CSD BOARD BLUNDERS IN COMMINGLING FUNDS
Community value in special Kiewit Pacific fund is expected to be diluted.
Posted: September 25, 2022
Newberry Springs Community Alliance
by Ted Stimpfel
CSD president Robert Springer is in denial based on his predisposed misunderstanding.
Redistribution of reserve account.
For 18 years, the Newberry CSD has been holding onto
funds that were acquired through a settlement in which a few residents
and the Newberry CSD had appealed a county mining permit for a construction
company called Kiewit Pacific.
The settlement funds have subsequently been referred
to as the Kiewit Pacific funds and have been held in a separate CSD
account. Now a commingling of the funds with public funds is proposed
during the CSD's monthly board meeting, Tuesday, September 27, 2022.
The settlement enabled each appellant in the action
to receive an equal portion of the settlement monies.
As the appellants had done the appeal for the
benefit of the community, it was agreed among the appellants that
they would allow the elected CSD directors to distribute THEIR funds
for the benefit of the community on matters that the CSD directors
could not spend their County allocated public tax funds on.
Based upon this agreement, rather than Kiewit
Pacific issuing settlement checks to each appellant, Kiewit Pacific
was instructed to write one check to the CSD directors who would
as a separate organizational body, outside the scope of their LAFCO
duties, distribute to the community.
Restated, the funds are to be held in a separate
account and not to be commingled into the CSD's general treasury as
the directors were directed to use the funds for special purposes
that the CSD could not use tax-generated funds on.
An elected body of officials, such as the county's
Board of Supervisors, routinely sit in seats of other administrative
bodies, and this is what the CSD board in 2004 agreed to do, outside
of their LAFCO duties. The funds were not tied to the CSD
(except for $20,000), but to the CSD's elected officials.
As the board was handling the bequest funds of
others, the board holds a fiduciary duty to properly administer the
funds which include the highest and best use of the funds.
The proposed CSD's commingling of the Kiewit Pacific funds (item #116) in the general Parks & Recreation account.
What is the Kiewit Pacific Trust Fund?
In 2004, in
settlement
of a clever Conditional Use Permit appeal (extortion plot) brought
by CEQA-NOW, the Newberry CSD, and community individuals against
Kiewit Pacific, the appellants acquired a legal settlement of about
one million dollars in benefits for Newberry Springs.
Included was $350,000 in cash.
$20,000 was dedicated upfront by the settlement for the local
fire department. The remainder was in road improvements
done by Kiewit Pacific.
At the time of the settlement, there were multiple
appellants. By agreement between CEQA-NOW, the CSD
directors, and various individuals, the CSD directors agreed
to manage the remaining funds as a conditional bequest on the
behalf of the appellants for the benefit of the community.
As the CSD directors were considered the best
representative entity to discharge the Kiewit Pacific funds, the
CSD directors accepted the duty in a trustee relationship.
The funds were to remain separate from the CSD's
functions. Except for the upfront $20,000 to the fire department, the
funds were not to be merged into the CSD's general fund which would have
restricted the fund's usage to only those current functions authorized under
LAFCO. Those
are the CSD's support of the fire department, parks and recreation,
and street lighting.
To assist the CSD in the discharge of the funds,
on November 19, 2004, the CSD held a community workshop where 21
ideas for using the funds were developed.
Thereafter, the CSD appointed Fred Stearn, Wes
Sperry, Wayne Snively, and John Olson, to do a communitywide
survey
via the mail and compile the results for guidance on how the
community funds should be used.
The 21 ideas from the
workshop were presented to the community to vote upon.
The response was low but provided a cross-section of the
community's desire.
It is important to note that most of the
CSD's suggestions in the survey have nothing to do with the CSD's
LAFCO-authorized functions. This clearly demonstrates
that the intent of the funds was not to be solely used for the
purposes under which the CSD is authorized. Comingling of
the settlement funds with the CSD's general fund is not something
that CEQA-NOW would have agreed to.
It should be further noted that the Newberry CSD
did very little in the appeal, rather it was CEQA-NOW and the
other appellants that originated and drove the appeal on behalf
of the community. It was felt that Kiewit Pacific's new
mining operation owed some benefits to Newberry Springs for
truck road wear and other considerations.
Instead of distributing the funds for the benefit
of the community, the CSD has sat on portions of the fund
for 18 years. With the rollover of new CSD directors and
the passing of time, there has evolved a mistaken belief that the
funds belonged to the CSD's general fund and can only be used
for the CSD's limited functions as authorized by LAFCO.
This misunderstanding has in recent years been
fueled by a letter sent by CSD president Robert Springer asking
an attorney for clarification on whether the funds were special
or a general fund.
The attorney responded the only way that he
could based upon Springer's letter that was highly misleading and
deficient in providing background information and documentation.
The attorney advised, based upon the information given to him, that
the funds were general treasury.
So, based upon this confusion and Springer's
unwillingness to consider another, Springer has been directing
the CSD down the wrong path.
Missing money?
Only three authorized expenditures
apparently have been made to distribute portions of the funds.
Two were to the fire department and one to the Senior Center. When
totaled and subtracted from the $350,000, it is reported that there
is money unaccounted for. The CSD may have mistakenly commingled
the missing funds with other CSD expenditures or the money was stolen.
Without a forensic audit covering 18 years, the question is unanswerable.
In the last report, only slightly over $139 thousand
remains in the trust fund. That appears to represent well over
$100 thousand missing from the trust!
The CSD directors accepted and have been handling
the Kiewit Pacific funds as a bequest with directives to its use.
This established a fiduciary trustee relationship. If there is
unaccountable money missing, the CSD is responsible.
Why does the reclassification matter?
(1) Breach of contract and breach of fiduciary
duty whereby the Newberry CSD can be held liable with punitive damages
possible! When money is given under a specified guideline, the
guideline must be followed.
(2) Commingling the funds into the CSD's general
treasury greatly limits the beneficial use of the funds. For
instance, although the CSD has no LAFCO powers to engage in community
economic development, the directors could use the funds as
contributing matching funds in a 1:5 or a 1:10 ratio economic development
grant. Commingling the funds removes this possibility.
(3) Or, let's say that the CSD would like to
build a nice arch structure over Route 66 proclaiming Newberry Springs as
the Gateway to the Mojave Trails National Monument or the Mojave National
Perserve. The CSD could not do it with its general funds, but it
could with the separated Kiewit Pacific funds.
The commingling proposal is a foolish mismanagement of
funds during a time of tight money. The funds should be used as
intended.
The ineffective fiddling Nero while Newberry suffers.
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