Hesperia Nixes Taking Part In Mortgage Quashing JPA

HESPERIA—Hesperia Mayor Russ Blewett’s colleagues have rejected his call to have their city join a regional group intended to help homeowners who are upside down on their mortgages. On June 5, the Hesperia City Council voted down an invitation to join the Homeowner Protection Joint Powers Authority (JPA) that has been formed by the county of San Bernardino and the cities of Fontana and Ontario.

Russ Blewett

Blewett, who flips houses for a living, sought to persuade his fellow council members that joining the JPA was worthwhile since declining property values have close to 50 percent of the city’s homeowners “underwater,” i.e., owing the institution that lent them the money to buy their homes more than the homes are presently worth.
The JPA, which was championed by San Bernardino County Chief Executive Officer Greg Devereaux, has chartered itself with the ability to use the eminent domain process. Eminent domain has traditionally been used to condemn and acquire property for public use. The JPA is contemplating utilizing condemnation procedure to force lenders to hand over the mortgages that are in arrears so that they can be refinanced to provide the homeowners with more affordable payments.
Blewett said lending institutions’ policies of sitting on foreclosed homes has stagnated the local economy and blocked recovery. He said at least 3,000 homeowners in Hesperia would benefit if the city joined the JPA. In the end, the only member of the council Blewett convinced was Bill Holland.
Council members Thurston Smith, Mike Leonard and Paul Bosacki, concerned that the already cash-strapped city would not be able to sustain the cost of participating, opposed the idea.
The JPA, which involves the county’s best funded municipality – Ontario – and the county’s third most flush city – Fontana – boasts the participation of the county as well pursuant to a vote by the board of supervisors this week. Throughout the county, 264,122 of the 488,422 single family homes in its constituent 24 incorporated cities and towns and unincorporated areas have at some point in the last four years been underwater.
Of those 254,122 homeowners in arrears, 63.7 percent or 151,876 had received notices of default. Unemployment in the county is roughly 12.6 percent. The JPA was created to assist those troubled homeowners stave off foreclosure.
While some elements of the community have criticized governmental involvement in the restructuring of home mortgages as progressive socialism, the JPA’s action will potentially provide businesses with the opportunity to make a profit.
A San Francisco-based investment group, Mortgage Resolution Partners, stands ready to work with the JPA to step in as a participant if officials resolve to use condemnation proceedings to acquire mortgage notes. Pursuant to the condemnation, the current owners of the loans would be forced to sell at a price deemed to be fair market value pursuant to a court’s determination.
Mortgage Resolution Partners has created a niche for itself by working to counteract the proliferation of so-called securitized mortgages, i.e., the practice of bundling mortgages which are then sold to massive numbers of investors. That practice has been seen as a contributory factor to the mortgage crisis because it has created a situation in which a single lender no longer holds the mortgages, preventing homeowners from renegotiating their loans when the value of their property has plummeted.
While the JPA has not committed to utilizing eminent domain to acquire the mortgages and has not signed off on  partnering with Mortgage Resolution Partners, Mortgage Resolution Partners has already secured the backing of investors representing over a billion dollars in ready capital to fund the effort and take possession of the mortgage notes in line with the current market value of San Bernardino County homes they are tied into. The homeowners would get renegotiated loans that reflect the actual value of the property. Mortgage Resolution Partners would earn a fee on each transaction.
Within the mortgage and real estate industry there is concern about the involvement of the government in the mortgage industry and the use of eminent domain and condemnation procedure.
The Inland Valleys Association of Realtors has stated that the use of eminent domain to seize mortgages in the numbers contemplated “could result in the biggest combined public taking in the history of California.”
While the JPA is leaning toward using the eminent domain strategy to obtain and quash the delinquent mortgages, other options are being explored, including bringing in private broker negotiators to change the terms of loans or coordinating relief for upside down homeowners through the federal Home Affordable Refinance Program. At present the median home price in the county stands at $150,000.

Majority Of County’s Cities’ Expenditures Will Outrun Their Revenues In 2012-13

As budgets for San Bernardino County’s 24 incorporated cities are being finalized or passed this week, an indication of the yet sputtering economy is apparent. Traditionally, cities propose, pass and maintain balanced budgets, i.e.,  spending plans that call for and entail  each city spending no more than that city takes in. Even last year, with the economy faltering for the fourth straight year, most cities in San Bernardino County found a way of maintaining operations without deficit spending by  cutbacks, sometimes severe, in personnel and the provision of services to residents, though some found it necessary at that time to dig into reserves..
For the upcoming fiscal year running from July 1, 2012 to June 30, 2013, with reserves and revenues dwindling, several cities have given up the pretense of matching expenditures to revenues. This is a change from the historical pattern in San Bernardino County and elsewhere in California, where municipal officials have been virtually obsessive about maintaining balanced budgets to demonstrate they are acting responsibly in their stewardship of the public trust.  Of the 23 county cities that had passed or drafted tentative budgets for 2012-13 by press time this week, fourteen anticipated spending more money than they will take in next year, either within all of their municipal funds or in their general fund operating budgets or both. In all of those cases, the deficit spending will be redressed by utilizing money from those cities’ reserve accounts.
The governmental fiscal year runs from July 1 to June 30.
Adelanto anticipates $37,612,789 in revenues into all of its funds next fiscal year and will spend $48,182,189. In its general fund, the city will have revenues of $10,027,758 and expenditures of $15,149, 902 after starting with an opening general fund balance of $5,357,624 as of July 1. Beginning the year, Adelanto will have $35,882,486 in reserves in all of its funds.
The town of Apple Valley in 2012-13 will see $73,262,649 in revenue into all of its funds and make total appropriations of $92,357,421. In the general fund, revenues of $23,408,309 are anticipated with expenses of $23,214,010.
In Barstow the city anticipates revenues of $42,889,545 into all of its funds and expenditures of $45,189,410 out of all of its funds, including general fund revenues of $17,869,545 and general fund expenditures of $17,749,410.
In Big Bear, the city anticipates $25,639,121 in revenue and $25,335,737 in expenditures through all of its funds and $6,076,431 in revenue into its general fund and $6,147,382 in spending out of the general fund.
In Chino, the city expects $112,311,239 in total revenues for all city funds and expenditures of   $113,011,380 from all funds. It anticipates revenue into the general fund of $52,446,423 and general fund expenditures of $55,380,767. Officials said they will utilize $2,934,344 of the city’s reserves in 2012-13.
In Chino Hills, the city anticipates $131.1 million in total revenues in 2012-13 and proposes expenditures totaling $147.8 million, including general fund expenditures, both operating and capital, of $35.7 million, and restricted fund expenditures of $112.1 million. The city’s general fund revenues amount to $32.2 million.
The city of Colton will take in $130,256,698 through all of its funds and spend $132,088,336 through those funds in 2012-13, including $34,021,995 in revenues into the general fund and $33,640, 484 in expenditures from the general fund.
In Fontana, city officials are looking forward to $221 million in revenues into all municipal entities in 2012-13 and total expenditures of $220 million. In the general fund revenues should reach $78 million with expenditures of $74 million. The general fund, which has a carryover surplus from 2011-12, will make net transfers to other funds in the amount of $6 million.
Grand Terrace, which will begin the fiscal year with $24,677,186 in its reserve accounts, anticipates $14,944,510 in revenues into all of its funds in 2012-13 and expenditures of $17,432,898, thus ending with $22,188,798 yet in its reserves. In its 2012-13 general fund, the city anticipates revenues of $3,539,486 and expenditures at least $3,378,092 and as much as $3,856,167.
Hesperia  will take in $91,673 446 in total revenue through all of its funds, including those for the water district, its fire district and its general fund, and will expend $121,183,912. Hesperia anticipates general fund revenues of $21,366,537 and expenditures of $23,358,148
In Highland, the total budgeted revenue through all city funds is $53,644,845, with anticipated total expenditures of $63,502,935. In Highland’s general fund, revenues of $14,702,605 are expected along with general fund expenditures of $14,765,715.
In Loma Linda, the city will have revenues of $26,385,400 and expenditures of $28,467,500 through all funds, including general fund revenues of $13,857,600 and expenditures from the general fund in the amount of $13,838,900.
In Montclair, the city intends to make a total of $34,037,292 in appropriations from a total evenue of $34,376,709 for all municipal funds. In its general operating fund, the city expects $25,592,834 in revenue and a like amount, $25,592,834, in expenditures.
In 2012-13, Needles will take in a total of $23.8 million into all its funds and expend $23.8 million. In its general fund it will have revenues of $5.1 million and expenditures of $5.6 million.
In Ontario, which has the largest budget of all county cities, there will be $393,010,708 in revenues and transfers into all of the city’s funds and expenditures of $442,692,349. Ontario’s general fund budget for 2012-13 envisions $157,075,399 in revenues and transfers-in and $163,022,811 in appropriations. Ontario will use reserves to balance those budgets.
In Rancho Cucamonga, the total revenue anticipated into all municipal funds is $141,155,170 and proposed expenditures out of those funds totals $135,683,190. The 2012-13 general fund proposed budget envisions revenues of $63,414,270 and appropriations of $63,414,270.
The Rancho Cucamonga Fire District is a subsidiary district of the city, and its funding is accounted for on a separate ledger. Total expected revenue into the fire district is pegged at $34,957,900 and proposed expenditures are $32,573,770.
In Redlands the city in 2012-13 anticipates it will take in $116,221,399 to all of its funds and expend $128,876,683 through all of those funds, including $49,225,680 in revenues into the general fund and $53,700,000 in appropriations from the general fund.
Rialto will have revenues of $94,052,532 into all of its funds and expenditures of $119,960 006. In its general fund, Rialto will have revenue of $49,369,147 and will expend $55,114,894 with its $5.7 million deficit to be funded from reserves.
The city of San Bernardino, which is the county seat and the oldest of the county’s municipalities, had not finalized its budget at press time and city officials were unwilling to release any tentative drafts of proposed spending plans.
In Twentynine Palms, total city revenues across all 15 accounting funds are projected to be $16,604,340, with total expenditures of $16,594,050. In the city’s general fund, it projects matching revenues and expenditures of $9,838,000.
In Upland, city officials believe they will take in $96.2 million through all funds and expend $94.2 million through all municipal entities.  The general fund will be balanced with $39.8 million in revenues matched by $39.8 million in expenditures.
In Victorville, city manager Doug Robertson anticipates total revenues of $154,860,613 through all city funds in 2012-13 and total expenditures of  $128,768,299, including  $47,048,912 in general fund revenue and general fund expenditures of 46,973,920 pending council approval at a public hearing on June 28.
The city of Yucaipa’s 2012-13 budget calls for overall revenue of $154,860,613 and total expenditures of $128,768,299, and projects $47,048,912 in revenues into the general fund and disbursements of $46,973,920 out of the general fund.
In Yucca Valley, budget figures for all city funds totaled were not available. The general fund budget had been tentatively set to reflect expected revenues of $9,409,300 and anticipated expenditures of $9,198,988.

County Approves $4.06 Billion 2012-13 Budget

The San Bernardino County Board of Supervisors on June 15 approved a balanced $4.06 billion county budget for the fiscal year that begins on July 1.
“I am pleased that we moved the county’s budget forward in such an expeditious manner,” said board chairwoman Josie Gonzales. “We stayed  focused on our priorities to provide quality services and support public safety countywide.”
The 2012-13 Budget envisions $28.8 million less in spending than the 2011-12 budget, closes a projected $33.2 million shortfall for the coming year, and accomplishes this while setting aside $16.3 million for contingencies and reserves, county spokesman David Wert said.
The budget also puts the county on track to eliminate a five-year gap of $91.5 million by including $40.3 million in cuts. Those reductions include $11.8 million in trimmings from department budgets and reducing $7.3 million in allocations to capital projects and an emergency radio system upgrade.
The savings also include $8.9 million in labor union concessions currently under negotiation.
The county’s role in achieving what it refers to as its Countywide Vision serves as the basis of the 2012-13 budget. For example, a $2.3 million investment in updating the county general plan and development code directly addresses the goal of making the county a model of business friendliness. A $20 million allocation toward the replacement of an outdated public safety radio system addresses the public safety element of the Countywide Vision effort.
“The board adopted an austere and balanced budget that will allow the county to continue serving and protecting its residents, but unknown factors could still impact this spending plan, including cuts to the state budget and lackluster returns in our retirement system,” said Second District Supervisor Janice Rutherford.
The budget approved by the board did not attempt to predict the impact of the 2012-13 state budget, which has yet to be approved. The board of supervisors was warned that the state budget could have a substantial impact on the county budget, especially in the area of human services, formerly referred to as the welfare department.
“Since our nation’s economy took a downturn years ago, we have done our  best to make appropriate budgetary decisions in order to keep providing services to our residents,” said Fourth District Supervisor Gary Ovitt. “The county is at the whim of the state legislature and I really hope that our tenuous position isn’t made worse by decisions from Sacramento.”
“While we have done our part, the looming threat of deeper cuts remains a reality with the state considering suspending pass-through agreements,” Chairwoman Gonzales added. “I echo the message to the state that Supervisor Ovitt voiced during today’s meeting, ‘Leave our pass through dollars alone.'”

Los Angeles Lowers Terminal Rental Rates At Ontario Airport

The complicated and sometimes troubled relationship between Los Angeles and Ontario over the management of Ontario International Airport intensified this week.
The Los Angeles World Airports Board of  Commissioners on Monday, June 18 took two separate actions with regard to Ontario Airport, one of which was seen as a positive step forward for the troubled facility and another that was perceived as a slight.
On the upside for Ontario, the commissioners voted to lower terminal rental rates for airlines at Ontario International Airport. Conversely, the board approved an advertising and promotional program for Ontario Airport that Ontario officials consider to be inadequate.
Ontario’s relationship with Los Angeles with regard to the airport is a complex one. On one hand, Los Angeles did much to transform the once-obscure regional airport into a successful and modern aerodrome that came to be considered a valuable asset crucial to the local economy. In recent years, however, Ontario officials have come to believe that Los Angeles has promoted the expansion of Los Angeles International Airport at the expense of Ontario Airport, greatly diminishing passenger traffic at the facility.
In 1966, passenger traffic at Ontario Airport stood at less than 200,000. At the city of Ontario’s behest, Los Angeles and its division of airports took over management of the airfield, in large measure because it was believed Los Angeles officials could use their clout and the ability to delegate gate availability at Los Angeles International Airport to induce more airlines to fly into and out of Ontario Airport. That arrangement worked and after Los Angeles assumed management of Ontario Airport in 1967, passenger traffic increased dramatically, reaching a peak of 7.2 million passengers by 2007. In 1985, the city of Ontario deeded Ontario Airport to Los Angeles for no consideration. Over the course of 44 years, Los Angeles saw to it that over $550 million in improvements were made to Ontario Airport. In the last five years, however, the number of passengers flying in and out of Ontario has dwindled considerably, with 4.2 million passengers in 2011, and further declines are expected to be registered this year.
Ontario officials in recent years and months have charged that Los Angeles World Airports, the Los Angeles municipal corporation that runs Los Angeles International Airport, Ontario Airport and Van Nuys Airport, has purposefully kept fees charged to the airlines to land in Ontario artificially high and has failed to properly and aggressively market Ontario International.
This week Los Angeles World Airport’s governing board agreed to utilize $5 million of its reserves to lower terminal rental rates for airlines at Ontario International Airport by 8 percent, from $156.38 per square foot to $144.11 per square foot. That move may allow airlines to reduce ticket prices for flights out of Ontario, thereby increasing to some degree flagging use of the airport.
In approving the 2012-13 budgets for all three of Los Angeles’s airports, the board gave little priority to marketing of Ontario Airport. The $63 million operating budget for Ontario Airport in the fiscal year running from July 1, 2012 through June 30, 2013 contained $142,000 for promoting Ontario Airport.By contrast, Los Angeles World Airports is putting up $4.6 million for the promotion and marketing of Los Angeles International Airport and $186,000 for the marketing and promotion of Van Nuys Airport.
Seven years ago, Los Angeles World Airports was far more energetic in seeking to gain ridership out of Ontario, having spent $2.6 million in marketing Ontario Airport in 2005.
Over the last two years, Ontario officials have made increasingly strident criticisms of Los Angeles World Airports’ management of Ontario Airport. When Ontario officials previously claimed that Los Angeles World Airports was neglecting the marketing of Ontario Airport, Los Angeles World Airports officials offered to turn the marketing assignment over to Ontario and provide some funding for that effort. Ontario officials, citing Ontario’s inability to control ticket prices at the airport, declined.

Department Of Health Issues Rabies Alert After Five Infected Bats Found

As of early this week [June 19], county health officials were actively seeking the person or persons who delivered a live rabid bat to the Chino Police Department on June 4.
There is concern that the person or persons are in grave danger of having been exposed to rabies.
The bat, which was in a cardboard box, was left at the police department’s headquarters around 4:30 in the afternoon on Monday, June 4. The county Department of Health subjected the flying mammal to tests, which showed that it tested positive for rabies.
That bat was one of five bats countywide which have since the beginning of the month been determined to carry rabies. Eight rabid bats across the county line in Riverside County have tested positive for rabies.
San Bernardino County Department of Health officials have issued an alert to residents, advising that they stay away from wild or unfamiliar animals.
Rabies is a viral disease of mammals most often transmitted through the bite of a rabid animal, although a victim can also be infected by simple contact under certain conditions. The rabies virus infects the central nervous system, ultimately lodging in the brain.  The early symptoms of rabies in people include fever, headache, and general weakness or discomfort. As the disease progresses, more specific symptoms appear and may include insomnia, anxiety, confusion, slight or partial paralysis, excitation, hallucinations, agitation, hypersalivation, difficulty swallowing, and hydrophobia. Rabies is almost universally fatal in humans once the second set of symptoms begins. Therefore it is imperative to seek medical attention as soon as possible after any rabies exposure.

Hultquist Returns To Become Apple Valley Fire Department Chief

APPLE VALLEY • Sid Hultquist, a division chief with the San Bernardino County Fire Department, has been selected as fire chief with the Apple Valley Fire Protection District.
Apple Valley Fire Protection District board members Lars Hanson, Larry Cusack, Richard Cambridge, Virgil Barnes and Pat Gabler chose Hultquist from a field of three finalists to serve as the district’s sixth chief since 1950, succeeding Art Bishop, who is retiring next month after two years as fire chief.
Hultquist previously served with Apple Valley’s fire department from 1991 to 1997, having achieved the rank of deputy chief. In 1997 he was hired by San Bernardino County to serve as division chief with the Valley, North Desert and High Desert Battalions.
Hultquist entered the fire service in 1979 and served as a seasonal firefighter with the California Department of Forestry and the United States Forest Service. In 1983 he became a paid call firefighter for County Fire and served at station 37 in Mountain View Acres. He also served as a paid-call firefighter for the city of Victorville Fire Department. Hultquist became a paramedic in 1985 and was hired as a firefighter paramedic for the Barstow Fire District in January 1986. He advanced to the rank of engineer paramedic in Barstow and in 1991 accepted a captain position with the Apple Valley Fire District. While serving the citizens of Apple Valley, Chief Hultquist promoted to battalion chief in 1994 and deputy chief in 1997. Hultquist also served as the chairman of the Regional Fire Protection Authority Operations group and helped implement the Emergency Medical Dispatch Program at Desert Communications. Hultquist participated in the merger/transition process when both the CSA 38 and Hesperia fire departments were taken over by County Fire.
Hultquist has lived over 47 years in the High Desert and grew up in Victorville.

CVUSD Rejects Charter Academy Application For The Second Time

The Chino Valley Unified School Board has again denied a charter petition by proponents of the Neighborhood Arts and Science Academy.
Advocates for the school were turned down in January and  sought  to reinterest the district in the charter school.
Chino Valley Unified has had a positive experience with another charter school, the Oxford Preparatory Academy, which has been in existence for two-and a-half years, and is the highest-performing school in San Bernardino County in terms of students’ scores on state standardized tests.
The school board recharted Oxford Preparatory Academy in December.
The sponsors of the Neighborhood Arts and Science Academy are proposing that the school serve kindergarten through eighth-graders beginning in the fall. They envision it as focusing on arts, science and technology, and preparing students to live and work in a global society. They are befuddled by the district’s reluctance to back the project after the success achieved with Oxford.
The California Education Code provides for the formation of charter schools under the aegis of that sponsoring local school district, although the charter school has its own separate school board or board directors.  Charter schools function outside the normal parameters of normal schools and can offer a curriculum and educational smorgasbord unavailable in traditional public schools.
The sponsoring district sustains a loss of funding from the state per student attendance at the charter school. While Oxford Preparatory Academy is a feather in the cap of Chino Valley Unified, paying for its operation reduces the amount of money available to the district’s traditional schools.
Chino Valley Unified examined the earlier and the latest petitions for the Neighborhood Arts and Science Academy’s chartering and concluded that the proposed school’s education program was unsound, did not contain a comprehensive description of 10 of 16 educational elements required by the district, did not meet the charter conditions contained in the state’s Education Code and that the petitioners were not likely to implement the program as described.
The Neighborhood Arts and Science Academy’s proponents have resolved to appeal the matter to the San Bernardino County Superintendent of Schools. After consultations with that office, the petitioners are making technical changes to their petition and will resubmit it to the San Bernardino County Board of Education.

Rancho Inching Toward Litigation With State Over RDA Bonds

Spurred on by Twentynine Palms and Chino, both of which have refused to docilely accept the state of California’s takeover of their redevelopment money, Rancho Cucamonga has resolved to sue the state if it is denied the bond proceeds it needs to see already initiated redevelopment construction projects to completion.
Governor Jerry Brown last year induced the legislature to pass two laws, AB X1 26 and AB X1 27, which dissolved more than 400 redevelopment agencies up and down the state. A legal challenge of those laws by a collection of cities failed and the shuttering of redevelopment agencies is proceeding.
Redevelopment agencies used a variety of funding mechanisms, including the issuance and sale of municipal bonds, to create infrastructure, promote economic development and eradicate blight. Theoretically, redevelopment bonds would pay for infrastructure improvements that would result in an increase in property values, in turn generating increased property tax. That property tax revenue increase, referred to as increment, would be utilized to pay the bondholders on a yearly basis.
In Rancho Cucamonga, as in many other cities, millions of dollars worth of redevelopment bonds had been issued and sold before AB X1 26 and AB X1 27 were passed and went into effect.  The resultant redevelopment projects were begun but unfinished, with millions of dollars left to fund the projects’ completion when the state foreclosed on the money.
The legislation shuttering the redevelopment agencies called for the creation of successors to the cities’ and counties’ redevelopment agencies to oversee the extinguishment of their authority and the discharging of their enforceable  financial obligations.
Provisions of AB X1 26 and AB X1 27 allowed successor agencies to utilize tax proceeds and bond money to complete ongoing projects pursuant to strict regulations and requirements, including having service or construction contracts in place before the laws went into effect. Another provision of the laws was that any lawsuits brought against the state over the agency dissolution or the availability of funding had to be litigated in Sacramento Superior Court.
Rancho Cucamonga was in the process of using its redevelopment authority and bonding capability to widen a portion of Foothill Boulevard on the west side of town, widen the I-15 interchange project at Base Line Road and make improvements to the public works yard on the southwest corner of Ninth and Hellman avenues.
Because elements of the aforementioned projects were not bid out at the time the redevelopment agency was closed down, the state is maintaining that the money cannot be used to see those projects to completion.
The California Department of Finance holds that bond proceeds for contracts made after the day AB X1 26 and AB X1 27 passed and were signed into law, June 28, 2011,  are not “enforceable financial obligations.”
The city of Rancho Cucamonga is appealing the state Department of Finance’s decisions in that regard and exhausting all other administrative remedies in seeing that the money is freed up. At the same time, the city is soliciting bids for the uncompleted work. City emissaries have been dispatched to Sacramento to see if the Department of Finance will entertain the validity of the city’s claims.
If the state continues to deny the city access to the money,  city attorney Jim Markman has been authorized to file suit against the state.

James Markman

While the law has yet to be tested, one interpretation is that bond proceeds can be utilized for “ongoing feasible projects.”
If Rancho Cucamonga does file suit, the case will be adjudicated in Sacramento.
Two other San Bernardino County cities have hatched strategies to hang on to their redevelopment money.
In April, the city of Chino’s redevelopment successor agency, taking stock of the consideration that the city of Chino had made more than $15 million in loans to its redevelopment agency for improvements in its redevelopment agency project areas, submitted to the state Department of Finance a recognized payment schedule for the first half of 2012 that called for the successor agency to begin retiring the debt on more than $15 million in promissory notes issued by the Chino Redevelopment Agency and held by the city of Chino. In May, the redevelopment successor agency followed up on its April action, and  submitted to the state a recognized obligation payment schedule for the second half of 2012 that cited payment on the promissory notes as an outstanding obligation.
The Department of Finance, according to Jeff Oderman, an attorney for the Chino redevelopment successor agency, has rejected the approved list, holding that loans made to the redevelopment agency by the city that founded it are, with the dissolution of the redevelopment agency, invalid debts. According to a number of attorneys, however, the promissory notes from the Chino Redevelopment Agency held by the city of Chino, like many other debts pursuant to loan arrangements involving other cities and  their respective redevelopment agencies, are enforceable under AB X1 26 and AB X1 27. Chino is on the verge of seeking a litigative remedy in Sacramento Superior Court.
The city of Twentynine Palms is proceeding with an even more aggressive challenge of the state Department of Finance in its effort to wrest  back $31 million in bond proceeds.
Twentynine Palms officials believe that AB X1 26 and AB X1 27 are trumped by federal securities regulations, meaning the money the Twentynine Palms Redevelopment Agency bonded for last year must be utilized only for the purpose that bondholders were told the money would be applied toward.
In 2011, while the redevelopment agency dissolution legislation was being considered in Sacramento, the Twentynine Palms City Council, which doubled as the city’s redevelopment agency board, issued two tax allocation bonds for a downtown revitalization undertaking known as Project Phoenix, which is to include a community center, a 250-seat theater, classrooms, a civic plaza, a park, a paseo, residential units, a wastewater treatment plant, and improvements to the downtown fire station. That bond money was made available before the law went into effect but was never expended.
Twentynine Palms City Attorney A. Patrick Munoz, of the law firm Rutan & Tucker, believes he can convince a judge the non-taxable bonds issued last year created specific obligations between the city, the issuer, the bond underwriter and the bond purchasers, and as such are enforceable obligations. If the city were to hand off the bond proceeds to the state and the state were to use the money for a purpose other than what the city had specified in marketing the bonds to the bond buyers, that would constitute fraud, according to Munoz.
Munoz’s strategy calls for having the successor agency lay claim to the redevelopment money and proceeding with the previously ratified redevelopment programs, including Project Phoenix. The state will have to go along with the city’s discharge plan because the bonds are enforceable obligations and the proceeds are secure, Munoz has theorized. Munoz suggested the city will have to be very precise about how the money earmarked for Project Phoenix is expended.
Munoz drafted a contract between the successor agency and the city by which the  successor agency is to  turn over the bond spending authority to the city with a directive that it go toward Project Phoenix. After the contract was presented to the council on May 22 and approved with the 4-1 vote, the oversight board took up the issue the following day, May 23, and its seven members voted unanimously to endorse a resolution to transfer their duties and obligations to administer the bond proceeds to “the city in its capacity as a municipal corporation. If the proceeds were turned over to the state to be re-allocated for operational purposes, these proceeds would no longer be tax-exempt if they were not used for public works projects,” Munoz maintained. “That creates concerns as to whether we violated federal tax laws and federal securities laws due to promises we made to the public when we sold the bonds versus the way we’re using the bonds.”
Acknowledging the strategy could entail a protracted “legal fight with the Department of Finance,” Munoz has recommended that if the state of California does not accept the contract for the Project Phoenix expenditures as legitimate, the city and its successor redevelopment agency should proceed with litigation against the state.

Upland Pot Clinic Principals Indicted

Federal authorities on June 14 arrested and arraigned the owners and employees of the G3 Holistic marijuana clinic in Upland, bringing to a close operations at that facility as well as sister clinics in Colton and Moreno Valley operated by G3 along with a cultivation warehouse in Ontario.
Named in a June 6 indictment that was kept under seal until June 14 were Aaron Sandusky, John Leslie Nuckolls II, Keith Alan Sandusky, Paul Neumann Brownbridge, Richard Irwin Kirchnavy, and Brandon Anton Gustafson.
The defendants were arrested at their homes without incident on the morning of June 14 and transported to Riverside Federal Court for arraignments that same day. The indictments, arrests and arraignments came nearly seven months after the federal Drug Enforcement Agency raided the Upland Clinic in November and more than five months after the DEA again paid a visit to the clinic in January and informed the clinic’s operators they would be deemed to be in violation of federal  law if they continued to operate.
The clinic was founded by Aaron Sandusky and Nuckolls as a capitalistic venture in accordance with Proposition 215, California’s medical marijuana availability initiative which was passed by 56 percent of the state’s voters in November 1996. Sandusky and Nuckolls maintained that theirs was a legitimate business under the law and they remained defiant in the face of federal law enforcement action against them, stating that they stood ready to test the issue on Constitutional and States’ Rights grounds. They are represented by attorney Roger Diamond.
The city had sought to utilize zoning and its legislative executive authority to prevent the clinic from operating and had expended $285,000 in legal fees paid to the law firm of Richards, Watson & Gershon, which employs former Upland City Attorney Bill Curley, in a legal effort against G3 Holistic. That strategy, in and of itself, was ineffective. Despite one favorable ruling indicating the city could bring its zoning and land use authority to bear in keeping the clinic from operating at its 1710 West Foothill Blvd. Suite F-4 location, the city was thwarted when G3 Holistic lawyers filed appeals first to the appellate court and ultimately to the state Supreme Court, in the meantime keeping the clinic running.
Controversy erupted over the city’s payment of the $285,000 in fees to Richards, Watson & Gershon to carry out a legal battle in state court when medical marijuana is legal under state law. As a consequence of those billings and other unrelated high dollar billings by his law firm, Curley was forced out as city attorney earlier this year.
The presence of G3 Holistic in Upland played a part in the federal indictment of former Upland Mayor John Pomierski on extortion, bribery and conspiracy charges. According to  federal prosecutors, Pomierski and his associates attempted to shake down Aaron Sandusky for money while he was seeking to maintain his operating permit with the city.
The leading advocate of the city’s legal effort against G3 was councilman Ken Willis. In speaking with the Sentinel, Willis acknowledged, “We were spending a lot of money fighting this thing on our own. We didn’t know what to do. This was new ground for us. It started out as a conditional use permit issue and a zoning issue. Other cities had to go through the same process we went through. There was a learning curve to being confronted with marijuana shops in the middle of our community and them being aggressive was a new experience. In time it became obvious to us we were dealing with a federal law at one end of the table and at the other end of the table the [Proposition 215] initiative that dealt with pot shops.”
Willis disputed the suggestion that the money the city spent on the legal effort was squandered, even though the city’s legal effort did not achieve the sought-after goal. He said that drugs are a scourge and the city could not remain idle. Tolerating medical marijuana would have planted the city’s feet on a slippery slope, he said.
“I’m sure you have heard my arguments in favor of pushing them out of town in the past,” Willis said. “Most of the concern revolves around the problem of protecting young people. There are a lot of arguments about marijuana helping people with glaucoma but many more children can be negatively influenced by this than there are adults with glaucoma. Just about every family has a story about one of its own members and marijuana and cocaine. Eventually, the two go together.”
At some point the city realized the strategy of trying to use the state courts to drive G3 out was of questionable efficacy, Willis said.
“Our police chief and city attorney said ‘Let us see if we can find a better way,’ and whatever information we had we turned over to the feds and crossed our fingers,” Willis said. “We finally learned the Department of Justice and the DEA were concerned about the issue, but it took a fair amount of urging to get them to come look at Upland. There were some red flags there and I think the feds began to see we were resisting this onslaught of pot shops and fighting it to the degree we could. They decided there was more to accomplish in Upland than in other communities. They have now drawn a line in the sand and I think they will back that up.  I am glad the feds took some action and personally I think a vast majority of the parents of children of this community will feel relieved if this leads to the permanent closure of these facilities in our town.”
The case of Upland vs. G3, which is now before the Supreme Court, since May 4 has been handled by Richards, Watson & Gershon pro bono.
Aaron Sandusky, 41, G3’s cofounder and CEO, Nuckolls, 31, G3’s cofounder and CFO,  Keith Sandusky, 44, who was a G3 manager, and Brownbridge, 29, Kirchnay, 45 and Gustafson, 30, all of who worked at the Ontario cultivation warehouse, pleaded not guilty.

Cedar Glen Water Project Proceeding Despite Underlying Problems

The county’s special district’s division is proceeding with the second phase of improvements to the Cedar Glen Water system in the San Bernardino Mountains, despite questions about whether underlying inadequacies of the system have been redressed.
The county in 2009 initiated the first phase of improvements to the area’s water system. That phase included the drilling of a well off of Coulter Drive where there was then no electricity to operate a pump. The special districts division subsequently entered into discussions with Southern California Edison to extend electrical service to the area.
Phases II and III 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.
There is some concern among Cedar Glen ratepayers that the well located on the southern boundary of the San Bernardino National Forest is being built to benefit developers and that current residents will bear the cost.
The community of Cedar Glen was provided with water service by investor-owned Arrowhead Manor Water Company (AMWC) until May of 2003, when the company went into receivership.
Five 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 created 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 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 believe they are being overcharged for the water service they are receiving.  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.
In 1980, the owners of the Arrowhead Manor Water Company, Ernie and Jean Schoettmer, were awarded $910,510 pursuant to the Safe Drinking Water Bond Act. The money the Schoettmers received was supposed to be used to build a pump house, a water tank and pipelines off of Balsam Ave. in Cedar Glen and put in 8-inch pipelines on Juniper Drive, Maple Drive and Pineridge Drive.
Engineering for that work 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.  Though a notice of completion was sent to the Department of Water Resources stating that all work had been completed, a large portion of the work, in fact, was never finished. There are major discrepancies between the systems in the ground and documents pertaining to the project contained in county files. Members of the board of supervisors have not themselves nor detailed their staff members to make a survey of the actual systems and have relied upon the erroneous documentation.
The phase of improvements begun in 2009 obscured that pipes were not laid in 1981 and the money diverted elsewhere. County special districts employees acknowledged  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.” However, in Davis’s official report to then-special districts director Thomas Sutton a month earlier on June 17, 2004, the defective or missing pipe was not mentioned.
Documentation indicates that the county confirmed that two miles of pipe were laid using money provided by a California Department of Water Resources Loan that was supposed to provide for the  laying of over 14 miles of pipe.
In July of 2002 the Public Utilities Commission made Decision 02-07-009, stating 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.” Though the surcharge was reinstated in July of 2003, two months after the Superior Court appointed John Richardson as the receiver of Arrowhead Manor Water, from that time nothing was paid to the Department of Water Resources.
In January 2009 bills sent to Cedar Glen residents included a $504 Safe Drinking Water Bond Act surcharge.  In February 2009, a facilities charge showed up on those bills 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, which now appears on each statement.
While Cedar Glen residents are being socked for higher water rates, some of them are clamoring for all of the money collected by the court appointed receiver and the Special District since 2003 to be refunded to the residents of Cedar Glen because that money was never paid to the Department of Water Resources.
The county did not provide legal notice to residents that there would be a facilities charge.
While ultimately the board of supervisors signed off on the billing policy, none of its members has evinced knowledge or understanding of the circumstances related to the previous history of the water system under Arrowhead Manor’s management.  Some Cedar Glen residents continue to maintain that the county and the board of supervisors, which authorized using taxing authority to collect water bills more than two years ago, are bound by Public Utilities Commission Resolution W-4407, which stipulated the conditions of the reinstatement of the surcharges and that the county must repay every resident in Cedar Glen all surcharge monies collected since July 10, 2003 or drop the surcharge payments altogether.