Draft report done; findings expected out in June
April 25, 2012 11:37 AM
Brooke Edwards Staggs, City Editor

VICTORVILLE • Three years after the Daily Press first reported that the San Bernardino County Grand Jury was investigating the city of Victorville, sources confirm a draft report of the citizen group’s findings is complete and will likely be released within the next two months.

City Manager Doug Robertson said he was recently given an opportunity to review the draft report. He was then asked to sign a confidentiality form on April 16, prohibiting him from discussing any of the report’s contents.

“I believe they will be issuing a report on June 30,” Robertson said via email, citing the date the grand jury’s annual report is typically released, “however, that determination is up to them.”

Melonee Vartanian, assistant to the grand jury, said by phone Wednesday she couldn’t comment on whether there will be a report on Victorville at all, or whether it might come as a special interim report before the June 30 deadline.

“I’m happy that there is a report and I am hopeful that the grand jury makes it public,” Mayor Ryan McEachron said, anxious to put the lengthy investigation to rest.

The City Council was not given a chance to review the draft, the mayor said, with that decision at the discretion of the investigative group.

“I have no idea what’s in that report. I really don’t think that anyone on the Council has any clue,” McEachron said, brushing aside what he called “rumors and innuendo” that are swirling around City Hall about the gravity of the findings.

Faulty financial reporting, handshake deals, questionable campaign contributions and generous contracts were among the issues raised during the investigation, generating concern over whether Victorville’s ongoing financial woes are the result of something more nefarious than the city’s decision to gamble on risky projects that fell apart amid a sour economy.

“Are there things that have gone in Victorville that shouldn’t have gone on?” McEachron said, posing the question he hopes the grand jury report will settle once and for all. “If they found something, they need to put it out there and make it public and do what is required of them by law. Then the city will do what it has to do to comply with those issues.”

Victorville Council Member Angela Valles

Wednesday, April 25, 2012 – 10:45 a.m.

8th Congressional District candidate and Angela Valles (R-Victorville) has finally reported her fundraising results.

For the entire 2011-12 election cycle Valles has raised $32,584 and spent all but $175 of that amount.

The is currently sixth out of a field of twelve candidates and is being heavily outspent.

In all honesty, Valles should have spent a decent amount of time in her current elected office of council member before attempting to move on.

April 24, 2012 5:41 PM
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Brooke Edwards Staggs, City Editor

VICTORVILLE • The class action lawsuit over Victorville’s red light cameras has been moved from state to federal court, with the city motioning to dismiss the case while a local attorney gears up for a potentially precedent-setting battle.

The venue change came at the request of Redflex Traffic Systems, the private company that operates 10 cameras in Victorville and is a codefendant in the case alongside the city.

In April 13 court documents requesting the switch, Redflex attorneys argue the case deals with a federal law, since the lawsuit claims Victorville’s red light camera system violates due process rights.

The camera company also argued a federal perspective is fitting since most of the plaintiffs in the class action suit are from the Victorville area while Redflex is based in Arizona and Delaware.

“It seems the city’s ties to Redflex are so strong that Redflex’s lawyers somehow got the city to waive their right to stay in state court,” Robert Conaway, the Barstow attorney representing Victorville resident Michael Curran and everyone who’s been cited by the cameras here, wrote in a statement on the switch. “Hopefully the move was not to escape scrutiny by citizens in the Victor Valley who are the victims of what Mr. Curran has alleged in an unfair and illegal agreement and business practice.”

The claim, which was filed in San Bernardino County Superior Court in February, states the camera system “violates the long standing legal rule that for an officer to cite a citizen for an infraction, it must be done ‘In the Presence’ of the officer.” And, since employees with Redflex are the ones first viewing the alleged violations, it states testimony from local deputies should be inadmissible as evidence.

Conaway is hoping to recover more than $9 million in damages on behalf of 4,300 people who’ve received tickets from Victorville’s red light cameras since they were installed in 2008. He also hopes to recover up to three times that amount in punitive damages from Redflex, or up to $28.5 million.

Fred Burnside, attorney for Redflex with Davis Wright Tremaine in Los Angeles, declined to discuss the active litigation.

Harvey Wimer III, the Riverside-based attorney with Graves & King who’s representing Victorville in the suit, didn’t respond to requests for comment.

Victorville’s motion to dismiss the case is scheduled to be heard in U.S District Court on May 21.

Brooke Edwards Staggs may be reached at (760) 955-5358 or at bedwards@VVDailyPress.com.

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Employees of water district say city reneging on promises made to fund vested coverage

April 19, 2012 9:04 AM
Natasha Lindstrom, Staff Writer

VICTORVILLE • Current city employees and retired employees of the water district absorbed by Victorville in 2007 are suing the city to protect their benefits, arguing the city is reneging on promises made to fund their vested coverage.

The six plaintiffs charge that Victorville is not standing by agreements it made to some 49 employees who’d worked for the former Victor Valley Water District.

The complaint, filed in the U.S. District Court for the Central District of California on April 9, alleges that Victorville and its water district “threaten to completely disregard their mandatory duty under binding public entity resolutions and contracts issued by multiple agencies.”

A May 2007 agreement between the VVWD Board of Directors and Victorville City Council stated that workers would continue to receive the same level of benefits they had always had, which for some included lifetime coverage for themselves and spouses. A July 2007 resolution by San Bernardino County’s Local Agency Formation Commission stated that Victorville would either retain the employees’ existing benefits or offer them a one-time payout of $10,000 to waive the benefits.

Nearly five years later, the city hasn’t established an irrevocable trust to fund those retirement benefits. Some retirees have been told their benefits will be cut off unless they switch to the city’s reduced coverage plan.

“Plaintiffs are at risk of losing retiree health benefits on which they and their families already or will soon rely, or alternatively being forced to spend hundreds of additional dollars per month to maintain this level of coverage, rendering them unable to cover other critical expenses,” the April 9 complaint states.

However, city officials say the lawsuit appears to be without merit.

“The city believes it has acted in accordance with the LAFCO action and until the complaint is reviewed by legal counsel will have no further comment,” City Manager Doug Robertson said via email Wednesday.

Until Tuesday, the City Council hadn’t approved doling out the $10,000 buyouts — something Robertson told council members “should have” happened in 2007.

The process of offering the buyouts and creating a trust stalled after the city found out the retirement liability was nearly double the $5 million city officials had been told to expect, Robertson said at Tuesday’s council meeting.

“No one has any final resolution on where it ended up or why it ultimately sort of stopped or faded way, other than perhaps other priorities came up,” Robertson said.

The City Council took action Tuesday to offer the $10,000 buyout to seven willing candidates, along with redoing an actuarial study to identify the current liability of the remaining employees. That agenda item was solely about the buyout program and did not address the lawsuit.

During the item’s discussion, Councilman Jim Kennedy raised concerns about the original VVWD resolution for stating that the retirement liability would be paid for out of asset replacement funds. Kennedy — who was president of VVWD’s board at the time — said he didn’t think anyone paid close enough attention to that provision.

“I’m no lawyer, but my guess was that was an illegal decision,” Kennedy said during Tuesday’s meeting. “We had no authority to use those kinds of funds for that purpose. … I don’t think that decision can stand the way we made it.”

“Councilman Kennedy, I think ‘illegal’ is too strong a word for it,” Robertson quickly responded.

The lawsuit was not agendized on Tuesday’s meeting because staff received the legal documents after posting the agenda and there was no immediate action required, according to Robertson. City Council will receive the documents in closed session after a review by legal counsel.

The 20-page complaint cites six plaintiffs: DeZwart, Jonnie Maddox, Timothy Whelan and Linda Whelan, who retired from the Victor Valley Water District before it merged into Victorville; and Wade L. Pieper and Steve Borrowman, who are now employed by the Victorville Water District.

The plaintiffs’ attorney, James P. Stoneman of Claremont, did not return a Wednesday call for comment.

Natasha Lindstrom may be reached at (760) 951-6232 or at NLindstrom@VVDailyPress.com.

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Valles

Thursday, April 19, 2012 – 09:45 a.m.

Victorville City Council Member Angela Valles (R-Victorville), candidate for the 8th Congressional District, is the only candidate not to have filed a campaign finance report with the Federal Election Commission (FEC).

The deadline for her filing was April 14.

Valles is spending money though.

Dozens of 4′ x 8′ campaign signs have sprouted up across the district.

Valles and her colleague, Victorville Mayor Ryan McEachron, will likely split-up their city’s vote.

But neither are well known outside their city.

McEachron had to lend money to himself in order to make his own campaign even viable.

It’ll be interesting to see what Valles comes up with.

Council also to view changes to agenda policy
April 17, 2012 8:54 AM
From Staff Reports

VICTORVILLE • The two-year Securities and Exchange Commission investigation, twice-delayed water service hikes and proposed changes to a controversial policy about how issues end up on the agenda to begin with are all before the Victorville City Council Tuesday night.

During the closed session meeting starting at 5 p.m., before the regular session, the council will discuss the ongoing SEC investigation. The agency has been looking into Victorville’s bond expenditures since summer 2010, recently issuing a new subpoena and conducting interviews with city staff and officials.

During the regular session, city staff is recommending an increase in charges related to water service. Proposals include raising meter installation fees by 4 percent to 14 percent and raising administrative fees for such things as service calls or returned payments by $1 or $2 each.

The proposed hikes have been on the agenda twice already but were continued both times.

Councilman Mike Rothschild asked that the group reconsider a policy that requires a council majority to agendize issues for discussion or vote, with Rothschild asking that they make an exception for the mayor.

The controversial policy was approved in January 2011, after Councilwoman Angela Valles stepped into office and began requesting to agendize a slew of issues she had with the way the city was being run.

A split council voted to officially approve a policy drafted on the spot during the previous meeting that requires a majority vote for any one council member to get an item agendized for future discussion.

Valles and two residents spoke against the move. They argued each elected official should be able to discuss items brought to their attention by constituents.

Councilman Jim Kennedy responded that America was founded on a “majority rules” concept. He said it protects any one person from being able to dictate the city agenda, with the rest of the council insisting it was nothing personal against Valles.

At the April 3 meeting, Rothschild asked to allow the mayor — currently Ryan McEachron — to add items to the agenda without receiving support from the majority of the City Council.

These issues are up for discussion during the meeting that starts at 7 p.m. Tuesday in Victorville City Hall at 14343 Civic Drive. The full agenda and live streaming video are available at the city’s website, www.ci.victorville.ca.us.

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Two and a half months ago, they lost their battle against the state to keep redevelopment agencies alive.

Now, in a complicated, untested process that’s likely to take years, local government officials are members of a select group serving on new boards charged with overseeing the agencies’ demise.

Winding down the RDAs is no small task — it involves unloading blighted properties and paying off hundreds of millions of dollars in debt — and redevelopment experts are raising concerns over how the process will play out. The state controller estimates the 425 now-defunct agencies will pass on nearly $30 billion of debt to their successors. That’s on top of an estimated $5 billion to $20 billion worth of redevelopment agency property that’ll need to be sold over the next several years.

“There’s a time pressure, and then there’s a technical pressure,” said Larry Kosmont, CEO of Kosmont Companies, which specializes in public-private real estate transactions and public finance. “I think much of it will not be well reviewed because it’s almost an impossible task.”

Dating back some six decades, California’s redevelopment program once garnered the state accolades for being a leader in what’s known as Tax Increment Financing. By selling bonds backed by future property taxes, the agencies freed up funds to revitalize blighted areas, generate affordable housing and attract private investment by offering tenants various incentives and infrastructure improvements.

Redevelopment dollars helped sweeten the deal that put a SuperTarget along Interstate 15 in Hesperia, a Dr Pepper Snapple bottling plant at Southern California Logistics Airport in Victorville and Jess Ranch Marketplace in Apple Valley.

But critics, including Gov. Jerry Brown, accused the agencies of investing in too many for-profit ventures without enough public benefit and doing a lousy job of tracking their accomplishments — arguments that ultimately led the state Legislature to ax the agencies altogether as of Feb. 1.

The plan is to re-route more than $1.7 billion in tax increment that was going into RDAs back into cities and schools. It’s going to take a lot of untangling and prioritizing of debt obligations, assets and interfund loans to get there.

Today marks one of the first deadlines in the process, when successor agencies are supposed to turn in to the state their “Recognized Obligation Payment Schedule.” The goal is to determine which debts must be paid and which obligations can be dropped. The state Department of Finance can veto any local decisions it doesn’t agree with.

Hesperia’s successor agency must shore up revenue to repay about $807.4 million in total outstanding debt, with $32.86 million due this fiscal year, according to its ROPS. San Bernardino County, with a relatively small RDA compared to the 28 others within the county, owes $214.38 million, with $14.13 million due this fiscal year, according to county spokesman David Wert, who’s also serving on the oversight boards for Apple Valley and Redlands.

Apple Valley, Adelanto, Barstow, Hesperia and Victorville have all become successor agencies for their RDAs, and they’re in various stages of appointing the required oversight boards comprised of city, school, county, community college and special district representatives.

The composition of the boards themselves could pose the problem of what Kosmont refers to as the “dysfunctional family factor,” as agencies like school districts and cities often have a history of adversarial relations and competing interests. One might want to sell off a property right away to get their portion of revenue back, even if the best value for the overall community might be to wait, Kosmont said.

Several local officials said they have faith in their newly formed boards and the commitment of their members to learn the ropes quickly.

But many continue to fault Assembly Bill 1×26 — the law that axed RDAs — for leaving too much ambiguity about the next steps. About nine pieces of “cleanup” legislation are now making their way through the Legislature in an attempt to address some of the initial law’s unclear areas and unintended consequences.

“The way the law is written it’s vague, and in some cases contradictory. Even departments like the state Department of Finance are having difficulty understanding exactly what their perimeters are,” Apple Valley Assistant Town Manager Frank Robinson said. “It seems like every day there’s something new coming out of the DOF or they’re changing their direction a little bit. It’s an evolution that’s taking place right now.”

Natasha Lindstrom may be reached at (760) 951-6232 or at NLindstrom@VVDailyPress.com.

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VICTORVILLE • A company at Southern California Logistics Airport has landed a competitive deal to service Boeing’s new 787 Dreamliners for the next 10 years.

Pacific Aerospace Resources & Technologies LLC, or PART, will be hiring between 35 and 50 new workers by the end of 2012, according to company CEO Johan Claasen, with more jobs expected over the life of the agreement.

The two companies celebrated the partnership during a ceremony at SCLA on Wednesday afternoon, complete with elected dignitaries and 787-shaped cake.

“We are grateful for this unique and exciting opportunity to work with Boeing and its customers,” Claasen said in a statement. “We look forward to a continuous expansion of our business, new employment opportunities for the city of Victorville as well as enhanced professional opportunities for our management and staff.”

PART has joined Boeing’s GoldCare program, which means it will compete with other pre-selected maintenance companies to perform scheduled and unscheduled work at SCLA on Boeing’s 787 Dreamliner, the long anticipated 747-8 and all Boeing aircraft included in the Boeing Aircraft Transition Services program, preparing planes for new ownership. PART and the other third-party companies will interact electronically with Boeing’s GoldCare Operations Center in Tukwila, Wash., which manages the program for its customers on a 24/7 basis.

“We have delivered seven bids to Boeing and were successful on two, three are still under consideration, one is postponed to a later date and we lost one,” Claasen said in an email.

In the beginning, Claasen said Boeing will perform the work as PART employees are trained to service the advanced aircraft.

“Boeing training for selected PART personnel is a substantial advantage for PART,” Claasen said. “We consider the B787 training as a high priority and will select our best and most promising staff for this training.”

They will then phase in having PART employees work under supervision from Boeing until the company’s workers are qualified to service the planes on their own, though Claasen said he believes there will always be a partnership between the two companies.

Each 787 will belong to a specific airline, so Claasen said the exact work needed will vary based on airline preference. But in general, he said PART workers will initially assist with work on interiors and communication and entertainment systems.

“Much of this work is intellectual property for each airline and we shall only know when the aircraft arrives,” Claasen said.

After about five years, Claasen said PART employees will begin assisting with actual maintenance work on the aircraft.

Maintenance or modifications can take anywhere from 14 to 90 days, Claasen said, with two shifts of workers and potential 24/7 schedules as business picks up.

The company is looking forward to hiring Airframe and Powerplant or A&P certified mechanics coming out of the new program at Victor Valley College, Claasen said.

Boeing has been testing engines and aircraft out of SCLA for a decade, including the much-delayed 787. The first planes were finally delivered for commercial service to All Nippon Airways in September, with Japan Airlines receiving the second set of Dreamliners on Monday.

PART has been operating at SCLA for eight years. The company has three hangars totaling 190,000 square feet, a 24,000-square-foot shop and seven acres of concrete aircraft storage space

Brooke Edwards Staggs may be reached at (760) 955-5358 or at bedwards@VVDailyPress.com.

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A private investor who recently bought 233 abandoned housing lots in four Victor Valley subdivisions plans to sit on them until the housing market picks up, according to a broker involved in the deal.

The unfinished housing lots purchased by the Southern California investor were owned and developed by Hesperia’s Frontier Homes, said Randy Coe, senior marketing consultant of the Land Advisors Organization brokerage firm. Construction halted after the housing market collapsed and a bank foreclosed on the properties.

The bank sold parts of the following subdivisions in February’s multimillion-dollar transaction (Coe declined to disclose investor names, banks and exact dollar amounts):

• Barcelona Heights II near Maple and Topaz avenues in Hesperia;

• Copper Crest near Escondido Avenue and Sultana Street in Hesperia;

• Autumn Glen IV and V near Nisqualli Road and Third Avenue in Victorville;

• Adelanto-5 in Adelanto; and

• Falcon Point II (131 lots) in Lancaster.

In a separate recent transaction brokered by Coe, another Southern California private investor bought 142 lots at the Tuscany III subdivision near Mojave Drive and Onyx Road.

During the past four years, investors have come into the High Desert, slowly buying up housing subdivisions as prices plummeted. A Newport Beach investor, for example, has purchased nearly 1,000 lots in Hesperia, according to Russ Blewett, Hesperia mayor and a former housing developer.

In February 2006, an average home in the desert sold for $327,561, according to data compiled by Larry Trombley of Century 21 Rose Realty. This year during the same month, a home averaged $116,812.

Blewett said it’s good news that speculators are purchasing cheap housing lots from banks. The investors will maintain the lots and sell them to homebuilders for profit when the market starts recovering, he said.

“I wouldn’t let banks own anything,” Blewett said. “Frankly, they don’t know what to do with it.”

There are few opportunities left in the High Desert for investors to purchase undervalued vacant subdivisions, Coe said

Tomoya Shimura may be reached at (760) 955-5368 or TShimura@VVDailyPress.com. Follow Tomoya on Facebook at facebook.com/ShimuraTomoya.

Get complete stories every day with the “exactly as printed” Daily Press E-edition, only $5 per month! Click here to try it free for 7 days. To subscribe to the Daily Press in print or online, call (760) 241-7755, 1-800-553-2006 or click here.

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McEachron

March 19, 2012 4:32 PM
Brooke Edwards Staggs, City Editor

VICTORVILLE • Mayor Ryan McEachron on Monday refunded a $1,000 contribution to his campaign for the 8th Congressional District after learning the donation wasn’t allowed under federal election code.

On Oct. 28, McEachron transferred $1,000 from his “Committee to Elect Ryan McEachron” political action committee — established to raise funds for his run for Victorville City Council — to the campaign fund for his Congressional run, according to records on file with the Federal Election Commission.

FEC code states: “A candidate’s authorized (federal) committee may not accept funds or assets transferred from a committee established by the same candidate for a nonfederal election campaign.”

Candidates can refund any leftover money and coordinate with contributors to redonate those funds to the federal campaign, but the law states the candidate can’t simply transfer the funds over.

McEachron said his treasurer, David Bauer with The Wayne Johnson Agency in Sacramento, had told him the donation was allowed.

Bauer said by phone Monday that he’d referenced an election code that says state committees can transfer up to $1,000 to federal campaigns if the donations were from individual contributors and not corporations. He didn’t realize until contacted by the Daily Press on Monday that the law didn’t cover transfers from local campaign committees launched by the candidate.

Local resident Bob Squillace filed a complaint with the FEC a couple weeks ago after spotting the improper contribution.

McEachron raised a total of $22,400 for his Congressional campaign in 2011, according to the FEC. He’s the only candidate in that race who listed any funds for that calendar year.

Of the $21,400 in donations from individuals, $10,000 was from people associated with ISU Insurance, including McEachron’s parents. McEachron runs a local office for ISU.

McEachron also received $4,800 in combined donations from the owners of Burrtec Waste, the firm with which Victorville contracts for trash services. He received $2,500 from Prime Healthcare manager Laxman Reddy and $2,000 from attorneys with the City of Victorville’s law firm, Green, De Bortnowsky & Quintanilla.

He also received $1,000 each from Apple Valley attorney Michael Davis and from Michelle Gapen, who is dating city attorney Andre de Bortnowsky and whose mother was once married to former Victorville City Manager Jim Cox.

Candidates have to file updated campaign disclosure reports by April 15 for the first quarter of 2012

Brooke Edwards Staggs may be reached at (760) 955-5358 or at bedwards@VVDailyPress.com.

Get complete stories every day with the “exactly as printed” Daily Press E-edition, only $5 per month! Click here to try it free for 7 days. To subscribe to the Daily Press in print or online, call (760) 241-7755, 1-800-553-2006 or click here.

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Financial reviews, water service fees, wastewater plant sale on tonight’s agenda
March 19, 2012 5:24 PM
Brooke Edwards Staggs, City Editor

VICTORVILLE • A bleak audit, price hikes for some water services and discussion about selling the city’s wastewater treatment plant are all on the agenda for Victorville’s City Council Tuesday night.

For the third year in a row, an independent audit of Victorville’s finances came with a warning about whether the city will be able to stay afloat.

Citing recurring losses, a lack of cash and negative fund balances, auditing firm Mayer Hoffman McCann expressed “substantial doubt about the city’s ability to continue as a going concern.”

The city expects to have just $543,779 now in its general fund reserve, used to cover any shortfalls or unexpected expenses that pop up throughout the year. Accepted practice is to carry at least 10 percent of the general fund operating budget in reserve, which for Victorville would be more than $4.8 million.

An audit of the city’s Southern California Logistics Airport Authority came with the same warning. While SCLAA’s aviation operations are finally posting positive revenues, the authority overall lost another $5.7 million over the last fiscal year for a total deficit of $100 million.

The city’s municipal utility fund is also upside-down, carrying a deficit of $75 million.

Victorville has $87 million in outstanding interfund loans and hundreds of millions of dollars in bond debt, with the auditor noting the city’s recent default on a bond payment and ongoing investigations by the Securities and Exchange Commission and San Bernardino County Grand Jury as concerns.

Along with discussing the audits, the City Council Tuesday night will vote to extend a letter of credit on one of its $83 million bonds, taken out in 2007 to build the failed Foxborough power plant. Since that project doesn’t exist, Victorville hasn’t been able to secure permanent financing. Victorville is hoping a pending $52 million settlement with the power plant’s designer, Carter & Burgess, will improve the city’s credit standing.

To help right some of the city’s cash issues, during closed session the council will discuss its goal to sell Victorville’s wastewater treatment plant to the regional Victor Valley Wastewater Reclamation Authority. The deal has been on VVWRA’s agenda a number of times over the past year, though the two parties have reportedly been far apart in price.

The City Council will also vote on staff’s recommendation to increase charges related to water service, such as hiking meter installation fees by between 4 and 14 percent and raising administrative fees for such things as service calls or returned payments by $1 or $2 each.

These issues are up for discussion during the meeting that starts at 7 p.m. Tuesday in Victorville City Hall, at 14343 Civic Drive. The full agenda and live streaming video are available at the city’s website, www.ci.victorville.ca.us

Brooke Edwards Staggs may be reached at (760) 955-5358 or at bedwards@VVDailyPress.com.

Get complete stories every day with the “exactly as printed” Daily Press E-edition, only $5 per month! Click here to try it free for 7 days. To subscribe to the Daily Press in print or online, call (760) 241-7755, 1-800-553-2006 or click here.

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Agency investigates relationship between broker, Inland Energy VP
March 18, 2012 10:17 AM
Brooke Edwards Staggs

Editor’s Note:

This is part one in a two-part series looking at the SEC’s investigation into the city of Victorville. See Monday’s Daily Press for part two, looking at whether bond funds were used to make campaign contributions.

VICTORVILLE • As part of its two-year probe into Victorville, the Securities and Exchange Commission is investigating whether there were hidden financial ties between the man who led the charge on the city’s largest energy venture and the man who’s brokered more than $400 million in taxpayer-supported debt on behalf of the city.

If so, a court judgment states Jeff Kinsell and his brokerage firm, Kinsell, Newcomb & De Dios, might have violated federal securities law, which could subject the firm to fines and other disciplinary action.

The SEC on Jan. 26 subpoenaed personal bank records for Inland Energy Vice President Thomas Barnett, who was paid hundreds of thousands of dollars out of city bond funds for work on local energy projects that are now shelved or defunct.

Barnett asked to “quash” the order, arguing it was too broad and that it invaded his privacy. But Judge Marc Goldman with the U.S. District Court’s Central District denied Barnett’s request Jan. 5, stating in his judgment that the bank records are “relevant” to a “legitimate law enforcement inquiry.”

“I have no comment on this matter nor will I in the future,” Barnett said via email Thursday.

Kinsell began serving as broker for Victorville’s bonds in 2003, at which time he said he hired Barnett to work for a joint powers authority his firm was launching. After Newport Beach-based Inland Energy decided to develop its own massive power plant in Victorville with help from the city, Kinsell said Barnett began working for that firm and the two started splitting the cost of Barnett’s salary.

Barnett stayed on Kinsell’s payroll so he could keep his health benefits and pension plan, Kinsell said. But by about 2006, Kinsell said Inland Energy was reimbursing Kinsell, Newcomb & De Dios for 100 percent of Barnett’s salary.

Meanwhile, city records show Victorville was paying Barnett and other Inland Energy employees using the very bond funds Kinsell had helped secure.

The city of Victorville paid Inland Energy more than $13 million between August 2005 and March 2009 under an open-ended contract, according to records obtained by the Daily Press. Some $11.2 million went toward development of the shelved Victorville 2 power plant, with roughly 40 percent of that total used to pay Inland Energy staff.

Victorville paid Barnett $346,250 in 2008 alone for working an average of 29 hours per week, primarily in his role as project manager on VV2.

According to a February 2010 email to the city’s finance department from Doug Robertson, who’s now Victorville’s city manager, those payments to Inland were made using bonds brokered by Kinsell for improvements at Southern California Logistics Airport — even though the power plant is located just outside airport property.

The potential problem is that federal securities law says brokers can’t offer cash, gifts or services such as employment in order to make a deal happen. And if there’s any financial connection with a party that benefits from a bond deal, that relationship has to be disclosed to investors.

Now court records show the SEC is looking into whether Kinsell should have disclosed his ties to Barnett, who ultimately benefited from the staggering amount of bond debt that Victorville took on.

The Daily Press has reported that in 2007, the city used proceeds from bonds sold by Kinsell to cover a $50 million downpayment on equipment for VV2. The move was a gamble, city officials later admitted, since Victorville hadn’t yet secured power purchase agreements and financing to bring that project to fruition.

Barnett touted the project at the time, telling the Daily Press that the risks were relatively small and that there was an escape clause. But by 2010, Victorville defaulted on the equipment payment and had to walk away from its $50 million deposit, with VV2 now nothing more than a set of permits and plans.

Though Barnett ultimately benefited from the bonds being issued, Kinsell said in an emailed statement that his relationship with Barnett “wasn’t appropriate to disclose in bond documents” because Kinsell’s firm wasn’t benefiting financially from the project or paying Barnett’s salary. He said he did disclose the issue to a number of city officials, including former City Manager Jon Roberts and City Attorney Andre de Bortnowsky, who served as co-disclosure counsel on the bonds.

De Bortnowsky said via email Friday that he wasn’t aware of any relationship between Kinsell and Barnett that should’ve been disclosed to investors.

De Bortnowsky monitored meetings where the City Council approved payments to Inland Energy that were recorded against the SCLA Authority bond fund account. But he said “unequivocally” that he wasn’t aware of Barnett having benefited from bond proceeds beyond any share of the underwriter’s fee Kinsell might have shared with Barnett.

Kinsell said his firm “will continue to fully cooperate with the SEC in its investigation.”

Another city official called to testify
February 21, 2012 1:13 PM
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Brooke Edwards Staggs, City Editor

VICTORVILLE • The Securities and Exchange Commission is subpoenaing more information from Victorville and has interviewed another city official as part of its two-year investigation into how bond money was spent.

“This request includes an update to the information requested previously, essentially any new responsive documents, as well as additional items making it more extensive,” City Manager Doug Robertson said via email Tuesday. “It will be a burden on staff time but we will respond appropriately.”

The request was dated Feb. 9 with a due date of Thursday, Robertson said.

“We are working with the SEC on additional time to complete the request,” he said, with the issue scheduled for closed session talks during Tuesday night’s City Council meeting.

Since the SEC has characterized its investigation as a “non-public, fact-finding inquiry,” Robertson declined to identify which city official had been interviewed by the federal agency.

Victorville received its first subpoena from the SEC in mid-August 2010, calling for 77,000 pages of documentation on how the city had spent some $480 million in bond offerings.

Several more subpoenas for testimony and information followed, as the city continued taking steps to clean up some questionable bond expenditures. In September 2010, for example, Victorville formalized a 2005 loan where bonds intended to fund improvements at Southern California Logistics Airport were instead used to buy high-priced land for a city library that was never built.

To read entire story, click here.

By Mike Cruz, The (San Bernardino County) Sun
Posted: 02/20/2012 12:54:49 PM PST

A class-action lawsuit against Victorville and its red-light camera program alleges vehicle owners’ due-process rights were violated and seeks millions of dollars in damages.

Barstow lawyer Robert Conaway filed the lawsuit on Feb. 14 in Victorville Superior Court on behalf of his client, Michael Curran, and others who received red-light tickets in Victorville from Phoenix-based Redflex Traffic Systems, according to court records.

The suit alleges misdemeanors and infractions have always been violations that must have occurred in an officer’s presence and not making that a requirement violates the California Penal Code.

Declarations that appear in red-light camera tickets from the Redflex-Victorville program are subscribed under “information and belief,” which the lawsuit alleges is akin to hearsay, not a police officer’s personal knowledge.

“The problem here is there’s a disconnect,” Conaway said Monday by telephone. “You can’t have two standards of evidence.”

Conaway said his Curran, a Victorville resident, got a ticket after a Redflex computer signed the name of the officer, Barbara Hill, to a “Notice of Traffic Violation,” despite the fact that Hill “did not contemporaneously observe the alleged infraction in California nor on an Arizona computer screen….”

Included with the ticket was a Redflex computer-generated proof of service, signed by a Redflex computer operator, and which was likely bulk-mailed on Oct. 4, 2011, the lawsuit states.

Red-light tickets raise other issues, too, according to the suit. Photographs and videos are not authenticated by an officer’s testimony and defendants can’t confront their accuser in court, the lawsuit alleges.

Neither Victorville nor a Redflex representative returned phone calls seeking comment. The city was closed Monday for the Presidents Day holiday.

To read entire story, click here.

February 20, 2012 8:48 AM
Brooke Edwards Staggs, City Editor

VICTORVILLE • With permits set to expire next year and more than $76 million invested into plans for Victorville’s second power plant, the city could finally strike a deal Tuesday night for a private company to take over the $1.2 billion project.

QGEN, a Massachusetts-based company that develops and operates utility-scale hybrid power plants around the world, has had exclusive rights for months to negotiate a purchase of the shelved Victorville 2 plant near Southern California Logistics Airport.

“We continue to talk to them,” Mayor Ryan McEachron said Friday, unable to go into further detail since the deal will be discussed Tuesday behind closed doors.

The California Energy Commission’s license for the project expires on July 16, 2013 — five years after it was first approved, according to CEC spokeswoman Sandy Louey.

To maintain the permit, the city has to either request an extension or submit preconstruction documents and secure approval to start construction before that date.

There is no filing fee for a petition requesting the deadline extension, but Louey said it should be done at least six months in advance to give the CEC enough time to review the request, write an analysis and make a decision.

Although the permit itself isn’t pricey or timeconsuming to extend, Thomas Barnett, executive vice president of Inland Energy, said that assumes his agency and the city can provide the CEC with a good reason for the delay and demonstrate the project will move forward “within a reasonable time period.”

However, there are other issues to worry about.

An air quality permit for the project has expired, Barnett said, with some analysis required to renew it.

The project also lost its place in line to connect to the state’s energy grid, and Barnett said it will require “considerable analysis and payment of fees” to get one back.

Lastly, with a new developer onboard, the plant’s design is likely to change — which will require changes to its permits. How long those changes will take and how much they will cost depends on how substantial the design changes are.

Talks with both NRG and Beowulf to build VV2 fell through, reportedly in part because of a contract that guarantees Inland Energy an estimated $5 million in annual revenue over the life of the plant for the company’s role in helping launch the project.

Then in fall 2010, Victorville entertained offers from seven companies interested in purchasing the lots to develop solar farms. However, the city ended up rejecting all of the bids shortly after news broke that Newport Beach-based Inland Energy had been tapped as the leading contender.

Victorville spent $10.2 million buying 300 acres north of SCLA for the project and another $15.9 million for third parties to secure permitting and perform engineering work, according to City Manager Doug Robertson. More than $11 million of that total went to Inland Energy, which signed a contract with Victorville in 2005 to develop what was then described as a $450 million hybrid power plant. The plant was supposed to start pumping 560 megawatts of power into the state energy grid by summer 2010, producing an estimated $6 million to $8 million in annual revenue for the city.

The city also lost $50 million it gave General Electric in 2007 as a deposit on turbines for the plant. Victorville was unable to pay off the balance and was forced to walk away from the deposit in 2010.

Victorville will be paying for that loss for another 30 to 40 years, bond documents show — at a total cost, under current interest terms, of roughly $193 million. Those bonds are currently in default, after the city missed a payment in December.

With Victorville hurting for cash, a deal to sell the 300 acres and project plans to QGEN is back on the closed session agenda Tuesday. It will be discussed before the City Council meeting, with time for public comment at 5 p.m. in City Hall at 14343 Civic Drive

Brooke Edwards Staggs may be reached at             (760) 955-5358       or at bedwards@VVDailyPress.com.

Get complete stories every day with the “exactly as printed” Daily Press E-edition, only $5 per month! Click here to try it free for 7 days. To subscribe to the Daily Press in print or online, call             (760) 241-7755      ,             1-800-553-2006       or click here.

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Agreement delays decisions on furlough days, benefits cuts
January 24, 2012 3:29 PM
Natasha Lindstrom, Staff Writer

VICTORVILLE • Three months after declaring an impasse, the Victor Valley Union High School District and its teachers union have struck a tentative agreement. (Click here to read the agreemment.)

But rather than resolve contentious compensation issues, the proposed deal essentially delays the hard decisions until negotiations resume in March for the 2012-13 school year.

District officials had been pushing to issue teachers eight furlough days, or unpaid days off, in the name of ensuring the district’s long-term financial stability. Union officials had protested the furloughs for slashing teacher pay by 4 to 7 percent and argued the district could instead pull from its healthy reserves.

Monday marked the third negotiation session led by an impartial state mediator, with several dozen teachers wearing bright red union shirts and signs like “Treat teachers fairly” while picketing outside all three meetings.

Under the tentative agreement reached Monday, existing teacher contract terms will remain in effect until at least June 30. The district could have opted to advance through the impasse process in an attempt to ultimately force furloughs on the teachers.

“It was very nice to see the district was working real well with the negotiating team,” VVTA President Jose Berrios said by phone Tuesday. “It was a real good meeting. It was a good positive step.”

The agreement states that salary and health and welfare benefits are “automatic reopeners” this spring when negotiations resume. It also requires both sides to “sunshine,” or disclose at a public meeting, their initial proposals for the 2012-13 school year by March 1.

“The District would like to thank VVTA and its negotiating team for their professionalism at the bargaining table and looks forward to productive bargaining session, commencing in March 2012,” states a district memo to all certificated staff from Steven Desist, assistant superintendent of human resources.

Desist did not return a Tuesday call for comment.

It’ll be up to union members to determine their next specific proposals, Berrios said, though it doesn’t seem likely they’ll be eager to swallow the concessions the district has wanted. Teachers are also waiting to see if Gov. Jerry Brown’s tax initiative will pass and improve the district’s fiscal situation.

“We still feel that there’s enough in the reserve that we can survive,” Berrios said.

The union membership now has 10 days to ratify the agreement with a vote before sending it to the district board for adoption.

If green-lighted by the union, the deal means it won’t be necessary for the district to take the next step to resolve an impasse called fact-finding, which would have involved a panel listening to arguments for both sides at an evidentiary hearing

Natasha Lindstrom may be reached at (760) 951-6232 or at NLindstrom@VVDailyPress.com.

Get complete stories every day with the “exactly as printed” Daily Press E-edition, only $5 per month! Click here to try it free for 7 days. To subscribe to the Daily Press in print or online, call (760) 241-7755, 1-800-553-2006 or click here

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January 19, 2012 12:43 PM
Brooke Edwards Staggs, City Editor

VICTORVILLE • A recent default on debt payments triggered one of the top credit rating agencies to downgrade $51 million in Southern California Logistics Airport Authority bonds another two notches, with Moody’s Investor Services predicting the airport won’t catch up on debt payments until 2029.

Moody’s now rates the SCLAA bonds at a B3 on the agency’s scale of Aaa1 to C, with the junk bonds considered “speculative” and a “high credit risk” for investors (click here to read more about the SCLAA rating). That low rating can interfere with the city’s ability to seek new bonds or refinance its existing troubled debt.

“The B3 rating reflects the current defaulted status of the bonds, the likelihood of continuing future defaults and ultimate bondholders recovery estimated at 95 percent,” the New York-based rating agency said in a statement released Tuesday.

Victorville’s airport authority in December defaulted on a series of bonds taken out in 2007 and 2008. SCLAA missed a $535,000 payment after what Moody’s called a “defect” and “an apparent editing error” in the bond indenture prevented reserve funds from being used to cover principal.

Moody’s last dropped its SCLAA bond rating to a B1 in April, citing the fact that property tax values securing the debt had continued to plummet.

Assuming a 1 percent annual growth in property tax values if the economy improves, Moody’s estimates SCLAA revenues won’t cover debt payments again until 2022 and that it’ll be another seven years after that before the authority is current on payments.

Victorville officials said they could have made the payment due Dec. 1 by borrowing funds if the state hadn’t axed all redevelopment agencies. That legislation also contributed to downgrading the airport authority bonds, Moody’s stated, since it isn’t clear as to whether Victorville will be able to use future tax revenues to help right the defaulted debt.

With the uncertainty stemming from the RDA legislation, Moody’s on Tuesday also downgraded by one notch some $11.6 billion in debt owed on all California tax allocation bonds rated below Baa2 (click here to read more about the state downgrade here). However, that move didn’t affect the SCLAA bonds, since they were already rated below that level.

The airport bonds remain on review for possible further downgrade

Brooke Edwards Staggs may be reached at (760) 955-5358 or at bedwards@VVDailyPress.com.

Get complete stories every day with the “exactly as printed” Daily Press E-edition, only $5 per month! Click here to try it free for 7 days. To subscribe to the Daily Press in print or online, call (760) 241-7755, (800) 553-2006 or click here.

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January 18, 2012 11:58 AM
Brooke Edwards Staggs

VICTORVILLE • Less than 12 hours after his contract was approved by the City Council, Victorville received notice that the man chosen to serve as deputy city manager overseeing finances had opted not to take the position.

“My family had serious concerns about the impact of the long commute on the family,” Valentine “Andy” Okoro, who has served as Norco’s deputy city manager, said in an email sent to the city Wednesday morning. “I had hoped that we (would) come to a resolution at the end. Unfortunately, that has not been the case.”

Okoro was chosen after a recruitment process to serve as deputy city manager in charge of administrative services. The contract included in Tuesday’s agenda called for Okoro to start at an annual salary of $80,153.

Councilwoman Angela Valles cast the sole vote against the new hire, stating she feels the city is already too management-heavy and financially strapped.

“He was well aware of financial challenges we are facing and was ready to take those on challenges,” City Manager Doug Robertson said in an email, attributing Okoro’s decision solely to the relocation issue.

Victorville hasn’t had a finance director since a round of layoffs two years ago. Robertson, who was serving as deputy city manager at that time, then took on overseeing the finance department. Since Robertson was promoted, Mayor Ryan McEachron had said it’s always been the city’s intention to fill that key position.

“I do not have another candidate I believe could fill the appropriate role at this time and will not be recommending another recruitment,” Robertson said. “I have some contingency plans that I prepared in the event we were unable to find a suitable candidate.”

Robertson said he wasn’t prepared to release details on those plans until he’d had a chance to discuss them with staff members who’ll be affected by the changes

Brooke Edwards Staggs may be reached at (760) 955-5358 or at bedwards@VVDailyPress.com.

Get complete stories every day with the “exactly as printed” Daily Press E-edition, only $5 per month! Click here to try it free for 7 days. To subscribe to the Daily Press in print or online, call (760) 241-7755, (800) 553-2006 or click here.

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Airport, city separate legal entities but closely bound together
January 15, 2012 6:00 AM
Brooke Edwards Staggs

VICTORVILLE • With the city’s airport authority behind on debt payments, residents are left wondering whether basic city services such as public safety and road maintenance might pay the price.

“Could that possibly happen? I’m sure that’s possible,” Mayor Ryan McEachron said. “But there’s too many things that still have to work themselves out, which makes it difficult to say.”

In late December, Southern California Logistics Airport Authority received notice from Bank of New York Mellon that it had defaulted on two of its bonds after missing a $535,000 debt payment. Then Dec. 29, the California Supreme Court upheld a decision to dissolve redevelopment agencies, casting doubt on SCLAA’s future.

“None of this is related to the city or city finances,” City Manager Doug Robertson said via email. “They are separate legal entities.”

Councilman Jim Kennedy has been adamant about that point, taking to his public Facebook page to emphasize the distinction.

“These bonds (about $320M) are an obligation of the Airport authority, not the City of Victorville,” Kennedy posted on his wall. “They are secured only by the property tax increment flowing from the developments in the Airport project area.”

While that’s true, outside experts say the city will likely be affected by SCLAA’s woes given the interconnectivity of the two.

“I think for the airport authority it’s going to be a problem, but it’ll be a problem for the city, too,” said Robert Doty, president of American Governmental Financial Services Co., a Sacramento firm that provides municipal bond advice to local governments. Doty said “people aren’t going to forget” how entangled funds between the airport and the city have become, predicting taxpayers will “pay a price for several years” if Victorville needs to finance a new road or other city project.

SCLAA was formed in 1997 as a joint powers authority between the city of Victorville and its redevelopment agency.

For the first 14 years of the authority’s existence, Robertson said Victorville’s general fund — used to support basic services such as police, fire and roads — was also used to subsidize SCLA and keep the airport operating.

Victorville is under investigation by the Securities and Exchange Commission, which is eyeing how Victorville used airport bond funds for city projects.

To read entire story, click here.

January 08, 2012 3:14 PM
Brooke Edwards Staggs, City Editor

VICTORVILLE • Even before the state axed redevelopment agencies to bolster its budget, the viability of Victorville’s RDA was in question, according to an annual audit released this week.

A $5.3 million deficit in assets and millions more in interfund loans had caused the city’s RDA to have liquidity problems, which the auditor stated “raise substantial doubt about the agency’s ability to continue as a going concern.”

Victorville established its first redevelopment area 31 years ago to rehabilitate and develop some 1,686 acres along Bear Valley Road and Hook Boulevard. The city added a smaller RDA in 1998 to clean up the blighted Old Town area, using the additional tax revenue to buy up property and improve aesthetics.

In September and October of 2009, the city loaned a total of $11.8 million from its redevelopment agency to its Southern California Logistics Airport Authority. The funds were needed for activities at the airport and to make debt service on bonds taken out for improvements there.

With SCLAA carrying a $101 million deficit and recently hit with default notices for missing debt payments, the airport authority doesn’t appear to have means to pay back those loans in the foreseeable future. Still, City Manager Doug Robertson said Victorville had intended to temporarily loan another $7.5 million from its RDA to SCLAA to make debt service Dec. 1, but held off due to state legislation pending at the time.

Last summer, Gov. Jerry Brown decided to eliminate all RDAs and redirect their tax revenue to support schools and local services. On Dec. 29, the California Supreme Court up held that decision.

When asked Thursday how Victorville’s RDA could have loaned the money to cover SCLAA’s debt given the liquidity issues outlined in the audit, Robertson said the money actually would have been pulled from a pooled city account and paid back by April as new tax revenue came in.

To read entire story, click here.

Joe Nelson, Staff Writer
Posted: 01/07/2012 02:42:29 PM PST

Victorville City Manager Doug Robertson said the city’s November default on bond payments totaling $10.6 million has not prompted an inquiry from a federal agency that has been investigating the city’s bond debt for the last two years.

In an e-mail, Robertson said investigators from the Securities and Exchange Commission (SEC) has not made any inquiries about the defaults thus far, but he is expecting they will.

“We don’t believe we’ve done anything wrong so our biggest concern is the timely completion of their inquiry so we can move on,” Robertson said.

The city received a notice from the Bank of New York Mellon, dated Dec. 16, indicating it had failed to pay a total of $535,000 in principal payments that were due on Dec. 1. The bank, which holds the city’s reserve funds in trust, said reserve funds could not be used to make payments on the principal.

The city was, however, able to use the reserve funds to cover interest on the bonds totaling $1.3 million.

According to the notice, the bank could demand that the principal of all issued bonds and accrued interest be paid immediately.

In 2010, the SEC launched an investigation into the city’s bond debt and how it spent the money, and the investigation has now entered its third year.

On Dec. 1, debt service payments for seven bonds the Southern California Logistics Airport Authority, or SCLAA, took out came due. The SCLAA, of which Robertson serves as executive director, is the redevelopment agency that secures funding and oversees development of the 2,500-acre airport, formerly the George Air Force Base, which the city envisions as its future economic engine that will drive growth.

The bonds taken out by the SCLAA are secured by redevelopment tax increments, not city funds, and the state’s efforts to dissolve redevelopment agencies has thwarted Victorville’s ability to use its redevelopment funds to help pay its bond debt, according to a letter Robertson sent to bondholders dated Nov. 21.

Robertson believes the SCLAA will be able to make the payment once Victor Valley Economic Development Authority (VVEDA) property tax distributions are made, which typically occur in April.

Even under legislation eliminating redevelopment agencies, VVEDA will be entitled to receive property tax distributions for purposes of making debt service payments, Robertson said.

To read entire story, click here.

January 03, 2012 1:50 PM
Brooke Edwards Staggs, City Editor

VICTORVILLE • An attorney is seeking to recover more than $9 million in damages on behalf of 4,300 people who’ve received tickets from Victorville’s red light cameras, claiming the system is “unfair, unlawful, fraudulent and deceptive.”

Robert Conaway, a criminal defense attorney from Barstow, sent notice in early December to the city of Victorville and Redflex Traffic Systems that he intends to file a class action lawsuit unless changes are made with the way red light cameras are handled here. He updated that notice in late December, tacking on the calculated damages.

Conaway is seeking to recover more than $2 million for each of the $490 fines paid by convicted residents, $6 million for resulting higher insurance premiums, $215,000 for legal fees paid by those who tried to fight the tickets and $860,000 to cover lost wages for those forced to miss work to attend arraignments or trials.

Along with actual damages, Conaway states he hopes to recover up to three times that amount in punitive damages from Redflex, or up to $28.5 million.

The thrust of Conaway’s argument against the cameras is that they violate civil rights because the accused don’t have the opportunity to confront their accuser, with a private, for-profit company in charge of first processing the evidence against alleged red light runners.

Conaway said he hasn’t heard any response back from either the city or Redflex since he sent his initial claim dated Dec. 9. If the two parties don’t agree within 30 days from receiving that notice to stop issuing tickets or assign San Bernardino County Sheriff’s deputies to watch the live video feed and issue tickets as the violations occur, Conaway said he intends to file the class action lawsuit.

A spokesman for Redflex and the city’s attorney have both previously said they don’t believe there are grounds for a lawsuit.

Victorville’s next City Council meeting — where the group can discuss the claim in closed session and potentially vote on whether to reject or agree to Conaway’s demands — is scheduled for Jan. 17

Brooke Edwards Staggs may be reached at (760) 955-5358 or at bedwards@VVDailyPress.com.

Get complete stories every day with the “exactly as printed” Daily Press E-edition, only $5 per month! Click here to try it free for 7 days. To subscribe to the Daily Press in print or online, call (760) 241-7755, 1-800-553-2006 or click here.

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Monday, January 2, 2012- 1045 a.m.

The fight over the future of Victor Valley Community Hospital (VVCH) has some interesting twists.

Dr. Prem Reddy, who operates Prime Healthcare Services, wants the bankrupt facility as part of his network of highly-profitable hospitals.

However, California Attorney General Kamala Harris wants a different owner because of Prime’s history of dumping less-profitable forms of insurance coverage, which has caused community access issues.

The hospital chain is also under scrutiny for alleged billing and patient care issues.

The hubbub comes after a tentative deal with KPC Global, owned by Dr. Kali P. Chaudhuri fell through over alleged problems with VVCH’s financials.

Chaudhuri and Reddy, according to sources, don’t care much for each other.

AG Harris has steadfastly refused to sign-off on the Prime acquisition of VVCH.

A legal requirement in California.

But this fact hasn’t stopped Reddy or the VVCH Board of Directors.

Prime has been the beneficiary of management contracts approved by the VVCH board, while at the same time being permitted to loan the facility funds to continue operations.

All with the backing of the U.S. Bankruptcy Court and a local Superior Court Judge.

In other words Reddy has been allowed a foothold.

What’s even more interesting is who sits on the VVCH board.

Assistant District Attorney Michael Fermin, the number two man in the DA operation,  is currently on the hospital board. Fermin’s family has been a part of VVCH for years.

Fermin has recently enjoyed a meteoric rise to his current position by vaulting from a Supervising Deputy District Attorney to Assistant DA in the blink of an eye.

Reddy has been a staunch financial backer of District Attorney Michael Ramos. And Fermin, who wants to be the next DA, knows this.

In another development, the latest news coming from sources at VVCH involves former San Bernardino County chief executive Mark Uffer.

Uffer who just stepped down from his role at Colorado River Medical Center in Needles is, according to sources, slated to join VVCH.

Uffer is to be charged with prepping the facility for a potential sale transfer.

The move brings Uffer closer to his home in Highland.

BY KIMBERLY PIERCEALL
STAFF WRITER
kpierceall@pe.com

Published: 30 December 2011 07:21 PM

Leaders with three Inland groups overhauling former military bases say legislation that would dissolve the state’s redevelopment agencies doesn’t apply to them.

The legislation was upheld by the state’s Supreme Court on Thursday.

The Inland Valley Development Agency, which is overseeing the reuse of San Bernardino’s Norton Air Force Base into San Bernardino International Airport, is not a redevelopment agency, officials said.

It just has the powers of one given to it through special state legislation, said interim executive director A.J. Wilson.

Victorville Councilman Mike Rothschild, who is among city leaders managing the conversion of George Air Force Base into the Southern California Logistics Airport, agreed.

And the executive director of the March Joint Powers Authority, Lori Stone, said work to revive former March Air Force Base land in Riverside County shouldn’t be considered the same as other redevelopment projects because the former federal land had been exempt from property taxes until the agency took it over.

Based on legal opinions Wilson said he has seen, the law that would dissolve redevelopment agencies only applies to those created by cities and counties. The IVDA wasn’t, he said.

In 1990, state legislation allowed the creation of the IVDA to manage a redevelopment area extending three miles from Norton’s boundaries, calling it a “redevelopment agency” throughout the statute in the state’s Redevelopment Law Section (number 33320.5 before it was renumbered to 33492.40).

The same legislation includes the development of an agency to oversee the reuse of George Air Force Base and an 8-mile area surrounding it, now the Victor Valley Economic Development Authority.

“It is the intent of the Legislature and the commitment of the local authorities to ensure that the existing airfields at both Norton Air Force Base and George Air Force Base are protected, developed, and enhanced as civil aviation public use airports,” the section states. “Therefore, the joint powers authorities authorized by this section should make every reasonable effort to guarantee that these vital airport facilities are retained for general aviation use now and into the future.”

Still, the IVDA voted to sell a flurry of bonds — more than $150 million worth — earlier this year to assure projects such as improvements to the agency’s new headquarters and surrounding road improvements would be paid for if the legislation was upheld.

“Right now, if anything, our greater problem for our projects would be when we were partnering with one of our member’s redevelopment agencies,” Wilson said. He added that he wasn’t aware of any current projects that would be adversely affected because of that, “not where we’re so far in that it’s going to blow up something.”

San Bernardino County Supervisor Neil Derry, who is among several local elected leaders to sit on the agency’s governing board, said that even if the agency fights the ruling legally or with legislation to argue for exemption for military reuse, he didn’t expect the agency to win.

“I don’t think that’s going to hold. I think this is going to impact us as well as Victorville,” he said.

To read entire story, click here.

Southern California Logistics Airport seen in Victorville Thursday, July 28, 2005./STAFF PHOTO

A technical payment mistake hits the city and the Southern California Logistics Airport
BY KIMBERLY PIERCEALL
STAFF WRITER
kpierceall@pe.com
Published: 28 December 2011 08:29 PM

Victorville has defaulted on two of several municipal bonds used to make improvements to the Southern California Logistics Airport, according to letters from the Bank of New York Mellon.

The city tried to pay $535,000 in principal payments by Dec. 1 with money held in a reserve account, an action the bank doesn’t allow which triggered the default, according to the bank’s letters.

The airport is the result of public and private efforts to redevelop 8,500 acres of the former George Air Force Base. Victorville owns the airport and the City Council oversees it as the Southern California Logistics Airport Authority.

The two bonds, issued in 2007 and 2008, are valued at $55.3 million not counting interest.

As first reported by the Daily Press in Victorville, a majority of bondholders could demand that the entire amount still owed — $173 million — be paid immediately. Other alternatives include litigation or amending the bond agreements, according to the letters.

To read entire story, click here.

December 27, 2011 6:15 PM
Brooke Edwards Staggs, City Editor

VICTORVILLE • The city has defaulted on two bonds after trying to use restricted funds for a $535,000 payment due Dec. 1, according to a notice from the Bank of New York Mellon.

As a result, if a majority of bondholders agree, the bank notice states they could demand full and immediate payment of the outstanding balance on $173 million in bonds taken out in 2007 and 2008 for improvements at Southern California Logistics Airport.

The bondholders could also sue for payment, or agree to allow Victorville to use the restricted funds — the more likely option, since the cash-strapped city clearly doesn’t have millions of dollars at its disposal.

Victorville owed a total of $10.6 million in interest and principal Dec. 1 for eight bonds its Southern California Logistics Airport Authority took out between 2005 and 2008. However, the city came up $7.5 million short, and officials said they were going to rely on funds deposited into a reserve account held by a trustee — the Bank of New York Mellon, in the case of the 2007 and 2008 bonds — to temporarily cover the shortfall.

But in a notice dated Dec. 16, the bank said SCLAA can’t use reserve funds to make principal payments, according to the agreement the city signed with bondholders when it issued the debt. As a result, the principal payment did not go through and Victorville defaulted on the bonds.

With SCLAA $101 million in the hole and tax revenues dwindling due to plummeting property values, the city in the past has relied on interfund borrowing to make the debt payments. However, this year redevelopment funds are frozen as the state works to dissolve those agencies.

The way Victorville spent its bond funds is also the focus of a lengthy investigation by the Securities and Exchange Commission.

The city first got a subpoena from the SEC in August 2010 demanding information about bond expenditures. City officials were slated for more interviews with the federal agency in November, and no report has been issued to date.

City Hall is closed until Jan. 2 and Mayor Ryan McEachron couldn’t be reached Tuesday for comment on the default.

Historically, SmartMoney.com reports fewer than one 1 percent of municipal bonds go into default — though many experts are predicting that percentage will balloon in 2012

Brooke Edwards Staggs may be reached at (760) 955-5358 or at bedwards@VVDailyPress.com.

Get complete stories every day with the “exactly as printed” Daily Press E-edition, only $5 per month! Click here to try it free for 7 days. To subscribe to the Daily Press in print or online, call (760) 241-7755, (800) 553-2006 or click here.

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Atty. Gen. Kamala D. Harris in September killed the proposed takeover of a struggling Victorville hospital by a nonprofit arm of Prime Healthcare Corp., saying it was “not in the public interest.” (Paui Sakuma, Associated Press / December 13, 2011)

By Michael Hiltzik
December 28, 2011

In September, state Atty. Gen. Kamala D. Harris killed the proposed takeover of a struggling Victorville hospital by a nonprofit arm of Prime Healthcare Corp., saying it was “not in the public interest.”

Her ruling was anything but casual. Basing the decision on what she said was her own department’s investigation, as well as testimony at a marathon public hearing in August, Harris indicated that the takeover would result in the reduced availability of healthcare in the High Desert.

Her concerns included Prime’s “disturbing business model,” which includes canceling managed-care contracts at the hospitals it acquires, driving up costs for those payers and forcing many patients to travel long distances to find affordable care elsewhere.

One would have thought that was that. The attorney general has explicit jurisdiction over transfers of ownership of California nonprofit hospitals, such as the bankrupt 101-bed Victor Valley Community Hospital.

Yet the attorney general believes her order is being flouted. The hospital has gone ahead and signed two agreements with Prime, including one for a $6-million line of credit, that Harris says will give Prime effective control of Victor Valley over her objections. In a separate frontal attack on Harris’ authority, the hospital has asked a San Bernardino County Superior Court judge to overturn her veto.

What makes this more than just a dust-up in the desert is the involvement of Prime Healthcare, which owns 14 hospitals in California and one in Texas. In recent years, Prime has drawn the scrutiny of state and federal regulators over its patient treatment policies, its billings to government healthcare agencies and its employment practices.

Prime defends its record, but these concerns raise the question of whether even allowing Victor Valley to shut down might be preferable to turning it over to Prime.

For the community, that’s not a serious question. “No one in the High Desert wants this hospital to close,” says its interim chief executive, Edward Matthews. But it does underscore the excruciating choices involved in keeping it open.

If there’s a secret to making hospitals profitable, Prime seems to have found it. The creation of Dr. Prem Reddy, an India-born cardiologist who came to the U.S. in 1976, Prime has assembled a portfolio of institutional castoffs — “Every hospital I acquire, I acquire in bankruptcy,” Reddy once said of his corporate strategy.

The company earned nearly $248 million in 2010 on revenue of $1.6 billion, according to an income statement filed with the Securities and Exchange Commission. (The privately held Prime’s financial statements were filed by a publicly traded real estate investment trust that is financially dependent on its business.)

Prime achieves this in part by stripping low-margin or unprofitable medical services out of its hospitals. As The Times has reported, Prime closed more than half of Centinela Hospital’s operating rooms and cut back on chemotherapy and birthing services after taking over the institution in 2007.

The hospital, a healthcare linchpin for South Los Angeles, served 146,000 outpatients, including emergency room patients, in 2006, according to state records; last year the figure was 55,000. But Centinela swung from a $10-million loss in 2006 to a profit of nearly $11 million in 2010.

Prime has acknowledged in legal filings that it avoids contracting with managed-care insurance plans, or HMOs. That frees the company from the obligation to deliver emergency care to those plans’ members at a low contracted rate. Instead, it charges those patients or their health plans what the market will bear.

In 2008 and 2009, auditors from the state Department of Health Care Services caught the firm trying to stick the Medi-Cal program with more than $4 million in what the auditors considered inappropriate expenses, including $838,000 for a Beverly Hills home, more than $1.4 million for a helicopter and hundreds of thousands of dollars more for a company Bentley.

The agency has referred the expenses to the attorney general’s office for a possible fraud investigation. Prime said this week that it “came to agreements with Medi-Cal” on some of the disallowed items and appealed others, but did not give details on the outcome of the agreement.

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December 23, 2011 1:41 PM
Brooke Edwards Staggs, City Editor

VICTORVILLE • A federal appeals office upheld the termination of Victorville’s EB-5 visa investor center, leaving the city with no option but to pursue a pricey lawsuit or say goodbye to millions in funding they’d hoped to borrow through the program.

City officials got the news Thursday afternoon, with plans to discuss next steps during the Jan. 17 city council meeting.

U.S. Citizenship and Immigration Services approved Victorville’s Regional Center in 2009, allowing foreign nationals to supply at-risk loans to the city so long as that money helped create 10 local jobs. Investors would then be granted U.S. visas and the loans would have to be paid back five years later with interest.

Nineteen people gave Victorville $500,000 each under the program, and the city intended to use that money to pay back restricted funds borrowed from its water department to build the struggling wastewater plant at Southern California Logistics Airport.

Then, in a precedent-setting move, USCIS terminated Victorville’s program in October 2010 due to “material factual discrepancies” in related financial reports.

Victorville sent USCIS additional information and appealed to that office to overturn the decision, but was turned down in May. The city then filed a lawsuit in Washington, D.C. District Court against USCIS, the Department of Homeland Security and several top officials with those agencies, but agreed to pause that civil case as it waited on word from USCIS’s Administrative Appeals Office.

In a letter dated Dec. 21, the AAO affirmed the decision to terminate Victorville’s program.

The appeals office pointed out several fatal flaws in the EB-5 center here, including apparent contradictions between information provided by Councilman Mike Rothschild and the city’s attorneys, conflicts in the timeline of when the city loaned funds versus when it told USCIS they were needed and more.

To read entire story, click here.

December 15, 2011 1:21 PM
Natasha Lindstrom, Staff Writer

VICTORVILLE • Victor Valley College’s board members have voted themselves a 60 percent raise, increasing their monthly stipend from $250 to $400.

The VVC Board of Trustees approved the hike at Tuesday night’s meeting. The increase is retroactive back to July 1, according to college spokesman Bill Greulich.

The stipend increase was justified because of the college’s increasing full-time equivalency rate, Greulich said. Community colleges get reimbursed based on full-time equivalency, or FTE, which can equate to one student taking 12 units, three students each taking a four-unit course, or another combination adding up to 12 units.

The move to up the stipends came after a review of board policy found that California Education Code allows for an increase in board member stipends when FTE surpasses a certain level. The board voted 4-1 to adjust the stipends accordingly, with trustee Michael Krause opposing.

“I cannot see giving myself more money — even though (Education) Code states that board members will get that amount over 10,000 FTE — when we are cutting employees and cutting classes,” Krause said in a statement Thursday. “I support the board’s decision and respect each board member’s vote.”

The latest estimates show the number of students enrolled in VVC during fall 2011 fell by 9 percent from fall 2010, but the college’s full-time equivalency rate was up 7.2 percent.

The full-time equivalency figure for fall was 4,146 compared to 3,867 in 2010, data shows. Meanwhile, there are 1,286 fewer students enrolled this fall compared to fall 2010, with the current head count at about 12,366.

Neither Board President Dennis Henderson nor Vice President Joe Range could immediately be reached for comment

Natasha Lindstrom may be reached at (760) 951-6232 or at NLindstrom@VVDailyPress.com.

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Protesters pack Victorville City Hall
December 15, 2011 8:45 AM
Brooke Edwards Staggs, City Editor

VICTORVILLE • Residents packed City Hall on Wednesday night, carrying signs and giving impassioned speeches against a Walmart Supercenter that’s planned near the entrance to Spring Valley Lake.

However, a Planning Commission decision on the project was delayed until January because there was a technical error with the way the item was agendized, according to Bill Webb, director of development for the city.

The item has been continued to the next Planning Commission meeting Jan. 11. At that meeting, Webb said Walmart will respond to comments and questions, and the commission will decide whether to recommend that the City Council ultimately approve or deny the project.

The delay didn’t stop residents from letting commissioners know how they feel about the store that’s slated to anchor Tamarisk Market Place, along Bear Valley Road between Tamarisk and Ridgecrest roads.

With signs that said “wrong location,” “students before shoppers” and “schools not Walmart,” residents of Spring Valley Lake and surrounding areas shared their concerns over the project’s proximity to schools and churches, how it will impact traffic congestion and their fears for its impact on area crime.

“When I even consider the location of a 24/7 big box store adjacent to our college and to the entrance to Spring Valley Lake, I get rather emotional,” resident Jim Carr said. “And when I get emotional, I may say something that you’d escort me out of here, so I’m going to read a statement tonight.”

Carr was met with laughter and loud applause before he went on to share concerns about the project.

“From the city’s standpoint, the only merit that I can see is tax money,” he said. “From the viewpoint of the rest of this area, there are no positive merits, only a major increase in traffic congestion, an increase in air pollution affecting everyone’s health and an increase in crime rate.”

The general manager for Spring Valley Lake Country Club also expressed concern for how the project will impact drainage issues, since the site is “upstream” from the golf course and the lake.

Some of these issues were also raised in the project’s Environmental Impact Review, though city staff recommended the project for approval.

After the Planning Commission’s Jan. 11 vote, the store could come back to the City Council for final approval as soon as Jan. 17

Brooke Edwards Staggs may be reached at (760) 955-5358 or at BEdwards@VVDailyPress.com.

Get the complete story every day with the “exactly as printed” Daily Press E-edition, only $5 per month! Click here to try it free for 7 days. To subscribe to the Daily Press in print or online, call (760) 241-7755, 1-800-553-2006 or click here.

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