A civil grand jury report issued Thursday faults Scot Spencer, the airport's developer, and Don Rogers, its executive director, for inadequately justifying the increase in cost and scope based on estimates of air travel headed to San Bernardino.
The report recommends the airport hire an auditor to examine $142.5 million in taxpayer money paid so far to contractor Spencer's companies for work on the terminal, the Million Air general aviation complex and a U.S. Customs building "to determine if the developer purposely inflated costs."
Among the concerns raised by the grand jury are decisions to increase the size and scope of a passenger terminal, the use of an auditing firm founded by the airport's executive director, and the potentially unnecessary purchase and repair of 11 jet bridges that are sitting idle.
Rogers said Friday that he expected to craft a detailed response in about 10 days to dispute what he called "erroneous" statements.
For example, Spencer's management agreement is for five years, not 25 as mentioned in the report, he said. He also disagreed with the report's implication that he purposely misled the board. "That simply didn't happen," he said.
The grand jury contracted auditing firm Harvey M. Rose Associates to prepare a performance audit of the airport and development authority. Stephen Foti, a principal with the firm, said they stand by the audit.
The report says the Inland Valley Development Agency and San Bernardino International Airport Authority -- made up of officials from San Bernardino County's East Valley to oversee the conversion of Norton Air Force Base into an airport and industrial park -- have ceded considerable power to Rogers, and should do more to reclaim oversight.
Spencer served several years in federal prison for bankruptcy fraud for his role with Braniff Airlines and was later banned from the aviation industry by the Department of Transportation after he operated an unlicensed charter airline at San Bernardino airport. Public records show two of his companies that have done business at the airport owe more than $680,000 in taxes.
Roiled by the accusations, but undeterred, elected officials that sit on the two agencies overseeing the airport said they will take a hard look at the airport's operations.
"I don't think there are people more disappointed than ourselves," said San Bernardino County Supervisor Josie Gonzales, chairwoman of the development agency and an airport authority member. "But it means we have to work even harder."
Slow to take Flight
Spencer's companies have earned $7.4 million since 2007 in fees and reimbursements to build the passenger terminal and general aviation facility, according to the report. Public records obtained last month by The Press-Enterprise showed the amount was $6.4 million.
The report contends that little effort was made to award the lucrative development contracts to anyone else, and that "in every instance" the contracts appeared to be given to Spencer after direct negotiations between just him and Rogers.
Under his agreement with the airport, Spencer earns 1.35 percent of the value of each construction contract to build the passenger terminal and 2 percent for each contract to build the general aviation facility.
The report said that one of Spencer's agreements dictated that San Bernardino would have had a passenger airline offering scheduled flights by June 22, 2008. And by Spencer's estimation, the airport would have been on its way to having 945,498 departing travelers by 2009.
By comparison, Bob Hope Airport had 2.29 million departing passengers in 2010, Long Beach Airport had 2.97 million and Palm Springs International Airport had 749,657. Ontario International Airport had 2.25 million departing passengers. The report implied that Spencer overestimated the airport's potential traffic in order to expand the scope of the airport construction -- and thus his development contracts.
Rogers said he had asked certain board members before the agreement was approved, " 'If Spencer's projections are wrong, do you still want to proceed with this level of airport?' And the answer was always yes." Nearly three years after flights were supposed to start at the airport, not a single airline has landed.
As the scope of the airport expanded, so did the cost, from an original estimate of $38 million just to renovate the terminal, to $142.5 million spent to date on the terminal and other projects.
San Bernardino Mayor Pat Morris, who is IVDA co-chairman and SBIAA president, defended the staff and board Friday afternoon and attributed the increased cost to the challenge of renovating a World War II-era structure.
"I think we've built a modern airport that will attract scheduled airline service for a price that is remarkably modest," Morris said.
When asked if $142.5 million is a modest price to be build an airport, Morris was emphatic. "Yes, we built a quality airport at a bargain price," he said.
The report also criticized officials for ordering 11 jet bridges, which link terminal gates to plane doors. A 2006 report, more than a year before Spencer was awarded the contract to develop the airport, found that no jet bridges were necessary.
Nonetheless, officials awarded Spencer a $4.2 million equipment contract, part of which went to repairing the jet bridges. The report suggested the airport could save $134,689 if it refused to pay for the 11th bridge, which is still under construction, and that it should stop paying Spencer for any more used aviation equipment. Rogers said the airport would buy the last jet bridge despite the report's suggestion.
"We wouldn't have bought 11 if we didn't need 11," he said, explaining that the airport has plans to expand from four gates to 10 when airline traffic demands it. The last jet bridge would be used at the U.S. Customs building.
Popular public project
Local officials have poured tens of millions of dollars into the airport, ranging from on-site improvements to widening nearby roads and encouraging development along key corridors to and from the airport in northeastern San Bernardino.
Federal money also has flowed to the airport, which is part of a larger effort to redevelop Norton after the base was closed in 1994, costing the area 10,000 jobs.
Rep. Jerry Lewis, R-Redlands, has steered federal dollars to the project, including $4.8 million in December 2009 for airport renovations.
"The bulk of the federal funding has gone toward the kind of improvements that had to be made to make Norton usable for any purpose," Lewis spokesman Jim Specht said in an email. "The largest expenditures -- for runway improvements -- were strongly endorsed by the (Federal Aviation Administration) without regard to whether the airport would host commercial flights."
Specht said Lewis would wait to comment on the grand jury's findings until after reading the report and conferring with local officials.
The grand jury report alleged that Rogers didn't always provide full or accurate information to the airport board. For example, it said Rogers received approval from the board for purchasing aviation equipment, but the terms of those deals changed and the board was never informed.
Another concern raised was that in 2007, a design firm put the total cost to renovate the terminal at $51 million before Rogers told the board it would cost $38 million. Since then, the terminal cost has exceeded $100 million. The report found fault with how those increases were justified to the airport authority.
"If I find out that I am being told one thing and staff has a different agenda, then there is going to be a problem," Gonzales said.
But so far, even without flights coming into the airport and millions more dollars spent than first expected, Gonzales said she still has confidence that Spencer and the airport's management are the right people to build the airport. "They better be, because if they are not, they need to go," she said.
(Kimberly Pierceall & Dug Begley - The Press-Enterprise)
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