Stop the Land Transactions?
From the September issue of Encinitas Views:
Q. Why do some in the public think there should be a moratorium on real estate transactions until a new council is elected?
A. The short answer is a list. The Mossy car dealership purchase, the Saxony land swap, the La Costa open space, the Seeman & Lone Jack vacant land and, unfortunately, the Hall Property. If the city were our real estate agent we would have fired them long ago. We repeatedly overpaid for land and failed to do adequate investigations of the land before completing the transaction. The squander will haunt our budgets for years.
Q. The council is proud of the Mossy dealership purchase. They say it solves a major problem for the city. Why is that on the list?
A. Yes, it solves a couple problems. First, it gives us a place to put a permanent public works yard and the Mossy site is turnkey. They had demolished the old public works site without locking in a replacement. They had cornered themselves. Second, it takes the Saxony land swap off the table. Against great public opposition, the council had decided that the Ecke’s Saxony property was where the public works yard should go even though the site hadn’t been considered as part of the original public search. Once the UT reported that the city was well on the way to giving Ecke $6 million worth of city land in exchange for some of Ecke’s agricultural land that was only worth $700,000 the public came unglued. This should have been troubling for Council Member Dalager because he had publicly declared the land swap to be a “no brainer.” The Mossy purchase helps to bury that plan.
The problem with the Mossy purchase was at $9.5 million the city flat out paid too much for the property. The city’s own appraisal says the fee simple market value was $8.5 million dollars and that value is dubious given information within the same appraisal. We paid at least one million dollars too much. Probably three. We should have been able to get a spectacular deal. At the meeting announcing the purchase, Dalager went on and on about how Mossy admitted that this was their only dealership location to flounder and that Mossy had tried but couldn’t find another buyer. Ironically, Dalager, who is a lawnmower repairman by trade, thought that he had out-negotiated one of our country’s most successful car dealers.
Q. You say the Mossy site was turnkey but didn’t the council just vote to spend half a million dollars on converting the dealership to a public works yard?
A. That expenditure wasn’t discussed at the meeting they announced the Mossy purchase. We should give the council a break here, no one could expect any site to be perfectly set up for our needs, but… that fits their pattern of behavior, you know, commit to a big project without first acknowledging and adequately planning for the entire thing.
Q. Your list of transactions includes the sale of surplus land. Were mistakes made on sales too?
A. The best way to describe it is to say that no one would ever sell their personal property the way the city did. Because the council needed to inject cash into their budget the city sold off land in Olivenhain and an ocean view lot in Encinitas. (The Olivenhain site could have been a nice park or fire station.) This was in 2004. The real estate market was red hot and the method of marketing the property certainly should have been questioned long before the close of bidding. Only one bid was received and few people inquired.
The city put up signs on the property for a short time and put a dinky little notice in the UT. That’s it. Few potential buyers were aware of the offering. The single bidder was a neighbor of the ocean view lot. He had bid the minimum bid identified in the notice. After discovering he was the only bidder, he notified the council that he was changing his offer to 90K less than he had originally offered. The council accepted the new offer after the city’s appraiser conveniently reduced the appraised value, which was below the publicly noticed minimum bid.
They should have never renegotiated. They should have never accepted anything under the minimum bid. They should have marketed the property so that a large pool of potential buyers were aware. This was quality property and there were a lot of speculators looking to sink big money into Encinitas property at that time. It was a frenzy.
Q. Was the La Costa Avenue open space property quality property?
A. From a development standpoint that property was useless. For some reason we paid top dollar for those 17 acres, $1.4 million in 2002. The owner of the property bought the site in 1998 for $260K and public records show that he attempted to put a single home on the site. The property is super steep bluffs with one flat area at the base of a ravine. The property was unstable and would require a mammoth engineering effort to build on. That’s the site that slid out onto La Costa Avenue in the big rains two years ago. (Public records show that city engineers knew the site’s stability needed to be addressed even before the city bought the property, which was made worse when the city permitted the developer to clear much of the site’s vegetation. Nothing was done until after the landslide happened. In 2005, the city estimated that half a million dollars worth of work went into stabilizing the site.)
The seller’s politically connected real estate agent had been marketing the property as a development mitigation site. Basically, the site wasn’t developable. That means three things: 1) it was going to be open space before the city purchased it, 2) the developer should be happy when the site finally slid across La Costa Avenue that he didn’t own it anymore, and 3) you would expect that the property would be worth less than the $260k he bought it for (after adjustment for inflation). The city got duped.
Oh, oh wait. Even if the site was buildable, the development would have had to meet the general plan’s open space provisions because of the site’s steep slopes. By the site’s well know development restrictions much of it would have been open space. The whole thing wasn’t a very efficient use of open space purchasing funds.
Q. The Hall property is the pride of the council and its development is the reason some council members want to be on the council. How can that be on the list?
A. The potential of the Hall Property absorbs the hopes of the entire city. It would be great to see it become our crown jewel. Unfortunately, we paid too much for the property. Had we paid a reasonable amount we would have more money available today to
put into building park infrastructure. Instead, the council is in a position where they are taking on massive debt to help pay for projects thoughout the city. We certainly didn’t get the Hall property at a price that reflected the lack of access to the site or the uncertainty of the property’s level of contamination.
The Hall property held greenhouses for decades and in the early years many nasty pesticides were used there. Some people think the city purposely broke the California Environmental Quality Act in an effort to hide the contamination. That violation was the subject of a lawsuit the city lost in 2004, which forced the city to do an adequate study of the site.This should have already been done. It should have been done before we closed escrow and bought the property. You should read the judge’s ruling. It isn’t a pretty portrait of our city’s administration. We won’t know if we bought a park site or useless toxic site until the city releases that environmental impact report. The EIR was due out in July 2006.