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Sentinel 11-01-13

(November 1)  SAN BERNARDINO—The continuation of James Penman’s 26-year tenure as San Bernardino city attorney will be on the line Tuesday when the county seat’s voters go to the polls during this year’s municipal election, which in this instance is augmented by recall questions against three city officials, including Penman.
2013 would normally be an off-political year for Penman, who was reelected to his seventh term as city attorney two years ago and has two years remaining on that term. But last year, after years of fiscal challenges, San Bernardino filed for bankruptcy. For many of the city’s 209,924 residents, that brought  City Hall and the officials there into disrepute.
In April, a hastily formed action committee, San Bernardino Residents For Responsible Government, declared that they were gunning for the political heads of mayor Patrick Morris, Penman and council members Wendy McCammack, Fred Shorrett, Rikki Van Johnson, John Valdivia, Virginia Marquez, Robert Jenkins, and Chas Kelley. The group said it was motivated in large part by the city’s filing for bankruptcy.
Eventually, the group called an end to its effort against Morris, who is not seeking reelection in November and will leave office next March. It also discontinued the campaigns against Jenkins, Marquez and Shorrett, who are standing for reelection in the November 5 municipal race to remain in office past March. It dropped the campaign against Van Johnson as well. It did proceed with the call to let voters decide on removing Kelley, Valdivia, McCammack and Penman.
While city clerk Gigi Hanna originally ruled that the group had failed to meet technical requirements to have the recall petitions against McCammack, Kelley and Penman considered, on August 22 Judge David Cohn ruled that Hanna had to accept the recall petitions and the signatures endorsing them and forward them to the registrar of voters to be tallied to see if the required number of voters had signed onto the effort to force the recall election to take place. Once the recall petitions and signatures relating to Penman, McCammack, Kelley and Valdivia were tallied by the registrar of voters, it was determined that 11,855 valid signatures had been affixed to the petition to remove Penman, 267 more than the 15 percent of the city’s registered voters citywide  needed to place Penman on the ballot as a recall candidate. In addition, it was determined, there were sufficient signatures –  at least 25 percent of the voters in their respective wards – to place McCammack and Valdivia on the ballot as recall candidates.  Signature gatherers, however, fell short in the effort to qualify a recall question against Kelley, who was one of eleven candidates vying for mayor in this year’s election.
As fate would have it, earlier this month, Kelley abruptly resigned from the council and ended his mayoral run on the same day he was charged with and pled guilty to diverting money in his campaign war chest to personal use. On the same day, his fellow council member Robert Jenkins was charged with 30 counts of fraud, identity theft, false impersonation and forgery.
Two candidates, Gary Saenz and Tim Prince, have emerged as alternate candidates to Penman. Their names will appear on next Tuesday’s ballot alongside the recall question against Penman. Should voters choose to remove Penman, his defeat will actuate the contest results between Saenz and Prince and whoever of those two gathers the most votes will succeed Penman.
Penman has pointed to the six times he has been reelected as city attorney following his initial election to the post and 26 years of guiding the city, the largest in the county, around numerous legal pitfalls, ensuring that the city’s codes are strictly and fairly enforced and simultaneously serving as a “watchdog” over the city’s elected and hired leadership.
He referenced seven “corrupt city officials” who have either been successfully prosecuted or otherwise removed from office during his tenure and maintains that taking up such cases and seeing them through to a resolution were demonstrations of his mettle and dedication as city attorney. He implied, without directly stating, that he was responsible for having instigated the investigation that led to Kelley’s resignation and conviction.
Penman said he has repeatedly shown the fortitude to openly declare that “council members are on the take. In each and every case, I was accused of lying. In each and every case, the truth of the statements I made was proved by subsequent events, including one joint city attorney/attorney general-filed law suit, jury verdicts, court orders, the defendants admitting the charges, paying large fines, and some even going to jail.
“Dedicated public officials speak the truth and those seeking to oust officials elected by the people should follow the same rules. I practice what I preach. I believe the recall proponents practice deception,” he said.
Saenz was less charitable about Penman’s performance, charging that he “brazenly flaunts his role as a political operative and policy-maker in his role as city attorney.”
If the voters cast Penman out and choose him as his replacement, Saenz said, “I will take politics out of the city attorney’s office.”
Prince was even more critical of Penman than Saenz, maintaining his failings as city attorney had impact beyond the scope of the city’s legal affairs, contributing to its financial downfall.   “Legal judgments against the city on cases he farmed out to outside attorneys and lost caused the city to urgently file for bankruptcy,” Prince charged.
Prince said Penman made inappropriate public comments defending Jenkins after criminal charges were filed against him last month. “Mr. Penman’s job requires him to defend the city, not the councilman,” Prince said.
Moreover, Prince said, he has a history of threatening and bullying city employees, including the city’s public works director on November 2, 2011, the director of community development on November 30, 2011, then-police chief Keith Kilmer in October 2010; and then-mayor Judith Valles in 2003.
Prince referenced numerous incidents in the 1990s that culminated in five female city employees filing sexual harassment complaints against Penman and the city’s subsequent investigation which resulted in his being reprimanded and required to attend sexual harassment training.
Prince said Penman’s legal acumen and ethics were brought into question by enforcement action against Penman taken in 2009 by the Fair Political Practice Commission, which levied its maximum punishment – a $5,000 fine – for failing to report that he accepted improper gifts from the Arrowhead Country Club.
Prince said that Penman had improperly lobbied the city council during a closed session of that body to increase the pension and other benefits of one of the attorneys working in his office. Prince said that Penman has repeatedly “encouraged the city council to raise employee benefits beyond what was financially sustainable.  Throughout his tenure Penman has consistently argued for higher pay, additional overtime and increased benefits for the wealthiest city employees, well beyond what the city can afford, bragging that he controlled four votes on the city council and ignoring the warnings of insolvency.”
Moreover, Prince said, Penman has disrupted the city’s management team, costing the city millions of dollars in terms of lost efficiency, administrative continuity and termination payouts. “Mr. Penman’s divisive political style has cost the city three police chiefs in seven years, three city managers in the past five years, the public works director, the director of finance, the assistant city manager, and others,” Prince said.
“Tuesday, November 5th could be a historic day in the city of San Bernardino – but only the voters can decide,” Prince said. “The bankrupt and much-maligned city has earned its poor reputation by having the highest unemployment rate in the state, one of the highest foreclosure rates, one of the lowest per capita incomes, and a never-ending crime and gang problem.  While the world economy of the past few years has impacted almost all cities, San Bernardino has achieved its bankrupt status through the actions of its leaders.
“City leaders, most notably the city attorney and the mayor, have been very divisive and have created factions in the city and on the city council,” Prince continued. “Voters are so outraged with the mess the city is in, a recall campaign was successful in collecting 30,000 signatures, placing the city attorney and the council members for Wards 3 and 7 on the ballot as well – meaning that seven of the eleven elected leaders in San Bernardino will face the voters on November 5th. We hope the dedicated voters of the city of San Bernardino select new, more fiscally responsible, ethical leaders.”

(October 31) UPLAND–At first subtly and then with greater urgency, Upland City Manager Stephen Dunn last Saturday attempted to usher the City of Gracious Living toward imposing on its residents a sales tax to shore up city finances.
Dunn was the master of ceremonies at a specially-called meeting of the city council that lasted  from 10 a.m. until noon and was  televised throughout the city to residents on the local Channel 3 government access station.
According to Dunn, who had arrived at City Hall at 4 a.m. to prepare his presentation, the city is currently functioning with a balanced budget but is on a collision course with fiscal reality in coming years. Before offering his own in-house analysis of the city’s financial condition, he cited two major independent size-ups of the city’s bleak financial picture, a 2012 auditor’s opinion from the certified public accounting firm Mayer Hoffman and McCann and Standard and Poor’s intended downgrading of the city’s credit rating. Mayer Hoffman and McCann said there are serious questions with regard to the city’s solvency to the point that in a short while “it will be unable to continue as a going concern.” According to Standard and Poor’s, the city, which has already been downgraded from an AA credit rating to an A+, is in danger of seeing its credit rating eroding even further. A municipality’s credit rating directly impacts the interest rate it must pay when borrowing money.
The city’s currently balanced $39 million budget is figuratively being held together by rubber bands, bailing wire, bubble gum and string, Dunn said, meaning it is borrowing heavily from rapidly evaporating reserves, while relying on income from two of the city’s enterprise funds which remain in the black, its water and sewer service funds.
Years of deferred maintenance are beginning to catch up with the city, pushing it to a point beyond which it will no longer be able to stave off those problems into the future, as potholes, streets and dilapidating equipment are being neglected, funding for promised post employment benefits is non-existent, and no programs are available for attracting businesses into the city or dealing with the city’s burgeoning homeless population, Dunn said.
Dunn provided the council a list of budget priorities and proposals for increasing revenues and cutting expenditures, asking them to rate each item 1 through 10 in order to give him direction on what action he should prepare to take. But two of the council’s members in particular, Brendan Brandt and Glenn Bozar, said they were reluctant to make any rating without having further information. Brandt noted that one of the items referenced the city making a $30 million sale of its water division, which he said was a far too involved and complicated proposal to make a facile judgment on.
The October 26 meeting was adjourned to October 28, at which time councilwoman Debra Stone lobbied her colleagues to comply with Dunn’s request so that he can move rapidly ahead with his budget balancing formula for the upcoming fiscal year.  In his pitch Dunn strongly suggested that the most efficacious way out of the city’s financial dilemma is to seek and gain city voters’ approval of a sales tax override. He noted that over the last two years he has achieved substantial savings in operating costs that included substantial layoffs as well as obtaining concessions from remaining employees on pension fund contributions.
Dunn admitted he was thoroughly befuddled as to what to do about the city’s animal shelter operation, which is gobbling up a substantial amount of money on a constant basis.
Dunn said the $3 million layered into the city’s budget for all order of public works projects including street maintenance, is unequal to the $8 million per year need in that division. He said to stave off eventual bankruptcy, which he calculated was about five years out, the city needed to either reduce spending further by $3.5 million per year or generate that amount of new revenue annually over the next half decade.
Stone was the council member most willingly accommodating of Dunn’s suggestion that Upland’s residents would be amenable to taxing themselves to maintain the community’s reputation as the “City of Gracious Living.” It was pointed out that, measured by the standard of per household median income, Upland is the second most affluent city in the county.
Councilman Gino Filippi appeared willing to sponsor Dunn’s taxing proposal as well.
Bozar in particular, however, appeared  unconvinced that Dunn has exhausted all of his options in streamlining and making more efficient the city’s operations before seeking a tax solution. Nor was he or Brandt willing to embrace any of the cost cutting proposals Dunn had cataloged without further information.
Accordingly, the council rejected Stone’s proposal that the council comply with Dunn’s request that  they complete the questionnaires by next week and instead voted, with Stone dissenting, to create a 10-member subcommittee instead, which is to review the cities financial options and report back to the council by January 31.

(October 30) As the handicapping for the 2014 31st Congressional race intensifies, perception is shifting as to who, exactly, the frontrunner is. That perception is shaped, at least in part by both party affiliation and wishful projection.
Currently, Gary Miller is the incumbent. In 2012 he cruised to victory in the district, which was reconfigured following the 2010 Census into one that seemingly favored Democrats. But a less than-coordinated approach by the Democrats, who fielded a surfeit of candidates in 2012, that year’s change to open primaries and Miller’s superior fundraising ability combined to prevent the Democrats from claiming the seat.
And while the Democrats appear to be intent on not repeating the electoral debacle of just one year ago, internecine fighting between the current field of 31st District Democrats has created a backdrop for a possible replay of Miller’s victory next year.
Democrats, with some level of justification, consider the 31st District to be one that should naturally fall to them. Of the district’s registered voters, 127,690 or 41 percent, are affiliated with the Democratic Party.  Registered Republicans in the district number 104,938, or 33.7 percent. Independent political appraisers see the 31st as a Democratic asset as well.
Undeterred by the reality that a member of the GOP – Miller – holds the 31st District scepter in hand for the time being, the Rothenberg Political Report, which rates the probable political affiliation of the nation’s Congressional districts, pronounced the 31st as leaning Democratic in June. The Cook Political Report, which persisted in listing the district as a political toss up since 2012, on October 17  changed its rating for the 31st District to “leans Democratic.”
One measure of the voting tendency within the 31st is that 57 percent of its voters polled for Obama in 2012.
The stage thus seems set for a Democrat to chase Miller out of office next year. But which Democrat that will be is the question and as that question lingers, the prospect is growing that those who see themselves as the answer to that question will end up bleeding each other white even before they can get into a one-on-one match-up with Miller.
Miller defied the odds to gain election in the Democratic-leaning 31st Congressional District last year despite his Republican Party affiliation. Between 2002 and 2012, Miller had represented voters in the 42nd District, encompassing the southwestern corner of San Bernardino County, the northeastern corner of Orange County and the southeastern corner of Los Angeles County, where Republicans held a strong registration advantage. But with the redistricting following the 2010 Census, Miller was left without a district in which to run safely, as Ed Royce, another incumbent Republican, found himself reapportioned into the new 39th District, which commandeered much of Miller’s old 42nd District.
Miller chose to run in the 31st where it was presumed that then-incumbent Democratic Congressman Joe Baca would run. But Baca, perhaps fearing Miller’s prodigious fundraising ability, elected to run in the even more heavily Democrat-laden 35th Congressional District.
Members of Congress do not need to live within the geographical boundaries of the district they represent, and merely need to live within the state where the district in which they hold office is located. Miller, who resides in Diamond Bar, took a calculated risk by vying in the Democratic-leaning 31st District, which encompasses parts of Upland and Rancho Cucamonga, and stretches eastward across San Bernardino County through a large portion of Fontana, Rialto, Colton, San Bernardino and Redlands. Another Republican, Bob Dutton, joined the fray in the 31st District in the 2012 primary, as did four Democrats – Pete Aguilar, Justin Kim, Rita Ramirez-Dean, and Renea Wickman. Despite the seven percent Democratic voter registration advantage in the 31st, simple mathematics hurt the Democrats as their vote was divided four ways, while the Republican vote was split two ways. Dutton and Miller proved to be the two top vote-getters and under California’s open primary arrangement, the November general election came down to a race between Republicans Miller and Dutton. Miller prevailed in that race.
The Democrats, licking their wounds, have attempted to regroup and undertake steps to take the 31st District back.
In May, the Democratic Congressional Campaign Committee selected Aguilar as one of five candidates nationwide to be included in its Jumpstart Program, which is intended to assist early-emerging Democrats seeking to unseat incumbent Republicans deemed to be vulnerable. In California, Aguilar has pulled in the endorsements of Senators Dianne Feinstein and Barbara Boxer.
Money is pouring into Aguilar’s political war chest. More attention was drawn to him, ensuring even more contributions, when  the Washington-based news organization, Politico, last month named  Aguilar one of “50 Politicos to watch in 2013.”
While Democratic Party members at the national level have settled upon Aguilar as the logical standard bearer against Miller in 2014, several local Democratic hopefuls are not on the same page.
Foremost among these is Baca, who did not fare well in the 35th District race last year against then-state senator Gloria Negrete-McCleod, also a Democrat. After Republican New York Mayor Michael Bloomberg provided Negrete-McLeod with $2.7 million from his political action committee, she was able to blitz the airwaves and district mailboxes with anti-Baca advertisements which pushed her over the top in the 35th. Now relying on the residual fundraising capability he enjoyed during his 13 years in Congress, Baca is trying to make a political comeback in the 31st District. In addition to the name recognition Baca brings to the political table, he possesses, as a former member of Congress, indirect and residual political clout, together with an insider’s knowledge of issues and alliances, which he is working assiduously to bring to bear.  In this way, Baca can count on big money backing from national and even international players. An example of this is his recent move to stand up for the Keystone XL Pipeline, which was originally undertaken by one of Baca’s former political supporters, ConocoPhillips, in conjunction with TransCanada. The first two of the four phases of the pipeline system to transport oil sands bitumen from Canada and  Bakken synthetic crude oil and light crude oil produced from the Williston Basin, known as the Bakken region, in Montana and North Dakota  primarily to refineries on the Gulf Coast have been completed. ConocoPhillips at this point has sold its interest in the undertaking to TransCanada, which is now investing heavily in the effort to assure the completion of the last two phases of the project, involving the expansion of refining and processing capability on the Gulf Coast and a controversial pipeline to originate at Hardisty in Alberta, Canada and extend 1,179 miles to Steele City, Nebraska.
Environmentalists are opposed to the project. Baca, however, has given TransCanada his assurance he will support the project on the grounds that it represents an advance toward North American energy independence as well as economic rejuvenation. In this way, he has taken a crucial step toward ensuring that he will receive substantial assistance from TransCanada, its investors, lobbyists and the political action committees TransCanada has endowed.
Nor is Baca the only Democratic candidate Aguilar, who is currently the mayor of Redlands, must overcome. Eloise Gomez Reyes, an attorney and longtime Democratic activist, and Danny Tillman, a school board member from San Bernardino and one-time close associate of former California Assemblyman Jerry Eaves, don’t appear to be responding to their party’s signals to get out of the race. They, along with Baca, appear intent on continuing to test whether they have the combination of charisma, existing support, name recognition and overall moxie to get one of the two top spots in the primary and then follow-up to prevail in November 2014.  So far they have proven resistant to calls that the party present a united front that is undiluted by competing Democratic candidates, allowing a test of Democratic strategists’ theory that Aguilar can beat Miller in a toe-to-toe slugfest, despite Miller’s incumbency and formidable fundraising capability.
Aguilar has yet to bring the campaign money he is accumulating to bear, as he is husbanding that cash for an energetic advertising effort this spring, in the run-up to the primary. As a consequence, he at present lags behind Baca in terms of name recognition and positive name identification among likely Democratic voters and behind both Miller and Baca in name recognition among Republican voters. Two recent polls show Miller and Baca ahead of the other candidates.
The race, or pre-race, has remained static for months, as no new candidates have emerged. It is noteworthy that no candidates have dropped out.  While it is widely accepted that Miller can, unless another Republican candidate emerges, count on garnering the full support of the Republicans in the 31st District in the June primary, a scenario is emerging under which both Baca and Aguilar will need to exhaust all of their available campaign money to get by one another in June, leaving their campaign coffers depleted and rendering whoever the winner is incapable of responding to the onslaught of Miller’s campaign.

(October 30) LOS ANGELES—U.S. District Court Judge John A. Kronstadt on October 28 heard oral arguments over whether the Securities and Exchange Commission complaint alleging investor fraud by the city of Victorville and assistant city manager Keith Metzler should be dismissed.
On April 29, the Securities and Exchange Commission (SEC) alleged that fraud was committed by the city, the airport authority and Metzler, who fills the dual roles of assistant city manager and executive director of the airport authority, when misrepresentations were made to the purchasers of bonds, the proceeds from which were intended to assist in the development of Southern California Logistics Airport, specifically with regard to bonds issued in April 2008.
The airport authority was formed by the city of Victorville to facilitate the conversion of the former George Air Force Base, which was shuttered by the Department of Defense in 1992, into a civilian airport. The Southern California Logistics Airport Authority, which has as its board of directors all five members of the Victorville City Council, issued bonds which were sold to investors to generate revenue to be used in making the base’s civilian use conversion.
Fundamental to the SEC complaint is the allegation that the defendants made misrepresentations with regard to the value of four airport hangars that Victorville referenced in its official statement for an April 2008 bond offering. The value of all four hangars was listed at $65 million. The county assessor later valued the hangars at $27.7 million. The SEC alleges that the authority used the inflated estimated values to mislead bond investors.
Two separate responses to the SEC complaint  were filed on August 30, one from attorneys with the law firm of Arent Fox, which represents Victorville and the airport authority and another from the law firm of Orrick, Herrington & Sutcliffe, representing Metzler.
Arent Fox maintains that even if the hangar valuations were overstated, they were not material misrepresentations by which the financing of the bonds in terms of the city’s and airport authority’s ability to continue to make payments to the bondholders was threatened.
Also charged in the SEC’s April complaint were  Kinsell, Newcomb & DeDios Inc., the underwriter for the bond offerings, that company’s owner, Jeffrey Kinsell, and Kinsell, Newcomb and DeDios investment banker Janees Williams.
The SEC complaint consists of nine claims for relief and one prayer for disgorgement. The authority is named in the first two claims for relief. Kinsell, Newcomb and DeDios [KND] is named in the third, fourth and eighth claims for relief. KND and Jeffrey Kinsell are named in the fifth and sixth claims for relief. Victorville, Jeffrey Kinsell, Williams and Metzler are named in the seventh claim for relief.  Jeffrey Kinsell and Williams are named in the ninth claim for relief.
In the prayer for disgorgement, which is a request for restitution of ill-gotten profits from security law violators, all the parties are named.
Orrick, Herrington & Sutcliffe’s James Kramer told Kronstadt that responsibility for any misrepresentations with regard to the value of the assets securing the bonds fell to the bond underwriters. “Metzler provided the correct information to KND in March and April 2008,” Kramer said in presenting a timeline of the bond offering.
Kramer took issue with Metzler having been included in the case altogether. According to Orrick, Herrington & Sutcliffe, “the SEC itself alleges that Mr. Metzler provided the correct hangar valuation information, twice, to KND. In light of this admitted fact, the SEC’s theory of recklessness boils down to the notion that Mr. Metzler engaged in ‘an extreme departure from the standards of ordinary care’ by, in essence, not assuming that KND ignored the updated valuation and failed to pass it along to the [bond marketing] consultant and by not taking it upon himself to check KND’s, and the consultant’s, math. This is not a plausible theory of recklessness, and the SEC points to no case on such facts that says it is. The SEC now tries to distance itself from its own allegations by claiming that it is ‘meaningless’ that Mr. Metzler, on two separate occasions before the April 2008 bond issuance, provided accurate updated hangar values to KND. According to the SEC, Mr. Metzler ‘did not provide this information to the consultant, which he knew needed that information to calculate the important tax increment.’ But in attempting to downplay the importance of its own admissions that Mr. Metzler provided the updated values to KND (and in attempting to overstate the role of the consultant), the SEC ignores its own allegation that ‘KND, as the underwriter, had ultimate authority over the portions of the official statements it prepared, including the false and misleading debt service schedule in the April 2008 official statement.”
Arent Fox maintains that even if the hangar valuations were overstated, they were not material misrepresentations by which the financing of the bonds in terms of the city’s and airport authority’s ability to continue to make payments to the bondholders was threatened.
“Unfortunately for the SEC, the conclusions in the complaint are inconsistent with the mathematical analysis that the SEC had to perform to bring the action in the first instance,” Arent Fox’s reply brief on behalf of the city and the airport authority states. “As a matter of mathematical fact, regardless of whether the alleged misstated hangar value is used ($65 million), or whether the alleged correct hangar value is used ($27.7 million), the debt service ratio remains above 1.25 in either case.”
The SEC stated in its complaint that the market required the 1.25 debt service ratio, and that the issuing agency was required to meet such a debt service burden on an annual basis throughout the life of the bonds. “The credit rating agencies focused on the debt service ratio, and a ratio below 1.25 would have affected the credit quality of the April 2008 bonds,” the SEC complaint states. Had the quality of the bonds been downgraded, the issuing agency, under the standards dictated by the market, would have needed to pay bondholders a higher yield.
The team of defense attorneys representing the city and the airport authority seized upon the standard the SEC cited in its complaint in constructing a legal shield for their clients.  “[T]he SEC’s allegations — taken on their own terms and accepted as true — do not rise to the level of alleged materiality necessary to survive a motion to dismiss,” the defense team, consisting of Terree Bowers, Jerrold Abeles and Adam Bentley, wrote.
The SEC is improperly seeking to delay a consideration of the materiality of the alleged misrepresentation, Bowers, Abeles and Bentley maintain. “[T]he SEC’s opposition attempts to shift the battleground, arguing that the court ‘need not’ consider it now, or that the basic arithmetic supporting it requires a ‘complicated calculus’ of ‘19 pages of complex math,’ as if to suggest that it is too hard to understand,” the defense brief states. “Both of these premises are false. The court should—indeed, it must—decide whether the facts alleged by the SEC satisfy its burden to demonstrate materiality in the complaint. And it must consider the calculations, because that is the only way to determine whether the SEC’s allegations indeed state a claim. In short, the court is both legally and intellectually capable of determining whether the SEC’s complaint adequately alleges materiality. The determination is possible and proper at this stage in the case.”
Arent Fox maintains the inability of the SEC to sustain that material misrepresentations were made to the bond buyers undermines the entire case against the city and the authority.
According to the SEC’s complaint, by April 2008, the airport authority was forced to refinance part of the debt incurred to construct the hangars and other projects by issuing additional bonds. “The principal amount of the new bond issue was partly based on Metzler, Williams, and Kinsell using a $65 million valuation for the airplane hangars even though they knew the county assessor valued the hangars at less than half that amount,” according to Elaine C. Greenberg, chief of the SEC’s Municipal Securities and Public Pensions Unit. “The inflated figure allowed the airport authority to issue substantially more bonds and raise more money than it otherwise would have. It also meant that investors were given false information about the value of the security available to repay them.”
SEC investigators say that Jeffrey Kinsell, KND, and another of his companies misappropriated more than $2.7 million in bond proceeds that were supposed to be used to build airplane hangars for the airport authority.
Knonstadt is to rule on motions filed jointly on behalf of the city, airport authority and Metzler  to dismiss the first, second, and seventh claims for relief in the SEC’s April 29 lawsuit before the case, with or without those claims intact, goes forward.

(October 31) The effort to extend Burrtec’s trash hauling franchise with the city of Upland from its current seven-year rollover term to 15 years fell short this week when the city council deadlocked 2-2 in its vote on the proposal.
Burrtec, which as the result of a bidding competition with Los Angeles County-based Athens Services in April lost a $17 million per year contract  it held for the previous dozen years for the operation of all of San Bernardino County’s landfills,  is now seeking to solidify its hold on the trash hauling franchises it has with 16 of San Bernardino County’s incorporated cities and 34 of its unincorporated communities. It has made a test case of Upland, where it has proposed adding street sweeping and household hazardous waste and medical waste disposal to the services it already offers in return for the city’s consent to lengthen the “evergreen” clause in the contract, which locks the city into the franchise arrangement, and increase the rate it charges Upland’s customers by 7.2 percent for the remainder of 2013-14; another 2.1 percent in July 2014; 2.1 percent in July 2015; 2.3 percent in July 2016; and 2.4 percent in 2017. Increases beyond that would be tied to the Consumer Price Index.
Currently, under the so-called evergreen clause instilled into the contract by former Upland mayor John Pomierski, the city is committed to keep Burrtec as its trash hauler at least until 2020. If it does not give notice to Burrtec by March of each successive year that it wishes to rebid the contract, the franchise is renewed again, i.e., kept green, for at least seven more years.  The franchise contract extension proposal put forth by Burrtec in May in a letter to public works director Rosemary Horning and finally voted upon by the city council on Monday of this week would have extended the evergreen clause by another eight years, such that the earliest Upland could get out of the contract with Burrtec would have been 2028.
Councilman Brendan Brandt, whose law firm has done legal work for Athens Services, abstained from the vote and discussion of the matter. Mayor Ray Musser and councilman Gino Filippi, who have received political contributions from Burrtec, were able to vote because those contributions had been provided to them more than a year ago, and the city’s ordinance which prohibits council members from voting on issues impacting a donor extends only to donations made within 12 months of such a vote.
Horning, city manager Stephen Dunn, and Horning’s second-in-command, assistant public works director Acquanetta Warren, along with R3 Consulting Group Inc., which was hired to evaluate Burrtec’s proposal, recommended that the city approve the contract extension. Councilman Glenn Bozar, however, said he could not accept doing so without first seeking bids from other trash haulers. Thus, he called for giving Burrtec notice under the terms of the current contract and going out to bid in six more years.
Staff, supported by councilwoman Debra Stone and Filippi, countered Bozar’s suggestion, emphasizing that the city’s share of solid waste program revenues has been eaten up in the past several years by increasing disposal costs that the city must bear to the point that the city will soon be losing money on the program. The Burrtec contract extension would avert that problem, they said.
Dunn warned that Burrtec is due to receive rate increases under the current contract. Bozar, in response, suggested that the city, which handles the trash service billing of the city’s residents and businesses, could increase the trash service rates independent of altering the current contract with Burrtec to head off any deficit the city runs on the trash program.
Mayor Ray Musser’s vote thus proved crucial in the decision. He said he was troubled by the  perception of a conflict of interest with regard to Warren, as deputy public works director, having recommended approval of the franchise extension. Warren, who is also the mayor of Fontana where Burrtec has a trash hauling franchise, had received $11,578 in campaign contributions from Burrtec prior to giving her recommendation in favor of the company and, five days after she made that recommendation, put on a fundraiser at which Burrtec participated as a major sponsor.
After Musser raised the issue of the potential conflict, city attorney Kimberly Hall Barlow attempted to intervene, rendering an opinion that there was no legal conflict of interest in Warren’s participation with regard to the contract.
This only intensified Musser’s objection. “You can say it’s legally okay, but it is not okay ethically. It reeks. It looks bad,” the seemingly incensed mayor told Barlow.
He voted against the contract extension, which failed on the resultant 2-2 vote.