(December 17)  Travelers will have another reason to utilize Ontario International Airport over the next five months as its two main terminals will host a display of the work by several contemporary artists relating to international themes.
Los Angeles World Airports), in partnership with the City of Los Angeles Department of Cultural Affairs, announces a group exhibition featuring twelve Los Angeles-based artists who derive inspiration from the urban and natural worlds to create photographs, paintings, sculptures, and installations, which are on display at Ontario International Airport, on the Departures Levels in Terminals 2 and 4 through May 2014.Curated by Ginger Van Hook, Out of Thin Air features a blend of original contemporary artworks reflecting the individual artistic processes intrinsic to working and creating in Southern California amidst an assemblage of people, places, and ideas from across the world.
Los Angeles World Airports, known by its acronym LAWA, is the airport oversight and operations department for the city of Los Angeles, which owns and operates  Los Angeles International Airport, Ontario International Airport, and Van Nuys Airport.  Over the last several years, city of Ontario officials have been critical of LAWA as ridership at Ontario International has declined from its peak of 7.2 million passengers enplaned there in 2007 to 3.9 million this year. In response, LAWA is seeking to attract passengers to San Bernardino County’s largest commercial airport, a medium-hub, full-service facility with seven carriers offering 14 daily nonstop flights to 13 major U.S. cities plus seven daily non-stops to Guadalajara, Mexico.
Out of Thin Air is a free exhibit on the second floor of both terminals, beyond the airport’s security screening barriers, making it accessible only to ticket-bearing passengers.
The nine artists on exhibit in Terminal 4 use a variety of media and methods to survey their surroundings.
Kenneth Ober, Luke Van Hook, Holly Tempo, and Michael Giancristiano demonstrate distinct approaches in examining and interpreting the landscape, in its organic and artificial states, from intricate renderings to fields of color and pattern.  Renée Foxcombinesornate paintings and sculpturesto depict microscopic occurrences, such as the propagation of a flower or the power of a seed, while Shizuko Greenblatt incorporates synthetic and organic objects to reference Ikebana, the Japanese art of flower arrangement.
Michael Massenburg and Mark X Farina mix color, language, and abstract forms to create a sensory experience and express human relationships with the environment. Artworks by Scott Griegeralter manipulate perspective using digital art and design.
The three artists on exhibit in Terminal 2, Siri Kaur, Yoichi Kawamura, and Anne Marie Rousseau, use photography to explore the expansive and limitlessness nature of the skies. Kawamura’s images of distant horizons and Kaur’s diptych of photographs capturing the Aurora Borealis reference themes of infinity, vastness, and contemplation. Rousseau’s combination of air show photographs creates a collage of intersecting lines and open space.
Initiated in 1990, the purpose of the Public Art and Exhibitions Program at Los Angeles World Airports is to educate and entertain the traveling public at Los Angeles International, Ontario International and the FlyAway Bus Terminal at Van Nuys Airport. The program showcases local and regional artists through temporary exhibitions and permanent public art installations, which enhance and humanize the overall travel experience for millions every year. Additional information is available at www.lawa.org.
Ontario International Airport is located near the confluence of the I-10 and I-15 freeways, roughly 35 miles east of downtown Los Angeles, and close to Orange County, the San Gabriel Valley, and Palm Springs. making it the Inland Empire’s preferred airport for nonstop flights throughout the West.  Information on flights and schedules is available at  www.flyontario.com.

(December 19)  Paul Chabot has given indication he will run for the lower house of the California Legislature if  40th Assembly District Assemblyman Mike Morrell is obliged to leave that post if he achieves success in his bid to succeed bill Emmerson, who resigned as 23rd District state senator effective December 1. That senate seat will be filled in a special election next year.
Chabot, a Republican who unsuccessfully sought election to the Assembly in the 63rd District in 2010, touts himself as a conservative, Navy veteran and anti-drug crusader.
Morrell’s 40th Assembly District includes Rancho Cucamonga, the foothills and mountains around San Bernardino, and the cities of Highland, Loma Linda and Redlands. It is considered to be a relatively safe district for Republicans.
Though he has not officially declared his candidacy, Chabot sought to deflate the chances of others who might vie to replace Morrell. In an email sent to his supporters on December 15, Chabot mentioned without being specific a Republican rival to succeed Morrell who he said is claiming to have endorsements of GOP higher-ups. Chabot said that is not true.
“[T]here is misinformation being spread regarding the Assembly race I intend to formally enter after the New Year,” Chabot said. “First, the state party and state party chairman have not endorsed nor are they supporting my soon-to-be opponent in the race. This piece of misinformation has been told to a number of officials in our region. The chairman, by rules, cannot support, and neither can the party. There are two local Republicans in this race so far, and could be others.”
Chabot did not name who those local Republicans are. He said he had personally “just returned from a trip to Sacramento and “leadership” [i.e. Republican Party leadership] has made absolutely no decision on ‘support’in this race –It’s too early.”
Referring to his campaign, Chabot said, “We are not making an official announcement until after the New Year – and even then it’s too early. Morrell still holds the seat and has yet to resign from it.”
“I will go to Sacramento as your future elected Assemblyman and lead with courage, honor, integrity, faith, passion, leadership and dedication,” he declared on one of the website’s pages.

(December 17)  A growing Southern California Company has expanded its manufacturing footprint, moving some two-thirds of its operations into San Bernardino County.
The expansion of CELCO Manufacturing, Inc. from what was formerly its main base of operation in East Los Angeles into the city of Ontario’s industrial district is the model that Inland Empire officials are hoping will be repeated over and over again as business owners are learning that lower property leasing and purchasing prices in and around San Bernardino County represent a decided advantage for entrepreneurs.
Celco is is the corporate personification of the Cortés  Family, who immigrated to the United States from Mexico in the mid-1970s. Seven of the eight Cortés brothers found employment with Hamilton Fixtures West,  a manufacturer of display furniture located in Brea, learning the various aspects of the fabrication of both wood and metal furnishings and display racks. In 1994, the eleven Cortés  brothers  and sisters – who then ranged in age from 18 to 37 – contributed to starting Celco. They drew their clients from both the retail industry and display furniture manufacturers.  They specialized in providing display racks and cases for companies such as Nabisco and Kraft Foods as well as component parts such as shelving and case legs.
The company struggled initially as it sought to break into a market dominated by well-established companies, but forged a toehold in the industry and grew steadily if slowly for a dozen years. By 1996, Celco boasted 35 employees and exceeded the $3 million revenue mark. The economic downturn that began the following year took its toll, however, and by 2009 the company brought in only $1.8 million and was forced to shed 17 of its employees.  Beginning that year, the company intensified its marketing efforts, targeting furniture design companies with needs for the type of components Celco could readily supply.
By late 2010, the company experienced a turnaround, with a 40 percent uptick in sales. And even as the recession’s grip on the local and national economy persisted, the company continued to prosper. In 2010, the company had $2.6 million in sales. This year, the company is on track to hit over $6 million, and it now employs 58, of whom, according to president and CEO Cesar Cortés, “27 are immediate family.”
The decision to set up shop in Ontario, Cortés said, was one that naturally evolved as a consequence of the company’s success, the lower cost of functioning outside of Los Angeles, the quality of the manufacturing and warehouse space available in Ontario, the nearby presence of a number of the company’s customers and suppliers, as well as the consideration that the new location is much closer to where the majority of Celco’s employees reside.
“We have a 17,000 square foot building in East Los Angeles,” Cesar Cortés told the Sentinel during an exclusive interview at his company’s new 30,000 square-foot plant, located at 1524 West Brooks Street in Ontario. “We are going to keep that facility open while we move 70 percent of our operation here. We chose to relocate here, first, because we need a bigger place and, second, some of our best customers are in this area.  One important difference is it is almost 30 percent less expensive here. Six out of eight of our supervisors live nearby in Chino. Most of our suppliers are closer – San Dimas and Ontario. There is also the advantage of 45,000 square feet of enclosed yard at this location, which is very valuable for the type of business we do.”
Cortés gave a description of the niche his company has found.
“Our basic product line is point of purchase displays – racks and fixtures for department stores such as Sears and Forever 21,”  Cortés said. “Our products include some office furniture. We incorporate wood, metal and plastic into our production process. We provide wood products for companies that fabricate or deal mostly in metal products.  We do thousands of wood components for the La-Z-Boy, United Furniture Industries and Jonathan Louise. We have a couple of customers who purchase close to a million dollars worth of merchandise from us.  We have had great sales for four consecutive years, with each year exceeding the last. In 2010, we predicted sales of $2.8 million and the company hit $3.2 million. We are now up to six million.”
In touting his company’s fabricating capabilities, Cortés said he would like his prospective customers “to know that we are one of just a few companies in Southern California that has the machinery and capacity to meet high capacity demand in a very short turnaround time.  We have a proven track record fabricating a quality product to our customers’ specifications. We work primarily as a subcontractor to businesses that want to increase their sales but find themselves too busy to complete new job proposals. We offer fabricating outsourcing that carries with it the advantage of reducing a company’s machinery requirements and capital investments, decreases its direct labor costs, and saving not only time on prefabrication cutting and preparation of materials but on material handling and on ordering raw materials. We have at our disposal ten CNC [computer numerical control] machines, two edgebanders, one panel saw, a CNC dowel inserter and ten conventional woodworking machines. We have a full-blown engineering department that can do volume engineering.”
The consideration that Celco is a family-owned and operated business provides the advantage of cohesion and dedication that is not always available elsewhere, Cortés said.
“My brothers, including myself, worked 103 combined years at Hamilton Fixtures West and we now have 83 more combined years working together with Celco,” Cortés said. “We are an unusual family in that we have been working together – the four of us who are the corporate officers with Celco – for 32 years. We occasionally have differences of opinion but we get along and we all take pride in meeting our customers’ needs and expectations.”

(December 19) SANTA ANA—The Police Officers Research Association has sued the recently shuttered Upland-based law firm of Lackie, Dammeier, McGill & Ethir, alleging malpractice and fraud relating to alleged overbilling practices.
Over the last 16 years, Lackie, Dammeier, McGill & Ethir had grown to become what was arguably the most aggressive and successful of law firms in the state devoted to representing police officers and their unions.
Along that way, the firm had made a fair number of enemies, including ones inside and outside the law enforcement establishment, particularly after the firm made use of tactics and surveillance techniques that had formerly been the province of the law enforcement agencies that employed many of their clients.
Lackie, Dammeier, McGill & Ethir represented police unions, officers in actions or defenses as well as professional law enforcement interest groups such as the Police Officers Research Association of California, known by its acronym PORAC, which maintained a legal defense fund for officers.
The firm established a reputation for dogged representation of its clients, prevailing in a majority of the cases it handled, occasionally pursuing expensive litigative strategies the unions had not endorsed that more often than not resulted in positive results, either at trial or in settlements short of trial.
A criticism leveled at the firm was that it routinely blurred the distinction between an aggressive legal defense and political activity, as was demonstrated in the unfulfilled political aspirations of one of the firm’s founding partners, Dieter Dammeier, as well as intensive scrutiny that bordered on the verge of invasions of privacy of elected and non-elected government officials and police department administrators in an effort to obtain negotiating leverage in legal cases or labor actions that were characterized by some as intimidation tactics or efforts at extortion.
This year, even as the firm was experiencing unprecedented success on several legal fronts, it was hit with a devastating rearguard action when PORAC this summer alleged Lackie, Dammeier, McGill & Ethir had consistently overbilled it.
On September 10, PORAC President Ron Cottingham informed his group’s legal defense fund participants Lackie, Dammeier, McGill & Ethir had been removed from its panel of approved providers of legal services, based on a finding of the legal defense fund’s board of trustees “that the former panel law firm Lackie, Dammeier, McGill & Ethir has committed serious acts of misconduct regarding their billing practices.”
Cottingham said auditors that had gone over the PORAC Legal Defense Fund books found that Sakunthala E. Ethirveerasingam, one of the firm’s thirteen partners, in 2012 submitted invoices claiming to have worked 4,275 hours, more than double what a full-time attorney would bill for in a typical year, and that she had acknowledged she had engaged in not only double billing, but “triple billing” on occasions where she had worked on three client cases at the same time, billing PORAC for three hours of work during a single one-hour period. Ethirveerasingam uses the professional name “Saku Ethir.”
Auditors had also determined, Cottingham said, that another of the Lackie, Dammeier, McGill & Ethir attorneys, Kasey Sirody traveled once to a single destination to interview three clients and then submitted invoices to PORAC’s legal defense fund for three separate trips, including time and mileage.
PORAC’s auditors also accused Lackie, Dammeier, McGill & Ethir attorney Peter Horton of billing for “phantom trips” and that he generated “scores of invoices” claiming travel mileage and travel time when he had never traveled at all.
The lawsuit, filed by the Police Officers Research Association (PORAC) on Nov. 26 in Orange County Superior Court, alleges legal malpractice, fraud, breach of fiduciary duty, negligence, unjust enrichment and unfair business practices. It names as defendants attorneys Dieter Dammeier, Michael McGill, Peter Horton, and Kasey Sirody.
The Orange County venue was an inauspicious one for the firm. It was in Orange County where its aggressive tactics in representing law enforcement officers with regard to labor actions came under sharp scrutiny, which in turn led to the demise of the firm, which dissolved earlier this year.
As tense contract negotiations were proceeding in 2012 between the city of Costa Mesa and the Costa Mesa Police Association, the firm, which represented the union, advised members to step up pressure on the city’s elected leadership. Shortly thereafter, a private investigator under retainer by Lackie Dammeie McGill & Ethir, Christopher Lanzillo, began tailing members of the Costa Mesa City Council. On August 22, 2012, Lanzillo followed Costa Mesa Mayor Jim Righeimer to a bar, Skosh Monahan’s, owned by another city councilman, Gary Monahan. Lanzillo followed Righeimer after he left Skosh Monahan’s as the mayor drove home, and en route called 911 to report Righeimer was drunk and driving erratically. When police came to Righeimer’s home, they found that he appeared sober but subjected him to a field sobriety test, which he passed. Righeimer subsequently produced a time and date-stamped credit card receipt for two Diet Cokes he had consumed while at Skosh Monahan’s. Information then emerged that the police association had also been seeking, at Lackie Dammeier McGill & Ethir’s suggestion, to entrap Monahan and another council member, Steve Mensinger.
Soon thereafter, the Costa Mesa Police Association ended its relationship with Lackie Dammeier but not before other Orange County municipal officials, including city council members from Buena Park, Fullerton and Irvine, came forward to tell how the Upland-based firm and its clients engaged in efforts to harass them as they headed into elections and contract negotiations with their cities’ police unions, which were represented by Lackie Dammeier McGill & Ethir.
So brazen was the law firm in its pro-police union strategies that it posted on its website a political activity playbook that advised police unions on how to intimidate and twist the arms of politicians and lobby the public in a way that associates police pay raises with higher levels of public safety. In the brouhaha that ensued, Lackie Dammeier McGill & Ethir removed that posting.
The Orange County District Attorney’s Office’s has opened up an investigation of Lackie, Dammeier, McGill & Ethir. On October 10, investigators with the Orange County District Attorney’s Office, assisted by Orange County Sheriff’s Department detectives and officers, served a search warrant at the 367 N 2nd Avenue Upland law office of the law firm, which at that point was in the midst of decommissioning itself and farming its cases out to various of its former partners or other law firms. Ivestigators carted off scores of boxes full of documents and other materials from the office.

(December 18) ONTARIO—Volaris confirmed a start date of April 13, 2014 for its previously announced, twice-weekly service between Ontario International Airport and Guadalajara.
“This is the first time Volaris will serve Ontario International, which is great news for international travelers wanting more options when flying to Mexico,” said Ontario International Airport’s manager Jess Romo.  “We look forward to partnering with Volaris and having another international carrier at Ontario Airport.”
Tickets will be available through www.volaris.com, Volaris’ Call Center at (866) 988-3527, as well as through authorized travel agencies.  Starting April 13, the schedule includes arrival of the inagural flight to Ontario International at 12:05 a.m. with a departure from Ontario at 1:20 a.m. Flights will arrive in Guadalajara at 6:45 a.m.  Departures from Ontario International Airport will continue on Sunday and Thursday of each week.
Volaris Chief Executive Officer, Enrique Beltranena, spoke of the importance of arriving in Ontario as a significant step in stimulating the market of those who visit family and friends between Mexico and the U.S. “This market is the largest of its kind in the world, which is why we are committed to covering its connectivity requirements, offering flights at affordable fares that allow us to compete with ground transportation fares, while fostering cultural, commercial, and financial exchange with the United States.”
Other airlines currently serving Ontario Airport include AeroMexico, Alaska, American, Delta, Southwest, United and US Airways.  International flights depart from Ontario Airport’s Terminal 2 with arrivals at International Arrivals Terminal.
The addition of Volaris will raise the number of Ontario International’s carriers from its current seven to eight.

By clicking on the following portal, you can download the December 13 Edition.

Sentinel 12-13-13

(December 12)  One of San Bernardino County’s leading citizens narrowly averted death when he lost control of his vehicle while driving northbound on the 15 Freeway south of Devore early Wednesday morning.
Rialto Councilman Shawn O’Connell sustained substantial injuries that left him unconscious for nearly 12 hours after he plunged down a 30-foot embankment on the east side of the freeway south of the Glen Helen Parkway exit at around 2:15 a.m. as he was en route to the home of a friend in the High Desert who was going to make repairs to O’Connell’s wheelchair.
The California Highway Patrol has yet to establish the precise cause of the accident. There have been recurrent reports that O’Connell, who has only limited use of his legs, was experiencing intense back pain and spasms, which may have precipitated the crash. Some seven hours previously, O’Connell had left the Tuesday evening city council meeting before it concluded because he was experiencing intense back spasms.
O’Connell sustained significant internal injuries, including  bruised kidneys and lungs, a fractured vertebra and spinal contusions. His car lodged against overgrown chaparral and brush against a fence at the bottom of the embankment. The former police sergeant with the Rialto Police Department remained and unconscious and azed for well over ten hours.
Meanwhile, the person he was journeying to visit when the mishap occurred, described as O’Connell’s best friend, became alarmed when O’Connell did not arrive. He attempted to phone O’Connell and when he could not reach him on his cell phone, contacted the Rialto Police Department to inform them he believed something may have befallen the councilman.
Rialto instituted a search for O’Connell, including making a check of his home. That search expanded to include a drive along the likely route O’Connell would have taken up the 15 Freeway from Rialto to the High Desert, and when that proved unfruitful, the Highway Patrol was contacted and a request was made to the sheriff’s department to do a helicopter flyover of the 15 Freeway as well.
Sometime around 1 p.m. O’Connell regained consciousness and was able to use his cell phone to summon assistance. While rescurers utilitzed his cell phone transmissions to triangulate on his location, O’Connell  was able to start his vehicle and move it to a spot where he was visible to responding units.
The councilman was transported to the Arrowhead Regional Medical Center, where he remained at press time within the hospital’s intensive care unit.

(December 9)  Ontario has declared a temporary legal truce with Los Angeles over its effort to wrest back ownership and control of Ontario International Airport.
On June 3 Ontario filed a lawsuit against Los Angeles claiming the larger city has been purposefully mismanaging the airport. The lawsuit seeks the return of the airport to Ontario’s possession.
In August, Ontario overcame a motion by Los Angeles to have the suit dismissed, but has made little progress legally since that point.
With the prospect of years and perhaps decades of protracted and expensive litigation over the issue, with no guarantee that it will prevail, Ontario has apparently reached the conclusion that working out a solution outside the legal forum may be the better approach.
On December 5, Riverside County Superior Court Judge Gloria Connor Trask consented to allow both parties to put further legal action on hold at least until January 31 while they seek a resolution. Los Angeles, represented by attorney Steven S. Rosenthal and Ontario, represented by the law firm Sheppard Mullen Richter and Hampton, indicated their legal teams will take a hiatus while officials seek to hammer out a solution between themselves.
The development reflects more of a change on Ontario’s part than on that of Los Angeles. Three days after the suit was filed, then-Los Angeles Mayor Antonio Villaraigosa sent a letter dated June 6 to Ontario Mayor Paul Leon offering to reopen negotiations over the transfer of ownership and management of Ontario Airport from Los Angeles to Ontario.
In that letter, Villaraigosa stated, “I stand ready to resume negotiations between our cities upon withdrawal of the city of Ontario’s lawsuit against the city of Los Angeles.”
Villaraigosa, whose term as mayor ended less than a month later, held out hope that the airport ownership and management differences separating the two cities could be ironed out expeditiously and perhaps before he left office. “I have always believed, and continue to believe, that if we work together in good faith, we can achieve such a transfer,” Villaraigosa wrote “I continue to support regionalization of air traffic, with the long-term growth of Ontario International Airport as a viable alternative to Los Angeles International Airport (LAX). While these are difficult times for medium and small airports across the nation, I agree that focused marketing of Ontario International Airport can and should help grow Ontario International Airport over the long-term.”
Villaraigosa said he and Los Angles were taken aback by the lawsuit.
“With all of the above in mind, I was quite perplexed that the city of Ontario would file a claim and subsequent lawsuit,” Villaraigosa said. “Given the urgency you and other stakeholders have expressed, it would be more productive to continue our negotiations with the shared goal of identifying a mutually acceptable way to accomplish the transition. Both sides should sit down again and hammer out a mutually agreeable arrangement.”
Ontario, which maintained that Villaraigosa’s letter had not been received until June 12, told Villaraigosa in a letter from Mayor Paul Leon  “a legitimate settlement meeting cannot be subject to an unreasonable condition precedent,” rejecting  Villaragoisa’s call for Ontario to drop the lawsuit. “That is not a reasonable demand,” Leon wrote. “Ontario filed the lawsuit after all other avenues of relief were exhausted.  Having been forced to file the case, it is not going to withdraw it as a prerequisite to a settlement meeting, especially given that the current Los Angeles mayoral administration will be transitioned out of existence in a little more than two weeks. With your administration’s professed desire to seek a negotiated resolution before you leave office, it should withdraw the demand that the lawsuit be dismissed prior to any such discussions.”
While Ontario officials had expressed their belief that Villaraigosa’s successor, Eric Garcetti, would be far more amenable to having Los Angeles let the airport go back to Ontario, they were chastened to learn that Garcetti was made even more upset by the filing of the lawsuit than his predecessor. In October, Ontario City Councilman Alan Wapner, who has taken the lead among Ontario officials with regard to Ontario’s assertion of what they consider the city’s rightful control of Ontario Airport, publicly expressed himself as being frustrated with Eric Garcetti and his lack of focus on Ontario Airport and his seeming unwillingness to dialogue with Ontario with regard to the airport’s future.
Last week, however, there was indication that Wapner and other Ontario officials have engaged in some level of introspection, perhaps concluding that it is not reasonable to expect Los Angeles to be carry on blithely while Ontario is suing it.
Ontario and Los Angeles have not always been at loggerheads over the airport.
In 1967, when Ontario Airport had a gravel parking lot and was servicing fewer than 200,000 passengers per year, Ontario and Los Angeles entered into a joint powers agreement to allow Los Angeles to use its clout with airlines to increase flights into and out of Ontario. Under Los Angeles’ guidance, the airport grew, more airlines began flying out of the facility and improvements were made to its runways and terminals. In 1985, after all of the conditions set down in the 1967 joint powers agreement had been met, Ontario deeded the airport to Los Angeles for no consideration.
In 2007, the airport achieved its high mark in terms of passenger traffic, when 7.2 million passengers enplaned there. But since that time, passenger traffic through Ontario Airport has diminished to 3.9 million per year and Ontario officials maintain that Los Angeles World Airports (LAWA), the corporate entity that Los Angeles utilizes to run Los Angeles International, Van Nuys Airport and Ontario Airport, has stifled Ontario International in a deliberate effort to benefit Los Angeles International, where improvements have been made and passenger traffic has continued to rise for the past seven years. In its now-four-year-long campaign to have Los Angeles deed the airport back to Ontario, Ontario officials have publicly insisted that LA should relinquish the airport for no consideration because the airport is considered a public benefit property which has no sale value. Privately, however, Ontario has offered Los Angeles $246 million for the airport. Simultaneously, Los Angeles has sought potential private and public buyers for the aerodrome at reported prices ranging from $225 million to $650 million. Last year Los Angeles revealed the existence of Ontario’s $246 million offer, embarrassing Ontario officials with an exposé of the discrepancy between their public and private statements. Last year, Ontario, with the county of San Bernardino, formed the Ontario International Airport Authority, an entity intended to take over ownership and operation of the airport once Los Angeles relinquishes it.
Los Angeles officials attribute the decline in passenger traffic through Ontario to the recession that has persisted since 2008 as well as widespread changes in the airline industry in which air carriers have reduced flights to outlying airports or non-centralized hubs. They say the airlines have proven resistant to LAWA’s earnest efforts to lure the airlines back to Ontario.  The terms of the 1967 agreement remain in place and Los Angeles maintains it has consistently lived up to that agreement.
In January, Los Angeles offered to sell the airport to Ontario for $475 million. In April, Ontario rejected that offer.
In his letter to Villaraigosa, Leon emphasized that Ontario believed Los Angeles was overpricing the facility, saying that “Ontario would be very interested in sitting down with the current administration to discuss a potential resolution” but only if the Los Angeles “administration is willing to consider terms materially less dramatic to Ontario than its prior demand of a $475 million payment for the return of Ontario International Airport.”

(December 11)  An option cash-strapped Upland may be gravitating toward in its effort to stave off a potential deficit in the upcoming fiscal years consists of what has been termed the “privatization” of its municipal water and sewer divisions.
In October, Upland City Manager Stephen Dunn said his city was on the verge of bankruptcy and after having engaged in a series of fiscal gymnastics to balance the current 2013-14 budget, the city will require at least $3.5 million in additional revenue annually to continue to provide city residents and businesses with the same level of service the city is currently providing.
As of last month, Dunn said, the city’s general fund is hard-stretched to cover Upland’s bare operating expenses. Funding for street repairs, equipment and vehicle maintenance, post-employment benefits, equipment replacement, economic development and solutions to the city’s growing homeless problem has been entirely depleted.
The general fund accounts for most of the city’s services. It funds 73 activities related to the basic function of municipal government.  Dunn said.
In October, Dunn said that the only alternative to drastic service cutbacks consisted of revenue enhancement, most specifically a tax that would need to be approved by a majority of the city’s voters. To emphasize his point and support his case, Dunn referenced a 2012 auditor’s opinion from the certified public accounting firm Mayer Hoffman and McCann and Standard and Poor’s intended downgrading of the city’s credit rating. Mayer Hoffman and McCann said there are serious questions with regard to the city’s solvency to the point that in a short while “it will be unable to continue as a going concern.” According to Standard and Poor’s, the city, which has already been downgraded from an AA credit rating to an A+, is in danger of seeing its credit rating eroding even further. A municipality’s credit rating directly impacts the interest rate it must pay when borrowing money.
To balance the city’s current $39 million budget, Dunn said Upland’s entire municipal operation is borrowing heavily from rapidly evaporating reserves, while relying on income from two of the city’s enterprise funds which remain in the black, its water and sewer service funds.
Last month, the city formed a budget balancing task force consisting of ten members – two appointed by each member of the city council. That committee is examining a panoply of means by which the city is to come to terms with its fiscal crisis. Already, even before the committee has begun an examination of the alternatives or moved toward any recommendations, the second-guessing has begun. Many Upland residents sitting on the sidelines have begun to weigh in on what path the city should take out of the financial abyss.
While one group of citizens is calling for the city to embark on cost cutting efforts including streamlining and making more efficient its processes and functions and eliminating services and redundant or nonproductive personnel, others are advocating that the city generate revenue to sustain the current level of service. The two most likely methods of revenue generation are raising taxes and selling off city assets.
What appears to be the city’s biggest potential cash cow is its water and sewer division.
Dunn, in passing, in October mentioned “privatizing” the water and sewer division.  No specifics were given at that time. Indeed, councilman Brendan Brandt vociferously signaled his reluctance to even consider such an option without first being provided with more in-depth information. It was that daunting task – considering this depth of information – that in large part led to the formation of the budget balancing task force committee, which is charged with making those examinations and evaluations and then providing a recommendation to the council after having done so.
Privatization could take many forms.
At one extreme, the entire system, lock, stock, and barrel – that is wells, treatment facilities, pipe, pump stations and meters – could be sold to the highest bidder. Once the water and the means of delivering it were in the hands of a private entity, there would be no local governance on the rates customers would pay for the precious commodity of water or the wastewater service they receive.
There is also the possibility of semi-privatization.  A model for this would be what occurred in Rialto.
Historically, roughly half of the city of Rialto’s residents received their water from the municipal water system. The other half  were customers of Western Water, a private company.
As early as 2008, former Rialto City Manager Henry Garcia opened up a dialogue with New Jersey-based American Water about that company taking over the city’s water utility. Garcia never closed that deal, though after having laid the basis for it, his successors, interim city manager Mark Kling and then Mike Story, progressed toward what evolved into a semi-privatization deal.  Story, aggressively examining and addressing the city’s infrastructure and service needs, concluding as had Garcia, that the city did not have the financial wherewithal to undertake needed water system upgrades on its own. He recommitted to making a deal with American Water and in March 2012, the city council approved by a 4-1 vote entering into the 30-year lease of the municipal water system with the company.  As part of the arrangement, the city agreed to a 114.8 percent increase in water and wastewater rates by 2016, such that the average water bill of Rialto households utilizing 17,000 gallons per month was to jump from $26.27 per month to $64.14 monthly and increase the wastewater treatment fee from $25.97 to $61.46 as of January 1, 2016.
That move immediately provoked a response in the form of a petition drive by members of the Utility Workers of America, the union representing city water division employees, to force a city-wide referendum on the takeover. In less than seven weeks, over 6,400 signatures were gathered to meet the threshold of 3,800 valid signatures of registered voters needed to force the matter to a vote. The petitions created an opportunity for city residents to reject the takeover by means of a mail vote to be conducted by the city. If more than 50 percent of the ratepayers returned the mail-in ballots rejecting the takeover, it would not go into effect.
But in a crafty piece of sleight-of-hand, Rialto officials short-circuited that challenge when they quietly took action to find another company to manage Rialto’s water operations. With two swipes of a pen, the city of Rialto in July 2012 substituted American Water out of the picture and entered into a contract with San Francisco-based Table Rock Capitol to take on the role of water service operator.
Table Rock, doing business as Rialto Water Services LP, supplanted American Water Works Co. Inc. as the city’s water and wastewater service provider, and then farmed out the operation to entities expert at water and sewer operations. Eventually, it worked out a deal with Veolia North American to run the city’s wastewater plant.
Under the terms of a 1,600-page concession agreement signed by all parties, the city kept title to the facilities but leased them to Table Rock for a period of 30 years, Rialto was given roughly $35 million, Table Rock committed to making $41 million in water and wastewater system improvements, Veolia was given a subcontract to run the sewer system and all of the city’s water and wastewater department employees were moved off the public payroll and hired by, variously, Table Rock or Veolia. In this way, further city pension costs for those employees were reduced, though the city is still committed to making good on what they are due for the years they did work for Rialto as municipal employees.
Other privatization permutations are possible. In the city of Needles, for example, the city created its own public utilities authority and sold the water and sewer divisions to that entity. In that way, the city can convert revenue into the water division – which is by law supposed to be maintained in a sequestered account to be used strictly for maintaining the system, making improvements to it, or obtaining water – and put it into its general fund to support other city operations without having to pay it back.
And while all of these approaches may have an upside for the city, i.e., City Hall, the municipal operation, there is a potential downside to the residents of the city.
In this way, referring to the water division as a “cash cow” becomes something of a misnomer. Perhaps more appropriate would be “sacrificial lamb” or “golden egg-laying goose.”
Upland residents need not look far to see the result of private ownership – corporate control – of a municipality’s water supply. Westward across the city limits and county line in Claremont, Golden State Water Company is charging residential users there four times what Upland citizens pay for their water.
If the water/wastewater system is sold or leased to a private entity, Dunn said, there is a reasonable expectation that would result in increased rates for residents.
“If they were to capitalize the water system, they will have to borrow money,” Dunn said. “If they have to borrow money, they will have to make payments to service that debt and the bondholders are going to make sure you have enough revenue to at least cover the debt plus all overhead.  Debt service ratio, also known as the debt service coverage, is the ratio of cash available for debt servicing to interest, principal and lease payments. A debt service ratio of at least 1.25 is standard in the lending industry. Thus, ratepayers are likely to see rate increases of at least 25 percent in the initial stages of the takeover of a public utility by a private company. Future increases could be expected as well.
The selling of a city-controlled asset such as a utility presents the city with at least a temporary cash flow advantage, Dunn said.  “Our utilities are accounted for as an enterprise,” Dunn said, which requires that all of the funds pertaining to it be kept in a sequestered account. “We can’t move that money into the general fund without a basis for doing so. By leasing the system and converting that asset into the possession of a private company, the company pays the city for the privilege of running the system and that money goes into the general fund.”
Dunn told the Sentinel this week that no decision to sell Upland’s water division has been made. Nor has the budget task force committee yet considered it. Nevertheless, he said, privatization of the city’s water and sewer divisions is “third” on the list of options he said he wants the committee to consider when it begins its deliberations.
“We are not committed to this,” he said. ‘We haven’t got close to that. It is one of the top three things I would consider. If the committee recommends it, it still has to be approved by the city council. Just because the committee recommends it, it is not necessarily going to be accepted by the council. The only reason this is out there is because when it comes to raising revenue, we can talk about taxes  but getting residents to approve it is going to be difficult. So, at the same time we are looking at what assets we have. When we use the term privatization we are not necessarily talking about selling the  water division, but more like changing from public sector to private sector employees.”
The idea was sparked, Dunn said, at least partially by the circumstance in Rialto.
“When we heard of the Rialto deal, I talked to the company about it,” he said. “I wanted to know what it entailed. After they [Table Rock] did the Rialto deal, they were obviously reaching out to other cities. They reached out to us. They threw out $30 million plus a potential $4 million per year. That was not firm and they said they would  have to study it to come up with a hard set of numbers. It is hard to say right now how they would make it result in system capitalization, which would exist in the form of them borrowing against the system using the rates paid by customers as a form of debt service. Obviously that would require an increase in rates.”
“We haven’t pulled the trigger on this,” Dunn said. “It is definitely an option, just as it was an option in 2001.”
Dunn’s reference was to a fiscal crisis that faced the city a dozen years ago that resulted in the consideration of a host of cost-cutting and revenue-enhancing moves. “What the city would  consider is a transfer of the water asset and its accompanying sewer service,” Dunn said. “It is an option available and I am testing to see if it is up for consideration with the committee and the council, as I don’t want to waste my time if I don’t have support for it from the council. If they don’t even want to consider it, I don’t want to spend effort on this if they have no interest in dealing with it. I could see it happening if everything lines up and there is support. I could live with a lease arrangement, personally, but I am not advocating selling our water department outright, by any means.”
Dunn said the public should not blur the distinction between the city’s water department and the local purveyors of water, which include the San Antonio Water Company, Western Water, an entity known as the Water Facility Authority, which is a consortium of five water agencies, and Metropolitan Water. The city owns 68 percent of the San Antonio Water Company and owns a few wells independently. A privatization move would not involve sales of any of those entities, he said.
One option available to the city with regard to its water division does not involve privatization, Dunn said. The city could, he said, simply up its water rates. Dunn said the city council can essentially act on its own to raise water rates, subject only to the restriction of Proposition 218, which provides customers/rate payers with the opportunity to protest the rate increase. If more than 50 percent of those subject to the rate increases file written protests, the rate increase cannot be effectuated, under Proposition 218. But the Proposition 218 restriction, Dunn said, is a mere formality, since without a highly organized rate increase opposition campaign, the prospect that a majority of residents will lodge protests is virtually nonexistent he said.
Councilman Gino Filippi this week told the Sentinel, “No one to my knowledge is advocating selling of any water/sewer assets. I am interested in the discussion of possible options regarding contracting out of water/sewer operations.”

(December 10)  LOS ANGELES—Slightly less than a month after a U.S. District Court judge rejected motions by the city of Victorville, its airport authority and assistant city manager Keith Metzler to dismiss the Securities and Exchange Commission’s complaint against them, lawyers for those entities on December 9 filed an answer to the entirety of the SEC complaint, denying any wrongdoing on the defendants’ part in connection with a 2008 municipal bond offering.
On April 29, the Securities and Exchange Commission (SEC) alleged that fraud was committed by the city, the airport authority and Metzler, who fills the dual roles of assistant city manager and executive director of the airport authority, when misrepresentations were made to the purchasers of bonds, the proceeds from which were intended to assist in the development of Southern California Logistics Airport. Those misstatements were made, the SEC alleges, specifically with regard to bonds issued in April 2008.
The airport authority was formed by the city of Victorville to facilitate the conversion of the former George Air Force Base, which was shuttered by the Department of Defense in 1992, into a civilian airport. The Southern California Logistics Airport Authority, which has as its board of directors all five members of the Victorville City Council, issued bonds which were sold to investors to generate revenue to be used in making the base’s civilian use conversion.
Also charged in the SEC’s April complaint were  Kinsell, Newcomb & DeDios Inc., the underwriter for the bond offerings; that company’s owner, Jeffrey Kinsell; and Kinsell, Newcomb and DeDios Inc.’s investment banker Janees Williams.
Lawyers for  Kinsell, Newcomb & DeDios and Jeffrey Kinsell and Williams filed answers to the SEC complaint in June.
Coordinating their filings on August 30, the law firm of Arent Fox, on behalf of the  city and the airport authority,  and the law firm of  Orrick, Herrington & Sutcliffe, on behalf of Metzler, sought to have the complaint dismissed before  filing their answers.
The gist of that argument was that even if the hangar valuations were overstated, they were not material misrepresentations by which the financing of the bonds in terms of the city’s and airport authority’s ability to continue to make payments to the bondholders was threatened. At no time did the actual debt service ratio between the bonds and the assets securing them fall below the SEC’s own standard of 1.25, Arent Fox maintains, exonerating the city and the airport authority.
Orrick, Herrington & Sutcliffe asserted that Metzler provided the correct hangar valuation information, twice, to KND before the bond issuance.
U.S. District Judge John A. Kronstadt on November 14 ruled that the combined defenses’ overall rationale for dismissing the case against the three defendants was “unpersuasive,” and that the bulk of the matter should go forward. The judge did, however, make a determination that the SEC has not yet presented any convincing evidence to show the defendants improperly gained from their alleged misconduct, which is the basis of the SEC’s prayer for disgorgement, a form of relief seeking restitution of ill-gotten profits from security law violators.
Fundamental to the SEC complaint is the allegation that the defendants made misrepresentations with regard to the value of four airport hangars that Victorville referenced in its official statement for an April 2008 bond offering. The value of all four hangars was listed at $65 million. The county assessor later valued the hangars at $27.7 million. The SEC alleges that the authority used the inflated estimated values to mislead bond investors.
Arent Fox maintains that even if the hangar valuations were overstated, they were not material misrepresentations by which the financing of the bonds in terms of the city’s and airport authority’s ability to continue to make payments to the bondholders was threatened.
The SEC complaint consists of nine claims for relief and one prayer for disgorgement. The authority is named in the first two claims for relief. Kinsell, Newcomb and DeDios [KND] is named in the third, fourth and eighth claims for relief. KND and Jeffrey Kinsell are named in the fifth and sixth claims for relief. Victorville, Jeffrey Kinsell, Williams and Metzler are named in the seventh claim for relief.  Jeffrey Kinsell and Williams are named in the ninth claim for relief.
In the prayer for disgorgement, all the parties are named.
“Given that the SEC has engaged in a three year investigation into this matter, its decision to present no allegations support[ing] of the request for disgorgement is significant and telling,” Kronstadt found in dismissing that portion of the case against Victorville, the authority and Metzler.
The SEC has now appealed Kronstadt’s dismissal of the prayer for disgorgement. On December 10, Terree Bowers of Arent Fox told the Sentinel that he intended to file a response to the SEC’s appeal “within the next two or three days.”
In its answer to the complaint, filed on December 9, Arent Fox lodges a first affirmative defense which maintains, “The complaint, and each of its causes of action, fails to state facts sufficient to constitute a cause of action.”
The city, the Southern California Logistics Airport Authority and Metzler are further demanding a jury trial.
In earlier filings with the court, Arent Fox maintained that the SEC complaint lacks materiality in that the city and the airport authority did not overvalue the hangars beyond a point that threatened the integrity of the investor’s bonds and that the SEC was delaying an examination of that issue. “[T]he SEC’s opposition attempts to shift the battleground, arguing that the court ‘need not’ consider it now, or that the basic arithmetic supporting it requires a ‘complicated calculus’ of ‘19 pages of complex math,’ as if to suggest that it is too hard to understand,” the defense brief filed this summer states. “Both of these premises are false. The court should—indeed, it must—decide whether the facts alleged by the SEC satisfy its burden to demonstrate materiality in the complaint. And it must consider the calculations, because that is the only way to determine whether the SEC’s allegations indeed state a claim. In short, the court is both legally and intellectually capable of determining whether the SEC’s complaint adequately alleges materiality. The determination is possible and proper at this stage in the case.”
The material misrepresentations which the SEC alleges are the linchpin of the case, defense attorneys maintain. Thus, the SEC’s inability to demonstrate material misrepresentations were made to the bond buyers undermines the entire case against the city and the authority, those attorneys argue.
According to the SEC’s complaint, by April 2008, the airport authority was forced to refinance part of the debt incurred to construct the hangars and other projects by issuing additional bonds. “The principal amount of the new bond issue was partly based on Metzler, Williams, and Kinsell using a $65 million valuation for the airplane hangars even though they knew the county assessor valued the hangars at less than half that amount,” according to Elaine C. Greenberg, chief of the SEC’s Municipal Securities and Public Pensions Unit. “The inflated figure allowed the airport authority to issue substantially more bonds and raise more money than it otherwise would have. It also meant that investors were given false information about the value of the security available to repay them.”
SEC investigators say that Jeffrey Kinsell, KND, and another of his companies misappropriated more than $2.7 million in bond proceeds that were supposed to be used to build airplane hangars for the airport authority.
Orrick, Herrington & Sutcliffe’s James Kramer told Kronstadt that responsibility for any misrepresentations with regard to the value of the assets securing the bonds fell to the bond underwriters. “Metzler provided the correct information to KND in March and April 2008,” Kramer said in presenting a timeline of the bond offering.
Kramer took issue with Metzler having been included in the case at all. According to Orrick, Herrington & Sutcliffe, “the SEC itself alleges that Mr.  Metzler provided the correct hangar valuation information, twice, to KND. In light of this admitted fact, the SEC’s theory of recklessness boils down to the notion that Mr. Metzler engaged in ‘an extreme departure from the standards of ordinary care’ by, in essence, not assuming that KND ignored the updated valuation and failed to pass it along to the [bond marketing] consultant and by not taking it upon himself to check KND’s, and the consultant’s, math. This is not a plausible theory of recklessness, and the SEC points to no case on such facts that says it is. The SEC now tries to distance itself from its own allegations by claiming that it is ‘meaningless’ that Mr. Metzler, on two separate occasions before the April 2008 bond issuance, provided accurate updated hangar values to KND.
According to the SEC, Metzler “did not provide this information to the consultant, which he knew needed that information to calculate the important tax increment.”