On March 11, 2020, I attended the morning session of the Town of Apple Valley v. Apple Valley Ranchos Water (CIVDS1600180), in front of Judge Alvarez in Department S-23 of the San Bernardino Justice Center.
The witness was Michael Busch, a purported expert in municipal finance and a member of the firm Urban Futures, which does a lot of bonding for cities, towns, and districts. The BB&K examination painted a rosy picture of Town finances, stating that the Town recovered well from the recession of 2008. The reserves and general fund are “trending” upward, despite policy decisions over the last 7-8 years to use reserves instead of reducing services to the public. According to Mr. Busch, that is an acceptable practice by cities.
As we all know, the TOAV reserves dwindled from over $9 million in 2012 to $1,771,000 at year-end 2018. The Town has not yet posted the year-ending 6/30/2019 numbers, perhaps because of trial, as Liberty has been looking for the final audit. At trial, the BB&K attorney tried to get the expert to testify to the 2019 numbers, based upon conversations with Town personnel. As this is hearsay, the judge did not allow it.
The overall theme of the expert’s testimony seemed to be that past practices of the Town did not matter because there was a new administration working under a new town manager and that the Town had $51 million in investments and cash liquidity. He testified that the Town can handle a water enterprise in the future. He also stated that the current enterprise funds are debt-free (of course, they have no assets — electricity is a contract, Burrtec bears all the costs of solid waste — but he sure was not talking about the class action in solid waste or the sewer-rate-raising debacle …) and that the decision to subsidize the golf course is discretionary with the council, presumably because the “public wants it.” He acknowledged that the golf course has been subsidized to the tune of $3.6 million.
Mr. Busch stated that the Town does not bear the cost of “San Bernardino County Fire” or any resulting pension obligation (I guess he does not know about the Apple Valley Fire Protection District); and that the Town does not pay Sheriff pensions (he spelled Sheriff as “Sherriff” in his report) and can reduce services if it is too expensive. Wow, I doubt he ever saw the Town’s contract with the Sheriff, which spells out the necessary number of deputies for purposes of safety, as well as the fact that the salaries the Town pays include the pension contributions.
The credibility grade for this guy had to be an F minus. Why? It appears he ignored past information and practices and had incomplete information upon which to base an opinion. His entire opinion was based upon “trends” and speculation of future town action! Maybe his glowing testimony was based upon a future promise of a contract with Urban Futures?
The postscript from other trial observers is that in the afternoon session the cross-examination was “devastating,” and that the “expert” testimony about the Town’s finances was completely discredited. Most significantly, Mr. Busch stated the town reserves increased by $500k from 2017 to 2018, when the numbers shown to him demonstrated that the Town reserves dropped five million dollars between 2016 and 2018, the very period the expert previously stated experienced an “upward trend.”
Attorney at Law