(June 21) VICTORVILLE— The Southern California Logistics Airport Authority failed to make all of a $1,155,961 interest payment for a capital improvement bond that was due June 1, Victorville city officials have acknowledged.
The Southern California Logistics Airport exists on the grounds of what was George Air Force Base. George was shuttered by the Department of Defense in 1992. Victorville worked with the city of Hesperia, the town of Apple Valley and the county of San Bernardino under the aegis of the Victor Valley Economic Development Authority (VVEDA) in the 1990s to put together a civilian conversion plan for the air base which prevailed over a competing plan put forth by the city of Adelanto. To a considerable degree, Victorville has shuffled off the coil of VVEDA. The airport authority, an adjunct to the city of Victorville, is now the lead development agency at the airport.
The Southern California Logistics Airport Authority, known by its acronym SCLAA, has relied in major measure on bond financing for making improvements at the airport. Bonds are issued and then sold to investors. The proceeds from the bonds are used to finance the construction of infrastructure or other improvements to facilitate the function of the airport. Bondholders are supposed to be paid back upon the escalation of property value in the area around the airport, which is intended to increase property tax revenue into the city. That increase in property tax revenue that results from the improvements is referred to as tax increment and is dedicated to debt servicing the bonds.
Development of the airport has stalled in recent years, however. SCLAA in a statement to its bondholders on June 1 notified them they would not receive the interest payment due them on the SCLAA Subordinate Tax Allocation Revenue Bonds, Series 2007.
“SCLAA will use the remaining reserves of $491,331 for interest payment and default on interest of $664,630,” Adele Mosher, the airport authority’s  financial officer, told investors.
City officials maintained that the default occurred because there is insufficient tax increment being generated at and around the airport to pay the bondholders. Increment is down because property values have consistently fallen in recent years, both at the airport and elsewhere.
The default complicates the legal positions of the city of Victorville, SCLAA and SCLAA Director Keith Metzler, who is also assistant Victorville city manager, all of whom have been named in a complaint by the Securities and Exchange Commission alleging they defrauded the purchasers of airport bonds SCLAA issued and sold between 2006 and 2008.
It is unclear how long the bonds will remain in default. The bonds do not fully mature for another 24 years, meaning the city is contractually committed to paying those bondholders an annual percentage of the value of the bonds they hold – usually between 4.75 and 5.35 percent annually, for the life of the bonds plus the original full cash value of the bonds on their date of maturity.
$42 Million in the 2007 Subordinate Tax Allocation Revenue Bonds were issued.