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Sentinel 06-22-18

By Mark Gutglueck
Trying not to convey as much to their constituents, the members of the San Bernardino County Board of Supervisors at their June 12 meeting tiptoed around the prospect that the cooperation they extended to four cities over the last three years will result in a financial loss to the county of somewhere in the neighborhood of $20 million annually. Clouding the discussion of fiscal year 2018-19’s $276.6 million county fire department budget were hints that extending agency-to-agency privilege to government officials in the cities of San Bernardino, Twentynine Palms, Needles and Upland to let them increase the taxes their residents pay and simultaneously ditch their local fire departments is now about to exacerbate an already alarming $29 million deficit the county has in running its own fire department.
Then, as boldly as before, a majority of the board moved to avail itself of the same ploy used by the four cities to bypass voters in creating a new taxing structure and shore up the county’s own fire department revenue shortfall.
Since 2015, the county and its division which adjudicates jurisdictional disputes, known as the Local Agency Formation Commission, have assisted the cities of San Bernrdino, Upland, and Needles, as well as the Twentnine Palms Water District, shed what were their previously municipal or locally administered fire departments and allow the county’s fire department, also referred to as a fire district, become the provider of fire safety service in those communities. Many of those among the civically active set consider the fashion in which this was done to have been particularly craven. In each case, those, or most of those, impacted by the changeover lived in an incorporated city in which fire protection provided by the municipal or local fire department had been in place since that particular city’s incorporation. As a basic service, fire protection as embodied in the presence of municipal fire department had been something the residents believed they were simply entitled to. Indeed, in the cases of Upland, San Bernardino and Needles, the municipal fire departments were traditionally considered a part of the city’s line of in-house operations, the costs of which were defrayed by those cities’ property tax allotments from the county. In the case of Twentynine Palms, the 29 Palms Fire Department had been in existence since 1957, and had always been under the control of the Twentynine Palms Water District, which serves the 55 square miles within the Twentynine Palms City Limits and the 33 square miles of unincorporated county area that also falls under the water district/fire department’s 88-square mile jurisdiction. The Twentynine Palms Fire Department’s operations were entirely defrayed by an annual $80 special assessment imposed upon all residential and commercial parcels within the water district boundaries.
In structuring the county’s takeover of fire service, more than a simple handoff of the service was at play. Rather than just shuttering their fire departments and contracting with the county for the delivery of fire service, the cities applied with the county’s Local Agency Formation Commission, which is also known by its acronym LAFCO, to have the entirety of their city limits annexed into a fire service and assessment district whereby each parcel owner in those cities was assessed a $143-to-$156 per year charge on top of their existing yearly property tax bill, creating a revenue stream that was used to defray in whole or part the cost of having the fire protection service delivered by the county. In this way, the cities saved in large measure the money they were previously expending to run their own fire departments. Getting out from underneath this burden and transferring it to their residents represented for these cities a continuous and ongoing yearly windfall tantamount to an added tax on their residents, who saw no respite in their property tax rates and now find themselves paying for a service they had been previously paying for through their property taxes. Layering onto those cities’ residents an additional tax was carried out without a vote of those to bear the new tax, as is required by the California Constitution. This was effectuated through the use of what many considered to be sleight-of-hand: instead of holding a straight up-and-down vote of those to be annexed into the assessment districts in which they were free to choose whether to create and subject themselves to the new tax, the Local Agency Formation Commission used an arcane provision of state law to subject the ratification of the assessment district to a so-called protest process. Under the protest process, residents and landowners of those cities were invited to make a protest to being inducted into the assessment district. All those who did not mail in a letter of protest were deemed to have supported the annexation. If 25 percent of those living within that particular city’s confines lodged protests, then an election would have been held. If 50 percent plus one or more of the residents lodged protests, then the effort to create the assessment district would have failed. City and county officials, banking on the consideration that apathy and a lack of public awareness about the significance or very existence of such protest opportunities doom all such protest votes to failure and that such
protest processes historically garner only minimal attention and participation of the electorate, in every case were able to see the assessment districts formed. Nevertheless, in all of the communities shoehorned into the annexations, a small but vocal contingent of the residents bitterly resented the ploy their elected officials had utilized to up their taxes while regionalizing a local service to which they had been accustomed, and inveighed against what their elected officials had done to them.
It so happened that when the county and the City of Upland had effectuated the closure of the Upland Fire Department, they included neighboring San Antonio Heights, an unincorporated but affluent community of just under 3,400 residents, in the fire service district annexation, imposing on them a yearly assessment of $152.68 on top of the annual property tax each property owner was already paying. The San Antonio Heights Association, a collective of that community’s home and property owners, encouraged and supported by a number of Upland residents, retained attorney Cory Briggs to initiate legal action to challenge the annexation. In the lawsuit Briggs and his law partner Anthony Kim drew up, they asserted that the “protest vote” is not an actual vote.
The city, represented by attorneys James Markman and Donald Wagner, the county, represented by Laura L. Crane, and LAFCO, represented by Ginetta L. Giovinco, have staked their assertion of the legality and enforceability of the assessment district on the precedent-setting case of Sunset Beach v. Orange County LAFCO, in which an appellate court ruled against a small population of residents living in Sunset Beach, what had been an unincorporated county area in Orange County adjoining and partially surrounded by the City of Huntington Beach. Those citizens objected to being annexed to the city with the requirement that they also pay preexisting Huntington Beach special assessment district taxes. Those Sunset Beach residents maintained they had not voted on the assessments and therefore should not be forced to pay them. After the trial court agreed with Orange County’s Local Agency Formation Commission and ruled the annexation could proceed without a vote and Sunset Beach’s residents were not protected against taxes that they had not voted on, the residents appealed to the state appellate court, which upheld the trial court and ruled that the Sunset Beach residents had to accept the assessments once they were a part of the city.
In the Sunset Beach case, the property was annexed into a nearby and adjacent jurisdiction and the appellate court held that Proposition 218, which offers California residents an assurance that no tax a majority of voters has not approved can be assessed, does not apply to improvement assessments already in place when an annexation of property into an adjoining jurisdiction occurs. In the case of Upland and San Antonio Heights, however, they were annexed into the county’s Fire Protection Zone 5, which is neither adjacent to nor near them. Rather, Fire Protection Zone 5 provides county fire service to the communities of Silverlakes and Helendale, which are located in the Mojave Desert south of Barstow, 64 miles driving distance or 49 miles as the crow flies from Upland and 47 miles from San Antonio Heights.
Moreover, according to Briggs, another state voter approved initiative, Proposition 26, offers even more comprehensive protection against any new taxes not approved by a vote than does Proposition 218. Proposition 26 was passed in 2010, the same year that the Sunset Beach case was ruled upon, and was not yet in effect when the Sunset Beach case was considered and a decision on it rendered.
The San Antonio Heights Association suit has survived not one but three attempts by the county, the city and LAFCO to have it dismissed, and the judge hearing the case, David Cohn, has indicated he sees merit in some of the issues Briggs and Kim have raised. Trial is set to begin on August 22.
At stake in the case is a principle that is larger than San Antonio Heights, Upland, the county fire department, LAFCO and the county. While any ruling by Cohn in this case at the trial court level is not binding beyond the immediate matter being litigated, were he to rule that the assessment district was not properly imposed without an actual vote, that could resonate throughout the state if the governmental entities seek to appeal such a ruling and it is upheld. Such an eventuality would have serious procedural consequences on other cities, counties or jurisdictions that have relied on protest votes to usher new taxes in the side or back door. Such a ruling in favor of San Antonio Heights in the immediate case would dissolve the assessment district in San Antonio Heights at the very least and potentially in Upland. Moreover, residents in San Bernardino, Twentynine Palms and Needles are doubtlessly watching to see what the outcome of the litigation brought by the San Antonio Heights Association will be. If Cohn ultimately rules against the city, the county and the Local Agency Formation Commission, it is a virtual certainty that taxpayer groups in the four cities will beat a path to either Briggs’ or some other lawyers’ doors to clone the San Antonio Heights suit and file a virtually indistinguishable action against the county, LAFCO and their cities or, in the case of Twentynine Palms, the water district.
On June 12, the board of supervisors took up the 124th item on that day’s agenda, which called for conducting a public hearing on the San Bernardino County Fire Protection District’s 2018-19 recommended budget, the adoption of a resolution approving and adopting that budget, including signing off on appropriations, operating transfers out, planned contributions to reserves, quantifying available reserves and budgeted staffing, and authorizing the department’s final fund balance adjustments for all of the line items in the budget.
During the hearing what was revealed was that outlays to run the fire department countywide this year are projected to increase $18 million in Fiscal Year 2018-19, entailing total anticipated expenditures of $276.6 million. In the same 12 month period running from July 1, 2018 until June 31, 2019, the projected revenue from all sources other than fees from contracted ambulance service providers is expected to reach no more than $247.3 million, meaning the fire department will run a $29.3 million deficit. What is more, according to County Fire Chief Mark Hartwig, that deficit is anticipated to continue on a yearly basis for the next decade, “although,” he said, “the further we get the harder it is to predict property taxes and the trends on the primary funding for the fire district, which are property taxes. Last year’s budget of $258 million was increased by $17.9 million to $276 million [this upcoming year],” Hartwig said.
In the short term, meaning for 2018-19, the county fire department will plug the $29.3 million gap using $11.9 million in reserves it has on hand and accepting $17.4 million in funding from the county.
“I will tell you I am in a position this year that I was in last year I think we were trying to avoid, but it was the use of $11 million – actually closer to $12 million – in reserves and fund balances from the district to do business this year,” Hartwig said. “Its been called in the past a subsidy. It’s been called a supplementing of the fire district.” Hartwig referred to the $17.4 million in funding the county would put up a “service zone enhancement” which was put in place pursuant to a “county M[emorandum] O[f] U[nderstanding]” with various relatively remote unincorporated areas. “The county has invested in the fire district to provide services in areas throughout the district that don’t generate enough property taxes to provide the level of services they currently have provided to them by the fire district,” Hartwig said. “The board has continued to invest in not only those areas but some specific programs that the district provides.”
The county is losing a substantial amount of money on some to those efforts, Hartwig said, including putting up “$7.7 million to subsidize ambulance service and offset the losses from the low volume of calls in Lucerne Valley, Wrightwood, Phelan, Searles Valley, Lake Havasu, Yucca Valley, Lake Arrowhead and Baker.” The county must, Hartwig said, “pay for stations in areas that do not have enough money to pay for those services. The current rate of spending for fire services is not sustainable because of our reliances on one-time funding.”
Prepping his ultimate pitch by presenting the doom and gloom prospectus of the fire department’s fiscal condition, Hartwig ultimately sought to usher the board toward the option of expanding Fire Protection Zone 5, which was referred to by the acronym FP-5, to include virtually all of the unincorporated county areas in desert areas of the county, which lie within supervisorial district’s 1 and 3, which are represented by Supervisor Robert Lovingood and Supervisor James Ramos, respectively.
Saying there are “currently ten tax service zones within the county,” Hartwig told the board, “FP-5 is the largest. The board of the fire service zone [meaning the board of supervisors] can expand that zone to maintain or improve services within the county fire district.” He said the “expansion would generate $26.9 million.” The expansion of the district can best be effectuated, Hartwig said by having the board of supervisors simply impose the annexations on the areas in question through its own authority without a vote of those to be forced into the zone. “We would recommend from the district that we would adopt a protest process,” Hartwig said, calling upon the board to do so immediately. “Act now to generate income by August 2019,” he said.
Hartwig outlined other options, which included holding an election in which the members of the various unincorporated communities would be asked to voluntarily, through a majority vote, annex into the assessment district. Hartwig, with a display of little enthusiasm, said the county could next schedule a “new special tax election in March 2019 to generate income by August of 2020. That requires a two thirds vote.” He also said, again without enthusiasm, that the board could choose to “reduce services to match revenue” in those areas of the county where little property tax is coming in.
Deficit spending by the fire department cannot continue indefinitely, Hartwig said. “As your fire chief of seven years who’s responsible as a taxing authority to provide services to the communities that we protect, I recommend that we do something, that we don’t continue to rely on reserves or one-time money. The county board of supervisors, you, have invested in the fire district and the communities in this county. We’re thankful and the people of San Bernardino County specifically are safer and better off today because if that, but I don’t believe you have a legal obligation to do that. As a business practice I would like to find a more sustainable path forward. We don’t talk a lot about capital improvement and we don’t talk a lot about reserves. Not only are we not contributing again this year to our reserve funds, we are using our reserves and our fund balance. As we look at capital improvements, we aren’t fully refunding our vehicle replacement plan at this point. We do not have a viable or adequate capital improvement and replacement plan when it comes to fire stations and facilities.”
Fourth District Supervisor Curt Hagman said, “I do think we as a board should consider one of these two measures, if not both. I’m concerned that if we go with FP-5 that later on, with I think it’s a court case going through or legislation going through, that may reverse all those efforts. I think this is something we put in front of the voters and let them decide what levels of service they want.”
One of Hagman’s references was to a statewide initiative that petitioners have gathered signatures for and have submitted to the California Secretary of State. If passed by California’s voters it would do away with the protest process, preventing governmental entities from forcing residents into a service assessment zone or imposing taxes on them without a bona fide up and down vote. Governments would no longer be able to invite those to be annexed, assessed or taxed to protest and deem those who do not lodge a protest as supporting the tax or being put into the assessment district. Reportedly, the language of the initiative has a retroactive clause in it that would make it applicable to any annexations begun this year. Hagman expressed concern with the impact passage of the initiative might have on voters in the unincorporated areas if the annexation gets rescinded and the county then seeks a voter-approved assessment district creation. He said voters might at that point vote en masse against the creation of the district because they will perceive the effort as redundant.
Hagman’s other reference was to the lawsuit filed by the Sn Antonio Heights Association.
Second District Supervisor Janice Rutherford, whose district includes Upland and San Antonio Heights, expressed opposition to attempting to impose annexations into FP-5 without a vote. Rutherford last year did not make any opposition to the Upland/San Antonio Heights annexation, garnering the enmity of a significant number of her constituents. It nearly cost her the position she holds on the board of supervisors. First elected in 2010, Rutherford was up for reelection in 2014. In that race she cruised to an easy and lopsided victory over her opponent, Randolph Beasley, collecting 21,077 votes, or 68.13 percent to Beasley’s 9,861 votes or 31.87 percent. This year, however, Rutherford was put to the test against Marc Steinorth, who capitalized on LAFCO’s use of the protest procedure to ratify the annexation and Rutherford’s tacit acceptance of saddling residents with assessments against their will. Earlier this month, on June 5, Rutherford polled 30,231 votes or 53.24 percent in managing to stay in office, though Steinorth was nipping at her heels with 26,555 votes, or 46.76 percent.
“You’ve heard a lot of comments that have come out of the Upland Community since their annexation process into FP-5,” Rutherford said. “We’ve all gotten an earful on that. I make a distinction between a city that had a city council voting for them and an unincorporated area that doesn’t have that voice. LAFCO’s action to include San Antonio Heights in FP-5 by solely a protest vote has had absolutely horrific reactions and reverberations in the community. They are to say outraged would be an understatement. Our unincorporated residents want to have a voice and a vote in what taxes they are paying, and I believe they deserve to have this information presented to them in very realistic terms. I would support an affirmative vote in the unincorporated areas. I believe that not only gets the buy-in of the community but it also addresses the potential issue of a ballot measure that undoes an annexation by protest only. I know that’s a heavy lift and a heavy lift just like a special tax measure would be. It is hard to go out and explain to people why they should pay more taxes. But if they’re not willing to do that, then the consequences are the different service levels. We need to have that honest conversation with our residents and allow them to make the decision.”
Though Fifth District Supervisor Josie Gonzales would ultimately reverse herself with her vote, she initially seemed to enunciate the belief that those to be put into an assessment district should have the opportunity to vote on it. “I have long asked that the table of costs be put before the public, that they understand that if there is an inability for them to pay their full share of the cost of the delivery of high quality fire response services that they need to be aware it is within their realm to decide for themselves ‘Do I want to pay the additional costs through a voter approved special tax assessment or not?’ And if they choose not, then let’s then look at what can and cannot be provided under those parameters and deal with reality,” Gonzales said. This meant, she said, that the level of fire service would have to be reduced in those unincorporated areas of the county that were not overlain with an assessment district. She said the delivery of fire service to the more remote areas of the county was more expensive than in the more heavily populated and accessible regions of the county. “I have not been in favor of using the general fund money to subsidize the difference in costs,” she said.
Discussion at one point returned to the possibility that the statewide initiative would do away with protest procedures and the possibility this would complicate or undo the contemplated annexation of the county’s unincorporated areas into FP-5. Of some issue in this discussion was the retroactive provision in the pending initiative, which is now being evaluated by the California Secretary of State to determine if the petition to put it on the November ballot has enough valid signatures of voters to qualify.
Hartwig was asked about his concern that the initiative, if passed, would cancel the annexation.
“There is a lot of talk, from my firsthand knowledge, in Sacramento about the constitutionality of retroactivity, and so even if the electorate were to approve that ballot initiative moving in a retroactive format that would negatively impact special districts and others that might rely on it, that might be challenged and in fact that’s what we’re hearing,” Hartwig said in seeking to have the board disregard the threat posed by the initiative.
Well into the discussion it appeared that the sentiment of a majority of the board was to either not use the protest process or hold off on committing to initiating it at least until it is determined whether the anti-protest process initiative qualifies for the ballot. But with Hartwig pushing the board hard to initiate the process at once, Third District Supervisor James Ramos militated strongly in favor of using the protest process to ensure that the revenue to offset fire department costs and cure the department’s deficit be used. When other board members brought up the alternative of holding a vote to approve a special tax in the unincorporated county areas to pay for enhanced fire service, Ramos by his questioning demonstrated that the fire district had not firmed up the special tax proposal even to the point of knowing how much each property owner would be assessed, a tacit admission that the special tax which the residents would have the opportunity to vote upon was not truly a serious suggestion by the fire district.
Rather than take that as an indication that Hartwig was not giving the board an unbiased smorgasbord of options, Ramos instead suggested the board support the fire chief in the direction he wanted to go and drop consideration of the special tax vote for the time being and concentrate on the protest process option.
“That option [i.e., the special tax vote] is more of an idea that came forward and trying to figure out if the board wants to pursue that,” he said. “We would have to have more information on that to make a decision. The one we’ve been presented with is FP-5.”
By her body language, demeanor and verbal reaction, County Counsel Michelle Blakemore appeared to be troubled by the board’s sudden veering back toward making an immediate decision to initiate the FP-5 annexation while excluding the option of scheduling a vote of those in the county’s unincorporated with regard to a special tax. Three times she began to draw a distinction between the voting protocol for approving a special tax and the protest process but was interrupted in her explication each time by Ramos. She discontinued her effort when in expressing herself she came to the brink of being argumentative with Ramos.
When Hartwig was asked directly what he considered to be the best solution, he did not hesitate to reiterate that using the protest process to impose on the residents of the county’s unincorporated areas a tax they are not now paying was preferable to giving them a chance to say no to the assessments at the ballot box.
“I can tell you from the fire district’s perspective, we like that [protest process] option,” Hartwig said. “We believe that as the board looks at maintaining or improving service levels within the district, that the board has the authority to essentially apply that FP-5 service zone over the areas that don’t currently have a service zone. Most of the sustainable districts that I’m aware of, and I do quite a bit of work throughout the state, don’t solely rely on property tax revenue. They rely on some other type of revenue.”
The proposed solution that proceeded from Hartwig’s suggestion, which was already outlined in the agenda item’s back up documentation, was expanding the scope of the assessments already levied in San Bernardino, Upland, San Antonio Heights, Twentynine Palms, Needles, Helendale and Silverlakes to virtually every other unincorporated community in the county where the county fire department provides fire protection and emergency medical service.
That parcel assessment would run to $157.26 yearly as of 2020 and would bump up three percent annually thereafter. All of the unincorporated county area not already in an assessment district would be welcomed into Fire Protection Zone 5.
As that motion moved toward a vote, Rutherford sought one last time to dissuade her colleagues from using the protest process to levy the assessments on those areas’ residents.
“This was the process that LAFCO imposed on the San Antonio Heights residents,” she said. “The outrage from that community at being limited to a protest vote when they wanted to all be able to have a say at the ballot box was absolutely overwhelming. If you go forward with the FP-5 vote today, you are buying that from every other area of the county. Having been the brunt of that, even though I didn’t vote on the LAFCO measure, I can assure you it is not pretty to have your residents and your taxpayers not be able to vote on a tax being imposed on them. People want that. It is a basic right. They are going to demand it. And I’m going to stand up for them and demand that of us today.”
The vote to initiate the boundary change for FP-5 and also to adopt the resolution to establish the protest procedures was 3-to-2, with Ramos, Gonzales and Hagman voting in the affirmative. Lovingood, who earlier had stated that much of the emergency response of the fire department in the First District was to situations involving travelers on the highways through the district, voted along with Rutherford in opposition.
Information provided to the Sentinel suggests that Hagman’s expressed concern about the continuing viability of the protest process, the inclusion of the option to conduct a special election to raise taxes to defray fire department expenses in the county’s unincorporated areas and Blakemore’s reaction to Supervisor Ramos’s push to initiate the protest process are indications that the office of county counsel has made a sober assessment of the case filed by the San Antonio Heights Association, and the county’s attorneys are less than sanguine about the pending outcome of that litigation. If the San Antonio Heights Association prevails in its suit, the county would remain legally bound to deliver fire service to Upland and San Antonio Heights but would be cut off from the revenue it is now drawing from the assessment district. If similar legal actions proceed against LAFCO, the county and the cities of Needles and San Bernardino along with the Twentynine Palms Water District and end in the same outcome, the net cost to the county would at present run close to $20 million annually.

County taxpayers will pay more than one-quarter of a billion dollars within the next five weeks to cover the cost of pensions for the county’s retirees in the upcoming 2018-19 fiscal year.
Next week the board of supervisors is set to authorize Auditor-Controller/Treasurer/Tax Collector Oscar Valdez to make an advance payment of the county’s estimated fiscal year 2018-19 annual contribution to the board of retirement within 30 days after the commencement of the county’s fiscal year July 1.
According to a report/recommendation from Valdez to the board of supervisors bearing next Tuesday’s date obtained by the Sentinel, “The total county general fund retirement contribution for 2018-19 is estimated to be $262,463,800, discounted by $8,205,753 (at a simple interest discount rate of 3.13%) for the prepayment amount of $254,258,047.”
Valdez said, “Government Code Section 31582, Subdivision (b), allows the County of San Bernardino to make an advance payment of all or part of the county’s estimated annual retirement contribution, provided that the payment is paid within 30 days after the commencement of the county’s fiscal year. The county has taken advantage of this advance payment alternative in the past, prepaying the general fund contribution to the board of retirement for the entire fiscal year. The prepaid amount is discounted by the board of retirement resulting in savings to the general fund.”
According to Valdez, “The county has calculated a 3.13% simple interest discount rate for fiscal year 2018-19, which results in a discount of $8,205,753 to the general fund. The auditor-controller/treasurer/tax collector and the county administrative office analyzed the financial impact of prepaying the retirement contribution, and have determined that the county will benefit from the transaction. The estimated retirement contribution of $262,463,800 and related discount amount of $8,205,753 are estimates and may change. Any benefit or loss realized by the board of retirement as a result of the retirement advance payment will be incorporated into San Bernardino County’s employer’s contribution rates, thus ultimately accruing to the county.”
In 2017-18, the total county general fund retirement contribution was $222,388,000, discounted by $7,236,227, at a simple interest discount rate of 3.25%, for a prepayment amount of $215,151,773
In 2016-17, the total county general fund retirement contribution was $211,164,300, discounted by $7,373,705, at an interest discount rate of 3.49%, for a prepayment amount of $203,790,595.
In 2015-16, the total county general fund retirement contribution was $218,014,200, discounted by $7,696,277, at an interest rate of 3.53%, for a prepayment amount of $210,317,923.”
With the exception of 2016-17, the county’s retirement costs have been escalating.
In 2011, the county made a $132,263,097 prepayment to the board of retirement to cover the cost of pensions for retired employees during the 2011-12 fiscal year, reflecting a prepayment discount of $5,299,603 from the $137,562,700 owed by the county as its annual contribution to the retirement fund that year.
In 2012, the county made a $154,626,037 prepayment to the board of retirement to cover the cost of pensions for retired employees during the 2012-13 fiscal year, reflecting a prepayment discount of $5,907,863 from the $160,533,900 owed by the county as its annual contribution to the retirement fund through June 30 of 2013.
In 2013 the county made a $172,478,057 prepayment to the board of retirement to cover the cost of pensions for retired county employees during the 2013-14 fiscal year, reflecting a prepayment discount of $6,589,943 from the $179,068,000 owed by the county as its annual contribution to the retirement fund through June 30 of 2014.
In 2014-15, the county made a $182,185,164 prepayment to the board of retirement to cover the cost of pensions for retired employees during the 2014-15 fiscal year, reflecting a prepayment discount of $6,922,236 from the $189,107,400 owed by the county as its annual contribution to the retirement fund that year.
In this way, county taxpayers have seen an average $17,427,850 per year increase in the cost of paying for pensions over the last seven years.
-Mark Gutglueck

So instantaneously and spectacularly lucrative is California’s nascent marijuana industry that staid and imperious members of the state’s business and social aristocracy, establishment figures whose familial and corporate reputations going back generations are steeped in conservative and decorous respectability, are casting aside all caution and venturing into trafficking in literally tons of a substance, the possession of a pound of which just a few years ago would have put one into a prison cell for ten years.
A case in point is the Lewis Family, the scions of Ralph and Goldie Lewis.
In 1955, Ralph Lewis, a tax attorney and accountant by profession, undertook construction on his first residential subdivision in Claremont. The synergy of Ralph Lewis’ business acumen and Goldie Lewis’ understanding of the need to build into each house living space and amenities to enhance the home’s domestic ambience set the Lewis Homes’ product apart from many of the cookie cutter structures built by competitors in the same market and in the same era. Indeed, in the weeks and days before a Lewis subdivision would go before the governmental land use authorities for approval in whatever jurisdiction where that particular project was to be developed, Goldie Lewis could be seen late in the evening perched in a chair at the kitchen table, upon which would be spread the blueprints and site plans for the homes and neighborhoods that the company was proposing to build, as she obsessed over the internal layouts of the houses and made sure there was adequate closet space in the bedrooms and along the hallways, and that the kitchen configuration made sense in terms of the relative position of cupboards and counters and the placement of the built-in stoves and the open spaces provided for refrigerators that would make most sense for a modern homemaker. After she satisfied herself that the individual floor plans were worthy of bearing the Lewis Home name and were livable internally, she would turn her attention to the external aspects of the product her husband was delivering, laying out in detail the pattern of variance in how the models of the homes were to be arranged in order up and down the streets to achieve the most appealing aesthetic effect for that future neighborhood.
It was this pride in quality and attention to detail, while other homebuilders were simply slapping their houses together as quickly as possible and without regard to the long term ambience of the communities being created, that set Lewis Homes apart from its contemporary competitors. Lewis Homes gained uncommon traction in the 1960s, expanded beyond all reasonably predictable expectations in the 1970s and had grown to become by the 1980s among the most fabulously successful of San Bernardino County’s corporate institutions.
At that point, the reins of the company were being entrusted to the next generation, Ralph and Goldie’s sons, Richard, Randall, Robert and Roger. Under their guidance, particularly that of Richard and Randall, what was already a premier locally-based company evolved into one of the largest homebuilders in California, and expanded from there. In the 1980s, the Lewis family had progressed from building single family homes exclusively to a full line of residential units, including large and small homes, condominiums, townhomes, apartment complexes and commercial subdivisions.
At this point, Lewis Homes and its corporate successors have developed in excess of 25,000 acres and more than 100,000 residential units within the context of subdivisions or planned communities in California, Nevada, Arizona, and Utah.
In 1999, the company sold a part of its operation to Kaufman and Broad. Since that time, the company is involved far less in actual building, concentrating instead on acquiring land and completing the entitlement process for large projects which are then completed by other homebuilders.
Lewis Homes long ago established its corporate headquarters in Upland and now, more than a generation later, the company has expanded to become the Lewis Group of Companies, which remains headquartered in the City of Gracious Living, from which Richard, the president of the Lewis Group’s California Division; Randall, the executive vice president of marketing; Robert, the president of the Nevada division; and Roger, the executive vice president; along with John Goodman, the chief executive officer and executive vice president; Jennifer Lewis, the vice president; David Linden, the senior vice president for asset management; Leon C. Swails, the senior vice president for apartment development; and Bryan Goodman, the senior vice president and regional manager for Southern California planned communities oversee an operation that has only a handful of native-grown peers in San Bernardino County, such as Stater Bros. in San Bernardino, Esri [Environmental Systems Research Institute] in Redlands, CO-OP Financial Services in Rancho Cucamonga, and Prime Healthcare Services in Ontario.
Even in the face of the Lewis Group of Companies’ continuing level of success in the development field, when an opportunity to make a substantial profit through involvement in the cannabis production industry presented itself, the Lewis Group of Companies jumped at the chance.
In Adelanto, the November 2014 election resulted in Rich Kerr, John Woodard and Charlie Glasper displacing, in a clean sweep, respectively, then-incumbent Mayor Cari Thomas and council members Charles Valvo and Steve Baisden. Immediately upon the three new office holders being sworn in, the newly composed city council spelled out to then-City Manager Jim Hart that the city’s political leadership was willing to depart with the conservative policies of past city councils and embrace the commercialization of marijuana as an economic engine to get the city, which was teetering on the abyss of bankruptcy and had declared itself to be in a state of fiscal emergency in June 2013, back on track financially. The approach engendered a degree of resistance among city staff, and the city burned through employees at an alarming rate, starting with Hart in February 2015 and a succession of four city managers thereafter, as well as three city attorneys, the city engineer/public works director, a senior planner, a public works superintendent, the city’s conservation administrator and a senior management analyst, all as a consequence of their misgivings over the city’s aggressive embracing of cannabis-related businesses as a financial panacea. Nevertheless, Kerr and Woodard, with the enthusiastic backing of another member of the city council, Jermaine Wright, and the lukewarm support of Glasper, were resolved to use the opportunity that had long existed in California, as a consequence of the passage of 1996’s Proposition 215 Compassionate Use of Marijuana Act, to make Adelanto a medical marijuana Mecca. Recognizing that the vast majority of California’s cities had enacted ordinances and maintained policies banning both the sale and cultivation of marijuana, prohibiting indoor and outdoor farms and nurseries, as well as keeping clinics or dispensaries from operating in their cities, the council majority believed Adelanto could fill a potentially lucrative void by going in a different direction. Only Councilman Ed Camargo would remain as a steadfast opponent of the marijuanification of Adelanto. Initially, to obtain the support of Glasper, who had concerns about making marijuana available to city residents, Kerr, Woodard and Wright agreed to limit marijuana-related activity in the city to agricultural operations, continuing to outlaw clinics and dispensaries. Kerr, as the mayor and point man on promoting Adelanto as the marijuana capital of California, made clear that the city was ready to welcome and facilitate any and all serious applications to grow marijuana out of enclosed warehouse-based greenhouses, as long as they were located in the city’s industrial park.
When the city ratified an ordinance that opened the way for marijuana-grow operations in November 2015, there ensued an intensive frenzy as aspiring cannabis millionaires were literally walking over each other to secure permits for such enterprises, either by purchasing, leasing or otherwise tying up land within the city’s industrial park for such businesses and applying for the permits and licenses to begin operating. Would-be marijuana industry entrepreneurs seeking permits began to regularly show up at City Hall in such numbers that they formed a line that wended its way through the building and out the front door. In an alarming sign, many carried with them into City Hall briefcases full of cash which appeared to be intended as inducements to city officials to give their applications favorable treatment and speeded processing.
It soon became apparent that the area zoned for cannabis cultivation within the city’s industrial park was insufficient size-wise to accommodate the influx of those with the intention of becoming farmers. Kerr, Wright and Woodard along with the somewhat reluctant Glasper gave indication they would enlarge the city’s marijuana growing zone.
Land speculators poured into the city, alongside applicants for marijuana-involved businesses. In many cases, those purchasing property in the city appeared to be functioning on inside information about what properties would later be zoned to allow cannabis-related businesses. This was particularly acute, given that land values in the High Desert in general and Adelanto in particular had historically lagged behind – far behind – those in many other parts of Southern California. Typical undeveloped property in Adelanto throughout the 1990s, early 2000s and up until two years ago sold for a fraction of comparably zoned properties in places like Rancho Cucamonga, Upland, Ontario and Chino Hills. Yet throughout that time, there had been no rush to purchase property in Adelanto, as the community was lacking in much of the key infrastructure – good roads, sewers, electrical and water utilities – needed to render it into being development-ready. Virtually overnight, property that no one was interested in had become the hottest real estate commodity going, with prices escalating by factors of at first two or three, then five, six and seven and then eight, nine and ten. By late 2016, federal officials in the form of Securities and Exchange Commission investigators along with Drug Enforcement Agency and FBI agents were interesting themselves in the city’s goings-on, as one seemingly well-heeled developer after another came into town, obtained land and in record time was moving toward completion of a project that would get occupancy and operating permits with seemingly no serious scrutiny by city inspectors, even as reports were rampant that those inspectors were being ordered to stand down so that the development rush could proceed.
With California voters’ passage, in November 2016, of Proposition 64 the Adult Use of Marijuana Act, the free-for-all in Adelanto intensified, as the three-member council ruling coalition of Kerr, Wright and Woodard, which technically did not need Glasper’s support to prevail, made clear that the city would expand from being a marijuana cultivation, production and wholesale center and open itself to the end use retailing of the drug at clinics and dispensaries where the substance would be sold for medical applications, as well as at pot shops, a la liquor stores, where those wishing to purchase it for use as an intoxicant could obtain it.
In February 2017, the city brought in Mike Milhiser, who had more than a quarter of a century experience as the city manager in Montclair, Ontario and Upland, to serve as acting city manager. After a six-month stint in that assignment, Milhiser left as top staffer as the city council in August 2017 chose to elevate Gabriel Elliott, the city’s development services director, to the position of city manager. While Kerr, Wright and Woodard fully expected Elliott would wholeheartedly advance their agenda to get as many cannabis-related operations on track as possible, Elliott soon demonstrated himself to be more cautious, deliberative and methodical in the way he ran the city than his political masters had hoped, as he insisted that staff be given time to evaluate and inspect thoroughly the project and permit applications coming into City Hall.
As Summer 2017 advanced, Councilman Wright, through an acquaintance he did not recognize to be an FBI informant, was put in contact with two undercover FBI agents, one of whom held himself out to be an arsonist and the other who made a convincing show of being an applicant for a license for a marijuana distribution business in Adelanto. Unsuspecting that those he was dealing with were actually law enforcement officers, Wright sought the assistance of one in helping him burn down his restaurant to collect on an insurance policy he had on it and agreed to take a bribe from the other in exchange for assisting him in getting his cannabis distribution enterprise on track. In October 2017, the FBI agents closed the trap they had laid for Wright, and obtained what turned out to be his short-lived agreement to cooperate with them in gathering information about graft on the part of other Adelanto officials. When Wright again approached the FBI informant, whom the councilman yet did not understand was cooperating with federal authorities, in an effort to help him arrange for a gangland hit on the FBI agent who had been masquerading as an arsonist, the FBI and the U.S. Attorney’s Office obtained an arrest warrant for Wright and took him into custody on November 7, 2017.
In December 2017, Kerr and Woodard, apparently unchastened by what had happened with their council colleague, remained resolved to continue with the accelerated effort to move Adelanto toward a cannabis-based economy. Perceiving Elliott to be an obstructionist to this agenda, they used complaints of sexual harassment lodged against Elliott by two city employees and an intern working at City Hall, which had apparently been orchestrated by Kerr, as a pretext to suspend Elliott as city manager, placing him on paid administrative leave, a status he remains in to the present. They then turned once more to Milhiser to serve as interim city manager.
In the meantime, by early 2017 corporate officers with the Lewis Group of Companies had seen the escalation of property values in Adelanto and saw in the circumstance an opportunity to turn a tremendous profit. The company makes a practice of acquiring property in places where doing so offers a prospect of future development potential. It just so happened that the company had acquired 178.75 acres in the northwestern quadrant of Adelanto, property that was zoned at that time for low density residential development. Observing the circumstances in Adelanto, company officials resolved to press the advantage that had accrued to them as a consequence of the land the company controlled in the city. In addition to being in a position of opportunity as a consequence of owning property in Adelanto, the company had especial access to City Hall, given that Mike Milhiser was then Adelanto’s acting city manager. As city manager in Montclair, Ontario and Upland in the 1970s, 1980s, 1990s and early 2000s, Milhiser was familiar, and on very good terms, with what was at one time Lewis Homes and later the Lewis Group of Companies, which was one of the major residential developers in each of those communities during his tenures with each.
In March 2017, Lewis Group of Companies Chief Executive Officer and Executive Vice President John Goodman, acting as an agent on behalf of the corporation, filed with the California Secretary of State’s office notice of a limited liability company that existed under the Lewis Group of Companies’ corporate umbrella, this one called Adelanto Ventures, LLC, a Delaware Corporation, giving Adelanto Ventures, LLC powers and privilege to conduct business in California. Adelanto Ventures thereafter undertook seeking to have the City of Adelanto amend its general plan and zoning map, rezoning the 178.75 acres it owned from so-called “Desert Living” upon which up to 2.5 dwelling units per acre could be built, to a “Light Manufacturing Cannabis Only” zoning designation.
To facilitate the processing of that application, Goodman, again acting as an agent on behalf of the corporation, filed with the California Secretary of State’s office to register Adelanto Ventures, LLC directly as a limited liability company with the state and obtain a California file number. The aim was to utilize that entity to intensify the effort to have the zoning of the 178.75 acres of residentially zoned property the Lewis Group of Companies owned in northwest Adelanto changed to allow cannabis cultivation.
The effort bogged down after Milhiser’s departure in August 2017, as Elliott’s methodical management of operations at City Hall was creating a substantial backlog of applications for marijuana cultivation and retail sales permits, and the city’s march toward considering and effectuating zone changes slowed.
The Adelanto Ventures undertaking was boosted early this year after Milhiser was once again installed as Adelanto’s acting city manager.
On March 7, 2018, the planning commission approved a resolution recommending that the city council adopt two ordinances, ratifying a general plan amendment and zoning map change transitioning the acceptable land use of the Lewis-owned acreage from residential to a light industrial cannabis only designation. Milhiser, who is retired and drawing a pension, is prohibited from working for a public agency for more than 960 hours in any 12 month period. Accordingly, he was due to leave as acting Adelanto city manager the first week of May. A public hearing on the proposed general plan amendment and zoning map change for the Lewis property was scheduled for the April 25 meeting, the last one that would occur during Milhiser’s tenure. Contained in the agenda packet for that hearing was a report from Milhiser to the city council which was put together by Charles Rangel, Adelanto’s development services director, and Louis Morales, the project planner, at Milhiser’s behest. It recommended that the amendments be granted and the city council adopt what is referred to as a mitigated negative declaration, meaning that the council has determined that by granting the changes no undesirable environmental impacts that could not be mitigated by conditions of approval would ensue. At the April 25 meeting, the city council, which was down to four-fifths strength because Wright had been removed from office more than three months previously, voted 3-to-1, with Kerr, Woodard and Glasper in favor and Camargo dissenting, to make the amendments and grant Adelanto Ventures and the Lewis Group of Companies the zone and general plan changes sought for the property. That action increased by a factor of at least seven the value of the Lewis-owned property.
Contacted by the Sentinel on June 6, Randall Lewis, Lewis Group of Companies’ executive vice president of marketing, said, “We own about 1,000 acres in Adelanto. We worked with the city to get an overlay on about 180 acres.”
His company has no intention of developing the property as a marijuana cultivation facility or operating it as such, Lewis said, but is looking to flip it to someone who will, now that the zone change has been granted. “We were involved because someone might buy it,” Lewis said. “We have no intention to go into the marijuana business in any way, either as a grower or a seller or a distributor. We went into this based on whether or not we could get the zoning. We wanted to see if someone wanted to buy some of the property.”
Land speculation is not the focus of his company’s efforts, but can be a consequence of what it does, Lewis said. “We are in the business of being a master developer,” he said. “We would serve as the developer, if our land was to be used for houses or apartments or a shopping center. In that case, we would do the developing. If the highest use turns out to be something other than that – other uses such as a gas station or a hotel – then part of our business is to get zoning for the property and sell it to someone who specializes in that kind of project. We will attempt to have that land developed to its highest use, even if we are not involved in the final development.”
A high ranking Adelanto official who has functioned within both the managerial and land use echelons at City Hall told the Sentinel that the Lewis property is in the north part of the city, well outside the city’s industrial park, outside the area previously zoned for marijuana cultivation, and well away from where such zoning would be most logically and sensibly applied.
“The other bigger picture is there in no infrastructure there,” he said. “Not only is the zoning inconsistent but it is going to be extremely expensive to locate the type of support infrastructure those types of facilities will need, such as roads, water, sewers, etcetera. The other big problem is displacing the residential zoning there. Our priorities there were for high desert living or zoning for something similar. I am not sure exactly how many hundreds of acres they were going to change. What occurred at the April 25 meeting is obviously not looking really good.”
Milhiser’s prior connection to the Lewis Group of Companies played a role in the decision, the official said. “He [Milhiser] knows the Lewis people,” he said. “I am not really sure why he would do this. This isn’t a good thing. There are some significant issues. Environmental maps had to be written, and that was a major obstacle.”
The official noted that Elliott had not been willing to make the zone changes that the Lewis Group of Companies had requested. As soon as Elliot “wasn’t in the picture, miraculous things began to happen,” the official said.
Given the Lewis Group of Companies’ reputation and prestige, the official said it was difficult to understand why the company would have lowered itself to participate in the manipulation of the city’s zoning codes, even considering the money to be made. “If I were them, this is not something I would have wanted to get into,” he said. “It required an illogical zone change and altering the city’s zoning map. What is up there doesn’t conform to that land use. They knew that from day one, and what amount of environmental study would be required to make that work. They said, ‘We don’t want to do an environmental impact report.’ It was for that reason it was originally turned down. It looks really bad. For a company of Lewis’ stature, it’s hard to figure why they did that. For someone smaller, you can understand it. But Lewis doesn’t need the money and you’d think the company’s image is more valuable than getting involved in something like this.”
–Mark Gutglueck

Less than a month from the initiation of the 2018-19 fiscal year, San Bernardino County officials last week made a mid-year $21 million adjustment to the 2017-18 fiscal year funding allotment to the county hospital’s budget.
On June 13, 2017, the board of supervisors adopted a resolution to approve and adopt the county’s 2017-18 budget, which included $603,514,451 earmarked for the totality of operations at Arrowhead Regional Medical Center in Colton, which is the main campus of the county hospital. On December 5, 2017, the board approved the 2017-18 First Quarter Budget Report, which included a $5.3 million budget adjustments for Arrowhead Regional Medical Center.
On April 3, 2018 the board approved the 2017-18 Second Quarter Budget Report which included a $17.4 million budget adjustment for Arrowhead Regional Medical Center.
According to William Gilbert, the director of the Arrowhead Regional Medical Center, “Staffing and services and supply expenses at Arrowhead Regional Medical Center are funded by State Medi-Cal, Federal Medicare, private insurances and other departmental revenue. Funding sources may change in the future pending any legislative activity related to the repeal and/or replacement of the Affordable Care Act. Salary and benefits are increasing by $6.5 million, primarily due to increased overtime expenses caused by vacant positions and minimum staffing ratios required by California Code of Regulations Title 22. Services and supplies are increasing by $14.5 million due to unanticipated increases in other professional services, purchases of pharmaceuticals and various medical supplies.”
Gilbert requested the adjustment be made and said, “Both of these increases – staffing services and supply expenses – will be funded by State Assembly Bill 85 Rate Range Revenue.”
The board of supervisors authorized Auditor-Controller/Treasurer/Tax Collector Oscar Valdez to increase appropriation and revenue in the amount of $21 million for various labor and operational expenses.
–Mark Gutglueck

Four of San Bernardino County’s districts are experiencing cash flow problems that will require that the county treasurer’s office advance them money against anticipated property tax revenue.
Next week the San Bernardino County Board of Supervisors is slated to approve and adopt a recommendation by Auditor-Controller/Treasurer/Tax Collector Oscar Valdez for the temporary transfer of funds to the Needles Unified School District in the total amount of $1,293,334, for Fiscal Year 2018-2019.
It is anticipated the Needles Unified School District will receive $2,582,859 in property tax revenue in Fiscal Year 2018-19.
The approval will establish a “line-of-credit” in the amount of $1,293,334 for Needles Unified School District to draw on, as needed, to be repaid by April 25, 2019.
The board of supervisors is also being asked to approve and adopt a recommendation by Valdez for the temporary transfer of funds to the Bear Valley Unified
School District in the total amount of $3,362,918 for Fiscal Year 2018-2019.
It is anticipated the Bear Valley Unified School District
will receive $10,673,760 in property tax in over the course of Fiscal Year 2018-19.
Approval of Valdez’s recommendation will set up a line-of-credit in the amount of $3,362,918 for the Bear Valley Unified School District to draw on, as needed, to be repaid by April 25, 2019.
Next week the San Bernardino County Board of Supervisors will be called upon to approve and adopt a recommendation by Auditor-Controller/Treasurer/Tax Collector Oscar Valdez for the temporary transfer of funds to the Barstow Fire Protection District in the total amount of $2,000,000 for Fiscal Year 2018-19.
It is anticipated the Barstow Fire Protection District will receive $4,087,334 in property tax revenue in 2018-19.
Approval of the temporary transfer of funds to the Barstow Fire Protection District will result in $2,000,000 of pooled funds of the San Bernardino County treasury being unavailable for county use. The funds will be repaid after the first property tax apportionment in November 2018 for full repayment by December 27, 2018.
Next week, Valdez is also going to recommend that the San Bernardino County Board of Supervisors approve and adopt a resolution to make a temporary transfer of funds to the Apple Valley Fire Protection District in the total amount of $1,234,278 for Fiscal Year 2018-19.
It is anticipated Apple Valley Fire Protection District will receive $5,611,926 in property tax revenue in 2018-19.
Approval of the temporary transfer of funds to the Apple Valley Fire Protection District will result in $1,234,278 of pooled funds of the San Bernardino County treasury being unavailable for county use. The funds will be repaid after the first property tax apportionment in November 2018 for full repayment by December 27, 2018.
-Mark Gutglueck

Less than a month from the initiation of the 2018-19 fiscal year, San Bernardino County officials last week made a mid-year $21 million adjustment to the 2017-18 fiscal year funding allotment to the county hospital’s budget.
On June 13, 2017, the board of supervisors adopted a resolution to approve and adopt the county’s 2017-18 budget, which included $603,514,451 earmarked for the totality of operations at Arrowhead Regional Medical Center in Colton, which is the main campus of the county hospital. On December 5, 2017, the board approved the 2017-18 First Quarter Budget Report, which included a $5.3 million budget adjustments for Arrowhead Regional Medical Center.
On April 3, 2018 the board approved the 2017-18 Second Quarter Budget Report which included a $17.4 million budget adjustment for Arrowhead Regional Medical Center.
According to William Gilbert, the director of the Arrowhead Regional Medical Center, “Staffing and services and supply expenses at Arrowhead Regional Medical Center are funded by State Medi-Cal, Federal Medicare, private insurances and other departmental revenue. Funding sources may change in the future pending any legislative activity related to the repeal and/or replacement of the Affordable Care Act. Salary and benefits are increasing by $6.5 million, primarily due to increased overtime expenses caused by vacant positions and minimum staffing ratios required by California Code of Regulations Title 22. Services and supplies are increasing by $14.5 million due to unanticipated increases in other professional services, purchases of pharmaceuticals and various medical supplies.”
Gilbert requested the adjustment be made and said, “Both of these increases – staffing services and supply expenses – will be funded by State Assembly Bill 85 Rate Range Revenue.”
The board of supervisors authorized Auditor-Controller/Treasurer/Tax Collector Oscar Valdez to increase appropriation and revenue in the amount of $21 million for various labor and operational expenses.
-Mark Gutglueck

Less than a month after the San Bernardino County Board of Supervisors on May 22 committed to spending over $53.13 million toward the provision of mental health-related services throughout the county over the next five years, on June 12 the board again made further outlays of $155,996,067 to augment those mental health services over roughly the same time period. The county’s bill for contracted mental health services in the upcoming 2018-19 fiscal year will run to $129.85 million.
The board’s action ratified recommendations made by Veronica Kelley, the director of the San Bernardino County Department of Behavioral Health.
The board approved an amendment, effective July 1, 2018, to a contract with Helping Hearts California, LLC for the provision of adult residential treatment services, updating standard contract language, exercising the first option to extend the contract by one year, and increasing the total contracted amount by $5,694,000 from $12,041,805, to $17,735,805, for the total contract period of June 2, 2015 through June 30, 2019.
The board approved an amendment, effective July 1, 2018, to four contracts for substance use disorder services through community-based recovery service centers, updating standard contract language, exercising first options to extend the contracts by one year, and increasing the total contract amount by $940,000, from $2,820,000 to $3,760,000, for the total contract period of July 1, 2015 through June 30, 2019. This includes upping a contract with Inland Valley Drug and Alcohol Recovery Services, Inc. by $327,000, from $981,000 to $1,308,000; increasing the contract with Mental Health Systems, Inc. by $404,000, from $1,212,000 to $1,616,000; boosting the existing contract with Rim Family Services, Inc. by $126,240, from $378,720 to $504,960; and increasing the county contract with St. John of God Health Care Services by $82,760, from $248,280 to $331,040.
With regard to the county’s contracts for substance use disorder residential recovery treatment program services it has with five providers, it updated standard contract language, exercised first options to extend the contracts for three months, and increased the total contract amount by $7,595,475, from $15,599,700 to $23,195,175, for the total contract period of July 1, 2015 through September 30, 2018. Thus the total contract amount with Inland Valley Drug and Alcohol Recovery Services, Inc., was hiked by $1,181,415, from $3,472,641 to $4,654,056; the total contract amount with Social Sciences Services, Inc. doing business as Cedar House Life Change Center went up by $1,845,102, from $3,833,805 to $5,678,907; St. John of God Health Care Services’ contract was increased by $2,414,014, from $2,970,201 to a total amount of $5,384,215;
Tarzana Treatment Centers, Inc., will see its revenue under contract jump by $627,349, from $2,297,250 to $2,924,599; and VARP (the Veterans Alcoholic Rehabilitation Program), Inc. will have its contract upped by $1,527,595, from $3,025,803 to $4,553,398.
The board approved an amendment, effective July 1, 2018, increased the total aggregate amount of its contracts with High Desert Child, Adolescent and Family Services Center, Inc., Inland Behavioral and Health Services, Inc., Inland Valley Drug and Alcohol Recovery Services, Inc., Matrix Institute, Inc., Mental Health Systems, Inc., MFI Recovery Center, Inc. and Social Science Services, Inc. doing business as Cedar House Life Change Center by $375,000, from $375,000 to $750,000 for the provision of substance use disorder services outpatient treatment services to Children and Family Services Department clients, exercising the first one-year extension option, updating standard contract language for the total contract period of July 1, 2017 through June 30, 2019.
The board approved contract increases with three entities in the amount of $850,000, from $2,900,000 to $3,750,000, for the total contract period of July 1, 2014 through June 30, 2019 for the provision of community wholeness and enrichment program services, jumping by $150,000, from $600,000 to $750,000 the amount of money Rim Family Services, Inc. is to receive; increasing South Coast Community Services’ contract amount by $450,000, from $1,300,000 to $1,750,000; and upping what Victor Community Support Services, Inc. is to receive by $250,000, from $1,000,000 to $1,250,000.
The board also approved another contract increase with St.John of God Health Care Services for the provision of substance use disorder outpatient treatment services, updating the standard contract language, extending the contract for an additional three months, and increasing the total contract amount by $120,000, from $1,404,789 to $1,524,789, for the total contract period of July 1, 2012 through September 30, 2018.
The board complied with Kelley’s recommendation to contract with two companies to provide what she called adult mental health clubhouse services, in an amount not to exceed $2,967,000, for the period of July 1, 2018 through June 30, 2021, with Pacific Clinics coming in for a $2,067,000 share of that outlay and South Coast Community Services getting $900,000.
The board accepted amendments to four contracts, effective July 1, 2018, to contracts for the provision of non-residential drug court program services, updating standard contract language, exercising the final one-year extension option to extend, and increasing the total contract amount by $2,133,173, from $8,532,692 to $10,665,865, for the total contract period of July 1, 2014 through June 30, 2019. High Desert Child, Adolescent and Family Services Center, Inc. will see its contract increased by $148,008, from $592,032 to $740,040; Inland Valley Drug and Alcohol Recovery Services, Inc. will see a contract increase by $124,296, from $497,184 to $621,480; Matrix Institute on Addictions, Inc.’s existing $1,826,800 contract will increase by $456,700 to $2,283,500; and Mental Health Systems, Inc. will boost its receipts by $1,404,169, from $5,616,676 to $7,020,845.
The board complied with Kelley’s call to amend contracts with two providers of substance use disorder narcotic treatment program services over the total contract period of July 1, 2014 through June 30, 2019, updating standard contract language, exercising the final one-year option to extend the contract, and increasing the total contract amount by $7,936,350, from $24,371,261 to $32,307,611. Under that change Aegis Treatment Centers, LLC is to increase its take by $5,106,658, from $14,774,218 to $19,880,876 and WCHS, Inc. doing business as Colton Clinical Services will bring down another $2,829,692, going from $9,597,043 to $12,426,735.
The board of supervisors approved an amendment, effective July 1, 2018, to the three contracts the county has for substance use disorder transitional housing supportive services, updating standard contract language, exercising the first one-year option to extend the contracts, and increasing the total contract amount by $329,528, from $988,584 to $1,318,112, for the total contract period of July 1, 2015 through June 30, 2019. Those amendments increased the total contract amount with Inland Valley Drug and Alcohol Recovery Services $136,875, from $410,625 to $547,500; increased the contract amount with New Hope Village, Inc. by $38,370, from $115,110 to $153,480; and increased the contract amount with St. John of God Health Care Services by $154,283, from $462,849 to $617,132.
The board of supervisors further ratified amendments to four contracts, effective July 1, 2018, that cover the provision of older adult community services, updating standard contract language, exercising the first one-year option to extend the contracts, and increasing the total contract amounts by $700,000, from $2,100,000 to $2,800,000, for the total contract period of July 1, 2015 through June 30, 2019. This upped the contract with Family Service Association by $315,000, from $945,000 to $1,260,000; increased the contract with Lutheran Social Services of Southern California by $100,000, from $300,000 to $400,000; raised the amount of money Rim Family Services, Inc. is to receive by $85,000, from $255,000 to $340,000; and provided a $200,000 enhancement to the contract with West End Family Counseling Services, Inc., moving its total receipts from $600,000 to $800,000.
The board approved a residency/fellowship training affiliation agreement with Loma Linda – Inland Empire Consortium for Healthcare Education for that entity’s psychiatry residents/fellows to obtain clinical experience with the Department of Behavioral Health, agreeing to pay those individuals who are on the brink of obtaining their medical licenses an amount not to exceed $1,166,660, for their services over the period of July 1, 2018 through June 30, 2021.
The board of supervisors approved committing to contracts in the amount of $104,499,930 for the provision of specialized care for children ranging from newborns to five-years-old as part of its “Age 0-5 Comprehensive Treatment Services” program over the five year period from July 1, 2018 to June 30, 2023, including paying Christian Counseling Services $10,735,975; Desert/Mountain Children’s Center $46,450,200; Hearts & Lives $2,493,050; Lutheran Social Services of Southern California $4,155,080; Victor Community Support Services, Inc. $24,995,720; and West End Family Counseling Services $15,669,905.
The board of supervisors approved two contracts for what the county has dubbed “Resilience Promotion in African-American Children Program” services in the East Valley and High Desert regions of San Bernardino County in an amount of $4,862,385, for the period of July 1, 2018 through June 30, 2023. Valley Star Behavioral Health, Inc. will receive $2,793,335 for that work and Young Visionaries Youth Leadership Academy will get $2,069,050.
The board made a fourth amendment to the contract it has with Valley Star Behavioral Health, Inc., effective July 1, 2018, for the continued provision of crisis walk-in center services in the High Desert and Morongo Basin regions, exercising the final option to extend the contract by one year, updating the standard contract language, and increasing the total contract amount by $4,277,489, from $13,354,978 to $17,632,467, for the period of July 1, 2014 through June 30, 2019.
The Department of Behavioral Health also, effective June 12, 2018, made adjustments to three contracts for substance use disorder Perinatal Services, updating standard contract language, with no change to the contract amount of $4,800,000 or the contract period of July 1, 2016 through June 30, 2019, impacting High Desert Child, Adolescent and Family Services Center, Inc., Inland Behavioral and Health Services, Inc. and Inland Valley Drug and Alcohol Recovery Services, Inc.
The board also approved first amendments, effective June 12, 2018, to the contracts for substance use disorder services outpatient treatment and intensive outpatient treatment services the county has with High Desert Child, Adolescent and Family Services Center, Inc., Inland Behavioral and Health Services, Inc., Inland Valley Drug and Alcohol Recovery Services, Inc., Matrix Institute on Addictions, Inc., Mental Health Systems, Inc., Contract No. MFI Recovery Center, Inc. and Social Science Services, Inc. dba Cedar House Life Change Center, updating standard contract language, with no change to the total contract amount of $8,290,500 or contract period of July 1, 2017 through June 30, 2020.
The board approved the Mental Health Services Act-required annual update for 2018-19, including an increase in expenditures by $11,049,077, from $118,801,466 to $129,850,543 for the period of July 1, 2018 through June 30, 2019.

By Carlos Avalos
Fontana’s first permanent school was built on the corner of Locust and Foothill in 1895. What is now called the Fontana Unified School District was established in the 1920s and unified in 1956. Fontana has 30 elementary schools, including a dual language immersion school, seven middle schools, five high schools, two continuation high schools, and one adult school. In September of 2016 FUSD had roughly 41,142 students. This included early pre-education schools, middle schools, and adult schools. Between 2016 and 2017 FUSD student ethnicity was 87% Hispanic/Latino, 6% African American, 4% White, 1% Filipino, and 1% Asian. American Pacific Islander, American Indian, and unknown finish up rest of the FUSD student ethnicity make up.
A Google search on Fontana Unified School District provides an array of information and a window into the district’s academic success or lack thereof. Although Fontana’s high schools have a high graduation rate, their ranking on college readiness is rather low. According to state test scores, 18% of students are at least proficient in math and 29% in reading. According to educational website niche dot com the highest grade the FUSD gets is a B plus for its health and safety. This is a good thing; at least our children are relatively safe. But this is a debatable topic with the dark times we live in and the unfortunate circumstances of school shootings becoming a normal occurrence in American society. On the same website, other areas such as academics, teachers, and college prep earn a barely average grade. FUSD is far from the worst in California but even further from the best. What is the reason for this? Are their specific reasons or people to blame for FUSD being of a lesser quality? Are the children attending school in FUSD really getting a quality education? Is serving the best interests of the children of FUSD really the number one priority?
Brandi Gallasso is a lifelong resident of Fontana. She is a product of FUSD and she has her children enrolled there. Brandi Galasso is active in the school district. She donates her time, energy, resources, passion, and money to it. What started as Mrs. Galasso just trying to do her part and help the school district in any way she could has turned into what some people might call an obsession and mission to find the truth. She claims the district is marred by unethical and corrupt behavior along with theft and fraud. People have called Mrs. Galasso unorthodox, uneducated, obsessive, crazy, and even a liar. Maybe some or all of this is true. But there is no denying that Mrs. Galasso has pure and honest intentions, wants what’s best for the children of FUSD, as well as to bring to light what is really going on in the district. Mrs. Galasso has spent countless hours requesting, researching, finding, and deciphering information about FUSD. There follows information, facts or allegations provided to the Sentinel by Mrs. Galasso.
FUSD’s superintendent, Randal S. Bassett, has no credentials and there is no oversight for him, Mrs. Galasso claims. Specifically, Bassett has no experience as an educator whatsoever. He actually has an I.T background and was previously the district’s head of business services. Mrs. Galasso asked the Sentinel, “How is it possible for a school district to succeed when the person at the helm has no education experience?” Mrs. Galasso also told the Sentinel that “The Department of Education says that the California Commission on Teacher Credentialing is who provides oversight to these positions. The commission says that they only have oversight over employees with credentials.” Because Bassett does not have teaching credentials, he cannot be controlled, she said. Therefore, Bassett cannot be reprimanded by the Department of Education. Thus, the person leading FUSD in its educational mission is not educated in education. Mrs. Galasso considers this a loophole in the system and is currently going to propose legislation to fix this. Mrs. Galasso told the Sentinel that people believe “Bassett was put in as superintendent as a yes man by Acquanetta Warren.” Acquanetta Warren is Fontana’s mayor. But that seems to be only partly the reason. The other appears to have grown out of a need to keep control of the district where it has always been. Mrs. Galasso claims it has been in the hands of corrupt administrators going back 30 years or more.
As part of the Local Control Funding Formula legislation, school districts in the State of California are required to develop a Local Control Accountability Plan (LCAP) to guide priorities in the budget development process. A public hearing on the plan must be held at a regular board meeting prior to being adopted at a subsequent meeting. Fontana’s LCAP gave its administration the freedom to control all of the school district’s money. This is not customary. With this much power over money, the chance of misusing funds heightens. Under the aegis of LCAP, the administration hired more administration staff, gave themselves raises from 24%-150% while teachers were give 12% over 3 years. Money being sent in the direction of top administration and not the teachers on the front lines of education might reflect why the school district scores low across the board on the overall education of its students.
The FUSD superintendent and top administrators rolled over a cut car allowance into salaries, so now they get raises on that money. When they retire it will cost the school district more money in the form of payments to the California Public Employees Retirement System, commonly referred to as CALPERS. Mrs. Galasso told the Sentinel that “Everyone from the superintendent to senior administration want more money now for themselves and do not care about the ramifications it will create later when they no longer work for the school district.” Mrs. Galasso said “The district is supposed to be left by teachers and administrators in better shape, not more complicated and with more problems for future students and employees.”
Mrs. Galasso has more than a dozen sources in FUSD who send her information about the questionable behavior that has taken place and continues within FUSD. They encourage her and tell her to keep pressing on. Their information cannot be released by the Sentinel because of fear of retaliation against them. One of Mrs. Galasso’s FUSD sources told her that special education students are not getting proper services via FUSD teachers. The teachers are warned not to inform parents of their legal rights to get their students’ services. The reason for this is because if a person does not know his or her rights and is left in the dark, there is less likelihood that person will create a problem with the school district. The last thing a school district wants is a lawsuit, especially a lawsuit that involves the mistreatment of special education students. Even though millions of dollars in expenditures are approved during school board meetings, it is difficult to verify whether these expenditures as approved are being made. Up until two years ago, services were provided that consisted of home visits to tie school and the home together, giving parents some training on how to handle their child with a school connection. FUSD stopped providing that service. Mrs. Galasso stated “The money is for the children, but it appears that they in fact are the last ones to receive it or many times don’t receive it at all.”
The name Leticia Garcia might ring a bell to people who live in Fontana or who pay attention to the people past and present on the FUSD school board. Letica Garcia was on the FUSD school board from 2010-2013. Leticia Garcia noticed similarities to what Mrs. Galasso is currently speaking about monetary-wise when it comes to FUSD. Mrs. Garcia noted thousands of dollars wasted on irrelevant trinkets purchased with school district dollars for the Fontana After School program.
Mrs. Garcia asked what was going on and why money was being wasted in this fashion. Because of this Mrs. Garcia was viciously attacked by Acquanetta Warren. Warren manipulated the Fontana voters to believe Leticia was against the students and the after-school work program. Wasted taxpayer money was used on a recall of her. The effort to uncover the corrupt truth Mrs. Garcia found was thwarted.
Mrs. Galasso believes that $20 million missing on top of the wasteful spending found by Letica Garcia warrants a forensic audit of the school district. Mrs. Galasso told the Sentinel that since Leticia Garcia left office it has only gotten worse, as there are yearly audits done only by a single agency. “It’s not that the auditing agency does wrong, but FUSD provides the same routine documents,” she said. Fontana manipulates the information given to the auditing agency to make it appear like the school district is on the up and up and that money is being spent where it needs to be and how it should be spent. Mrs. Galasso told the Sentinel “It is really simple; FUSD provides fake ledgers to the auditing agency when in reality there is a separate ledger with what is really going on financially in the school district.”
A forensic audit is requested and needed if there is suspicion of asset theft fraud. A financial statement audit is conducted yearly or routinely but does not look deeply into any of the information provided. The only way a forensic audit will happen in the FUSD is if the majority on the school board vote for it, or by a local legislator’s request. Mrs. Galasso believes that “the school board is not going to request it, because they all have their own agendas. But none of those agendas include the students. The majority voting bloc supports the mayor, so a vote on it won’t happen.
People wonder why the mayor is so involved with what happens with the school district. What most people don’t know is the school board controls certain aspects of the city, such as developer fees, property taxes, and boundary lines. That is the mayor’s concern, not our children. Fontana falls in California Senate District 20. This is Connie Leyva’s district. Senator Leyva has been approached by Brandi Galasso. Senator Leyva has been given all of the information that Mrs. Galasso has pertaining to the FUSD. Mrs. Galasso told the Sentinel that Mrs. Leyva met with her one time and they exchanged a few emails but Mrs. Leyva blew her off and did not want to touch the political hot potato that is Fontana. Mrs. Galasso also stated that she is currently talking to other representatives in the district to see if anyone has the courage to do what is right.
Some school board policies require approval to spend money on things like equipment for schools, vehicles for the district, and travel for district employees. In those policies, they have set amounts allowed to be spent. If they go above the allowed amount they must go before the school board to ask for their approval to spend that much money. The superintendent has the ability to reword these policies or change these limits. Board approval is the only thing that is needed. Mrs. Galasso says exploiting this is extremely easy considering the board approves everything. Superintendent Bassett just needs to manipulate the explanation and the board rubber stamps his request or position. So, when they raise limits, they purchase continually without needing the board’s approval. Mrs. Galasso said “There is no pushback against what the superintendent proposes, and because of this, who knows what has really happened in the past or what is going on and where money has gone? This is an example of why a forensic audit and more overall oversight is needed.”
The district’s director of purchasing for more than 30 years is Janie Rowland and she is one of a group at FUSD that has much control of many things that occur within the district. Mrs. Galasso believes Ms. Rowland should be looked at very carefully. She controls such things as all incoming and outgoing bids, purchase orders, invoices, deliveries, warehousing, recycling revenue, and money gained from auctions. When the school board asked for more proof as to what is auctioned and money received, Mrs. Galasso said she never answers the question and says “There is just too much information to keep track of.” Mrs. Galasso told the Sentinel that this statement by the Ms. Rowland was “ridiculous. Her job is to keep track of this.” In 2016-2017 the school board approved spending over $6.9 million for teacher professional development, but only minimal amounts of money that does not even get close to $6.9 million can be tracked as having been spent for that training and preparation. “Where is the money?” Mrs. Galasso asked.
Mrs. Galasso’s sources in the school district also stated that the school board always highballs contracts or money that needs to be spent, and takes money appropriated for the specific requests that is left over and uses it elsewhere. At one of her children’s schools alone there is $322,000 dollars in lunch funds reimbursed to the school district, of which 45% should have gone back to that school specifically for food. The school saw only between $24,000 and $38,000 of that returned. More then half the amount of money that is supposed to be used to feed the FUSD students is in fact not being spent on the children. A past audit was done on the school district and $2 million came up missing. There was no oversight. The money wasn’t found. But the audit showed that no money was spent anywhere else. Mrs. Galasso told the Sentinel to not take her word for it.
She said, “Ask the kids. They will tell you.”  Apparently, many times the cafeterias in many of the FUSD schools run out of food before every student has the chance to eat.
Mrs. Galasso believes it is unfair and criminal how much money can be wasted to cover up for the people running FUSD. People often ask who is responsible for the pipeline to prison problem with young children. Mrs. Galasso believes people like the ones running FUSD are responsible. “They take every possible resource or dollar they can from the children,” she said. “What else would you expect to happen?”
FUSD has administrators like Martha Duenas who was promoted to her husband’s position in 2009 as director of English Language Development. Martha makes over $130,000 a year. FUSD has 96% English learners at their schools and Mrs. Galasso told the Sentinel  she has never seen her at a school event or even providing instructional support. “Instead of paying a woman who is virtually non-existent this much money, why not invest it in the children or programs?” she asked.
Mrs. Galasso says this is only a miniscule amount of questionable information she has about the school district. Over the past four years Mrs. Galasso has contacted every single department a person could imagine to ask for help, or to look into FUSD. She said no one has oversight or is willing to help her by looking into the school district. Mrs. Galasso said that if people actually do come to take a cursory look at what is happening in the district, officials there know they’re coming and can manipulate what an investigation into the district will find. Mrs. Galasso said she wants to be proven wrong. She wants to be embarrassed because she has been misinformed about the FUSD. Until someone proves otherwise, she is going to keep collecting signatures, requesting information, and seeking the truth. The kids, she has always said, come first, and she believes what she is doing is putting them first by getting to the bottom of what is really going on at FUSD.