roberts and current City Attorney Andre de Bortnowsky, tried to prevent outside advisors from informing the city council in closed session about an impending default related to the Authority’s purchase of equipment for a proposed electric power generation project at SCLA.
A default that did in fact occur, costing the city a $50 million equipment deposit.
InlandPolitics.com has also learned of the existence of emails between the Roberts, de Bortnowsky and KND Affiliates, which reportedly pressure KND not to disclose the aforementioned pending default to Authority Directors.
It’s further alleged that de Bortnowsky did not provide the San Bernardino County Assessor with corporate tenant lease provisions regarding the payment of leasehold interest property taxes. In addition, it’s also believed that de Bortnowsky did not disclose to the Assessor the existence of two contracts, approved by the Authority, stating the value of the Hangar Project to be $65.1 million and $70 million respectively.
In 2008, Roberts left his position in Victorville. In 2009, he was hired as the city manager of Steamboat Springs, Colorado, where he served until his resignation in October 2012.
de Bortnowsky, a partner in the Calabasas law firm Green de Bortnowsky LLP, remains employed by Victorville.
Through a series of omissions and mistatements Authority officials apper to have adopted a strategy to hang KND Affiliates out in the wind, in an effort to take the heat off themselves. Now those omissions are coming to light.
Victorville has refused to honor an indemnification agreement with KND. KND has initiated legal proceedings for breach of contract against the city in San Bernardino Superior Court. Those proceedings are currently stayed pending the outcome of the SEC action.
To read the SEC Complaint, click the folowing link: U.S. Securities and Exchange Commission v. City of Victorville at al