FINAL REPORT - San Bernardino Superior Court

Executive Summary
Section 4. SCLA Hangar Development
In September 2005 the City Council, in its role as the Southern California Logistics Airport
Authority (SCLAA) Board of Directors, entered into a no-bid agreement with CBS Aviation
Development, LLC for the construction of hangar facilities at Southern California Logistics
Airport. The development agreement was based on a proposal put forward by the manager/owner
of CBS Aviation Development, an individual with no prior relationship to the City and whose
background and competency was not fully known. Further, there is no evidence that sufficient
background research was conducted on CBS Aviation Development or its owner until two
months after the SCLAA entered into a ground lease agreement with the contractor.
Although the original hangar development agreement called for the construction to be
completely funded by CBS Aviation Development, the SCLAA spent approximately $54 million
for CBS Aviation Development work on the hangar development project and nearly an
additional $50 million for a second firm, KND Affiliates, LLC, to complete the project after City
management lost confidence in the abilities of CBS Aviation Development. The hangar
development project may have ultimately cost SCLAA approximately $103 million to complete
four aircraft hangars.
The hangar development project at the Southern California Logistics Airport was undertaken
without proper controls to prevent cost overruns, the misuse or loss of public funds, or fraud.
Specifically, there is no evidence that City management clearly estimated costs or presented the
SCLAA Board (City Council) with a clear project budget or development plan before disbursing
funds to CBS Aviation Development. Further, City and SCLAA management did not put proper
controls in place during the project to ensure that outside contractors: (1) properly performed
their duties; (2) used public funds efficiently; or, (3) were prevented from misusing public funds.
The lack of controls is evidenced by the inability of City management to account for the entirety
of public funds, including nearly $13 million provided to CBS Aviation Development.
Based on these findings, the SCLAA Board of Directors should:
4.1. Adopt and implement procurement procedures for the management and operation of the
Southern California Logistics Airport that incorporates competitive bidding for the
design, development, and construction of airport facilities.
4.2. Adopt and implement SCLAA policies and procedures that institute sufficient financial
controls for airport capital projects. Such controls should be consistent with best practices
for public sector capital projects.
Section 5. SCLAA Bond Expenditures
The VVEDA JPA stipulates the uses of tax increment raised on parcels of the former GAFB as
well as tax increment from the member jurisdictions’ territories. The VVEDA JPA specifically
requires that tax increment revenues which are to be allocated to GAFB should only be used for
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Harvey M. Rose Associates, LLC