This is my version of a couple of news stories that have recently ran on the Victor Valley Economic Development Agency.From the SB County Sentinel ...
Moody’s Investment Service Downgrades SCLA Bonds
As a warning to potential investors, the nation’s leading bond rating company has downgraded over $90 million worth of bonds issued by the Victor Valley Economic Development Authority to finance infrastructure and other improvements at Southern California Logistics Airport.
The airport, built on the grounds of the former George Air Force Base which was closed in 1992, is undergoing conversion into a civilian use aerodrome, one that is intended primarily for the transport of cargo rather than passengers.
In order to make that conversion, the facilities there need to be augmented with roads, rail lines, warehouses, hangars, tarmac improvements and other refurbishments. To finance the provision of that infrastructure, Victorville, Apple Valley, Hesperia, Adelanto and San Bernardino County, functioning under the aegis of the Victor Valley Economic Development Authority, which is known by its acronym VVEDA, issues bonds, which are then sold to investors. The proceeds from those sales are then used to pay for the improvements. Those improvements in turn boost the value of the property at and around the airport as well as making operations at the airport viable. A portion of the revenue generated from airport operations together with the increased property tax yields triggered by the increased property valuation is then utilized to service VVEDA’s bonded indebtedness, i.e. make annual payments of a set percent, specified in the bonds, of each bondholder’s investment over a period of years, also specified in the bonds.
The percentage paid to the bond holders is determined in large measure by the rating of the bonds. The riskier the bonds are deemed, the higher the yield for the bond holder and the higher the debt service for the issuing agency.
Recently, Moody’s Investors Services downgraded over $90 million in Southern California Logistics Airport Authority bonds that have yet to be purchased to near-junk status, meaning future purchasers of those bonds will receive, and VVEDA will pay, a higher annual percentage to retire that bonded indebtedness. That assumes that bond buyers will elect to purchase the Southern California Logistics Airport Authority Bonds altogether.
The lower bond rating means that the bonds are deemed a far riskier security than other bonds, meaning the prospect that VVEDA might default on the payments it will owe to investors is greater than with higher rated bonds.
Moody’s, based upon a filing Victorville made last month with the Municipal Securities Rulemaking Board, cited concern that the city of Victorville, which is the entity that has operational authority at the airport through its municipal sub-agency, the Southern California Logistics Airport Authority, will be able to continue to pay the mounting accumulation of debts it has taken on, bonded and otherwise, at and around the airport, including the 90,000-acre redevelopment area encompassing the aerodrome.
There have been a total of nine bond issuances by the Southern California Logistics Airport Authority with an accumulated balance of over $336 million. The city’s ability to cover that debt is being compromised by the downturn in the economy, which has driven down property values throughout the county as well as around the airport.
Increases in the value of the airport district property - together with increases in property tax levied on that property - is a key assumption in the formula for paying back those holders of bonds intended to finance airport infrastructure construction and acquisition. For the last two years that assumption has not been fulfilled.
According to Moody’s Investors Services, property values in the airport’s redevelopment area have presently slipped to just over 40 percent of what they were in 2007 and dipped more than $1.6 billion in 2009 from what they had been in 2008.
Next is a screen shot of the cover letter from CPA Jennifer Starbuck.
The point I want to make is that this was not an audit.This was a review of "Agreed-Upon Procedures". The "error" was that Victorville took its money out before the other agencies did and around $376,000.00 in interest was lost. An audit needs to be performed and an opinion needs to be expressed. These are the Daily Press stories concerning VVEDA that have me concerned.
Apple Valley finance director arrested for domestic violence
William Pattison on administrative leave
BY BROOKE EDWARDS
STAFF WRITER 1-5-10
APPLE VALLEY
• The town’s finance director is on administrative leave after he was arrested over the holidays for allegedly assaulting his girlfriend, according to officials Pattison with the Las Vegas Metropolitan Police Department.
William Pattison, 45, reportedly kicked his girlfriend in the back at a Las Vegas home on Dec. 26, Barbara Morgan, spokeswoman for the Las Vegas station, said.
Morgan said the victim did not require medical attention.
Pattison, who has an unlisted number at his Temecula home, was not available for comment.
However, court records show Pattison has a history of domestic disputes with girlfriends. When he and former girlfriend, Stacy Calvert, worked together for the City of Hemet, Calvert was arrested for assaulting Pattison. Calvert pleaded guilty to one count of misdemeanor battery in November 2005 and was put on probation for three years.
Pattison was then arrested on battery charges against Calvert in 2006, while he was serving as Hemet’s finance director. He was convicted of disturbing the peace in November 2006 and also given three years probation, with his term expiring just six weeks before his recent arrest.
When questioned about the fact that Pattison was hired while he was on probation, town spokeswoman Kathie Martin said, “These situations can be evaluated on a case-by-case basis.”
Martin confirmed that Pattison is on paid administrative leave but said she couldn’t comment further on personnel matters.
In the meantime, she said Town Manager Frank Robinson and Finance Manager Kaye Reynolds will work together to handle Pattison’s duties, which include acting as treasurer for the regional Victor Valley Economic Development Authority.
VVEDA audit uncovers error
$376,741 Victorville accounting error to be split between local cities
BY BROOKE EDWARDS
STAFF WRITER 12-27-09
Victorville has agreed to pay a total of $376,741 back to the members of Victor Valley Economic Development Authority after an independent audit uncovered an accounting error from more than two years ago.
Roughly half of that total will actually go back to Victorville per the VVEDA distribution policy, with the rest split between Apple Valley, Hesperia, Adelanto and San Bernardino County.
The error was found when Brad Mitzelfelt, 1st District supervisor for the county and chairman of the agency created to redevelop the area surrounding the former George Air Force Base, called for transferring the treasury function for VVEDA from Victorville to Apple Valley. The board approved the move, with concern over Victorville having received no opinion on its 2007 audit, and Apple Valley then hired an independent auditor to ensure everything was accurately transferred.
Local accountant Jennifer Starbuck performed the audit back to July 1, 2006, and found a few errors during that fiscal year in how Victorville had reported losses on investments and interest credited to the member agencies.
The majority of the discrepancy — or $309,447 worth — resulted from Victorville backdating transactions and therefore short-changing all of the member agencies out of nearly five months’ interest income on some $21 million.
Starbuck said the error would’ve been easier to catch and trace had the VVEDA cash funds been segregated from Victorville’s other pooled accounts. Since the cash accounts were comingled, she said it was a little more complicated to unravel. However, she said the dating error was caught and fixed by Victorville’s finance team for the 2007-08 fiscal year.
William Pattison , finance director for Apple Valley and the new treasurer for VVEDA, said there are no plans to go back and see if that same error took place in VVEDA’s previous 13 years as an agency with more money potentially owed to the member cities.
