VICTORVILLE: City defaults on two bonds related to airport
A technical payment mistake hits the city and the Southern California Logistics Airport
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Southern California Logistics Airport seen in Victorville Thursday, July 28, 2005.
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Victorville has defaulted on two of several municipal bonds used to make improvements to the Southern California Logistics Airport, according to letters from the Bank of New York Mellon.
The city tried to pay $535,000 in principal payments by Dec. 1 with money held in a reserve account, an action the bank doesn’t allow which triggered the default, according to the bank’s letters.
The airport is the result of public and private efforts to redevelop 8,500 acres of the former George Air Force Base. Victorville owns the airport and the City Council oversees it as the Southern California Logistics Airport Authority.
The two bonds, issued in 2007 and 2008, are valued at $55.3 million not counting interest.
As first reported by the Daily Press in Victorville, a majority of bondholders could demand that the entire amount still owed — $173 million — be paid immediately. Other alternatives include litigation or amending the bond agreements, according to the letters.
Southern California Logistics Airport has lost far more than it has earned in recent years.
The airport reported a deficit of $101.3 million at the end of June 2010, twice what it was at the beginning of that fiscal year because of a $50million legal settlement, according to an annual financial report for the airport authority.
Victorville Councilman Mike Rothschild, reached by phone, said city leaders were dealing with the issue when he left for vacation and elected officials were told not to discuss it publicly in the meantime.
He described it as a technical issue that the city would solve and one that was a direct result of the state’s attempt to dissolve redevelopment agencies. Victorville froze funds its redevelopment agencies might owe the state if the decision is upheld.
The California State Supreme Court is expected to decide on a case challenging the state’s decision today. Rothschild said that if the decision is reversed and redevelopment agencies are allowed to remain, Victorville agencies would have enough money to pay the principal amount and interest owed on bond debts
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