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December 4, 2013

DHS City Council Meeting, November 19, 2013

Recognition Of Rudy Acosta

Wade McKinney, City Manager in Indian Wells, and Rob Wood, Interim City Manager in Cathedral City, came to the podium to present on behalf of the International City/County Management Association, a plaque to Rudy Acosta for the "Assistant Excellence In Leadership Award in Memory of Buford M. Watson Jr."

Here is a PDF of the description of the award for Rudy Acosta.


This award, commemorating former ICMA President Buford M. Watson Jr., honors a local government management professional who has made significant contributions toward excellence in leadership as an assistant to a chief local government administrator or department head.

Rudy Acosta - Community Health and Wellness Project Manager, Desert Hot Springs, California

Desert Hot Springs is a severely economically distressed community in the Coachella Valley of Riverside County, California. Since joining the city in 2007, Rudy Acosta has served in several capacities, including assistant city manager, director of redevelopment, and project manager for the Community Health and Wellness Center. As director of the redevelopment agency, Mr. Acosta created and implemented the Vortex Specific Plan to revitalize the city's downtown. He aggressively sought out Community Development Block Grants (CDBGs) and HUD funds to implement neighborhood renewal programs, which, in conjunction with law enforcement efforts, were critical in reducing crime by over 35% since 2007. With only one doctor for the entire population of 26,600, Desert Hot Springs is a federally designated Medically Underserved Area. Together with the city manager, Mr. Acosta created a plan to attract federally qualified, nonprofit health care facilities to the community. To begin, the city negotiated an agreement with the Borrego Community Health Foundation to provide health care services, including nine doctors, a laboratory, and an x-ray facility. Mr. Acosta then assembled several public and privately owned parcels of land and worked with the city's youth to imagine a building that would meet residents' needs. The 32,200-square-foot Community Health and Wellness Center includes a state-of-the-art Boys and Girls Club with 21st- century technology centers, a full-size gymnasium, and an aquatic center. Through federal earmarks, CDBGs, New Market Tax Credits, private donations, state parks grants, and a grant from the Desert Healthcare District, more than $22 million was raised for the project, which was completed in December 2012 — on time and under budget. Because of the city's partnership with the Desert Healthcare District and Borrego Health, all residents now have access to health care, diagnostic services, nutritional education, support groups, and screenings. And that success prompted the University of California Riverside to choose Desert Hot Springs as the site of its new School of Medicine Primary Care Clinic, which will deliver fully trained primary care doctors to the entire Coachella Valley. In total, construction of the center created more than 450 jobs, and the primary care clinic will create 180 more. There is a direct link between these results and Rudy Acosta and his commitment to community.

Mr. Acosta said that it would be arrogant of him to accept the award without recognizing and sharing it with the City Council, the design and construction team, and other members of staff like Troy Strange and Linda Kelly who helped keep this project together.

This reward is all the more impressive when you bear in mind that this recognition is at the international level. Other recipients of ICMA awards came from Arizona; Missouri; Worcester, Massachusetts; Austin, Texas; New Hampshire; New South Wales; British Columbia; Wisconsin; and Ohio.

DHSHS Marching Band

Mayor Parks announced that the Desert Hot Springs High School Marching Band won the Division 1 state championship, defeating 70 other bands. News story and video here.

Public Comments

Terri Sanchez is the director of the St. Elizabeth's food pantry. She was asking for more help for the food pantry - any help at all. The food pantry serves 300 to 350 families. The church's phone number is 760-329-8794. Her phone number is 760-333-8525. Mayor Parks suggested she look into Sunline's "Fill-A-Bus" program.

Richard Pyle spoke next. He is a 35-year resident of DHS. He said we need to have the police here. It didn't work out when we had the Sheriff's Department here.

Larry Essex has lived here 19 years and has worked for the Police Department for 18 years. He spoke on behalf of the Police Officers and the Police Officers Association. He was hired as a police consultant to help establish the Police Department in the 1990s. He rode with the Sheriff's Department during their last 3 months three nights a week. He said the streets were filled with zombies. Every street had 10 or 12 people walking up and down, high on heroin, methamphetamine, every sort of thing you can imagine. The Sheriff's Department had only two deputies in town, and when one Deputy took someone in custody, the second Deputy went to the station and waited until the first Deputy had gone all the way to Indio and back. Every call for service was held until that Deputy returned. He said the police have developed a partnership with the citizens and have a great program in the Community Policing Initiative. He encouraged people to compare apples to apples. It would by easy to get a cheaper bid from the Sheriff's Department. But you can't get the same level of service or personalization.

Emily Schmidt has lived in DHS for 19 years. When she first moved here there were gunshots in the courtyard of her triplex. It took the Sheriff's Department 1 hour and 40 minutes to respond. When they arrived they didn't speak to the residents. She has lived in the unincorporated area but moved back into the city so she could feel safe with our Police Department. She has raised 5 children in this city. She has grandchildren in Desert Hot Springs. She guaranteed that if the Police Department were taken away there would be a mass exodus of citizens. She has talked to many friends who have moved into the city because it was safe again. She doesn't want to return to "The Night Of The Living Dead" when people were walking up and down the streets in the middle of the night. She had a meth house right across the street. With AB109 in effect, we're going to have more criminals on the street. She said there should be investigations into why we're in this [financial] place right now. There are people who should be removed from office. There should be criminal prosecutions. The City Council has asked the citizens to forgive them repeatedly and the city has been gracious and forgiving. People make mistakes, but if this does not go right she doesn't know if the people can forgive it.

Hank Goodreault said he supports the police as well, but he doesn't support pay that is over $120,000. People who make more than that are "10-percenters," he said. He said the contracts and pay structures should be reworked. He discussed being included in the Desert Recreational District. He said he thinks it costs about $32/month [per household] to be in the district. He said another person has suggested adding $16/household too. He can't afford to pay more. His mortgage is upside-down and he works 60 to 70 hours per week. He said the city should not raise fees, but work within the budget. When he needs more money he goes out and works for it. He believes 4 or 5 members of the Police Department are getting $250,000. He liked it when Ann Marie Gallant was City Manager. Her pay was only $120,000. She cut the budget. He likes everyone on the City Council. He encouraged them to do what is right.

George Fisher chair of the Community & Cultural Affairs Commission came up to remind people about the tree lighting on December 1. Also, the 4th holiday lighting contest will take place in December. Residents who want to be eligible for an award should have their lights turned on between 6 PM and 9 PM from December 9 through 13, the judging period. He said every year we get more lights in this city. He also asked people to notice the many decorated utility boxes. Artists who would like to paint a utility box should get in touch with the CCAC. The Commission will give them $500 from the Art In Public Places fund [a fund that is reserved and cannot be used as part of the general fund].

Lou Stewart discussed allegations of voter fraud. He thinks there was fraud. He mentions the removal of Adam Sanchez campaign signs and anonymous emails. He said the real fraud was the campaign promise that the city's finances were rock solid. He said Mayor Parks willfully deceived the voters. He asked why they thought the Finance Director and City Manager bailed so quickly. He said the Mayor should simply go into a well-compensated retirement. He asked her if she had debts to pay off to developers who, he said, financed 98% of her campaign.

[Someone] Clark said she is disappointed in the City Council and Mayor. She said they didn't recognize the looming financial crisis. She said saying this financial situation is a surprise is like delivering a baby and saying you didn't know you were pregnant. Raising property taxes makes her nauseous. "Cut the budget," she said. She said each department should cut their budget 40%. Tax dollars should not go to pay for a phone, car or life insurance. She wondered where the utility tax goes. The police force should not be cut. "Start by cutting the perks." She accused the council of holding office for their own monetary gain. Contractors should be given 90 days to bid.

Nicole Soto came representing the AQMD. They have a program for gardeners and landscapers. [I think she meant this leafblower exchange program.] Energy upgrades and weatherization are still available.

Donna Lozano spoke next. She has been a resident, off and on, since before the city was incorporated [1963]. She has seen a lot of changes, good and bad, and now she's seeing ridiculous. Not Mayor Parks, she said. She said that if they had put more money in public safety in 2001 her son would still be alive. "Don't be telling my son is just a number across the board, Mr. McKee," she said. Operations like Falling Sun must be repeated. She doesn't have any answers. But she knows public safety is not the one to cut. She hates more taxes, but she would rather pay them than see other parents lose their children. It took her 11 years to get accountability because she persisted and insisted everyone do their jobs. "We can do the same here." Election changes do not insure any change. She held up a photo of some graffiti in Tedesco park, saying it was the same gang that was chased out by Operation Falling Sun. She has an email from Adam Sanchez saying gangs are not tolerated in this city, but we don't have a gang task force. Public safety is what brings growth. She thanked the Chiefs of Police and Fire for all they do.

Dot Reed announced the 50th anniversary celebration would be November 30. She has lived here 35 years and spends a lot of time volunteering. She asked for House Of Hope. Donations are tax deductible. She had 50th Anniversary pins from the DHS Historical Society.

Fiscal Emergency

Interim City Manager Bob Adams gave the staff report. He said the city's expenditures have exceeded revenues for a number of years. The core issue is the limited tax revenue. Staff has refined the estimate of expenditures for this fiscal year and put it close to $18.7 million. This leaves a structural deficit of $4.8 million. Revenues are $13.9 million. When the fiscal year started it was thought that there was $4 million in reserves, but it turns out to be only about $3 million. Now the estimate is that if we did nothing we would be out of cash in April or May. That information became available to staff only the afternoon before this meeting. Some positions have been kept vacant. But policy direction is needed from the council for structural changes. The city has $6.5 million in contracts for services. The city work force has been reduced by 66% in the last few years, but public safety has not been reduced, although there are a few vacant positions in the Police Department. We are nearly at the point where it would affect core services. State law requires the city to process development of property within a certain timeframe. Declaring a fiscal emergency would allow the city to restructure its contracts.

Mr. Adams says he sees a 6-month issue, an 18-month and a 5-year issue. The 6-month issue is to be in the black at the end of this fiscal year. The 18-month issue is to have the structural deficit fixed in the next fiscal year. The 5-year plan would be to avoid getting into this situation again. They are still closing the books on the first quarter of this fiscal year (ending October 31) and he expects to have more accurate numbers at the next council meeting.

Hank Goodreault came up to comment. He said it was obvious that we had to declare a fiscal emergency. 40% is the amount that needs to be cut. [$4.8 million is about 26% of $18.7 million.] "No new taxes. No new fees, except for those who own property empty parcels who pay only $2 or $8 a year." He said it needs to be equitable and no resident needs any adjustment of fees.

Former City Councilmember Mary Stephens made a rare appearance. She said she supports the council, but they are in a different position now than they were earlier when we had the Silver Sage lawsuit. That was when the people first approved the two public safety taxes because they wanted the Police Department. She has lived here 20 years and known Adam Sanchez for 24 years. They came from the same city. The bankruptcy gave the city the chance to stop and take a breath. She could do some of the city jobs for $25,000 less than is being paid. She does not support increasing the parcel tax, but thinks it's time to look at something like a sales tax. The parcel tax punishes people for being property owners. Back when the city filed for bankruptcy the council made $350 month and had no car allowance.

Dean Gray said he was on the Finance Committee. He and others asked to make cuts. People are talking about taxes, but we haven't cut anything. "We haven't cut any salaries." Cutting the pay of City Council members is not going to solve the problem. "The city has been lied to over and over and over again. And, frankly, I'm just done with y'all." He thinks the new City Council will make good decisions.

Councilmember Pye said she would like to hear from Councilmember-elect Joe McKee. Mr. McKee said he thinks the city should declare a fiscal emergency. He said he supports the police and wants to keep them. We need to see why Coachella spends so much less than we do. Cutting out the entire city government [except police] would still leave us about $800,000 short of necessary cuts. Our biggest problem now is time. Since we have waited so long, the cut needs to be in the 40% to 50% range. Nobody wants the city to be unsafe. He said the important thing is to come together to work on this, not separate into camps.

[The City of Coachella contracts with the Sheriff's Department for its police services.]

Mayor Parks asked if there was any need for rebuttal. Councilmember Matas asked for clarification on that point and Interim City Manager Adams said he didn't see anything that needed to be rebutted. Some in the audience appeared to misinterpret this as an expression of an opinion by Mr. Matas, when in fact the council was simply following the steps laid out for a public hearing. When Attorney Quintanilla came on duty he saw that the council had not been strictly following the required steps for a public hearing, so now they are each laid down explicitly in the agenda. They are:

  1. Staff report
  2. Staff entertains questions from the council
  3. The chair opens the public hearing
  4. Testimony from applicant (not applicable in this situation)
  5. Testimony in favor
  6. Testimony against
  7. Neutral testimony
  8. Close the public hearing
  9. Opportunity for rebuttal (this would normally be a rebuttal by the applicant, but since there is no applicant in this case it's unclear who would rebut anything)
  10. Council discussion
  11. Make a decision

As you can see, the 9th step is more appropriate for something like a real estate development, rather than an administrative decision like this one.

Mr. Matas recalled that four years ago Finance Director Jason Simpson had alerted the City Council that this fiscal year and the next one were going to be tough times. During the time since then Mr. Matas said he asked former City Manager Daniels about how things stood and was reassured that the city had adequate reserves to get through. He said he made decisions based on information supplied by city staff, who he trusted. He reminded us that at the vote on the budget in June 2013 the City Council was told that if the budget was not approved, the city wouldn't be able to pay bills on July 1. The council was told the Finance Committee would look at the budget again. He said he would have been in favor of a declaration of fiscal emergency a year ago, if this had been brought to light.

Mr. Matas asked the Interim City Manager to explain what bankruptcy means and on a scale from A to Z, where are we? Mr. Adams said that the definition of being bankrupt is being able to pay your bills in 60 days. "We're not at that point yet." But if we don't do anything, we could be there in 4 or 5 months.

Mr. Matas said earlier revenue estimates were high. He said the city needs to continue with economic development, because the city will be looking 3 to 5 years in the future. He said he wished Jason Simpson was still with the city since he would project out 3 to 5 years and maintained a 2-year budget. He said the fact that the Police Department has 5 unfilled positions would mean a savings of $800,000 in this fiscal year. He is not in favor of new taxes. He said the annual cost per household for the Desert Recreation District would be about $60. He invited members of the public to call him and go over the numbers. Or you can get that from Kevin Kalman, the General Manager of the district. Mr. Matas does not favor raising the parcel tax, nor sales tax. He was never in favor of the parcel tax to begin with, but it has had overwhelming support from the public because it goes directly to support public safety. He recalled when the Sheriff's Department was in town and sometimes the Fire Department would have to wait for emergency backup because the Sheriff's Deputies couldn't get there. "I will do everything in my power to make sure the Police Department is kept here." He said the POA would be meeting with the City Manager. Mr. Matas says he knows the Sheriff's Department could give us a lower bid than what the Police Department now costs, but it could never provide the level of service of our Police Department. Palm Desert or Indian Wells could buy 10 extra officers tomorrow, he said. We to maintain Community Policing. He said he would support the declaration of fiscal emergency to give city staff the tools they need.

Mayor-elect Sanchez expressed thanks to all city staff. "We are all in this together. The solution lies within all of us. Especially it lies within the Police Department. They have to now come to the table and help save themselves." "We will keep our Police Department." He expressed optimism that we would get through this as a team.

Mr. Matas asked if there would be a discussion of debt service payments. Finance Director Amy Aguer said she had provided a schedule of debt service payments over the next couple of years. All September 2013 payments have been made. December 1 payments have already been made. "All our debt reserves are in place." This means the city has one year of debt service payments set aside. "Right now, as we stand, we're good on our debt service. The goal is to keep it that way." She explained that debt service money is held in restricted funds, not the General Fund, which is the subject of the agenda item at hand. Here is the debt service table that Ms. Aguer had provided (click for a more readable size).
DHS Debt Service Payments 0913-0615

Notice that last line "Compensated Absences as of 06/30/13" which to my layman's eye would not seem to fall into debt service, but is interesting nonetheless. It seems to say that we had a liability of just under $1 million in unused annual leave, administrative leave and comp time.

The motion to declare a fiscal emergency was approved 5-0. A unanimous vote was required for approval.

Skyborne Development Agreement Review

Martín Magaña gave the staff report. This was to determine if a force majeure event has occurred that prevented the developer from meeting the requirements of the development agreement.
Skyborne Map
Map of Skyborne.
Mr. Magaña explained that that pink indicates where there are existing homes, red is where foundation pads have been poured, white is what's left to be built.

The letter from Skyborne request three items:

  1. Recognition of force majeure and a revised performance schedule;
  2. Revise the due date for the third and final installment of payments for Pierson Boulevard improvements to the 12 anniversary of the development agreement or the issuance of the 500th Certificate of Occupancy, whichever comes first; and
  3. Extension of the development agreement to match the revised performance schedule.

Councilmember Betts interrupted Mr. Magaña to say that the published agenda covered only the force majeure issue and review of the development agreement, but not the other issues. Attorney Quintanilla agreed with him, adding that some of the changes in the development agreement would require review by the Planning Commission first.

Skyborne Revised Performance Schedule
Revised performance schedule.

Mr. Betts said that when a City Councilmember has contact with a developer they should state so publicly. He said he has spoken briefly with Jim Kozak of Skyborne. Also, he has not received any financial contributions from Mr. Kozak.

Councilmember Pye said she did receive campaign contributions from Mr. Kozak. Under California law, campaign contributions do not place one in a position of conflict of interest.

Mayor Parks said she hadn't spoken with Mr. Kozak.

Mr. Matas said he has spoken with Mr. Kozak and has received campaign contributions from him.

Mr. Betts said he understands that it is legal to accept campaign contributions and then vote on a project. He said the public should simply know if a council member has had contact with the applicant.

[If every council member is going to have to make a similar statement every time some member of the public comes before them who has made a contribution to some political campaign, things are going to get unnecessarily wordy at future meetings. That should be "MORE unnecessarily wordy."]

Attorney Quintanilla explained that campaign contributions to a City Council member do not "conflict you out" of a discussion and vote. But if you're a Planning Commissioner and running for City Council and accept a campaign contribution that would create a conflict of interest within a certain time period under California law.

Mr. Magaña continued his report, which included all the basic points we heard at the earlier November 6 study session. Staff's view is that the developer has complied with the development agreement and the City Council should find that a force majeure event has occurred.

Karen Park
This original plan for Karen Park was included in the agenda packet.

Dean Gray came up to comment. He said that three City Council members received campaign contributions and the developer is asking not to pay $200,000. Mr. Gray said this was in real clear terms. He said that the City Council was trying to push this through because there might be a different decision at the next City Council meeting. He said that Paul Miller had suggested that the City Council make their decisions behind closed doors.

Pastor Miller disputed this accusation. Some months ago he had addressed the council when they were wrangling about their rules and procedures. He suggested they could work out the rules and procedures informally and then bring them back to a regular city council session to vote on them, but that is not permissible under California law.

The request from the developer regarding the remaining $200,000 for Pierson Boulevard says this:

Revise Section 4.1.1 whereby the third installment of the Pierson Boulevard Improvements will be due upon the earlier of the twelfth (12) anniversary of the Development Agreement or upon the issuance of the Certificate of Occupancy for the 500th unit, whichever occurs first.

Lou Stewart said the city cannot continue its practice of giving welfare to developers. He said many of the projects "in the pipeline" do not meet some unspecified standards of jobs, revenue, environmental qualities and financing. The agreements between the city and developers should be re-assessed and permitted only if they benefit the financial well-being of the city, not their investors. He said the City Council has been overly indulgent with Skyborne. He said the developer has violated terms of the agreement and the city has looked the other way. He talked about the change in the grading bond and said there should be an explanation [that was the next item on the agenda]. He wanted an explanation of why the city has not collected sales tax from a strip mining operation. He said that Mayor Parks and Mayor Pro Tem Matas must recuse themselves from any matters dealing with Skyborne. He said their conflict of interest was not criminal, but "may cross an ethical line." The policy of providing welfare to developers has led to the current financial disaster.

John-Paul Valdez said he is homeowner at Skyborne. He thinks it's a great development. He received a campaign donation of $250 from Mr. Kozak. He thanked Mr. Kozak for his civil participation in the campaign. He said that even though Skyborne is a private "gated" development, there is no gate, which has lowered home prices unnaturally. He has made arrangements with the HOA to pay back dues and late fees. He pointed out to Mr. Gray that Mr. Kozak is only asking to pay the $200,000 at a later date. "Many amenities have not been met." He believes there is no possible way to arrive at a finding of force majeure. He said the economic situation is not an "act of God," but an act of people. He thinks the decision should be delayed until the new council is sworn in.

Cliff Williams has lived in Skyborne for five and a half years. He's on the HOA. He said one of the problems at Skyborne is the people who live there. They are lucky if they can get ten people to show up at an HOA meeting. Four homeowners were present at this City Council meeting, out of 173 homes in Skyborne.

Attorney Quintanilla said that adverse economic changes are included in the list of possible reasons for a force majeure in the development agreement with Skyborne.

Hank Goodreault said "appearance is everything." He wanted to know why a study session the day after the election. He said that no one received a bribe from any developer, but the appearance is there due to the rush. He said both this item and the next one on grading should be tabled.

Finally, Jim Kozak, representative of Skyborne Ventures, came to the podium. He disclosed that he had made donations to every member of the City Council. He donated to a coalition to stop Green Path North at the request of Mr. Betts. He also made a donation to a golf tournament that Mr. Sanchez had promoted. Skyborne believes in being active in the community, he said, including campaign contributions and donations to civic organizations. Saturday, December 7, will be the third annual 5K and half marathon run sponsored by Skyborne to benefit Food Now. Skyborne has funded over $45,000 to Food Now. They've made the Skyborne clubhouse available to various civic and charitable organizations.

He said Mr. Valdez was correct that Skyborne is not asking to have the remaining $200,000 forgiven, but said it is tied to a traffic study. The payments were for part of the cost of signalization east of Skyborne when traffic volume required it. The $400,000 already paid is being held by the city for those future improvements. Therefore, it is not unreasonable to ask for a delay.

He said Skyborne is in significant compliance with the development agreement. The fire station was built. Other significant improvements have been made. He reminded the council that ultimately Skyborne is to include over 2,000 homes on 600 acres which will take some time and significant investment to complete. He said he didn't know of too many other developments in Desert Hot Springs that have contributed as much to the city as Skyborne during these last few years. Not counting the cost of the land, over $100 million has been invested in Skyborne so far. "Other developers are going to watch what's going on. If a person comes in and a project invests $100 million in the city of Desert Hot Springs and is deem to not be substantially complying with the development agreement because of this recession, it's going to be very difficult for someone else to want to come in and do business here."

He went on to say that considering the city's fiscal crisis, the city could cut all the expenses it want to, but you need revenue for a viable city. Housing development generates revenue. He cited a statistic from the National Association of Homebuilders that every new home built generates $23,000 in state and local taxes. Another statistic from the California Building Industry Association is that the direct effect employment multiplier for the California construction industry is 2.305. This means every construction job supports another 1.3 jobs. He shares a desire for a better Desert Hot Springs. They want Skyborne to be a premier project. He has submitted the required reports to the city every year. [These were included in the agenda packet.] He had verbal reassurance from City Manager Daniels that he understood, so Skyborne and the city never went through the formal force majeure process.

He pointed out that many other developers in town just cut and run, while Skyborne has stayed. He has maintained the property. If there is a report of a problem, it gets fixed. There are no outstanding code violations on Skyborne. No other development that's 600 acres or larger can say that. Fencing improvements and improvements in water detention have been made. They want to build as many homes as fast as they can, but in the quality manner required by the specific plan. It would be a real marketing negative for Skyborne if the city declared bankruptcy. He cited Mr. McKee and Mr. Sanchez when he said "When we all work together we can accomplish things."

He asked the City Council to consider the delay of the $200,000 and if that wouldn't be acceptable, he would work out a payment plan, and offered to make the first installment of $50,000 on December 1, 2013, making an annual $50,000 payment for the next three years.

Mr. Matas asked when Skyborne initially tried to get this subject before the City Council. Mr. Kozak said he began discussions with staff in June or July 2013. He said the City Attorney had suggested that a development agreement review was called for.

Mr. Sanchez asked Mr. Kozak if he had ever had any meetings with residents about his "proposed mining project." [Next item on the agenda.] Mr. Kozak said it had been discussed in an HOA meeting. He added that it is not a "mining project." It is a "mass grading process." Here Mayor Parks interrupted because this subject was not part of this agenda item.

Mr. Matas said the campaign contribution he received from Mr. Kozak was $2,000. He said that contribution wouldn't weigh in his decision making, but he has always been pro-development and he has been supported by the Building Industry Association. Desert Hot Springs needs to be pro-development in order to get sustainable revenues for the city. He's in favor of a red carpet program for any developer that comes to the city. He said there are no backroom deals and any comparison with Moreno Valley is ridiculous. He added that he didn't think Pastor Miller had ever told the City Council to go in the backroom and cut a deal. Pastor Miller spoke from the audience saying "Dean just says what he wants. It doesn't matter if it's true." Dean Gray countered, "That's not true! He said that." Pastor Miller responded, "Out of context, sir," followed by a barely audible "Idiot."

Mr. Matas got things back on track saying that if a developer needs to review his development agreement, it's important that the city do that. He asked Attorney Quintanilla what a proper motion could encompass, since a couple items were not properly noticed. Mr. Quintanilla answered that the first step is a decision on force majeure. The next step would then to determine whether the developer had substantially complied with the terms of the development agreement.

Mr. Matas made a motion to approve force majeure and to work with the developer on his request and work on helping the city to receive the $200,000. Attorney Quintanilla suggested that the motion should be revised to say that staff should work on setting up a payment plan for the $200,000 with an annual payment of $50,000 commencing December 1, 2013.

Councilmember Pye said she was not clear on how a motion could be made on the $200,000 based on what the attorney said at the beginning of this hearing. IOW, the $200,000 issue was not properly noticed. Mr. Quintanilla said he thought that "At this point, if he's offering to give $50,000 you take it, no matter what." [Laughter and applause all around.] Then he acknowledged that, indeed, that decision should go back to the Planning Commission first. "But there's nothing preventing him writing a $50,000 check and giving it to the city."

Mr. Matas revised his motion to simply approve a decision of force majeure.

Mr. Betts said he understands the challenge faced by Skyborne Ventures. He said no one on the council is not developer friendly. He said there have been more than minor hiccups with other developments. He cited Agua Dulce. He said he remains on the force majeure issue. Mr. Betts believes that the proposed grading item next on the agenda, conflicted with a force majeure decision.

Ms. Pye said that since Mr. Kozak had been reporting since 2009 that they had stopped all construction due to economic conditions, it was the city who dropped the ball by not considering a force majeure decision then.

Mr. Matas asked if the force majeure would begin now or at a time in the past. Mr. Magaña said the it was up to the City Council to make its findings.

The finding of force majeure was approved 3-2 with Mr. Sanchez and Mr. Betts voting against.

The next subject was whether the developer was substantially in compliance with the development agreement.

Mr. Betts said that in November 2009 when the City Council approved replacing some of the bonds on Skyborne with a lien contract, the council was given to understand that within one year of the lien contract public improvements related to villages 1 and 2 were to be completed. He wanted to know if that language was included in the lien contract. Mr. Magaña said that is not in the lien agreement which is why the city is still holding a $486,000 bond to cover the capping of the streets. He said the streets have been capped where there are homes. Where there are vacant lots or just foundations, the final lift has not been put in because construction vehicles would tear it up. Mr. Betts asked if there were any bonds in place for "landscaping, perimeter walls." He said the sidewalks on Pierson start and stop and are unfinished. Mr. Magaña said there were and that they had been released.

Then Mr. Betts displayed some photos he had taken of streets in Skyborne. One was of a street without the final lift. Another was an unfinished landscape wall with construction fence. The photos served to verify Mr. Magaña's statement that where there are no homes, there has been no final lift put on the streets. Mr. Betts said all of that is supposed to be covered by a bond. Mr. Magaña agreed and said that's why the city still holds a bond for that. Mr. Betts asked what the terms of the bond are and when do they expire. Mr. Magaña said the bonds would never expire as long as city staff kept them active. He went on to say that many of the photos showed streets that the city had not accepted.

Mr. Betts asked what it's like for residents to drive over these incomplete streets versus what they can expect. Then he brought up the subject of Karen Park and the well. He asked Mr. Magaña what is being done about that. Mr. Magaña explained that the development agreement requires a 5 acre, $1.2 million park. It does not specify location. He said the well site takes up half an acre.

Mr. Matas moved to find that Skyborne is in substantial compliance with its development agreement. Ms. Pye asked for a friendly amendment to add that a certificate of compliance be issued to the developer.

Mr. Kozak came back to the podium to say that several of the photos shown by Mr. Betts were in villages 5, 6 and 7, where development has not yet begun. He said there are no outstanding improvements yet to be done in villages 1 and 2 where the homes are except for the final cap.

Mayor Parks said she saw the several of the photos were in open space.

Motion approved 3-2 with Mr. Sanchez and Mr. Betts voting against.

Mass Grading At Skyborne

Rudy Acosta made the staff report on this item. He said this had been in the queue at city hall since June. It's a request from the developer to enter into an agreement with the city on a mass grading permit. The original request would have required a bond of $800,000. The request at hand is for only 18 acres.

Skyborne Grading Map
Proposed grading map.
Mr. Acosta said a full grading plan that is more than 30 pages long is on file with the city. It would not have been legible when reduced to fit into the agenda packet.

The bond required for this is $125,000. There will also be a performance bond for $62,500. Mr. Acosta said city staff calculations showed that these bonds could be lower, but these higher numbers came from the developer's engineer and the developer wanted to go with the higher numbers.

The agency with the jurisdiction to determine what is or is not a mining operation has issued a letter saying this is not a mining operation.

Dean Gray came up to comment. He invited the City Council to take a look at the Escena development in Palm Springs. He said the sidewalks are complete on Gene Autry Trail, and that inside the development the streets and sidewalk are complete even though there are no houses there.

[Actually, there are quite a few completed and occupied homes in Escena, I can assure the reader.]

Mr. Gray said the State Board of Mining and Geology said this was a surface mine. He said the sand was being taken to Twentynine Palms and the rock would go to the Eagle Canyon dam in Cathedral City. He went on to say that Mr. Acosta did not have an engineering degree and that Mr. Magaña had no experience with working for a municipality before he came to Desert Hot Springs. This is what's gotten us into trouble, he said.

Mr. Matas asked Mr. Magaña where he worked before coming to Desert Hot Springs. Mr. Magaña answered "City of Cathedral City and before that City of La Quinta and before that the City of San Jose." Mr. Matas asked him to confirm that those are municipal governments. Mr. Magaña said that was correct, they are municipalities.

Mr. Matas said that originally the Board of Mining and Geology was asked to rule on the grading. They did and the result was a notice of violation. After that the developer worked with city staff to correct the issue and now want to move forward.

Mr. Betts said all mass grading permits must come before the City Council. He asked if this mass grading permit is exactly the same as what was approved by the Planning Commission. He said this should be called "phase 9" but the staff report calls it "phase 1." What is this phase 1, he asked. Mr. Acosta answered that it was only intended to show that this was phase 1 of grading this particular 104 acres. Mr. Betts said that if it didn't exactly match what the Planning Commission had already approved, then it had to go back to them for approval.

Dave Kopecki, Interim City Engineer, came up to explain. He unrolled a much larger map of the mass grading plan. He said all of the new contours shown agree with the approved tentative. Mr. Betts asked if they already had a permit for mass grading. Mr. Kopecki said no. Mr. Betts asked if all the mass grading bonds had been released. Mr. Kopecki said no. He said that when they do mass grading they have to do additional bonds. Mr. Betts wanted to know why a much larger bond amount mentioned in August was now down to only $125,000. Mr. Kopecki said it was because they are doing only part of the grading. Mr. Betts said that if you look at a Google satellite image you can see finished pads, curbs and gutters in areas outside of villages 1 and 2.

Mr. Betts has said things like that before, but I can find no finished pads out there, and the only "curbs and gutters" are a few short segments like you see below.

Curbs & gutters at Skyborne.

Mr. Betts objected to doing the grading in small phases since that extends the period of annoyance for the neighbors.

Ms. Pye pointed out that the permit as written runs from July 1, 2013, to February 1, 2014, meaning this grading would have to be completed by February 1.

Mr. Kozak confirmed that the 18 acre grading would be finished by then.

Mr. Sanchez asked if any other city in California is doing this kind of grading. Mr. Acosta said he hadn't researched that, but there is activity beginning to pick up all over the state. He said he had been vice-president of Lennar and there were a lot of suspension of permits and agreements because of economic conditions. Mr. Sanchez asked if anyone in the Coachella Valley is doing mass grading. Mr. Acosta said no. Mr. Sanchez asked if there was mass grading going on anywhere in California. Mr. Acosta said he couldn't name any specific ones right then, but he could search and find some.

Ms. Pye said that the force majeure applied retroactively, and this grading plan is looking forward.

The mass grading agreement was approved 3-2 with Mr. Betts and Mr. Sanchez voting against.

Budget & Financial Update

This included a request for the council to direct staff to open negotiations with its labor groups, to work with contractors to seek a 10% reduction of costs, and to begin work on a more equitable parcel tax. Interim Finance Director Aguer said that the General Fund actually has about $1.6 million in cash right now.

At this point staff was estimating the year's expenditures at 18.7 million. The structural deficit is about 25% of that, or $4.8 million.

Dean Gray commented that he was on the basketball team in high school and he played center. He disagreed with the Mayor on how to define a team. He objected to a lame duck Mayor voting. He said it was unfair for the entire City Council to be making decisions.

Mr. Betts moved to direct staff to begin to negotiate with labor groups, to seek reductions from contractors of 10% or more and to hold off on working on a more equitable parcel tax until the next meeting of the City Council. He revised that last part to direct staff to bring back the parcel tax with more information at the next meeting.

Mr. Matas asked why the estimate of revenue from code enforcement was being reduced from $1,012,921 to $800,000, a decrease of $535,385 from actual receipts in 2012-13. Ms. Aguer said it was based on Chief Singer's projections for this year. Chief Singer said that before the new code enforcement team was approved, the code enforcement staff was down to only two people, so receipts from fines are expected to be lower.

Mr. Matas said he thought these recommendations should be more broad - we shouldn't be limiting staff to just these three items. Interim City Manager Adams said that the intent is to include this budget item on every agenda until the problem is considered solved. Those will seek additional authorizations for staff. Staff had only two days after the previous study session to prepare this agenda item. This item includes only those things where staff felt there appeared to be some consensus on the City Council. Mr. Matas asked if it would make more sense to bring all the tax items together all at once, including the 911 tax. Mr. Adams said some of those would be new taxes and the unanimous consensus of the City Council was "no new taxes." The parcel tax already exists and is inequitable. There was a rough estimate that an additional $350,000 could be generated by fixing the parcel tax. Any change would have to go to the ballot. June 2014 is the earliest possible point for any vote by the citizens. Mr. Adams said that if after cutting expenses and enhancing every possible source of revenue the budget was still out of balance, then maybe the City Council would want to look at new taxes. Mr. Adams said that the Urban Futures report could be brought to the council at its next meeting and council could review it and indicate directions it wanted to pursue. Ms. Pye asked that recommendations from the Finance Committee come along with that. Mr. Betts said he didn't think that needed to be added to his motion because staff already has enough to work on. The assumption is that everything is on the table.

Ms. Pye said the city should consider selling the property that is proposed for COD and the library, even though it would just be one time money. She also wanted to look at shutting down the police camera system.

Approved 5-0.

AQMD Contract For Solar System

This item was to approve the execution of the contract for the photovoltaic array that will be paid for by mitigation funds from CPV Sentinel. Rudy Acosta made the report. The original proposal had been to put the solar panels atop 8 different city buildings, but it would be less expensive and simpler to maintain if they were simply put all together in one place. Therefore, the city proposes to put them on the ground between the Carl May and the police building.

Richard Cromwell commented. He sat in on the final negotiations with AQMD on this project and congratulated Mr. Acosta with getting rid of a lot of phooey. Then he talked about the planned upgrade to the CNG station and getting the CNG vehicles for the city, Food Now, Family Services of the Desert and MSWD. They have run into an insurance problem between the city and Clean Energy who will be building the station. He hoped he would be able to bring that to the December 3 agenda. He praised members of the city staff for doing the heavy lifting.

Mr. Betts asked if these panel would provided shaded parking. The plan is to put them on the ground, not on a parking canopy, but if they need extra area, some panels will go on top of police carports.

Approved 5-0.

Sports Field Use Policy

The policy was adopted in December 2012, but since it is not an ordinance it has no teeth. This item was simply to make it an ordinance.

Approved 5-0.

Consent Calendar

This was approved 5-0. Some of the items included were...

A quarterly report from the Hoteliers Association. Web hits are up 44% compared to the same period last year. More people are searching specifically for "VisitDesertHotSprings.com." They've reduced their expenditures at Google Adwords, but even so they brought 1,218 visitors to the website. They would like to spend another $10,000 to broadcast their commercial in the Los Angeles market.

Acceptance of a grant of $5,814 grant from Homeland Security for CERT supplies and training.

Approved John R. Coleman's application to paint the utility box on the northeast corner of Palm and Hacienda. The city gives $500 from the Art In Public Places fund to help with the expense. The AIPP fund currently holds $66,925 which can only be used for art in public places. This money is not in the General Fund.

Approved the notification of the County Recorder that Essential Transportation Phase III is complete. That is the area bounded by Palm, Pierson, West and Hacienda.

Final Public Comments

Dean Gray came up to apologize to Mr. Magaña. He was referring to Hal Goldberg, the former Public Works Director, when he said he hadn't worked in a municipality before.

It's an easy mistake to make despite their very different names, different departments, and differences in appearance, but their seats at the dais were close to each other.

He said that Buzz Gambill had told him he had gotten a call from Yvonne Parks ordering him not to publish material from Mr. Gray any longer. Mr. Gray appeared before the Riverside County Grand Jury for several hours a couple of months ago. He is not permitted to talk about what transpired, but he came to realize "stupid is not a crime." [Although it can lead to some expensive fines, as in the case of former City Council member Hank Hohenstein.] There was no fraud on election day, he said. He said good-bye to Ms. Pye and Mayor Parks.

Council Member Comments

Mr. Betts asked Mr. Adams to place an item on the next agenda which would move the start time of the city council meetings to 6 PM, with closed session following rather than preceding. He asked if another council member would join him in that request. [Silence.] He repeated the request. [Silence.] Finally Mayor Parks reminded Mr. Sanchez of his job to back up Mr. Betts on all requests. Mr. Sanchez mumbled an assent.

Ms. Pye said she attended the ribbon cutting for the restaurant at Two Bunch Palms Resort. She was told by the General Manager that they are embarking on a 36-month plan to improve existing rooms and create new rooms. The restaurant is totally different from what it was, she said. The renovations there cost $350,000.

Ms. Pye asked city staff to look less at the contracts for the Hoteliers, the Senior Center and Visitor Center.

Mr. Matas corrected Mr. Gray, saying that Ms. Pye will be taking the vacancy created by Mr. Sanchez's move to the mayorship. He also congratulated the Desert Hot Springs High School band for taking the #1 spot in the state band competitions.

Mr. Matas said he has received numerous complaints from people who have been cited for turning left from northbound Palm Drive onto first. The matter was reviewed by staff who said the No Left Turn was correctly posted. Mr. Acosta said that when the downtown renovations were made the center lane for left turns had to be eliminated. He suggested that perhaps if the color of the sign were brighter it might be more noticed.

The problem there has been obvious to me since they made the changes. The same situation exists if you are southbound on Palm and want to turn left on Acoma. The No Left Turn sign is something like 15 or 20 feet before the intersection. This apparently meets minimum standards for California. The problem is that when you are actually at the intersection trying to make your illegal left turn there is no sign AT the intersection that the driver can see that would tell him he's doing a bad thing. All they need, in addition to the current signs, is one more No Left Turn sign AT the intersection; that is, just north of 1st and just south of Acoma. At Acoma they can put it in the median. I've seen this before in other California cities, but it usually involves a No Right Turn On Red Sign that is placed well before the intersection. When you are at the intersection and trying to turn right, the sign is behind you and not visible. It would be wonderful if all drivers noted all signs along the route and bore them in mind as they proceeded, but sometimes we are just a bit more concerned about that pickup truck that seems to be drifting in his lane, or the old guy jaywalking at night in black clothing.

Mr. Matas went on to say that he got an email from a Mr. Masters which he did not respond to because it was vulgar and out of line. He will try to answer any proper request for information, but when you use language like that and make threats then he will not answer the questions. He also asked the Mayor to verify that she neither gets nor will get any retirement pension due to her service at the city. She said that not only does she not get any retirement benefit from the city, but she gets no health benefits because she retired in 1993 and has her own health insurance.

Mayor Parks said she is proud of her record with the city in the last 8 years. She proud of what the city has done, and proud of the Police Department. She's proud of what has been done with the streets, and for the graffiti removal, and reducing the parolee population, and the downtown facade project. She thanked her supporters and friends.

Filed under Desert Hot Springs | permalink | December 4, 2013 at 06:56 PM


Somebody did not understand surety bonds. This will hopefully help the discussion.

A surety bond is a three-party agreement where the surety company assures your city that the principal (the developer) will perform a contract. Surety bonds used in construction are called contract surety bonds.

Construction is a risky business. A industry study shows that of 853,000 contractors in business in 2002 only 610,000 were still in business in 2004 - a 28.5% failure rate. It has been some time since that study but with the crash of the housing industry in 2008 those percentages skyrocketed. Surety bonds offer assurance that the contractor is capable of completing the contract on time, within budget, and according to specifications. Specifying bonds not only reduces the likelihood of default, but with a surety bond the city has the peace of mind that a sound risk transfer mechanism is in place. The burden of construction risk is shifted from the city to the surety company.

Surety companies have a rigorous prequalification process that contractors must go through that protects cities and offers assurance to the lender, architect, and everyone else involved with the project that the contractor is able to translate the project's plans into a finished project. Surety companies and surety bond producers have been evaluating contractor and subcontractor performance for a long time. This is a century old practice. The expertise, experience, and objectivity in pre qualifying contractors are valuable tools in the process for a city.

Contractor default is always unfortunate and sometimes unavoidable circumstance. In the event of contractor failure, the city must formally declare the contractor in default. The surety conducts an impartial investigation prior to settling any claim. This protects the contractor's legal recourse in the event that the city improperly declares the contractor in default. When there is a proper default, the surety's options often are spelled out in the bond. These options may include the right to re-bid the job for completion, bring in a replacement contractor, provide financial and/or technical assistance to the existing contractor, or pay the penal sum of the bond. Evidence of cities and other bond owners being shielded from risk is evidenced by surety companies having paid nearly $9 billion due to contractor failure on bonded projects since 1992, and half of that was paid in the three years and before the crash of the housing market. Since then the amount paid dramatically increased. Even through the recent crash the Surety Industry provided protection.

I hope this helps everyone understand the process. My purpose in writing is to correct the information somebody else posted regarding the protection surety bonds provide.


Posted by: Gabriel King at Dec 9, 2013 3:25:50 PM

There are very few sidewalks that are not installed in Skyborne development. Pierson Boulevard has sidewalks between Karen Avenue to the main entrance fully complete. The top coat of asphalt that's missing is only on roads in the project where there are no homes built. Why is Betts making a mountain out of a molehill here? Grandstanding? From the Skyborne entrance to the east, where there are no homes built yet, there is a wall and sidewalks on Pierson are installed almost totally complete just short of Worsley Road except for a small section where there was going to be some kind of community building or something. They don't put in sidewalks when they know construction equipment would tear them up, they wait until after those are built....and then the housing market crashed and burned which changed everything. Russ Betts keeps misleading the public on this issue. He keeps saying "the entrance to the city looks bad because sidewalks are not installed" and "the city should have called in the bonds" and that "they are basically insurance policies" yet most sidewalks are complete and development bonds are not like insurance policies. Development bonds are backed by investors money, not money derived from premiums, thus development finance laws are at play here that regulate bonds, not insurance laws, they are completely different, and the courts would never have sided with the city had they pressed this matter as investors would have demanded their money back, stating to the courts the developer broke the contract with them. The city council majority at that time understood this and correctly renegotiated using a lien as a tool. The vote by Pye, Parks, Matas in this recent meeting was also the best thing to do. It's going to take another 18 months before investors will get involved in that project, at which time, a new bond can be created for the city, instead of the lien, and then when the houses are built, those small sections of unfinished items will be complete.

Posted by: Take a walk at Dec 6, 2013 10:51:44 AM

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