FINAL REPORT - San Bernardino Superior Court

Section 2: Inter-fund Loans and Use of Restricted Funds
between the inter-fund loan and a transfer is that there is no expectation of repayment for a
transfer, so any violation of state or local laws would have a greater exposure to the risk of
backlash from rate payers, constituents, or other government entities. The transfer of Sanitary
District Funds to the General Fund is an example of this risk exposure.
Dissolution of Sanitary District and Transfer to General Fund
The Sanitary District provides wastewater collection facilities to the residents of the City of
Victorville. Revenues for the District consist of sewer user fees and property taxes. After a
review of services, the San Bernardino County Local Agency Formation Commission (LAFCO)
adopted Resolution No. 3021 on September 11, 2008 to officially dissolve the Sanitary District.
The resolution contained 13 conditions as part of the dissolution and designated the City of
Victorville as the Successor Agency.
Subsequent to the dissolution of the Sanitary District, the City transferred $15,000,000 from the
Sanitary District Fund to the General Fund on June 30, 2009. According to City management, the
$15,000,000 represents a portion of the property taxes received by the District since its inception
in 1964 through 2008. Based on financial statements provided by the City, the Sanitary
Districted collected a minimum of $17,768,648 in property taxes since 1964. The City could not
verify the property tax revenue collected for at least 14 fiscal years.
Calculation of Residual Property Tax Revenue
When questioned why only $15,000,000 of the $17,768,648 in verified property tax revenue was
transferred to the General Fund, City management asserted that they were required to leave funds
raised for capital improvement with the Sanitary District Fund, per the LAFCO resolution.
However, when asked specifically how the City estimated the $2,768,648 designated for capital
($17,768,648 less $15,000,000), members of City management provided conflicting responses.
The Finance Department stated that $2,768,648 was “ball-parked” to be a sufficient amount for
capital improvements, despite the fact that there were no official capital improvement plans
guiding the estimate. In contrast, the City Manager noted that there were specific guidelines to
determine the portion of the user fees designated for capital improvements.
Despite several requests to provide work papers for how the City estimated $2,768,648,
sufficient documentation has not been provided. In response to the most recent request, the City
provided a resolution adopted by City Council on September 16, 2008 which raised the sewer
user fees from $14.72 to $19.95. A portion of the increase in sewer user fees, or $3.24, was to
raise funds for repairing or replacing the existing infrastructure to improve the sanitary collection
system. However, the City has still not provided sufficient work papers to show how the $3.24
fee for infrastructure improvement resulted in the estimate of $2,768,648. The $3.24 portion of
fees designated for infrastructure improvement is approximately 16 percent of the total sewer
user fee of $19.95. Similarly, $2,768,648 is approximately 16 percent of the total estimated
$17,768,648, so the estimate appears to be reasonable.
2-13
Harvey M. Rose Associates, LLC