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SCLA will again default on bonds
Victorville's airport authority $3M short for December payment
VICTORVILLE • The city's airport authority is set to once again default on its hefty bond debt, coming up nearly $3 million short to make a payment due Dec. 1.
Victorville’s Southern California Logistics Airport Authority plans to make up the shortfall the same way it did a year ago: by temporarily pulling funds from a reserve trustee account. It’s a practice that’s not permitted per the bond agreements, leading to criticism from federal agencies and triggering a downgrade in SCLAA’s bond ratings.
“What is most important for our local public to know is that this default does not impact the service level at the Southern California Logistics Airport and it does not affect the services provided by the city of Victorville to its local residents,” Mayor Ryan McEachron said in a statement Thursday, after the city notified bondholders of the pending default.
Victorville is struggling to pay down nine SCLAA bonds, which date back to 2005 and carry some $330 million in outstanding balances. The airport authority first defaulted on those bonds amid plummeting property values in December 2011, coming up $7 million short for that year’s annual payment.
The majority of the bond funds were used to make improvements at the airport, which recently began operating in the black. However, at least a quarter of the debt funded Victorville’s own projects off Southern California Logistics Airport property, including land for an abandoned city library and work on the shelved Victorville 2 power plant.
The bonds are secured entirely by tax increment brought in from every local city in the 90,000-acre Victor Valley Economic Development Authority, a redevelopment agency that includes most of Victorville, large chunks of Adelanto and Apple Valley, a portion of Hesperia and patches of unincorporated San Bernardino County. As property values have declined over the last several years, so has the revenue available to pay the bond debt.
Since SCLAA is carrying a $101 million deficit due to failed energy ventures and past operating losses, Victorville began turning to interfund borrowing to make the debt payments, covering the 2010 tab largely through loans from restricted funds. But with its redevelopment agency dissolved and its general fund reserve nearly depleted, Victorville was left without a city fund to borrow from the next year.
In the wake of the 2011 default, Moody’s Investors Service dropped the rating on $51 million in SCLAA bonds, predicting the city agency won’t catch up on debt payments until 2029. The low rating can interfere with the city’s ability to seek new bonds or refinance its existing troubled debt.
The way Victorville has spent its bond funds is the source of a Securities and Exchange Commission investigation that’s been going on for the last two years.
The San Bernardino County Grand Jury also expressed concern about whether SCLAA can avoid bankruptcy, calling out the authority’s deficit, its bond debt and $13 million that went unaccounted for in relation to hangars built at the airport.
SCLAA’s next debt payment is due June 1, with tax revenues due in the spring expected to cover that payment and the airport authority expected to again default in December 2013.
Brooke Edwards Staggs may be reached at (760) 955-5358 or at BEdwards@VVDailyPress.com.
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