(July 13) The county of San Bernardino and the cities of Hesperia and Victorville, along with the town of Apple Valley will soon be pooling their code enforcement resources, pursuant to an agreement ratified by the county board of supervisors this week.
Code enforcement at the county level for the last several years has fallen under the purview of the county’s land use services department.
Christine Kelly, the director of county land use services, called upon the board of supervisors to “approve a memorandum of understanding among the North Desert Cities of Adelanto, Hesperia and Victorville (North Desert Cities), the town of Apple Valley, and the county of San Bernardino for cooperative code enforcement activities.”
Kelly said she wanted the county “to enter into a non-financial memorandum of understanding to partner with participating North Desert Cities to conduct code enforcement sweeps for the purpose of finding, identifying, and correcting violations. In June 2011, representatives from the North Desert Cities, the town of Apple Valley, and the county met to discuss the feasibility of establishing a system for coordinated, multijurisdictional code enforcement sweeps in the Victor Valley. There was agreement that the jurisdictions have a shared interest in resolving nuisance and blight conditions in their neighborhoods, which often crosses (sic) jurisdictional lines. There was support among the participating jurisdictions for establishment of a ‘mutual aid’ type of agreement in which partner agencies would share resources to support targeted, limited term code enforcement sweeps. The city of Adelanto volunteered to take the lead in developing a draft memorandum of understanding to establish a legal framework for cooperative code enforcement activities and outline the roles and responsibilities of each participating agency.
“While it has taken some time to draft a memorandum of understanding that covers all the legal obstacles, the city of Adelanto has drafted the memorandum of understanding, which has been reviewed by county counsel staff who have advised that the county’s concerns over legal issues have been addressed,” Kelly continued. “Once all jurisdictions have approved the memorandum of understanding, the sweeps will begin to be scheduled and target areas will be confirmed.”
According to Kelly, “Each participating jurisdiction will cover the costs associated with their staff members during the sweeps. If there are any specific forms or tools needed for a particular job, the corresponding jurisdiction will furnish the necessary items.”

The county this week agreed to pay $2.33 million to a company to carry out testing of the perchlorate contaminated soil at the Mid-Valley Landfill in Rialto.
Those tests must be conducted in conjunction with specific directives issued to the county by the California Department of Toxic Substances Control growing out of the county’s actual and potential liability from its actions with regard to the property in the 1990s.
In the late 1990s, a plume of contaminants containing perchlorate was found to be migrating through the local water table
It is believed that five corporate entities – Pyro Spectaculars, Ken Thompson Inc., Chung Ming Wong, BF Goodrich, and Emhart Industries – were engaged in manufacturing activities that resulted in the accumulation and release of the perchlorate.
Water agency officials, state officials and federal officials believe the county of San Bernardino may have engaged in activity that exacerbated the perchlorate problem.
The county runs the Mid-Valley Landfill in north Rialto.
Officials with the Rialto-based West Valley Water District and their lawyers have alleged that San Bernardino County razed and buried a hazardous waste-disposal facility at the site, an act those officials maintain was not only illegal but has worsened the contamination of the groundwater below Rialto.
Broco Inc. maintained the hazardous-waste disposal operation in northern Rialto from the mid-1960s until the late 1980s. The county purchased the property in 1994 and used it in the expansion of the Mid-Valley Sanitary Landfill.
According to attorney Barry Groveman, who represents the West Valley Water District, it appears the county simply knocked the hazardous waste facility down and spread the debris around before burying it. That action was against the law, Groveman said.
Groveman said the county was in violation of state hazardous waste handling regulations and the federal Resource Conservation and Recovery Act.
Burying hazardous waste and storing it without a permit is illegal.
In the area around the Broco site, Pyro Spectaculars, Ken Thompson Inc., Chung Ming Wong, BF Goodrich and Emhart Industries had operations that were ongoing in the 1940s, 1950s, 1960s, 1970s and 1980s. Public health officials have identified that area as the origin of the plume of perchlorate.
Perchlorate is a product used in the manufacture of both fireworks and ordnance. In very minute quantities perchlorate can wreak havoc on the thyroid gland.
The site has been designated by the Environmental Protection Agency as one of its Superfund sites, which makes federal funding for the remediation available but also carries with it a requirement that the parties responsible for the contamination assist in the effort. Simultaneously, the EPA will apply the Superfund money toward the remediation. Eventually, if any of the parties deemed responsible for the contamination refuse to sponsor or otherwise pay for a share of the remediation, the EPA will sue and under federal law, any party proven responsible will be required to pay triple the cost of that portion of the clean up for which they were the contaminating party.
Meanwhile, the California Department of Toxic Substances Control in 2002, noting the historic presence of the former Broco facility, informed the county of the need to close it pursuant to regulations. The Department of Toxic Substances Control took the position that the county, as current owner of the property, was responsible for closure. The county has been working with the Department of Toxic Substances Control since that time to prepare the “closure plan” for the former Broco site, and submitted the final document on May 28, 2010. The closure plan identifies an extensive soils investigation that the county will complete.  Phase 1 of the soil sampling effort is to consist of drilling borings, soil and soil pore-gas sample collection, laboratory analyses, evaluation of the analytical data, and preparation of a report that details the methods used and results of the field and laboratory investigation.
The closue referred to pertains just to that portion of the landfill where the Broco facility was located. The landfill will remain in place.
On April 25, 2012, the county put the first phase of the soil sampling effort out to bid and the request for proposals was advertised on the county purchasing division’s web page and electronically sent to twenty-two firms. Four bids were received. Geologic Associates of San Bernardino offered to do the job for $2,383,460. Ninyo & Moore of Rancho Cucamonga made a bid for the job at $2,476,134. Advanced Earth Sciences, Inc. of Irvine bid $3,116,915 on the job.  ATC Associates, Inc. of Monterey Park’s bid came in at $3,924,698.70.
A county bid evaluation committee considered the qualifications of the four firms competing for the assignment and ranked Geo-Logic Associates as the most qualified firm to perform the services as requested in the request for proposals based on the company’s technical approach to the scope of work and experience with projects of similar nature and scope.

(July 13)  TWENTYNINE PALMS—An inquiry into the operations and accounting practices of the Twentynine Palms Public Cemetery District by the district attorney’s public integrity unit and the county grand jury has not turned up any grounds for a criminal prosecution, the Sentinel has learned. Nevertheless, pronounced shortcomings in bookkeeping and recordkeeping, as well as failures to make timely reporting of transactions have been discovered. Documentation of revenues and expenditures as well as governing board actions has also fallen below governmental standards, the investigation determined.
In carrying out a routine five-year review of operations in various governmental entities in and around Twentynine Palms, the San Bernardino County Local Agency Formation Commission discovered some accounting irregularities within the Twentynine Palms Public Cemetery District and forwarded that information to the district attorney’s public integrity unit and the grand jury.
On May 7, 2012, Local Agency Formation Commission (LAFCO) executive officer Kathleen Rollings-McDonald, assistant executive officer Samuel Martinez and project manager Michael Tuerpe delivered a report relating to the various agencies serving Twentynine Palms and the surrounding area. In carrying out that portion of the review pertaining to the cemetery district, Rollings-McDonald, Martinez and Tuerpe were unable to find any district records updated since the 2008-09 fiscal year. Their report states that the district did not complete audits in a statutory time frame and prepared its budgets without auditing or verifying the numbers utilized.
According to LAFCO, the most recent budget information provided to state and county controllers had not been adopted by the district board at a noticed public hearing. These shortcomings qualify as “a prime indicator of governance challenges,” according to Rollings-McDonald, Martinez and Tuerpe.
At the district’s June 28 meeting, the cemetery district’s trustees gave indication that they were seeking to extrapolate from existing ledgers and account data available to them the district’s precise fiscal circumstance, including deposits into district accounts and expenditures therefrom. With one vacancy on the board and April Gibson on vacation, a quorum of Betty Laferriere, Sandra Gray and Les Snodgrass sought to make and record better documentation of the district’s current fiscal operations than has been carried out in the past. It was duly noted that a recent account statement from Wells Fargo bank, into which the district’s operating funds are deposited and from which its operational capital is disbursed, was unavailable. The board moved to make a timely retrieval of that information.
May expenditures of $16,582.05 were approved against income of $24,831.39 for the same time period, consisting of sales and other revenues. It was noted that the missing account information may cause a future adjustment of the May expenditure total.
According to documentation available, the endowment care fund, which included the money available in the Wells Fargo account, stands at $351,865.93. The district has also registered a pre-need trust fund total of $217,955.95.
The board examined but ultimately tabled until a later date approval of an operating budget for 2012-13 that had identical $222,948 revenue and expenditure projections.
Trustees indicated that the district is actively seeking to procure an auditor to meet LAFCO’s demand that the district redress its failure to complete previous audits in the yearly statutory time frame. The board directed district secretary Casey Dobler to send out bid solicitation letters to auditing firms.
Dobler’s action in presenting an employee salary schedule to the board in 2009 briefly came under scrutiny. That salary schedule was approved July 1, 2009, giving Dobler, the caretaker and assistant caretaker

An investigator in the district attorney’s office will attend a seminar on the current proliferation of crimes involving companies operating offshore and exploiting international banking arrangements to engage in fraud.
Roger Chien, now a senior investigator with the San Bernardino County District Attorney’s Office, has been a member of the International Police Association since 2001. He has served as a board member for the Los Angeles area chapter of the International Police Association and has hosted numerous foreign police visits and visited members in foreign countries.
The International Police Association is the world’s largest organization for police officers with nearly 400,000 members in over 60 countries.
This year, Chien was chosen as a recipient of a $1,500 scholarship from the International Police Association to cover tuition for his attendance at police seminars in Gimborn, Germany from August 27 – 31, 2012.
The county board of supervisors this week approved a request by district attorney Mike Ramos to approve an expenditure of $2,725 to cover Chien’s travel expenses to Germany to attend the seminar.
“Approval of this item would allow district attorney senior investigator Roger Chien to attend various police seminars at the I.P.A. Castle in Gimborn, Germany as one of this year’s scholarship recipients,” Ramos told the board of supervisors. “Senior investigator Chien’s selection for the 2012 Scholarship for the United States is an honor for himself and the county of San Bernardino. The seminar being attended by investigator Chien pertains to economic decline and imperfect multicultural integration. Mr. Chien is currently assigned to the district attorney’s fraud units. The level of activity in these units has increased over the past few years as the economy continues to underachieve. Suspects being investigated are often business people from diverse cultural backgrounds that frequently cite economic necessity or financial decline as reasons for not complying with applicable laws. The seminar in Germany will provide an opportunity for Mr. Chien to congregate with other law enforcement individuals from many cultures to see how other countries are responding. The information and insight obtained will be used to improve fraud investigations in San Bernardino County.”

In an effort to modify the behavior of the county’s juvenile delinquents, probation officials are offering them what they hope will be positive reinforcement.
In continuation of an ongoing program that has been in place for several years, the county board of supervisors this week authorized the county probation department to purchase $105,934.50 worth of prepaid gift cards which are to be doled out to young probationers deemed to be deserving of such rewards for sticking to the straight and narrow path.
According to Michelle Scray, the county’s chief probation officer, the gift cards will be purchased using money available “through state and federal programs/grants that specifically allow for the use of incentives, public donations, and asset seizures. Approval of this action will provide authorization for the probation department to purchase prepaid gift cards from various vendors for use in fiscal year 2012-13. The probation department provides probationers and juveniles with a variety of prepaid cards as incentive and supportive devices. The use of prepaid cards allows the department to reward juveniles for good behavior and to assist probationers in attending mandatory meetings by supplying bus passes. The department also uses the prepaid gift cards to assist juvenile probationers in the Independent Living Program. This program facilitates the development of independent living skills as juveniles transition from being in placement. It is estimated that the department will need to issue $105,934.50 in prepaid gift cards during fiscal year 2012-13 from various vendors.”
The county will spend $425 to purchase for the probation department 85 Del Taco $5 gift cards; $335 to buy 67 McDonald’s $5 gift cards; $585 to buy 117 Bakers $5 gift cards; $275 to buy 55 El Pollo Loco $5 gift cards; $575 to buy 115 Jack in the Box $5 gift cards; $360 to buy 72 In & Out Burger $5 gift cards; $337.50 to buy 15 Mountain Area Transit (Monthly) $22.50 gift cards; $42,232 to buy 10,558 OmniTrans (Daily) $4 gift cards; $2,250 to buy 150 OmniTrans (7 day) $15.00 gift cards; $22,500 to buy 450 OmniTrans (Monthly) $50 gift cards; $13,860 to buy 3,850 Victor Valley Transit (Daily) $3.60 gift cards; $2,500 to buy 50 Victor Valley Transit (Monthly) $50.00 gift cards; $4,500 to buy 300 $15 Arco gas cards; $3,750 to buy 150 $25 Arco gas cards; $200 to buy 20 $10 AMC movie passes; $1,250 to buy 50 Food 4 Less $25 gift cards; $2,500 to buy 25 Stater Bros. $100 gift cards; and $7,500 to buy 300 Walmart $25 gift cards.

BARSTOW—Barstow Police Chief Dianne Burns, the first woman to head a police department in San Bernardino County history, voluntarily retired on June 29, three days before her five-year contract was set to expire.

Dianne Burns

Burns’ trailblazing on behalf of her gender within the ranks of southern California law enforcement featured stints as a patrol officer, homicide detective, sergeant and lieutenant of a gang suppression unit during the 20 years she was with the Los Angeles Police Department. In 2007, she was the choice of then-Barstow city  manager Hector Rodriguez to replace former police chief Lee Gibson. Rodriguez selected Burns within four weeks of Gibson’s May 1, 2007 departure, but it took a majority of the city council another month to achieve a consensus about Burns’ suitability for the position. Her credentials as a gang task force leader on the mean streets of Los Angeles and her possession of a law degree were among the items on her  résumé that led to her being given a contract effective July 2 of that year.
The department was 11 short of its authorized strength of 38 officers when she took command. The department gained five officers over the next 21 months and then went to full staffing in May 2009 when six officers were sworn in.
Before that, however, Burns’ tenure as chief suffered a blow when in November 2007, Rodriguez, her primary supporter at City Hall, departed Barstow.  From the outset there were problems related to at least some of the department’s officers accepting a woman as their commander in the oftentimes machismo-driven atmosphere of a law enforcement agency.
Burns attempted to work through that challenge and instituted several positive changes that were hailed by the community. The first of those was to institute a shooting and tactical training school just outside of Hinkley and mandate that officers take target practice at least once every two months. She then rewrote the department’s policies and procedures manual, which had not been updated since 1983, and she co-authored an internal affairs manual for the department, which until that time was non-existent. She simultaneously sought to improve the interdepartmental relationship with the sheriff’s station in Barstow and encouraged officers in the department to become actively involved in community programs such as Cops for Kids, Neighborhood Watch,  Cook and Serve for the Homeless, and local neighborhood street fairs. She also sought and obtained $100,000 per year in “Cop’s Grant” money to update equipment, buy new computers, and provide officers with protective vests.
Outside the department, Burns’ efforts did not go unnoticed and the 2009-2010 grand jury in its yearly report took the uncommon step of commending her “for the changes, improvements, and upgrades she has made since becoming chief of police.” The grand jury waxed praiseful in the commendation, stating “It is hoped that the citizens of Barstow and the surrounding area appreciate her fine work.”
Though she received external accolades, internally there were problems brewing. Her command of the department was tested by some officers resentful of her leadership, her initial status as an outsider who had vaulted into the top position in the department without working up through the ranks in Barstow, her formalized big city approach and her gender. In response, Burns on occasion lashed out at officers in ways some caricatured as hysterical.
In July 2011, Burns went on vacation and did not return at the end of her hiatus, which was not anticipated to last for more than two weeks. When she did not return, city manager Curt Mitchell placed her on administrative leave. She remained absent from the department for more than six months while Mitchell and the council conducted a review of an unspecified issue relating to her job performance.
On February 24, as Mitchell’s assessment of Burns was drawing to a close, the Barstow Police Officers Association, representing 30 officers, corporals and detectives, and the Barstow Police Management Association, representing six sergeants and lieutenants, provided a vote of “no confidence” in Burns’ ability to continue to lead the department. The groups then sent a letter to Mitchell referencing the votes and excoriating Burns  for “poor performance” and “extreme favoritism,” as well as a “hostile work environment” that the unions said was the product of her oversight of the department.  The letter upbraided Mitchell for “failing to adequately address all concerns” the department’s officers had expressed about Burns. “She has demonstrated a lack of leadership and she has displayed severe instability in her emotions while in an official capacity,” the letter stated.
Despite the insurrection, Mitchell restored Burns to her position on February 27, mindful that her contract was up on July 2 and that she would be due for another review before it would be renewed on July 2, if indeed it was to be renewed.
Mitchell had not yet completed his review nor arrived at a decision about whether he would recommend to the city council that Burns be retained when she tendered her resignation. The prepared statement Burns provided after she filed her resignation did not hint at the difficulties she had experienced with her subordinates during her tenure.
“There is never a good time to leave a job and a police department that you love and enjoy, but there is always a right time,” Burns said. “That time has now come for me professionally and personally to retire and spend time with my husband who retired five years ago.”
Mitchell has designated lieutenant Albert Ramirez to serve as interim chief of police.

Dr. Kali Chaudhuri’s KPC Group has once again emerged as the most likely buyer of troubled Victor Valley Community Hospital.
Riverside-based KPC appears to have supplanted both Ontario-based Prime Healthcare Services, owned by Dr. Prem Reddy, and  St. Joseph Health System, which operates St. Mary Hospital in Victorville, as Victor Valley Community Hospital’s main suitor.
A federal bankruptcy judge has approved KPC Group’s $33.8 million offer for the takeover of the hospital. This is the second offer KPC has made in two years.

Kali Chaudhuri

In 2010, Victor Valley Community Hospital, staggering under more than $20 million in debt, filed for Chapter 11 bankruptcy protection and the 101-bed hospital was put on the auction block. KPC Global Care, one of KPC Group’s entities, outbid Prime Healthcare, tendering a $37 million offer in November 2010 that was $2 million above Reddy’s offer. But after KPC obtained the state attorney general’s approval for the takeover, it failed to finalize the acquisition because it was not able to line up financing and that deal fell apart in May 2011. Subsequently, a federal bankruptcy court judge approved an agreement allowing the non-profit arm of Reddy’s for-profit venture, known as Prime Healthcare Service Foundation, to purchase the hospital for $35 million.
KPC now needs the approval of the state Attorney General’s Office to complete the deal. Last year, after Reddy’s $35 million offer was accepted by the bankruptcy court, the state attorney general’s office on September 20 intervened, blocking Reddy’s plan. A major consideration was that Victor Valley Community was founded and set up as a non-profit institution.  The attorney general’s office had moved to ensure that the High Desert preserve at least one non-profit hospital in an area with a multiplicity of for-profit medical centers, including one already owned by Reddy, Desert Valley Hospital.
“We have concluded that this proposed sale is not in the public interest and will likely create a significant effect on the availability or accessibility of health care services to the affected community,” acting chief deputy attorney general Michael Troncoso said at that time.
Nevertheless, with Victor Valley Community teetering on the brink of financial collapse, Reddy on October 14, 2011 proffered capital in the form of loans and a consulting arrangement to prevent the hospital from having to close its doors. That assistance was codified in the form of what was called a “post-petition revolving credit and security agreement between Victor Valley Community Hospital as borrower and Prime Healthcare Management, Inc. as lender.”
The California Attorney General’s office redoubled its effort to prevent that agreement from being actuated and filed on October 28 for a temporary restraining order to prevent the hospital from entering into a financing plan and consulting arrangement with Prime Healthcare. On October 31, Superior Court Judge Steve Malone tentatively denied the attorney general’s request for the restraining order. In November, Malone again denied the state attorney general office’s effort to block the $6 million financing and consulting agreement. Prime Healthcare never acquired Victor Valley Community Hospital, however.
The scenario was made more complicated when, also in November, KPC Global reasserted its interest in acquiring Victor Valley Community, filing legal and financial documents to create an entity known as Victor Valley Hospital Acquisition Inc., and indicating it stood ready to put up $31.1 million toward that end. Victor Valley Community Hospital officials were somewhat resistant to the KPC Global offer at that point, and were seemingly more favorably disposed to working with Prime Healthcare.
In January, St. Joseph/St. Mary made a $35  million bid on Victor Valley Community Hospital  but has not followed through with an arrangement on financing.
At present, KPC has commitments to cover the full $33.8 million purchase price of Victor Valley Community.

The city of Victorville squandered at least $116 million on efforts to develop electrical generating projects since 2005, according to the final report of  the 2011-12 San Bernardino County Grand Jury.
The city’s failed power plant projects were among five elements of Victorville’s municipal and ancillary operations scrutinized by the 2009-10, 2010-11 and 2011-12 grand juries. The grand jury also considered the city’s overall financial condition, its use of interfund loans and restricted funds, hangar construction and airport bond expenditures. Last year and the previous year, the grand jury did not include any findings with regard to Victorville in those years’ final grand jury reports, which are traditionally released on June 30, the close of the governmental fiscal year. Included in the section of this year’s report pertaining to Victorville was a performance audit conducted by the San Francisco-based accounting firm of Harvey M. Rose Associates.
With regard to the power plant debacles, the grand jury examined two such efforts engaged in by the city of Victorville and the Southern California Logistics Airport Authority (SCLAA), which is an adjunct to the city dedicated to the civilian use conversion of the former George Air Force Base.  Those two projects were the 500-megawatt Victorville Power Plant #2 (Victorville 2) and the 14-megawatt Foxborough Electrical Generating Station.  The Victorville 2 project was initiated by city officials based on an evaluation and recommendation from Inland Energy, a firm with a significant financial interest in having the city build a large power plant. The Foxborough Plant was intended to provide low cost energy to tenants at the Foxborough Industrial Park. Both projects, the grand jury contends, were initiated without a clear project plan, project goals, adequate research nor due diligence to determine if they were consistent with other municipal power plant development projects and arrangements for their completion. And both, according to the grand jury, were marred by inadequate project controls and the reliance on recommendations from contractors who have had a financial interest in the projects.
“Contrary to industry best practices, the city of Victorville, and by extension the SCLAA, have initiated large high-risk capital projects without conducting proper due diligence or ensuring proper controls,” the grand jury report states. “Rather than conducting a competitive process for awarding major development contracts, city management has executed contracts to companies and individuals with previous experience or familiarity with the city. Rather than conducting transparent risk assessments and establishing clear project plans, city management has failed to fully assess potential risks and has not established project plans with clearly stated goals, budgets, milestones, or performance measures. Instead of establishing clear and effective controls, policies, and procedures, city management has allowed contractors to operate without close oversight and has not consistently enforced contract terms. The absence of fully assessed risks, established project plans, and instituted controls has contributed to substantial failures of at least two power generation projects that required considerable financial investment.”
According to the grand jury, after the cities of Victorville and San Marcos in October 2003 became the founding members of the California Clean Energy Resources Authority (Cal-CLERA) but were unable to attract other municipalities to join that joint powers agency, the city bought into a March 2005 recommendation by Inland Energy that the city should “commit to undertaking the development of a 500 megawatt hybrid plant at Southern California Logistics Airport without delay.” That recommendation, the grand jury noted, was based on Inland Energy’s observation that city possessed a “unique blend of positive political, economic, and infrastructure factors that favor the development of such a plant.”
Inland Energy, which stood to gain by its further participation in the project, according to the grand jury, in its “evaluation downplayed the financial risk to the city, stating that ‘The city’s economic risk is mitigated by the fact that such a fully permitted plant at the SCLA [Southern California Logistics Airport] site could likely be sold or transferred in 2007-2010 for far more than it cost, if the city elected not to proceed with the plant’s construction.’’
Furthermore, according to the grand jury, “The Inland Energy evaluation also noted that the city could initiate the project without a definitive plan. City management did not conduct proper due diligence before initiating the Victorville 2 project. Specifically, management did not conduct a thorough independent analysis of risks prior to recommending that the council approve the development agreement with Inland Energy and, notably, a subsequent agreement to purchase expensive turbine equipcment from General Electric. Neither city management nor Inland Energy established a formal business plan for the project and never established a project budget. Without such planning, the city and SCLAA proceeded without clearly defined goals, milestones, or performance measures. For instance, throughout the project and even after the city had committed over $182 million to General Electric for fuel generation equipment and related services, it was still unclear whether the city would own the plant or if it would be sold to a third party operator. City management did not prepare an independent risk assessment and there is no evidence that potential risks were formally discussed by the city council. Although no formal business or project plan was established, it is apparent from interviews with city officials and from a review of the Inland Energy agreement that the initial goal of the project was to make the necessary preparations so that the project could be ‘build ready.’”
Build ready meant that the city would design the plant, obtain the requisite permits, and procure land so that another firm could construct and operate it. The grand jury said that Inland Energy represented that it would take roughly 24 months to fully permit the plant so that a developer could purchase the development rights, build the plant, and either operate it or allow another firm or the city, through Victorville Municipal Utility Services, to operate it.
However, according to the grand jury, “City management and the city council never formally established a budget for the Victorville 2 project. The closest approximation of a project budget can be found in the Inland Energy contract.” That budget, the grand jury noted, estimated $5.5 million in costs over a two year period, which was simply for the “permitting” of the power plant and did not include the cost of land purchases, potential borrowing costs, such as bond issuances, and staff time. Over time, the actual cost escalated.
According to the grand jury, “The city entered into the no-bid contract with Inland Energy based on a proposal from the company.” The grand jury noted that city management and the city council committed to the having Inland Energy lead the way with regard to building the plant largely on the basis of Inland Energy’s participation with Baltimore-based Constellation Energy in the successful development of the High Desert Power Plant, sometimes referred to as Victorville 1, the permitting process for which was first undertaken in 1998 and which came on line in 2003 and was widely seen as a lucrative success for the private interests.
“The development agreement with Inland Energy was based on a previous agreement between Inland Energy and Constellation Energy for development of the High Desert Power Plant,” according to the grand jury. “The agreement was written by attorneys representing Inland Energy using the High Desert Power Plant contract as a template. Although the city attorney reviewed and provided comments on a draft contract, it does not appear that the city attorney or other city managers actively negotiated the terms of the agreement to be substantively more beneficial to the city than the template contract it was based on. In fact, the agreement that the city entered into appears to be significantly more generous to the developer than the template agreement.”
The city made inadequate review of the contract terms, the grand jury found, noting the “agreement vaguely defines and poorly controls the provision of services. The agreement with Inland Energy allows for the company to be compensated for two types of services: (1) ‘development services’ and (2) ‘supplemental services.’ The agreement defines ‘development services’ as including: negotiating any agreements necessary to implement the project, and securing those permits and approvals required to entitle the project for development, including any task having the purpose of improving or enhancing the value of such entitlements. These services were the core of Inland Energy’s role in the Victorville 2 project and included the permitting of the plant. These services were eventually expanded to include assistance with the construction of the plant. Inland Energy was paid approximately $12.2 million from 2005 to 2010 for development services related to the Victorville 2 project. The agreement broadly defines ‘supplemental services’ as including: any on-going technical or management task deemed necessary by the city manager of Victorville including supervisory, administrative, consulting, advisement and other management services.  While these services, to an extent, may have been related to the Victorville 2 project, the supplemental services clause has been used to justify services completely unrelated to the project. Specifically, the city has paid over $607,000 to Inland Energy through May 2010 under this clause for other, consistently unsuccessful, projects. These expenditures have included over $166,000 for consulting services related to the city’s unsuccessful efforts to obtain federal grant funding under the U.S. Department of Homeland Security’s Immigrant Investor Program, also known as ‘EB-5’, and over $182,000 for consulting services related to the city’s unsuccessful attempt to develop and construct a power plant at the Foxborough Industrial Park in the Bear Valley Redevelopment Project Area. Additionally, Inland Energy was paid over $258,000 for consulting services related to the city’s efforts to investigate the possibility of becoming a community choice aggregator. While this service was related to the Victorville 2 project, it ultimately provided no tangible benefits to the project, the city, or SCLAA.”
According to the grand jury, the contract performance terms were poorly constructed and implemented. “The development agreement contains no effective performance measures for Inland Energy,” the report states. “There are no specific mechanisms that would allow the city council or city management to hold the contractor accountable for its performance.”
The compensation structure specified in the development agreement with Inland Energy provided for two payment methods: a monthly management fee at a rate of $150 per hour for “consultant” staff and $250 per hour for “senior consultant” staff, and a portion of “project operating profit.”
According to the grand jury, “There is no cap to the amount that can be billed. The company’s 2008 projections for the operational expenses of the 500 megawatt plant includes this compensation, which was estimated to be $4.5 million per year by grand jury sources. Further, the development agreement contains no clauses to limit this compensation to a defined period of time or a capped amount.  Assuming that the plant was built and then operated for 30 years, Inland Energy would be entitled to compensation of approximately $135 million over the life of the plant (without adjusting for inflation). Under this scenario, Inland Energy would be compensated with an additional $135 million over 30 years for what was estimated in the agreement as 24 months of design, development, and permitting work. The operating profit clause appears to be an unusual form of compensation and potentially troublesome for the effective sale and operation of the plant.”
Inland Energy’s management of the project was particularly poor in one regard, according to the grand jury, resulting in the city’s loss of a $50 million deposit with General Electric.
“In 2007, as Victorville 2 permitting was nearly completed, Inland Energy began advising the city to move forward with the purchase of equipment for the proposed plant,” according to the grand jury. “Inland Energy initiated negotiations with General Electric (GE) and advised the city, with some urgency, that it was important to make a commitment to GE due to the length of time required to procure the equipment and the desire for the plant to go online in accordance with the state’s energy demand schedule. Several city officials have stated that Inland Energy was driving the process to develop the Victorville 2 project with equipment purchases. Specifically, Inland Energy officials were briefing city officials, in closed session ‘workshops,’ with slide presentations that recommended the city move forward with a large financial commitment for the equipment purchase. On December 4, 2007 the city council ratified a resolution, which had been previously adopted in closed session, authorizing the city to execute an agreement with General Electric to purchase certain power plant generation equipment at a total contract price of $182,036,824. The contract called for the city to make an immediate initial down payment of $52 million on the equipment. The remaining $130 million was due in November 2008. According to city management, city officials were confident at the time that additional funding could be secured due to perceived demand from other jurisdictions in Southern California. Ultimately, city officials moved forward without any written or legal commitments from these jurisdictions, without bond financing in place, and without a committed third party prepared to purchase the development rights. City officials ultimately could not secure funding for the remainder of the purchase price of the power plant equipment. As a result, the city did not make its second scheduled payment in November 2008 and, on April 16, 2009, GE declared that the city had defaulted under the contract. Further, GE asserted that the city still owed additional amounts under the contract termination clause, although the city disputed the obligation. On May 18, 2010, approximately one year after the city defaulted on its obligation, the city and SCLAA came to an agreement with GE to settle the dispute. According to the settlement agreement, GE shall retain all funds ($50,020,000) provided in the initial payment. However, as a future sales incentive, the city is entitled to credits of up to $10 million on future purchases from GE, subject to certain conditions. The credits expire on April 30, 2016.”
The grand jury noted that city management is still trying to sell the development rights to the project. “City management asserts that the Victorville 2 Project is still ‘active’ as the city has purchased land and accumulated entitlement permits for the power plant,” the report states. “City management has made attempts for over three years to sell the development rights to the project. Despite a request for proposals sent out in May 2009 to 13 firms, which had expressed interest, the city has not been able to successfully identify a project developer. City officials have noted that potential buyers must negotiate primarily with Inland Energy, due to the clause in the firm’s development agreement with the city granting the right to five percent of project operating profits, estimated at $4 million to $5 million annually, for the life of the project.”
According to the grand jury, “The Victorville 2 project has cost the city over $76 million to date including approximately $50 million lost to General Electric for the power plant equipment, $12.1 million disbursed to Inland Energy for development services, $3.8 million to other services providers, and $8.6 million for the purchase of parcels for the project. This estimate of project costs does not include funds dispensed for consulting services provided by Kinsell, Newcomb, & De Dios, the city’s bond underwriter and to Goldman Sachs for financial services.”
The grand jury was as scathing in assessing the city’s performance with regard to the effort to build the much smaller Foxborough Power Plant, which commenced in 2004. That plant was intended as a small generating station to serve two anticipated tenants at the Foxborough Industrial Park, Nutro and ConAgra. The plan was for the electricity to go directly to the industrial park’s tenants without being conveyed onto the state power grid, thereby saving users the ten percent surcharge the state levies, and encouraging occupancy and expansion of operations into and at the industrial park
“The Foxborough Power Plant project was initially conceived as a method to provide low cost energy and steam to two incoming tenants at the Foxborough Industrial Park on the assumption that these two incoming tenants, Nutro and ConAgra, required a total of between five and ten megawatts of power for their operations,” according to the grand jury. “The city procured no-bid services from a consultant firm, Carter and Burgess, Inc., beginning in June 2004. This firm was retained to design, develop, and construct a cogeneration power plant to service the energy needs of tenants at the Foxborough Industrial Park in the city’s Bear Valley Redevelopment Area. The project was undertaken by the city without a thorough assessment of risks or sufficient expertise. Through a series of mishaps the project was never completed, wasting tens of millions of dollars of public funds.
“Neither city management nor Carter and Burgess established a risk assessment, business plan, or formal budget,” the grand jury report continues. “Without such planning, the city proceeded without clearly defined goals, milestones, or performance measures. In fact, the project was initiated with the broad objective of providing low cost power directly to tenants at the Foxborough Industrial Park without connecting to the California electrical grid system. However, toward the end of the project city management changed course and looked at options to connect the plant to the grid system.”
The grand jury said the project failed because of “dramatic growth” in its price tag.
“According to interviews with city officials, the Foxborough Power Plant project was initially estimated to cost the city approximately $17.5 million,” the grand jury report states. “However, the costs of the project quickly rose to $22 million. In April 2005, approximately 10 months after the project commenced, the city council approved a $41 million bond issuance for the project. In June 2006, approximately two years after the initiation of the project and four months after the anticipated completion, the city council approved a second bond issuance that provided an additional $21 million in financing to Carter and Burgess. The final cost of the Foxborough Power Plant project topped $91 million with press accounts stating that over $95 million had been spent. Out of this amount, Carter and Burgess was paid approximately $8.2 million.”
The city was ill-served by Carter Burgess, the grand jury said, and was able to prove that in court, though it has yet to recoup the money lost.
“Due to a series of mishaps, including an overestimation of the power needs for certain tenants, multiple design revisions, and the failure of certain power generation equipment, the Foxborough Power Plant was never completed,” the grand jury report states. “Following the cancellation of the construction project, the city initiated civil litigation against Carter and Burgess relating to the failure of the project. In December 2010 a Riverside County jury unanimously ruled in favor of the city and awarded Victorville $52,116,367 to be paid by the developer’s parent company. Despite the award of approximately $52 million, the city will still be left with approximately $40 million in losses. Further, the judgment award has not yet been paid and is under appeal.”
The grand jury recommended that the Victorville City Council “Draft and implement planning policies and procedures for all city and SCLAA capital projects. Such policies should incorporate best practices, including an independent evaluation of risks and fiscal impact.” Furthermore, the grand jury called upon the city council to “Draft and implement capital project controls, policies and procedures for all city and SCLAA capital projects. Such policies should incorporate best practices such as establishment of a project plan, including a project budget, which is periodically revisited and formally approved by the city council and/or SCLAA Board of Directors in open sessions. The policies should also include requirements for implementing performance measures that are regularly reported to the council during the life of a project.”
In addition, the grand jury said “Victorville needs to establish procurement controls, including requirements for competitive bidding, increasing levels of control over approval of professional service contracts based on cost to the city, and standard documentation requirements for the payment of invoices.”
And the grand jury indicated that Victorville has failed to adhere to California’s open public meeting law, the Ralph M. Brown Act.
“The city council should establish policies to ensure that its operations are consistent with the requirements of the State Government Code relating to open meetings and best practices, as they relate to government transparency,” the report concluded.
While issuing a prepared statement that “Certainly the findings and conclusions are cause for concern,” Victorville city officials noted that “Many of the recommendations were implemented previously and the city is committed to making every effort to continue to implement recommendations, which will continue to ensure the economic stability of the city.” But city officials suggested that the report was in part “inaccurate” as well as “inflammatory”, as well as out of date with regard to some facts and two years late.
“Many of the findings and recommendations would have been better timed for release in 2008 or 2009, as significant progress has been made since then,” according to the statement.
The city also noted that Jon Roberts, the city manager under whom the events referred to in the report transpired, is no longer with the city.

Powerful opposition is forming to the inclusion of eminent domain as a key component of the foreclosure fighting arsenal a newly-formed homeowner assistance joint powers authority is seeking to acquire.
The county of San Bernardino and the cities of Fontana and Ontario have banded together to form the Homeowner Protection Joint Powers Authority, which is charted to assist “underwater” homeowners and stave off pending foreclosures.
Throughout the county, 264,122 of the 488,422 single family homes in its constituent 24 incorporated cities and towns and unincorporated areas have at some point in the last four years been underwater. Of those 264,122 homeowners whose homes cost more than their current assessed value, 63.7 percent or 168,246 had received notices of default. Unemployment in the county is roughly 12.6 percent.
At the prompting of county chief executive officer Greg Devereaux, the joint powers authority was formed and a  variety of approaches to the problem have been contemplated, including bringing in private broker negotiators to change the terms of loans or coordinating relief for beleaguered  homeowners through the federal Home Affordable Refinance Program, along with an innovative strategy that calls for using government’s power of condemnation to seize the mortgages on those upside down homes to allow those homeowners on the brink of being thrown out on the street to renegotiate downward the terms of their loans.
Historically, the power of eminent domain has been used by governments to force private landowners to sell property, i.e., real estate, needed for public improvement projects. Under that process, a legislative body or local governing board condemns the property and takes the property in exchange for what is determined to be fair market value. Previously, eminent domain had been utilized for public works projects such as roads, bridges, water treatment facilities and the like. In 2005, the U.S. Supreme Court, in the case of Kelo v. New London, widened the government’s eminent domain authority to allow the city of New London, Connecticut to seize from Suzette Kelo her home so the property could be in turn provided to a private developer for development in conjunction with a redevelopment plan.  The court, in a 5-4 decision, ruled the 3,169 new jobs and $1.2 million a year in tax revenues to be realized as a consequence of the development justified the seizure from Kelo, since the project could be construed as a benefit to the community and as such was a permissible “public use” under the Takings Clause of the Fifth Amendment.
Some see in Kelo v. New London an opening that will allow eminent domain to be used in other circumstances where community benefit can be cited as justification.  One of those at the forefront of that movement is the San Francisco-based investment group, Mortgage Resolution Partners. Mortgage Resolution Partners is seeking to create a niche for itself by working to counteract the proliferation of so-called securitized mortgages, i.e., the practice of bundling mortgages which are then sold to massive numbers of investors. That practice has been seen as a contributory factor to the mortgage crisis because it has created a situation in which a single lender no longer holds the mortgages, preventing homeowners from renegotiating their loans when the value of their property has plummeted.
Mortgage Security Partners has offered to work with the Homeowner Protection Joint Powers Authority toward its goal by applying eminent domain against mortgage holders.  Mortgage Resolution Partners has already secured the backing of investors representing over a billion dollars in ready capital to fund the effort and take possession of the mortgage notes in line with the current market value of San Bernardino County homes they are tied into. The homeowners would get renegotiated loans that reflect the actual value of the property. Mortgage Resolution Partners would earn a fee on each transaction.
Eminent domain long has been derided as a potentially onerous and overreaching power of government. The contemplated expansion of that power triggered the objections of eighteen real estate and banking business and trade entities, who last week collectively sent a letter to San Bernardino County, Ontario and Fontana bemoaning any approach that would involve the use of condemnation proceedings to acquire mortgage notes.
The trade groups maintain the plan to use eminent domain constitutes “very serious legal and constitutional issues,” that would prove “immensely destructive to U.S. mortgage markets by undermining the sanctity of the contractual relationship between a borrower and creditor.”
In the letter dated June 28 to the San Bernardino County Board of Supervisors and Fontana and Ontario city councils, the organizations, including the Inland Valleys Association of Realtors, American Bankers Association, National Association of Homebuilders, the Securities Industry and Financial Markets Association, and the Association of Mortgage Investors  maintain that contrary to alleviating the foreclosure crisis, the use of eminent domain could worsen an already bleak real estate market by creating reluctance on the part of banks and lending institutions to make loans. “This program could actually serve to further depress housing values in the county by restricting the flow of credit to home buyers,” the letter states.

CHINO HILLS— California Public Utilities Commission President Michael Peevey on July 2 ordered Southern California Edison and the city of Chino Hills to ready information and prepare testimony by February 28, 2013 pertaining to the options for undergrounding large scale transmission lines previously approved to be strung from massive towers through the heart of the city.
In issuing that order Peevey further instructed Chino Hills officials to determine how much of the added cost of undergrounding the lines the city and its taxpayers and electrical ratepayers are willing to bear.

Michael Peevey

The preparations Peevey has called for will set the table for a later public hearing on the issue of undergrounding the cables for the $2.1 billion Tehachapi Renewable Transmission Project, which is intended to generate at least 1,500 megawatts of power from new windmills to be erected within a 50-square mile wind field in Kern County and then convey that electricity to the Los Angeles basin.
In 2009 Southern California Edison obtained from the California Public Utility Commission over Chino Hills city officials’ objections permission to utilize the long-existing 3.8 mile-long  power line right-of-way through Chino Hills from Tonner Canyon to the Riverside County line to erect 200-foot high towers to hold the line that is to traverse the upscale city in the far southwestern corner of San Bernardino County.
The city of Chino Hills sued Edison in 2010, claiming the company was on the verge of  “overburdening” the power line easements, but West Valley Superior Court Judge Keith D. Davis ruled the California Public Utilities Commission has exclusive jurisdiction regarding the route used by Edison. Chino Hills appealed Davis’s ruling to the 4th District Court of Appeal, but on September 12, 2011 the appeals court affirmed Davis’ finding that the California Public Utilities Commission and not the courts has exclusive jurisdiction over property rights issues between the city and Southern California Edison (SCE). That legal effort cost the city more than $2.3 million.
Even as the towers were being erected in Chino Hills last fall, the city made a last ditch appeal to Peevey, who visited the city and called for a delay while alternatives to the tower were sought and research on and discussions of alternative routing methods were carried out. Further work on the towers was suspended on November 11.
Monday’s ruling is an important milestone in the progress toward what Chino Hills officials and residents hope will be a change in the method of transmitting the electricity that will banish what they consider to be the unsightly towers from their landscape.
Peevey stopped short of saying that the towers, 12 of which have been erected within the city limits and five of which now stand in Carbon Canyon, will be dismantled, but indicated the PUC will conduct a forum by which alternatives to the towers will be thoroughly and comprehensively considered in time for Southern California Edison to have the Tehachapi Renewable Transmission Project up and running within three years.
“My objective is to ensure that the PUC moves promptly to develop a complete record with respect to the alternative of putting this line underground in Chino Hills, including the environmental impact of this type of construction. We need a better estimate of the cost based on a detailed engineering design,” Peevey said. “I applaud the efforts of SCE and the city of Chino Hills to explore this alternative through settlement negotiations over the past few months. Those talks have been very helpful in narrowing the scope of the controversy. By today’s ruling, I am directing both sides to sharpen their pencils to bring the underground solution into better focus.
“This will allow the PUC to then select, through its final decision in this case, the best solution for this important renewable energy transmission line,” Peevey continued. “We cannot lose sight of the fact that time is of the essence in getting this line completed and energized by 2015. We must enable the delivery of electric generation over the project on the schedule currently anticipated.”
In the ruling itself, Peevey said he wants all of the issues pertaining to the portion of the Tehachapi line through Chino Hills, referred to as Segment 8A, hashed out so the Public Utilities Commission “may reach a timely and lawful resolution that affirms a viable route for the project within that segment, releases the construction stay, and enables the delivery of electric generation over the Tehachapi Renewable Transmission Project on the schedule currently anticipated.”
Specifically, Peevey said he wanted Edison to prepare testimony related to preliminary engineering data it has acquired on the undergrounding of a single-circuit with three cables per phase in conduit in the existing Chino Hills right-of-way and the undergrounding of a single-circuit with two cables per phase in conduit in the existing Chino Hills right-of-way. He said he had excluded a third option for an undergrounded single-circuit with one cable per phase in conduit in the existing Chino Hills right-of-way “because that option would not supply enough margin under normal and emergency conditions.”
Many Chino Hills residents and officials hailed Peevey’s order, focusing most readily on the presumed likelihood of the elimination of the towers, which locals consider to be a visual blight that will negatively impact property values in the city. They generally looked beyond the implication in Peevey’s order that the city and its residents will need to bear a good portion of the financial burden of undergrounding the electrical circuits.
“Chino Hills should develop prepared testimony responsive to Southern California Edison’s prepared testimony on the three cables per phase and two cables per phase in an undergrounded, single-circuit cross-linked polyethylene conduit in the existing Chino Hills right-of-way,” Peevey wrote in his order. “In particular, Chino Hills should identify and clearly quantify any financial commitment it is prepared to make to minimize the total additional cost of an underground option as compared to the project initially approved for Segment 8A.”
According to Edison officials, the cost of digging a six-foot wide, 3.8-mile long trench the entire length of the existing easement through town and burying a double-circuit line will cost from $703 million to $1 billion.