Victorville, California, cures seven years of bond defaults
Victorville, California, is about to become current on payments for bonds that left a seven-year trail of defaults and forced the city to settle a bond fraud case brought by the Securities and Exchange Commission.
The city said Monday that Southern California Logistics Airport Authority bond payments will soon be up to date.
Victorville will be current on all principal and interest payments on nine bonds issued by the authority for the Southern California Logistics Airport when it makes its Dec. 1 payment, according to a posting on the Municipal Securities Rulemaking Board’s EMMA website.
The news comes four months after the city reached a settlement with the SEC on fraud charges related to the bond offering.
“SCLA has withstood the biggest recession in our economy since the Great Depression,” said Victorville Mayor Gloria Garcia in a prepared statement. “We are pleased that the issues resulting from the recessionary period are now behind us."
The SEC brought the complaint in 2013 against the city, the airport authority, underwriter Kinsell, Newcomb & De Dios and several individuals over the bonds the SCLAA issued in 2008.
It was settled earlier in August.
The SEC dismissed the most serious claim against the city's airport authority on July 19 and removed Keith Metzler — assistant city manager at the time and today Victorville's city manager — from litigation altogether as part of the settlement reached in August.
Federal regulators agreed to drop the intentional fraud claim against the airport authority as well as aiding and abetting fraud claims against both the city and Metzler. The city and SCLAA instead agreed to a judgment, prohibiting the city and airport authority from violating SEC antifraud rules and ordering Victorville not to issue municipal securities until an independent consultant review of internal controls and practices is completed and the recommendations implemented.
The settlement also included a final judgment against Janees Williams, a former vice president of Kinsell, Newcomb and De Dios, permanently prohibiting her from aiding and abetting violations of SEC anti-fraud rules.
The city, the airport authority and Williams agreed to the settlement without admitting or denying the SEC's allegations.
The SEC said in August that litigation against KND and president Jeffery Kinsell continued. KND's SEC registration was terminated in 2014, according to FINRA's BrokerCheck website.
The SEC complaint accused the defendants of defrauding investors by vastly inflating the $65 million valuation of four airport hangars used to secure the bond offering, enabling the airport authority "to issue substantially more bonds and raise more money than it otherwise would have."
Economic recovery and rising property values in the 132-mile square-mile redevelopment project area including the airport enabled the city to finally become current on payments, city officials said in a news release.
Victorville, a city of 120,000 midway between Los Angeles and Las Vegas, is in the Mojave Desert, a region that saw property values dive by as much as 30% following the 2008 recession and took longer to recover than California’s coastal areas. For many years, economists such as the UCLA Anderson Forecast described the state’s recovery as bifurcated with inland areas taking longer to dig out of the recession than the coast.
As a redevelopment area, the airport was also affected by the state’s decision in 2011 to dissolve redevelopment areas and require tax increment money be used to make bond payments with any excess going to the state to redistribute primarily to ease the state’s burden in funding school districts.
While property values began to rebound in 2013, city officials, said it took five years for assessed value to increase enough to generate the tax increment needed to make bondholders current.
The recovery and resultant increase in property values enabled the city to catch up on payments. Over the past several years, it had been making partial payments on the bonds.
The SCLAA first issued bonds in 2001 to transform the 85,000-acre former George Air Force Base into an industrial, manufacturing and logistics park. Parts of unincorporated San Bernardino County and the surrounding municipalities of Hesperia, Adelanto and Apple Valley are included in the redevelopment area, which leases space to Boeing, GE Aviation, Newell Rubbermaid and Keurig Dr Pepper.