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

Vargas Being Vargas… Gives Brea A Black Eye.

vargas_300Leave it to Steve Vargas to completely botch something as simple as initiating a personnel change.

Wednesday, September 28 started like any other day, then I received a simple text, “Condolences.”

When I responded, “Why?” a friend sent me a copy of a letter from Steve Vargas firing me from the Planning Commission.

By the end of the day I’d received calls or emails from dozens of well wishers, had two lengthy phone conversations with City Manager Bill Gallardo… but no “official” copy of the letter from Mr. Vargas which didn’t arrive until the next morning. So much for common courtesy.

markman_300_dThe next 48 hours were a blizzard of texts, phone calls and emails. The City Attorney, Jim Markman weighed in citing city code and taking the obligatory neutral position. Can’t blame him really, he has five bosses and one just put him in a most untenable position.

After the dust had settled, I sent a summary email to the City Manager, and felt Brea Matters readers deserved to get this side of the story.

To the City Manager…

Bill…

This is in response to your text message to me following your meetings with Jim Markman and Steve Vargas on Thursday afternoon.

In short, here is a synopsis for context. “After much discussion, Steve Vargas has, per the code, the ability to remove his appointment. He does not need a reason or cause… Tuesday night, on the [study session] agenda, Council will discuss the timeline to fill the unscheduled vacancy.”

Steve’s unilateral decision to dismiss me from the Planning Commission may be done without cause, however he chose to include a statement of cause in his notification letter. He thus opens the door to rebuttal.

There is not a word of truth in what he says are the reasons he’s firing me. None. No two year agreement. No failure to respond. No obligation to keep him informed. The notion that he is incapable of doing his job as member of Council without my input is ludicrous.

As I’ve expressed to you previously, in detail, many who’ve become aware of this sad and regrettable moment in Brea history, including current and former members of Council, Commissioners and Committee members, share a common opinion. My dismissal is nothing more than retribution.

Retribution for what?

  • For filing a complaint with the FPPC regarding the $25,000 donation to Steve’s campaign committee by Brea businessman Druva Hardas without filing the required “Major Donor” information.
  • For asking the Building Department [code enforcement] if the Vet’s Club was permitted for the construction in progress which, it turns out, they weren’t. The project was shut down and plans have yet to make it through plan check.
  • For asking the Planning Department if the Vet’s Club’s original entitlement for an ABC license, as a private club, is still valid. The Vet’s Club no longer owns the building. Use of the facilities (bar) has been opened up to a broader customer group than what was originally specified. I ask if the Vet’s Club should apply to the Planning Commission for a CUP to perpetuate the liquor license entitlement.
  • For publishing the preemptive guest blog on term limits, forcing the discussion into the public forum, by John Koos in Brea Matters.
  • For publishing the reaction to Steve’s unilateral attempt to put a draconian term limits initiative on the November ballot guest blog by Brea resident Christie Russell.

Pick one, pick them all. More than enough to trigger retaliation from an obviously tormented mind.

When we first spoke about all of this last Wednesday, when half of Brea had received a copy of the dismissal letter and I had not, I told you, “The GPS on my phone indicates that I am in the absolute center of I don’t give a damn.”

I haven’t moved. Unlike too many in public service, I am not defined by the titles I’ve held or the positions I’ve filled. I am pleased to have been able to give back to Brea in various capacities for over 15 years. I will continue to do so through my blog Brea Matters.

Brea First.

Rick Clark

A world of support.

gallardo_a_300Let me interject that I have received the most helpful and supportive treatment from Bill Gallardo, other members of Council and friends in the community.

This support is deeply appreciated when blindsided by an irresponsible person, hell bent on self destruction, with little regard for the community he was elected to serve.

Final thoughts on Mr. Vargas.

loose_canonWell, there you have it, a dark day for Brea. I could find no Commissioner or Committee member in the 99 year history of Brea that has received such callous treatment at the hands of a member of Council.

I’ve heard Vargas referred to as a “loose cannon” many times. A rather apt metaphor to be sure.

Once again Vargas proves how unworthy he is to hold the office of Council member. On a brighter note, he has single handedly guaranteed that he will be clean swept in 2018… here or wherever his ego puts him on the ballot.

If you, like me, have had just about enough of Mr. Vargas… please, for the love of Brea, do not vote for his surrogate Christopher Parkin for Council or his wingman Rick Rios for Treasurer. Thanks!

cannonballs