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

Hines: A Tale Of Two Cities.

HinesIt was the worst of times… period. We’re fighting a war on two fronts and threatened with losing both. On one side Breans are going head-to-head with Hines Properties, a megacorp hell bent on building a hulking monstrosity on St. College north of Birch. On the other we have a runaway Planning department who seems to consider themselves above the law, repeatedly overreaching their authority.

Neither situation bodes well for the people of Brea. The fact that both are connected makes the threat exponentially larger. As the policy and procedural issues can only be addressed by City Council I’ll leave that for another blog and focus on the development issues that need to be solved by the Planning Commission.

Reining in Hines.

At their April meeting, under the less than subtle steering of Chairman McGrade, the Planning Commission ended up desperately trying to patch one small element of the Brea Place project and calling it done.

Commissioner Schlotterbeck made the observation that the project fell short, by about 20%, of complying with our 14 year old General Plan’s maximum density guideline. Next thing you know the much larger southern building and the hotel were tucked aside, seemingly approved and focus was turned to the northern building… Building B.

In a miraculous demonstration of redesigning-on-the-fly, the Hines architect made most of the fourth floor disappear and reduced the building’s density by almost 20%. That’s 22 apartments for those who nitpick numbers. Commissioner Schlotterbeck was quick to point out that the disappearing act also removed parking for 38 units, throwing the building into noncompliance with the 1.78 spaces per unit parking requirement.

Maximum vs. minimum standards.

So, the push seems to be to stay within maximum allowed density while meeting a minimum parking standard. Ok, I’ll say what you’re thinking. What the hell? This is like getting open heart surgery done on a low bid basis.

Why do these city planners think the best policy is to always operate at the fringes of acceptability? Why is building as close as possible to the maximum allowable density the best idea? Why are parking conditions always targeting the fewest number of spaces that might accommodate the demand?

How about building comfortably below the maximum density and designing a parking plan that would actually meet peak demand? What a novel damned idea.

Speaking of minimum standards.

While we’re on the subject, it’s this same unsupportable mentality that led to adopting an addendum to a 14 year old General Plan EIR as the best way to comply with CEQA. Again, operating at the very fringe.

Going with the addendum is the weakest, least defensible means of minimizing or mitigating environmental impact. Hell, the addendum claims there isn’t sufficient environmental impact to warrant doing a new EIR. Circular logic. Inexcusable.

Once again staff dances on the edge of rational choices. Why? To cut public comment out of the conversation? To fast track the project and save Hines the $1.5 million cost of an EIR so staff could extort it later to help defray the cost of some politician’s pipe dream or rock garden?

Drawing a line in the sand.

HinesHey… Commissioners, Planners and Mr. Ninty-Five Billion Dollar Out-of-town Developer… we’re putting you on notice. Nothing less than a blanket 20% reduction in density across the entire project is acceptable. Nada. Nothing.

And that’s the starting line… not the finish line. We still need to talk traffic, parking, building mass and setbacks, in lieu fees and retail that won’t cannibalize local business.

You walked out of the April meeting fist bumping and trading high fives. Listen carefully, you never count your money when sitting’ at the table, there’ll be time enough for countin’ when the dealin’s done.

Markman & Flower

 

Poking Holes In Markman & Flower

Markman & FlowerOn April 13, the City Attorneys Markman & Flower released a memorandum attempting to refute some of the claims I have made on this blog.

What followed was eight pages of prickly language arguing against claims that were never made.

(1) that the City’s hiring of Kimley-Horn Associates was inconsistent with the legal requirements of CEQA. (2) that ICF proposed to prepare a subsequent or supplemental EIR to the 2003 General Plan EIR.

A cursory review of my previous blog will remind any careful reader that I did not make these claims, and I’m not sure why Markman & Flower think I did. I challenged the City’s hiring practices with regard to proposal and records retention processes as a whole, and ICF’s proposal explicitly stated that a subsequent/supplemental EIR or addendum were not the way to go to properly follow the CEQA process.

These facts didn’t stop Markman & Flower from furiously defending their irrelevant positions with disparaging language peppered with legal citations that did nothing to refute my original claims.

Markman & Flower’s opening statement, a blatant and unwarranted ad hominem attack against the character of those opposing the Hines project, underscores their complete failure with all allegations and arguments they made.

Further, Markman & Flower’s characterization of public comments and opinions regarding City Staff’s behavior as “spurious” and “reckless” are insulting, dismissive and unacceptable.

By continually saying things like “claims recently made on social media” they undertake to dehumanize us. We are real people after all, residents of this community who enjoy rights that allow for the free expression of our opinions.

We are not “social media.” We are taxpayers, citizens of Brea, and we do not appreciate any insinuation that our opinions are akin to “fake news.”

The eight pages of blustery, “Well, I never!” pearl-clutching arguments in the Markman & Flower memorandum are largely empty and don’t address the accusations we’ve made.

Markman & Flower may well have overstepped their authority by commenting outside establishing what they believe to be the legal standing of the city’s attempt to comply with CEQA. Their authority does not extend to commenting upon intent or purpose behind public comment, mine or from the general public. Jim… Stephen… if you feel compelled to publish snarky, baseless remarks like those in your memo to the City Manager… create a blog.

Memorandum misses the point.

Markman & Flower charge that we have made, “… unsupported claims… that the City Staffs decision to prepare an addendum to the 2003 General Plan Environmental Impact Report… violates the California Environmental Quality Act.

Obviously, Markman & Flower only skimmed “social media” and never read the (originally deleted, recently recovered) ICF proposal to reach this conclusion. It couldn’t be farther from the truth. I pointed out in my last blog post that while some things may be legal it does not follow that they are prudent.

Markman & FlowerICF’s proposal declared, “We understand that the City’s goal is to tier from the 2003 General Plan Final EIR and the 2005 Negative Declaration for the establishment of the Mixed-Use Zoning Districts to the extent feasible. However, the baseline conditions for the project-level analysis for the current environmental document will need to be existing conditions…, rather than the previously approved land use entitlements. Thus, we do not necessarily believe that tiering from these documents is the best option for CEQA compliance.” [emphasis added]

In what world does “not the best option for CEQA compliance” mean “violates CEQA” — it doesn’t. Markman & Flower, in their rush to discredit public opposition to the project and to fend off allegations of staff misconduct, seem to have accomplished neither.

Markman & Flower self destruct.

In response to Markman & Flower’s professionally myopic comment, “ICF is not a law firm equipped to offer legal opinions on CEQA.” I offer this, ICF employs legal staff well experienced in environmental law, and the proposal was developed and submitted by a principal with 22 years of experience in environmental consulting and CEQA documents.

The conclusions reached by ICF were provided at the request of City Staff. It is fair to assume that ICF was invited to submit their opinions because their expertise exceeded that available on City Staff.

If the City did not feel that ICF was equipped to offer legal opinions on CEQA, why was its proposal sought at all? Discarding ICF’s recommendations without first giving the Planning Commission an opportunity to offer their opinion is ludicrous.

Are Markman & Flower masters of disinformation?

Markman & Flower have little choice but to offer this to avoid any suggestion of treading upon our First Amendment rights, “Members of the public may rightly have strong opinions regarding the merits of the Project and are free to express those opinions through available means, including social media.” Then they immediately return to their ad hominem attack.

They next proffer, “Spurious [fraudulent for those without a thesaurus handy] claims of official misconduct are a different matter, however.” This assumes, without substantiation, that the public’s claims are fraudulent. Until proven otherwise, our claims remain protected speech.

Markman & Flower persist, offering another unconfirmed allegation, “There is no evidence to support claims of collusion or corruption by any City official and we can only conclude such claims are based on a fundamental misunderstanding of the law, bad faith, or both.

Evidence has been provided, in abundance. If Markman & Flower had invested a fraction of the time “we the people” have put into digging up the truth, they would have avoided these sort of bogus statements.

Further, the blog’s headline “Corruption’s Partner Is Our Own Indifference.” is the only use of the word corruption in the entire piece. It is obviously a reproof to readers not to become indifferent… a call to end apathy. Nowhere was staff accused of corruption.

Never poke a tiger with a short stick.

Markman & FlowerIn recent years the voting, taxpaying public has paid closer and closer attention to how their community was being run and by whom. As the process of reviewing and approving the Hines project progressed, irregularities became apparent. Unfortunately, all attempts to get to the bottom of what appeared to be dodgy business was thwarted at every turn.

Documents were deleted, information requests turned up little or nothing. The City Council and Planning Commissioners were kept in the dark right along with the rest of us. Contrary to the disparaging criticisms peppering Markman & Flower’s eight page memorandum, all observations pointed to staff’s performance as questionable.

This behavior could be corruption, an indication of collusion or simply reflect a systemic case of incompetence.

Now what?

I’ve shared enough by now to make it clear that I believe the Planning Commission and all concerned can round file, toss out, jettison, dump, ditch or deep-six Markman & Flower’s memorandum and get back to weighing the facts.

Fact: Records were improperly disposed of. Solution: Correct loopholes that allowed these documents to be deleted without proper oversight and beg ICF to send another copy of their proposal so the record can be restored.

Fact: Important documents have been withheld from the Planning Commission. Solution: Make sure the missing documents are included in their information packet for the April meeting.

Fact: Whether deliberately or accidentally, the Planning Department has not conducted a transparent process with the Brea Place project. Solution: Start over and invite the Planning Commission and the citizens of Brea into the process and the commenting and collaboration opportunities such a process presents.

Markman & Flower