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Ontario-Montclair superintendent used a town house as a credit card and taxpayers paid the bill

Ontario-Montclair School District’s superintendent took out a line of credit against a town house the district helped him buy and racked up nearly $100,000 in new debt against the property before he persuaded the school board to pay off not only his mortgage but the credit as well, the Southern California News Group has learned.

After the board agreed, Superintendent James Hammond sold the Ontario town house for $389,000 in 2017 and kept the proceeds, but continued to collect housing payments, totaling $114,000, from the district over the next two years.

The district ended up giving Hammond $331,000 total for a property he had originally purchased for $235,000, according to public records.

Hammond initially answered certain questions about the home purchase, but has refused to address the line of credit in subsequent requests.

Originally, the Ontario-Montclair school board extended a 10-year, $100,000 loan to Hammond to incentivize the newly hired superintendent to live within the district’s boundaries.

Former Trustee Samuel Crowe, who was on the board when it negotiated the loan in 2011, said Ontario-Montclair had struggled with a prior superintendent whose commutes to and from the district created a disconnect. The board felt that having a superintendent invested in the community would pay dividends and, at least initially, it did, Crowe said.

“He indicated that he couldn’t afford to purchase a home in the district, so the board agreed to loan him $100,000,” Crowe said. “Everything after that shouldn’t have been done.”

The arrangement shifted more and more in Hammond’s favor over time, and the benefits the district received in return were quickly outweighed, Crowe said.

Board members not only forgave the initial loan and the accrued interest in eight years without a single payment from Hammond, they also agreed to pay the superintendent an extra $231,000 spread over four years, from 2015 to 2019, for the “purposes of paying down the principal” on the town house, according to Hammond’s contract. What wasn’t mentioned at the time, at least publicly, was that the principal had ballooned because of the line of credit.

Crowe, who stepped down from the board in 2018 partly over concerns about Hammond’s skyrocketing pay, cast the only dissenting vote against the amendment authorizing the principal payments and early loan forgiveness in 2015. In an interview, Crowe said he felt the board should not have forgiven the loan early and then extended the additional payments when Hammond already was making nearly $500,000 a year at that point.

“It was unnecessary, unrealistic and economically didn’t make any sense,” Crowe said.

Highest paid in state

Hammond was California’s highest paid superintendent in each of the past three years, with a total compensation that neared $700,000 in 2020. Though he no longer receives housing assistance, his perks today include 110 days of leave that he can cash out every year, lifetime health benefits and $130,000 in annual retirement contributions.

It’s unclear how Hammond was able to sell the property before the loan was officially forgiven in 2018. Records provided showed the district had a lien on the home starting in 2011.

Crowe said he didn’t learn that Hammond had sold the property until after the sale concluded, and when he did, it wasn’t directly from the superintendent. Under the terms, Hammond should have been asked to pay what he still owed on the loan — about $40,000 — from the proceeds, Crowe said.

“When he sold that house, if I were involved, the lien would have still been there and he would have had to pay back the unused portion,” he said.

Under terms of the loan, Hammond was required to notify the district before any sale, but the district did not have records that such  notification took place.

Board President Elvia Rivas, in an email, said she was “informed about the sale of Dr. Hammond’s first Ontario residence when he purchased his second Ontario residence.”

Property records indicate Hammond sold the town house a month before he purchased the second home.

Both Hammond and Rivas refused to explain the timing of the loan’s forgiveness or to address why the district paid $100,000 more than the original purchase price. It’s unclear if other board members were aware of the sale. OMSD’s four current board members either declined to answer specific questions, deferred to Rivas or did not respond.

The Ontario-Montclair School District in western San Bernardino County enrolls about 19,000 students in kindergarten through eighth grade across 32 elementary and middle schools. The median household income in the area was $65,046 as of 2019, according to the U.S. Census Bureau.

At a school board meeting Thursday, Nov. 18, Hammond was unapologetic about the pay and perks he receives.

“This isn’t the first time that articles have been written about my contracts, and it certainly won’t be the last time,” he said.

Ontario-Montclair school board Superintendent James Hammond listens to public comment during a school board meeting at Central Language Academy in Ontario on Thursday, Nov. 18. The OMSD superintendent was the highest paid K-12 school administrator in California for the last three years and regularly made more than $600,000 a year. (Contributing Photographer/John Valenzuela)

More and more loans

Property records and documents released by the district indicated the $100,000 difference in what the district paid versus the original sales price came in the form of a revolving line of credit that Hammond opened against the property after receiving the district’s loan, but prior persuading the board to pay off the remaining principal in 2015.

A home equity line of credit uses a lien against the home as collateral for advances to the homeowner. Like a mortgage, it must be paid off before someone can sell.

Typically, the balance on a home should decrease year to year as the owner makes payments. But in the case of the town house, it steadily grew, according to public records and interviews.

Hammond stated he used the district’s original loan in 2011 as a down payment. At the time, Ontario-Montclair’s lien on the property was subordinate to a single $138,885 mortgage from Sterling Bank, a promissory note showed.

Two years later, the board agreed to an amendment to the promissory note that reordered who would get paid first in the event of a default. The district’s loan was placed behind the Sterling Bank mortgage and a $46,000 home equity line of credit provided to Hammond by the Ontario-Montclair Employees Federal Credit Union.

A staff report at the time stated that the amendment would not create an additional cost and meeting minutes did not show any discussion.

Crowe said he vaguely recalled amending the promissory note and that he believed the line of credit may have been used for fixtures or furniture, but that he thought nothing of it at the time because it would have been Hammond’s personal responsibility to make the payments.

The remaining principal on the property increased to $231,702 by January 2016. The board used that figure to calculate the four years of payments, including the two that occurred after Hammond sold the town house.

Missing documents

School officials, including Hammond, seemingly failed to follow through on the terms of the arrangement at several points. The original loan agreement with Hammond in 2011 required an appraisal that the district was unable to provide when asked for it. The agreement also states that the original loan was contingent on approval from the San Bernardino County Office of Education, yet neither the district nor the county has written record of the approval.

Crowe said he believed the district called the Office of Education to ensure the loan was proper and received a verbal authorization.

County Superintendent Ted Alejandre declined to answer specific questions about the matter. His office provided a brief statement suggesting his office had no official role: “The authority to approve the terms and conditions of a district-level superintendent’s contract rests solely with a district’s respective governing board, which serves as the superintendent’s employer of record.”

‘Both parties met their obligations’

In separate emails, Hammond and Rivas said both sides held up their parts of the deal.

Rivas said it didn’t matter that Hammond collected additional money after the town house sold, because the board’s intent was for him to live in the district and that continued once he moved to his new residence.

“The particulars of his contract are clearly stated: If Dr. Hammond remained a resident of the district, over time the Board would contribute to his housing,” Rivas wrote. “Both parties met their obligations in this regard.”

The board was granting Hammond extra compensation for living in the district, not for living in a specific property, she said.

“The contract bound him to at least eight years,” she said. “He is now approaching his 12th year. The board’s contractual intent has been not just met, but exceeded.”

Hammond similarly stated he was in compliance with the terms, referred to as “Section 9.E.” in his contract, at all times.

“Both the language and the purpose of Section 9.E. was that I remain a home-owning resident within the district,” Hammond wrote in an earlier email. “9.E. had no purpose that was tied to any home in particular except that the home I resided in be in the district.”

While the agreement does state the payments were conditional upon Hammond “continuing to reside within the district,” it also states the payments were “for the purposes of paying down the principal” and references the “first and second deeds of trust,” both of which are legal documents tied to a specific property — in this case, the town house.

Crowe, the former board member, said the payments were “only for the town house.” “Anything else would have been totally different,” he said.

Hammond disagreed.

“I had a first and second mortgage on the first property when I sold it and when I purchased a new home in the district, I continued to have a first and second mortgage,” Hammond said in his email.

Hammond declined to respond to follow-up questions asking about the missing appraisal, the lack of county approval and the additional debt added to the property.

The superintendent did continue to live in the district, however. He purchased a 3,029-square-foot, four-bedroom home for $850,000 near Vista Grande Elementary School in September 2017, according to property records. He later transferred ownership of the property to JM&M Development Corp., a company registered to and solely owned by him.

Hammond described J&M Development as a “a private corporation that has never done any business with the District.”

Today, Zillow, the online real estate marketplace, values the new home at $1.12 million.

The Ontario-Montclair School District gave $331,000 to Superintendent James Hammond for him to purchase a $235,000 Ontario condominium. He later sold it for $389,000 and purchased this Ontario home, with a current value of over $1.1 million, according to Zillow.com, pictured here on Monday, Nov. 8, 2021. (Photo by Will Lester, Inland Valley Daily Bulletin/SCNG)

Language in contracts matters

Michael Fine is executive director of California’s Fiscal Crisis and Management Assistance Team, a state agency tasked with averting fiscal crises and promoting sound financial practices in K-14 education. County offices of education can request his agency’s assistance with investigations into potential financial irregularities.

Fine, who could not speak to the specifics of Hammond’s contract, said school boards and administrators must follow the language in their contracts, regardless of intention.

If the language doesn’t match the intent, then the board should revise the language through a public amendment, he said.

“If there is a contract and it has terms to it, it is important to follow those terms,” Fine said. “If the board did something different than the terms that were approved, then there is a serious question about transparency and integrity — and potentially a question about the misappropriation of public funds or the gift of public funds.”

Housing uncommon for superintendents

In an interview, Fine said housing assistance is not common for K-12 administrators. And even in higher education, where it is more likely, the university typically purchases the home as an asset and allows the administrator to live there.

“It’s generally a residence that is owned by the college or the university, so there is no opportunity for the president of the college or the superintendent of the college to profit from it,” he said. “It is the university that benefits from that, not the individual.”

Fine acknowledged it is critical to retain superintendents in public schools and said he had no qualms with a district paying a high price to do so. The average tenure in California is about two to three years, he said.

“The larger the district, generally speaking, the shorter the time,” he said. “That short tenure is one of the greatest risk factors for a school district. The constant change in the senior leadership is destructive.”

If community members are upset about high pay or excessive perks, then it is within their right to vote out the board members who made those decisions, he added.

But ultimately, a superintendent’s contract should be transparent and presented in a manner in which the general public can easily understand exactly how their tax dollars are being spent, he said. If a district intends to compensate its superintendent above and beyond, then it should increase his salary directly and overtly.

“Be straightforward in the contract, pay the salary you need to pay and don’t make this complicated,” he said.


Source: Orange County Register

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