Steve Dukett’s exit as Upland’s development services manager earlier this year was proceeded by a verbal dispute that escalated into a physical altercation with the city’s senior information technology technician.
Dukett is a notable and controversial personage in local government in San Bernardino County and elsewhere in California. For the last dozen years he has functioned primarily in the role of consultant to governmental entities through his employer, Urban Futures.
A longtime governmental employee, Dukett worked with a number of municipal entities in management, including stints as the redevelopment director with the cities of Redlands, Upland, Hesperia, Ontario, Lancaster and San Bernardino. He was briefly, in the late 1990s, the interim city manager in Hesperia. His employment in Upland took place during the reign of then-Mayor John Pomierski. At present he pulls a $168,128.36 public pension consisting of $114,920 per year provided to him by the California Public Employees Retirement System based on his 29.43 years with various municipal entities including Upland and Hesperia, as well as $53,208.36 from the retirement system Los Angeles County has for its public employees based on 12.42 years he worked there, including within the county administrative office.
Dukett is one of three managing partners with Urban Futures, a full service municipal consulting firm that carries out contractual work for cities, counties, school districts and special districts. The company consists of public finance advisors and functionaries, public management advisors, as well as individuals engaged in economic development and real estate advisory and analytics. Dukett’s range of expertise extends to all of these categories, and his profile put out by the company credits him with the planning and implementation of economic and community development, affordable housing, asset management, public facility, public infrastructure financing and grant programs. No fewer than 81 California cities, counties, districts or agencies utilize the services of Urban Futures, including Adelanto Barstow, Grand Terrace, Highland, San Bernardino and Upland in San Bernardino County.
Urban Futures’ client list exists as a virtual who’s who list of California cities that have been pushed to extremity by the vicissitudes of the economy or internal poor management. In this way, the actions taken by these cities in accordance with the company’s direction is periodically extreme or ruthless. In some cases, such as in Upland, Urban Futures has assisted the city in making arrangements for the issuance of special tax bonds ultimately to be born by the purchasers of the residential properties within the subdivisions against which those bonds were issued under the city’s authority, so to provide the developer of those residential projects with the funding to create the infrastructure needed to allow the development to proceed. Such arrangements grow out of the city’s desire to facilitate development as well as the unwillingness of the developer to shoulder, ultimately, the cost of that infrastructure. This results in the purchasers of the residential units to either learn or realize, often after they have made the purchases, that in addition to their mortgage payments and normal property tax burdens, they have been saddled with an extra $3,000 to $4,000-per-year bond debt service payment as a consequence of their home ownership. Urban Futures insists such arrangements are entirely legal and that the minimal legal disclosure of the financing arrangements are made to the residential property purchasers.
Urban Futures often involves itself in providing services, including advisory, document preparation and application assistance for the refinancing of a city’s bonded indebtedness. Virtually all of the bond debt refinancings undertaken in accordance with Urban Futures’ advisal entail a lowering of the interest rates, resulting in an immediate reduction in the city’s ongoing payments to service that debt. Those refinancings, however, generally involve extending the period of bonded indebtedness many years into the future well beyond the original life of those bonds, such that overall, the cities doing the refinancings pay substantially more to retire the original debt than would be the case if no refinancing had been made. Urban Futures’ critics have suggested that in these cases, the company’s advice to it clients is driven more by the interest the company has in securing for itself fees associated with doing the refinancings than the actual long term financial interest of the city and its taxpayers.
Perhaps Urban Futures most controversial engagement in San Bernardino County in the last decade relates to the work it did for the City of San Bernardino.
In 2012, after nearly a decade of consistent deficit spending, the City of San Bernardino found itself in an intractable financial crisis, with $80 million in unfunded liabilities and $49 million more in annual operating costs than income. After then-City Manager Charles McNeely resigned, his assistant, Andrea Travis-Miller, assumed the city’s helm, and after huddling with then-Finance Director Jason Simpson, they generated a report to the city council in which the duo recommended that the city seek Chapter Nine bankruptcy protection. In compliance with that recommendation, the city council gave authorization to do so, and the filing was made in August 2012. Travis-Miller and Simpson remained in place for six more months, but then departed the city just before the onset of spring in 2013. At that point, Urban Futures was retained to oversee the city’s fiscal affairs, to provide, in essence, the services of the city’s finance director and the finance department’s senior staff.
In addition to serving as the city’s finance department, Urban Futures was also enlisted to serve among the bevy of advisors to the city – including itself, the law firm of Stradling Yocca Carlson & Rauth; Management Partners Inc.; Bartel Associates, LLC; Bienert Miller & Katzman PLC; the Law Office of Linda Daube; Rust Omni; and McDermott Will and Emery – with with regard to its bankruptcy and the effort to make an exit from that status.
The city lingered in bankruptcy for nearly five years, during which time Urban Futures, Stradling Yocca Carlson & Rauth; Management Partners Inc., Bartel Associates, LLC; Bienert Miller & Katzman PLC; the Law Office of Linda Daube; Rust Omni; and McDermott Will and Emery formulated a strategy to saddle the city’s residents with higher taxes without holding a vote and finding a creative way to stiff a multitude of its creditors and slip out the backdoor without paying its debts.
One part of that formula was a plan to save money by closing out the city’s 137-year-old fire department, have the county fire department take on fire protection in the city, and pocket the savings from the closure while having all residents and businesses pay a $143 fire service assessment to the county to pay for a service the residents and entrepreneurs were already paying for with their sales and property tax. The city city also simply skipped out on much of what it owed to the city’s vendors and creditors, such as Luxembourg-based EEPK, holders of the city’s pension bonds, and Ambac Assurance Corp, which indemnified some of those bonds, who were given 40 percent of what they were owed. Others the city owed money to fared even more poorly, such as litigants and claimants against the city, including ones who had prevailed in certain lawsuits, among them those alleging they had endured civil rights violations relating to excessive use of force by the police department. Those entities and the lawyers representing them were given just a penny on the dollar for the first $1 million in judgments against the city.
Nevertheless, Urban Futures, Stradling Yocca Carlson & Rauth; Management Partners Inc., Bartel Associates, LLC; Bienert Miller & Katzman PLC; the Law Office of Linda Daube; Rust Omni; and McDermott Will and Emery – the entities who helped formulate the game plan of having the city not pay its debts – were provided with 100 percent remuneration for those services, which ran to more than $25 million – $25,193,340 to be precise. Stradling Yocca Carlson & Rauth, which represented the city in bankruptcy court, was paid in full on the $19,470,878 it billed the city. Urban Futures, Inc. was paid $2,327,665 for bankruptcy related services, including refinancing loans and bond financing and managing the disposition of various municipal assets. Management Partners Inc. received $1,466,190. Bartel Associates, LLC, was paid $214,050. Bienert Miller & Katzman PLC was paid $441,340. The Law Office of Linda Daube was paid $644,317. Rust Omni was paid $284,646. McDermott Will and Emery was paid $283,103.
In the early 2000s, while John Pomierski was mayor, city management in Upland made a series of concessions to the city’s employee unions, lessening the work week to four days a week, increasing salaries and upping benefits. Because the formula for calculating benefits, particularly pensions, include as a multiplying factor the top annual salary a retiree received as an employee, the city has made hefty commitments to its current and former employees in terms of pensions, such that the present projected future pension liability, which grows with each passing year, now stands at more than $121 million. The city must make ongoing payments into the California Public Employee Retirement System to stay abreast of this cost, which at this point means that of the city’s roughly $42 million annual general fund budget, more than $8 million – exceeding 19 percent – must go to the California Public Employee Retirement Fund.
In 2012 and 2013, Upland was teetering on the abyss of bankruptcy, with Standard and Poor’s downgrading the city’s credit rating and the certified public accounting firm of Mayer Hoffman and McCann stated in its auditor’s opinion from 2012 that serious questions with regard to the Upland’s solvency had emerged to the point that there was a serious question as to whether the city “will be unable to continue as a going concern.” Hence, the city’s management felt, given the overly generous concessions that had been made to the city’s employee unions previously, that maintaining existing salary levels without salary increases going forward were in order.
Over the last two years, the city’s employees’ bargaining units have sought substantial salary increases in collective bargaining exchanges with city leaders. In recent months, the union members have taken to wearing pins emblazoned with “11,” symbolic of the number of years they have worked since having last had a contract or cost of living adjustment.
Last November, Jeannette Vagnozzi, who was formerly the city’s deputy city manager, city clerk, administrative services director and head of human services, was promoted to city manager. Vagnozzi is decidedly unpopular with a small but quite vocal and active group of citizen activists. The city’s employees’ union leaders, reading the strong sentiment against Vagnozzi, have likewise intensified their efforts to achieve a new contract by personalized attacks upon Vagnozzi.
Vagnozzi, meanwhile, is caught between three hostile forces, consisting of two members of the city council – Rudy Zuniga and Janice Elliott – who would fire her if a third vote among their colleagues materializes to do so; city resident activists calling for her head; and the city’s municipal employee union leaders and members who believe that their continuing pressure on Vagnozzi will pay dividends. The union leaders and the union members hope Vagnozzi will cave under the pressure and simply provide them with the raises, said to be in the five to six percent range, they are demanding. If Vagnozzi holds the line on that issue, then her firing could yet benefit them, since her replacement would come to the bargaining table knowing that his or her predecessor had lost her job, at least in some measure, because of not being able to keep peace with the city’s employees.
Last year, with the departure Jeff Zwack as Upland’s development services director, the city hired Steve Dukett on a contractual basis to fill that void while seeking out Zwack’s replacement. As part of the city’s management team, Dukett worked closely with Vagnozzi. As no permanent replacement for Zwack materialized, Dukett remained in place.
In January, 77 of 83 members of the Upland City Employees Association taking part in a poll expressed no confidence in Vagnozzi, a pointed stb at her for her toleration of maintaining the city’s pay grade status quo, given that the city employees had gone more than a decade without a cost of living adjustment. At the January 14, 2019 Upland City Council meeting, Rami Asad, the former president of the Upland City Employees Association, and April Flores, the president of the Upland City Employees Association, spoke during the public comments forum, announcing the no confidence vote against the city manager and articulating what they said was the union members’ collective disdain for Vagnozzi.
Eight days later, on January 22, 2019, Dukett buttonholed Asad, who works within the city’s informational technology division, and made clear that in the divide between management and labor, he came down on the side of management. Dukett’s line of authority as the city’s contract development services manager did not extend to supervision of Asad. Dukett offered his prediction that the union’s tactics would not succeed, saying that they could count on having to invest in union pins with the number 12. The exchange grew heated, and according to witnesses and a video of the incident caught on the cell phone of a city employee, Dukett tapped Asad several times on the chest with his index finger as he expressed his views.
According to a letter dated Februaryyyy 20, 2019 from Joan Heithoff, a labor representative with the Long Beach-based City Employees Association, to Richard Jeganathan, the City of Upland’s information technology division manager, “Mr. Asad asked Mr. Dukett to stop harassing him. When Mr. Asad told Mr. Dukett to act professional and not get involved in negotiations issues, Mr. Dukett told Mr. Asad that he was the one who was not acting professionally. Mr. Dukett persisted in physically poking and verbally harassing Mr. Asad, including invading Mr. Asad’s personal space, in regard to Mr. Asad’s union activities.”
Accounts of what occurred next vary somewhat.
The next day, January 23, 2019, Asad emailed Vagnozzi, indicating that he found Dukett’s presence near his workstation intimidating and that he therefore intended to leave work that day. Vagnozzi summoned Asad to her office, where she informed him that Dukett would remain with the city until the expiration of his contract on January 31, but would be departing thereafter. She said that for the interim until Dukett departed, Asad would be provided with temporary work quarters outside of City Hall at another city facility. Asad characterized that as an unacceptable solution, as it was Dukett, he maintained, who had created the hostile work environment. Asad said his being forced to abandon his normal workplace to accommodate Dukett implied that Asad was being deemed responsible for what he characterized as an assault by Dukett. Being forced out of his workstation, even for the relatively short duration of a week, Asad insisted, was tantamount to being disciplined. Vagnozzi said she was doing her best to work through a difficult situation, while seeking to maintain a safe, peaceful and productive work environment. She said that all parties needed to meet each other halfway. She said that Dukett would apologize for his action and any misunderstanding, and that everyone could then get back to work.
Asad stated that he was not interested in nor would he accept an apology from Dukett, and he would not leave his own office. That being the case, Vagnozzi said, Asad must prepare himself to work in close proximity to Dukett, as Dukett would not be leaving his assigned office until his contract was expired. Asad then accused Vagnozzi of gender bias, saying she would be taking steps to protect him if he were a woman. He reiterated that he was not comfortable having to try to avoid Mr. Dukett as he worked. Vagnozzi offered her view that the atmosphere of intimidation at City Hall included action by union members and the union itself, of which Asad was the immediate past president. As city manager, she said, she was herelf subjected to a hostile work environment, and that she felt she needed to remain clear of certain employees who were hostile toward her.
At one point, Vagnozzi told Asad he could avoid having to deal with Dukett by not coming to work, and that he would yet get paid.
According to Heithoff, the City Employees Association employee representative for Upland, Asad was given to understand based upon what Vagnozzi said, that she was going to arrange for that day, January 23, to be Dukett’s last day at City Hall.
Either Asad misunderstood, Vagnozzi had deliberately misled him or she lost her nerve in having to execute upon her statement and failed to convey to Dukett that he should make himself scarce at City Hall because the next day, January 24, 2019, Dukett was again present at his workplace near Asad’s workstation.
Asad filed a report with the city’s human resources department, which under the city’s policy should have triggered an inquiry by the city’s human resources director in conjunction with the city manager, chief of police, city clerk and the city’s labor law counsel, a group known as the workplace crisis management team. With Dukett’s departure from the city to take place in any event as of January 31, the matter was deemed moot and the team was not assembled.
According to Heithoff, “On January 28, 2019 Mr. Asad also was told by a witness to the incident, Jaime Davidson, that Mr. Dukett had contacted her and the other witness and told them that an investigator would be contacting them. In a text message to Mr. Asad, Ms. Davidson alleged that Mr. Dukett said to both witnesses that he was their manager and friend and that Mr. Asad was lying.”
After Dukett’s departure, Asad, Heithoff and the union pressed the matter, doubling down on allegations that Vagnozzi had failed to respond appropriately, and seeking an independent outside investigation of the incident. According to Heithoof, because the city currently does not have a human resources director on staff, “the city manager is currently the acting human resources director, which we believe is a conflict of interest, considering her involvement in the case. Due to the chain of command for human resources staff, we do not have confidence in human resources to conduct a fair and thorough investigation.” Heithoff demanded that the city hire a “neutral investigator” to conduct an inquiry and report the findings to the police chief, public works director and the city council.
It does not appear that the city went to the expense of hiring an investigator, but the Sentinel is informed that Police Chief Darren Goodman somewhat reluctantly had his department look into the matter. Reportedly, Dukett told investigators he had not been disciplined, chastised or in any way questioned by Vagnozzi about his exchange with Asad. A well-placed source said Goodman considers the matter to be one involving “workplace politics” that was inappropriate for his investigators to have become involved in, and the department has made no recommendation regarding any further action in the matter.
Dukett told the Sentinel it was Asad who was acting inappropriately and not he.
“I am aware of this person’s conduct,” he said. “My answer is really simple: Not one thing of what you said is true. I can’t explain why the person has alleged such things and I don’t know why that is happening. I don’t know why he has said what he said. Typically, he sometimes gets angry. I can’t explain what his motivation is to make allegations that are untrue.”
Told that the report to the Sentinel was that he had confronted Asad over the union’s beef with the city manager, Dukett said, “That is interesting. I hardly ever shared words with this person. I’m not saying he doesn’t believe in his own opinion, but I don’t know what makes him tick.”
Dukett said he was not caught up in nor interested in the union’s activity, one way or the other. “I wasn’t an employee,” he said. “I was a consultant; I was never involved with the employees. I wasn’t involved and I am not going to psychoanalyze anyone. As far as I am concerned this whole thing is one of the most bizarre things I have ever experienced. It’s not my intent to put any more meat on the bones.”
Dukett continued, “I know what has been alleged, and those allegations are not true. There has not been any contact between me and Jeannette Vagnozzi relating to any employees or anything at all since I left. Now that my contract has expired according to the terms, I told her thanks for the opportunity and wished her well. I was there longer than anyone expected because it took them longer to hire a permanent director. I was originally going to be there three or four months. Ultimately, I was there for a little more than six months. It’s all taken care of, and the city’s new director is very capable. As to what is being said about me, I absolutely deny all of the allegations.”