Cedar Glen Water System Makeover Disregards Former Owner’s Lapses

Despite long-lingering questions over whether Cedar Glen residents were ever provided with the improvements to the water system they have been paying for over the last three decades, the board of supervisors this week made a crucial commitment toward proceeding with revamping  that system at further expense to those residents. The county’s insistence on proceeding with the improvements without redressing the underlying reasons for the current inadequacy of the system, some of those residents say, will likely result in an even more widespread refusal on the part of local property owners  to pay their escalating water bills.
The county in 2009 initiated the first phase of improvements to the area’s water system. With that portion of the project now reported as completed, the county will move on with phases II and III, which are to consist of continued improvements, including the replacement of existing water storage facilities with additional steel water storage reservoirs; construction of a new domestic water well; and replacement of approximately 7.7 miles of existing distribution pipeline to bring the Cedar Glen water system into compliance with the California Safe Drinking Water Act and California Department of Health Services requirements.
In May of 2009, county special districts division managing engineer Jim Oravets reported that one well was successfully drilled off of Coulter Drive where there was no electricity service to the area in order to operate a water pump. Oravets said the special districts division was in discussions with Southern California Edison to extend electrical service to the area.
It is this well and its location that has led some of the residents to question the motives of the special districts division, in that the well is located on the southern boundary of the San Bernardino National Forest and is surrounded by San Bernardino National Forest. Some citizens have expressed their belief that they are paying for infrastructure to benefit developers.
The community of Cedar Glen located in the San Bernardino Mountains was provided with water service by investor owned Arrowhead Manor Water Company (AMWC) until May of 2003, when the company went into receivership.
Six months later, in October of 2003, the community was devastated by the Old Fire, which burned over 300 homes. Based on the disaster, the San Bernardino County Board of Supervisors adopted the Cedar Glen Redevelopment Area on November 23, 2004.
The board approved a loan from the county general fund in the amount of $800,000 for a proposed improvement zone on June 7, 2005 and shortly thereafter, an improvement zone was formed by the county under County Service Area 70 to provide water to the residents of Cedar Glen to be governed by the San Bernardino Special Districts Department (SDD).
On November 15, 2005, before the county had even purchased Arrowhead Manor, the county submitted an application for funding to the California State Department of Housing and Community Development for a Community Development Block Grant (CDBG) through the United States Department of Housing and Urban Development.
In February 2006, the county of San Bernardino was provided with $3,091,270 in federal Community Development Block Grant funds as part of a disaster recovery initiative to pay for the proposed repairs to the water system in the Cedar Glen community.
The board of supervisors approved the purchasing Arrowhead Manor Water Company for the price of $305,000 through the court appointed bankruptcy receiver on October 17, 2006. The county finalized the purchase on January 28, 2009.
Shortly after the purchase of the water company, Phase 1 of the water improvements funded by the CDBG funds began.
At a meeting of the Cedar Glen Redevelopment Project Area Committee on April 24, 2009, special districts director Jeff Rigney said 14,000 feet of water line had been completed, a well had been drilled and they were repairing a water tank.
Many Cedar Glen residents have refused to pay their water bills over the last couple of years.
This refusal has grown out of the circumstances under which the county obtained ownership of the water facilities. Shortly after Arrowhead Manor was placed into receivership in 2003, water rates were raised over 400 percent. The county borrowed $800,000 to acquire the water company and its assets and to make necessary improvements to it. $305,000 of that loan money was used to buy Arrowhead Manor. By 2008, the loan principal, penalties, and interest had risen to approximately $2,000,000.
At present, the $800,000 loan is not being repaid, but local water users are still paying greatly inflated prices for water.
“The Cedar Glen water situation is based on several layers of fraud and the county supervisors are now in jeopardy of becoming accomplices in this fraud,” said area resident Hugh Campbell. “There is a reason people are not paying these bills and it is the responsibility of the board of supervisors to investigate the reason. The original fraud took place in 1980 when through the Safe Drinking Water Bond Act the owners of the Arrowhead Manor Water Company, Ernie and Jean Schoettmer, were awarded $910,510. The fraud consisted of how that money was ‘not used,’” Campbell said.
“Amazingly, the 1980 improvement plan involved three phases, much like the current three phase plan in Cedar Glen,” Campbell said. “One phase was to build a pump house, a water tank and pipelines off of Balsam Ave. According to the plans, there was an existing tank on site and a new tank was to be built. As per the plans only the existing tank is currently on the property. A notice of completion was sent to the Department of Water Resources stating that all work had been completed. That work, in fact, was never completed.”
“Another phase of the project was to put new 8- inch pipelines on Juniper Drive, Maple Drive and Pineridge Drive,” Campbell continued. “These are the exact locations where the current phase 1 was just completed. The original notice of completion was dated January 9, 1981. There are even more questions on the billing as there were hundreds and hundreds of hours charged for expensive office labor, field inspectors that obviously didn’t inspect anything and travel charges at .50 a mile in 1980! The fact is that at least half or more of the project was never done. The fraud here is in excess of $400,000.”
The board of supervisors is being misled by the falsehoods contained in the record and by county staff members, who have examined the circumstances and know about the fraud, said Campbell.
“The reason that the county and its special districts division have been so quiet about this is that the engineering was done by Albert Webb and Associates and the final permits were signed off at the time by what was the county’s Department of Transportation and Flood Control in 1982. The letter from the Department of Transportation and Flood Control stated, ‘This letter is to confirm that the work performed in the Cedar Glen area under Permits E31696 and E30957 with Arrowhead Manor Water Company has been satisfactorily completed.’”
Current staff is compounding the problem and layering more fraud on top of the existing fraud, Campbell charged.
“Phase 1 was designed to cover up the fact that pipes were not laid in 1981 and the money was embezzled,” Campbell said. “The county even went as far as to give themselves an out by stating in a preliminary system evaluation dated July 20, 2004 that ‘Based on conversations with Mr. Darel Davis (the engineer hired by the receiver), 6 & 8-inch piping installed was not installed correctly and needs to be replaced.’ This was never mentioned in Mr. Davis’s official report to Thomas Sutton a month earlier on June 17, 2004. This is far from where the fraud stops. In July of 2002 the Public Utilities Commission made Decision 02-07-009 and the significant thing stated is that Arrowhead Manor was found to ‘have improperly diverted Safe Drinking Water Bond Act surcharge funds…’ and ‘The Commission concludes that all penalties imposed by the California Department of Water Resources (DWR) on Arrowhead for failure to make timely loan payments are Arrowhead’s obligations under its DWR contract and are not recoverable from ratepayers.’ Further in Resolution W-4407 dated July 10, 2003 when the PUC reinstated the Safe Drinking Water Bond Act surcharges it also stated ‘As a condition of re-establishing the Safe Drinking Water Bond Act surcharge, the decision put Arrowhead on notice that it would be held responsible for refunding or applying on behalf of customers any surcharge revenues not applied to repaying the loan.’ So the surcharge was reinstated in July of 2003 two months after the Superior Court appointed John Richardson as the receiver of Arrowhead Manor Water and from that time nothing was paid to the Department of Water Resources.”
Campbell told the board of supervisors, “The reason that the county worked so hard to pass a bill to eliminate the interest and penalties is that the customers of Arrowhead Manor could not legally be charged. The fact is that all money collected by the court appointed receiver and the Special District since 2003 needs to be refunded to the residents of Cedar Glen, because it is obvious that it was never paid to the Department of Water Resources. While receiving information through a public information request, I met with James Oravets of the Special Districts division on March 3, 2009 and told him of my concerns with fraud and even downloaded the files I obtained from the Department of Water Resources through a public information request. Mr. Oravets stated that they laid two miles of pipe during the loan. I told him that according to invoices charged against the loan that over 14 miles of pipe were supposedly purchased. Mr. Oravets could then only seem to find page one of the original plans for Cedar Glen. This was a sad attempt to again cover up the fraud that the Special Districts was aware of. In spite of this, I downloaded all the information I received from the Department of Water Resources onto Mr. Oravets’ computer and I mentioned to him that it would be nice if County Special Districts looked into the fraud for the benefit of the people of Cedar Glen instead of showing that they are just another corrupt county organization.”
But, according to Campbell, “Of course this was not the end of the fraud. In January 2009 a bill was sent to residents to collect $504 on the Safe Drinking Water Bond Act surcharge.  This constituted more fraud. In February 2009, a facilities charge showed up on the bill for the first time for $17.35. In April 2009, the facilities charge grew to $36.60. In August 2009, the facilities charge grew again to $123.60, where it now appears on each statement.”
Campbell said that the board of supervisors had failed to provide legal notice to residents that there would be a facilities charge. “What legal mechanism was used to implement these charges and how did the charges go from $17.35 to $123.60 in 6 months?” Campbell askied. “Was the board of supervisors aware of these charges?”
Campbell said he is now taking action – i.e., refusing to pay his bill, as the next logical step in forcing the county to come to terms with the fraud that has been perpetuated.
“After the April 2009  bill I gave up and quit paying, as it was obvious that there will be no end to new charges and the public has no input to what Special Districts does.”
Campbell offered his opinion that “If the board of supervisors place these charges onto the taxes of Cedar Glen residents, they are guilty of a conspiracy to commit fraud. The county was involved with this conspiracy in the beginning and steps have been taken recently to cover up the fraud. The board of supervisors needs to initiate an immediate investigation into these allegations. The board of supervisors is also bound by PUC resolution W-4407, which stipulated the conditions of the reinstatement of the surcharges and the county is thus bound to repay every resident in Cedar Glen all surcharge monies collected since July 10, 2003. The other option is that the county can drop the surcharge payments altogether.”
The board of supervisors, functioning on a different tack, authorized using taxing authority to collect water bills two years ago.
This week the board voted to file environmental documents certifying the completion of the California Environmental Quality Act compliance process with respect to the construction of phases II and III of the water system improvement.
“The existing water system does not meet the requirements of the California Safe Drinking Water Act and the California Department of Health Services requirements and work has been phased to provide capital improvements as funding becomes available. The first phase of improvements (Phase I) was approved with the adoption of a Mitigated Negative Declaration in 2008, and included a new domestic water well, construction of a 425,000-gallon water tank and 3.8 miles of replacement water lines,” Rigney told the board this week.

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