Gateway Center: Kiss Your Assets Goodbye.

In October 1991 the Gateway Center at Brea Blvd. and Imperial was launched as one of Brea’s first RDA projects. On March 7, 2017 the City Council, acting as the Successor Agency, terminated 100% of the city’s interests in the center in exchange for a check in the amount of $7.8 million dollars.

But wait… there’s more. Brea had to pass this revenue on to the Orange County Auditor-Controller to pay off all taxing entities (other agencies having a right to a portion of the proceeds). The City netted only $1.2 million. I’ll explain later where it went.

Not such a good deal.

In simple terms, staff provided Council with their recommendations, backed by just a 5 page Memorandum by Keyser-Marston, extolling what a great deal this was.

Since 2012 we’ve received an average of $354K annually from rental income (subject to the same pay off to all taxing entities). This one time payout would generate around 3.5 years income.

Instead, why didn’t we opt to continue collecting annual rent? Our participation agreement ran another 30 years… until 2048. Rents would have more than doubled by then but Keyser-Marston left that out.

What staff and Keyser-Marston also failed to disclose to Council was that we had a 25% equity stake in the Gateway Center. It would be triggered by either a refinancing or a sale (full or partial) of the property.

In 2005 Watt-Craig Associates Limited Partnership, per the timeline provided by staff, “sold majority stake in ownership to AFL-CIO Building Investment Trust (AFL-CIO) but continues to retain a small portion of the partnership interest.”

Staff’s claim, when pressed on the matter, is that only a 100% sale would trigger a payout to the city. Watt-Craig retained a 1% stake in Gateway. Who was the rocket scientist that thought this was okay and that we should walk away from around $16.2 million?

Conservatively, the Gateway Center is worth about $80 million… you do the math. Termination of the city’s interest robbed us of $20 million if the property sold today.

Who knows how much our equity would be worth if we simply let it ride?

You can fool some of the people…

Did no one on Council see these red flags? No, because they assumed staff had provided the full scoop. The deception of Council was anchored in their belief that the property owner, Watt-Craig Associates LP, had opened the discussion of a termination agreement.

Not so, even though the staff report, the Keyser-Marston memorandum, the fancy always to be trusted PowerPoint presentation and the Successor Agency Resolution SA 2017-02 all stated otherwise, “The Owner is proposing the buyout of the Successor Agency’s interest…”

It was disclosed, early last week, that this process was initiated by our Director of Development, David Crabtree, presumably at the suggestion of City Manager Bill Gallardo. It was also disclosed that protracted negotiations followed which lead to staff’s recommendations.

From where I sit, this smacks of premeditation and reinforces the notion that this was all fabricated to generate the revenue needed to balance an otherwise upside-down budget (see below).

I’ve made a series of thorough CPRA requests for all communications and documents relating to the termination of our participation in the Gateway Center project. The City’s initial response last week overlooked numerous responsive documents and the City Clerk, Lillian Harris-Neal, has promised to provide them as quickly as she can.

gatewayFollow the money.

You can’t. As is the custom, the revenue was dumped into the General fund where it vanished into thin air. Well, sort of.

It had been determined that the FY2016-17 budget, thanks to declining sales tax revenue, was coming up short somewhere between $800K and $1M – an alarming dilemma for a city that had “always” balanced it’s budget.

Subsequently, unanticipated revenue miraculously offset the shortfall and… voila, the budget was balanced after all. I can’t help but wonder how many preceding “balanced” budgets benefitted from similar fiscal skullduggery.

A couple more scary thoughts.

Not one of Brea’s commissions or committees has a resident member with expertise in commercial real estate or the taxing authorities.

Staff has been careful to keep City Treasurer Rios, Planning Commissioners McGrade and Ullrich (both with deep experience in commercial real estate and the taxing authorities) as much in the dark as they have Council.

We own Embassy Suites and lease land. Staff is contemplating to sell off another “legacy “ asset!

Where does this leave us today?

In deep shite. We have a new budget about to be proposed in the face of continued revenue decline.

Cuts have been made, without clear validation as to how and where considering that the city’s “soft cost” approach to accounting fails to consider labor as a cost.

Many fees have been increased thanks to the city’s ability to calculate labor and overhead down to an hourly rate.

Hang on… am I the only one who sees the contradiction? The city needs to convert to a true cost accounting system and to stop trying to solve the reduced income situation by handing is off to taxpayers to pony up even more.

Time to put on the brakes!

A FY2018-19 operating budget would go into effect in about 47 days. I’ve seen no report from that new fancy special strategic budget oversight committee.

The City Treasurer, Rick Rios, who has leveraged California statutes governing the authority and scope of responsibilities of an elected City Treasurer to reconstitute the office’s role as fiscal watchdog, has yet to see a single page of a proposed budget.

It’s time to put a halt to City Staff’s Ready-Fire-Aim approach to managing city business.

I suggest that Council approves a 30 day emergency stay by employing the proposed operating budget for the month of June only.

This breathing room will allow for Council to give staff more finite instruction, for the Budget Oversight Committee to actually do some oversight and give the City Treasurer the time and opportunity to do the job we elected him to do.

rock the boat

Election 2016.

Election 2016Election 2016 is the year that ugly came out. For a city to become so divided, so uncivil, so unwilling to rationally approach the facts when the future of several generations is at stake is unconscionable. I have to own my share of that, a shamefully large number of my friends and neighbors do too.

I needed to say that. No one is off the hook… no one. Some, from both sides, crossed lines that ought never be crossed. Shame on you. You’re insensitive halfwits with no concern for any point of view but that Bizarro world you live in.

Here’s a thought for you… when a tree falls in the forest, it does of course, make a sound… because, you need to realize, it is not all about you.

My position on Measure K has been pretty clear – No. Measure L deserves mention as well, reduce school board from 7 to 5 members – Yes.

Moving on now…

Election 2016Having kicked this around with friends and after harassing Marty for over a year, I decided to vote for Marty SImonoff for an unprecedented sixth term. For many reasons, volatility in local politics, economics, development and population, we need a strong rudder on the ship of state. I believe Marty, along with support from Glenn Parker, thanks to their history and wisdom, give us that trustworthy guidance.

Election 2016Four years ago Christine Marick and I found ourselves more at odds than not. Like many, I felt the dysfunction poisoning Council and staff either sucked Christine into it’s vortex or was too loud for her to shout over. Regardless, Clean Sweep cleared her way to become a strong, well seasoned member of Council. Watching her rise to the challenges earned Mayor Christine Marick my vote.

Election 2016Winning a seat on Council again in 2014, Glenn Parker created an opening for City Treasurer. By Council appointment, this was filled for many months by Bill Christensen who resigned for personal reasons a few months ago. Again Council made a very short term appointment of Rick Rios to complete the term.

Rick decided to run for the office challenged by Planning Commissioner George Ullrich. Having a history of sorts with both, having looked their credentials over very closely and sensing what I believe their motivations to be… my confident vote is for George Ullrich.

Election 2016In my blog back on October 6th, “Measure K: The Pros & Cons” I expressed my support for Jason Kraft and Paul Ruiz for the BOUSD Board of Directors. Their campaigning since clearly shows they have a better grasp of what faces Brea schools today and how best to address the academic, infrastructure and financial challenges that threaten the district than any incumbent seeking another term.

Election 2016The only thing thats changed is that I have also decided to vote for Joseph Covey to fill the third slot. Joseph and I share opposing views on Measure K but he has demonstrated a much better grasp of the district’s priority issues and is better prepared than any incumbent to be a problem solver.

Election 2016: Closing thought.

As Dennis Miller says, “That’s my opinion and I’m sticking to it.”

I’m not suggesting you adopt my choices but that you invest the time and energy needed to make a considered vote as well.

 

2016 Election Likely To Set Voter Records.

The 2016 election has evolved into the most contentious and, in many ways, inexplicable political seasons I can remember. It has divided families, lifelong friends, partisan constituents in almost violent ways and likely without hope of reconciliation.

It would be political suicide for me to wade in on any level other than local… Brea First… Brea Matters. We have more on our plate in 2016 than in recent years and a larger voter population tasked with deciding Brea’s future.

2016 Election: Why vote?

2016 ElectionSadly I hear too many people voicing opinions on candidates and issues that are little more than last night’s talking points from campaign surrogates… none of whom has had an original thought since the primary season began.

Sorry, that isn’t good enough.

Cooping the opinions of others, mostly because it’s easier than doing the work or because it creates an illusion of considered thought, is doing a total injustice to the value and purpose of our right to vote.

In the 2016 election, if you want your vote to mean anything… if you want it to honor those who have been wounded or died to preserve that right, then you need to devote the time and energy necessary to fill out your ballot by being informed rather than merely opinionated.

2016 Election: City Council.

2016 ElectionWith two incumbents, Marick and Simonoff, and a relative newcomer Christopher Parkin on the ballot, it will be interesting to see what issues emerge and how they’re addressed.

Parkin, you’ll remember, ran an almost invisible campaign for Council in 2012. Marick and Simonoff, separated by 250 votes, were just shy of hitting 9,000 votes each. Parkin was lucky to get 1,715.

Marick and Simonoff have been actively campaigning since well before the Country Fair, Parkin put in his papers at the last possible moment and is rumored to be the surrogate candidate of Council member Vargas.

Having fumbled his solo attempt to get term limits on the 2016 election ballot, running/supporting opposition to the incumbents seems a likely fallback strategy. While still only a rumor, the speculation is widespread and not without feasibility.

2016 Election: City Treasurer.

2016 ElectionGlenn Parker’s return to Council following two and a half terms as City Treasurer, led to the appointment of Bill Christensen as Parker’s replacement. For reasons never quite clear, Christensen resigned the position and Ric Rios was appointed to finish the final 90 days.

Both Rios, oddly enough running as the “incumbent” and George Ullrich, currently on the Planning Commission, seek to be the next duly elected City Treasurer.

Both have history serving in various capacities in town but Ullrich has a distinct advantage in terms of finance, investment and accounting experience. This will likely be the more interesting race for city office.

2016 Election: School Board.

2016 ElectionIncumbents Lyons, Todd and Hobby are running against Paul Ruiz, Jason Kraft and Joseph Covey. The two ballot initiatives will likely have a strong influence on who emerges victorious.

Measure K, the hotly contested $148 million dollar 2016 school bond initiative, has a steep uphill battle ahead of it. Measure K lacks detailed explanation of how the money might be spent or how this expense would contribute to raising the quality of education.

Measure L, which would reduce board membership from 7 to 5 members, seems to have universal appeal to voters and would serve to provide a boost to the “clean sweep” movement hoping to reboot the board with as many new members as possible.

On your mark, get set…

Start putting in the time and energy to become more informed than opinionated.