Birch Hills Golf Course, An Independent Legal Review.

Thankfully, for all of us, Dwight Manley sent a copy of the massive set of documents accompanying the October 1st item to accept title of the BHGC (Brea Hills Golf Course) to his attorney for review.

Richard Montevideo is the Chair of Rutan & Tucker, LLP’s Environmental Law Practice Group since 1992.

The review that follows was provided by him and shared with members of Council and the City Manager prior to last Tuesday’s circus of a Council meeting.

 

 

Property Transfer Document Review

There is a lot to unpack with these documents, but from my initial review of the Settlement Agreement, the AS IS Indemnity Agreement, the Guarantee, the Consolidated Area Easement Agreement and the Environmental CC&Rs, I have the following big picture comments from the perspective of protecting the City’s interest:

  1. For both legal and practical/business reasons, the City should clearly be preparing a formal Phase I Environmental Assessment Report on the Property before taking title to the same. The Phase I Report would provide some legal protection to the City from future enforcement action, and equally important, would consolidate all in one report, a description of the history operations that led to the contamination, a description of the type, levels and media of contamination, the remedial work that was conducted, the residual contamination that remains, and the risks posed by the residual contamination that remains.
  2. For all contamination on the Property, except for essentially contamination caused by Union Oil and that exceeds an existing cleanup standard, the City is indemnifying the seller, including Union Oil. As such, unless this provision is changed, the City should do everything it can to make sure it fully understands the nature and extent of the contamination, meaning conducting a Phase I Report and further evaluating the risks associated with the existing contamination for onsite workers and guests/invitees.
  3. The contaminants of concern at the Property, i.e., PCBs, dioxins, furans, arsenic among others, especially the dioxins, are significant carcinogens and thus the City should have the resulting risks associated with the residual contamination evaluated by a qualified environmental consultant, and presumably a toxicologist/risk assessor. If there is a problem in the future and someone is hurt or claims they are hurt from the contamination, it would be a PR problem for the City, in addition to being a significant legal problem.
  4. Pursuant to H&S code section 25359.7, the seller of the property is required to provide written notice of the existence or potential existence of all hazardous substances it knows or believes exists on the property to the buyer. In this case, I see no evidence of any due diligence disclosures that have been made to the City. Such due diligence reports/disclosures would provide a beginning point for the City to hire an environmental consultant to conduct a Phase I Report.
  5. The protections provided to the City under the various agreements are weak.   Essentially, the City is providing a full release of any all claims under Civil Code 1542, except for among other items, contamination caused by Union Oil that is above current regulatory agency action levels. Thus, if the cleanup standards change in the future, the City is on the hook for addressing the contamination. And in fact, DTSC is currently reviewing and will soon be issuing new guidance/policy on vapor intrusion standards, which may or may not impact the Property, depending on the nature of any volatile organic compounds on the site and their location.
  6. If a problem arises in the future resulting from existing contamination found to exceed existing cleanup standards (which is the only scenario requiring additional work by Union Oil), even then there is no direct remediation covenant that extends to the City. Instead, the City only has a general indemnity to rely upon and will need to show it has suffered some Loss before the general indemnity will kick in. in short, if there is some existing contamination exceeding existing/current cleanup standards, the City will not be able to require Union Oil to clean up the contamination. Normally, in a situation like this, you would negotiate a Remediation Covenant in the Agreement triggering an automatic cleanup obligation.
  7. Stormwater runoff, including dry weather runoff, is a significant issue in California, and golf courses can be big offenders of runoff limits, especially for nitrates, fertilizers, pesticides, etc. From the documentation provided, it is unclear whether the City has hired anyone to evaluate the stormwater runoff compliance issues, but it is clear that the City will be accepting this obligation.
  8. A certain quantity of contamination was buried within the Consolidated area, which then has resulted in a recorded set of Environmental CC&R imposed on this property. The City should make sure that its current and future use of the Consolidated area will not violate these restrictions. This is where again a Phase I Report would be helpful/important.
  9. The AS IS/Indemnity Agreement the City is committing to arbitration and waiving its right to a jury trial.
  10. The “Guarantee” provided by Union Oil is NOT a separate indemnity, but nothing more than Union Oil guarantying the very limited indemnity provided in the AS IS Indemnity agreement.
  11. The Guarantee agreement contains a Confidentiality clause which is unenforceable or otherwise irrelevant in this context when it is being provided for the benefit of a public agency. Either way, it looks bad from the City’s perspective and makes no sense.

I do not know the business/financial benefits of the transaction from the City’s perspective, but from a pure legal and environmental risk perspective, there are a number of issues that the City should take a second look at.

Also note, that the above are the larger issues with the agreements as written, but there are many more. The agreements appear to me to be seller oriented.

A “Reasonable Person” Responds.

I’ve made no attempt to distill Mr. Montevideo’s observations into lay language. As lawyers are apt to say, these remarks are understandable by “any reasonable person” – no reason for me to butt in.

I’ll close by simply saying this, all concerned… Council, Staff, “we the people”, have only a fraction of the facts and information needed to make a prudent decision in this matter.

By failing to admit their error, by not putting on the brakes to give much closer scrutiny to the details and implications of a decision this huge… Council fails us miserably.

Matters From Don Parker.

Last Tuesday, at Matters From The Audience, Brea Deputy City Treasurer Don Parker dropped a bombshell on Council and staff. There seems to have been yet another case of “less than best practices” on the part of staff and there could be a cost to approaching a million bucks.

Emerging from a nine year series of amendments (six actually) to a professional services agreement with Ninyo & Moore for their work on the Rails-To-Trails project that increased their cost from $24,500 to $1,034,777.30 – 42.3X the original estimate.

Don’s Report To Council.

I said I would review the contracting done when the City auditors questioned costs and I am here to comment on that. As background, the contracting for soil testing and services on the Tracks project was questioned because the file(s) “could not be located” but I looked at the contracting.

In 2010, an agreement was approved with Converse Consultants for a soil remediation plan. The report indicated their bid was $46,100 and the high bid of Ninyo & Moore was $55,200. A consent item approved their contract for $55,200. No I have not misspoken, the low bidder was given the high bid price with no explanation as to why. In my 40 plus years of municipal auditing and accounting I have never seen this done and no one questioned it. What was done with this difference is unknown.

(Burying items like this on the Consent Calendar has become de rigueur for city business whenever they prefer to keep the public in the dark. More on this later.)

In 2012, Ninyo & Moore, prior high bid, proposed $19,500 for a soil remediation plan and a contract was prepared for $24,500. Again I have not misspoken as this was $5,000 more than their proposal with no explanation. Since this was under $25,000 “policy limit” our prior City Manager approved it. Where that $5,000 went is unknown.

(Hot button number two – City Manager purchasing authority. Are you serious? It was purported to be $25,000 back then (2012 and prior) but no one could establish when or even if this was approved by Council!

Today the rumor has doubled to $50,000, with no indication as to how many times a year the City Manager can exercise this authority. I’ve filed a CPRA request to document details of this. We’ll see what the City Clerk can dig up.)

In 2013 through 2015, the first through third amendments were done and approved on consent for $200,000, $70,000 and $40,000, respectively. Supposedly because original estimates of soil depth, etc. were in error.

(Note: As a part of soil remediation work, a separate contractor is required to provide oversight to ensure that the cleanup meets the standards of both the City and the local regulatory agency, which is the Orange County Health Care Agency.

So, this exponentially escalating cost is only part of the expense. This is for analysis and oversight. Another contractor had to dig up the arsenic laced soil and properly dispose of it. When I mentioned this to a friend they chuckled, “Maybe ‘the roads are paved with gold’ didn’t come from Dick Whittington and his Cat after all.”)

In 2016, the fourth amendment was approved on consent for $60,700 again for additional soil testing services. However, now in the staff report it was stated that Council approved the original agreement with Ninyo & Moore in 2012. As I have indicated, and as confirmed by your City Clerk, the original agreement in 2012 was never approved by Council. This misinformation started after our current City Manager took his position and I believe this was added to justify using this vendor

In 2017, the fifth and sixth amendments were approved by consent for $218,144.30 and $421,433, respectively for segments 2, 3 and 4 of the project. Each of these segments should have been bid separately. Instead, they were just given to the existing firm. Repeatedly in these staff reports it was stated that Council approved the 2012 original agreement which was a lie.

(Not unlike the lie that the Paramedic Tax was for the sole purpose of developing and maintaining a mobile intensive care paramedic service. Now we know it was just another honey pot. Anyone but me starting to see a pattern here?)

In summary, we have contracts awarded for amounts in excess of the proposals received with no explanations of why or where those monies went. A contract which started at $24,500, approved by our prior City Manager, which was increased to $1,034,777.30 with no additional bids to protect the public’s money. Staff reports repeatedly misled readers into thinking the original agreement was Council approved but it never was. Community Development staff, management and our prior and current City Managers cut corners, prepared false staff reports and possibly enriched themselves or others to the detriment of our City.

Our auditors did not comment on these situations so we are lucky they did not follow through. However, it is possible we still could have to repay these monies. In any event these situations occurred and they do time and time again. When is Council going to say enough is enough and start holding City management accountable and protecting our monies? I guess just approving false staff reports is easier.

D.P.

So, where do we go with this? How about starting to hold Council accountable to do what we elected them to do. I think the popular term today is ‘community driven governance’ – something I’ve been advocating for many years.

So, What Have We Learned?

We’ve learned that our Records Retention Schedule allows critical records and important public documents to be routinely dumped every 90 days. Stuck in the sixties, the City Clerk has no control over electronic communications… the IT department has their servers set on auto-purge.

We’ve learned that a deceptive plan to do an end run around Prop 13 gave us the Paramedic Tax. Millions of dollars, almost half of what has been collected since 1978, has been diverted to pay for development debt and other obligations not even remotely related to the paramedic services Brea voters believed they were creating.

We’ve learned that, for decades, the Consent Calendar has been used as a bureaucratic black hole to hide everything Council and staff wanted to keep from public view. Thankfully, in recent years, several Breans have become quite talented at spotting the big fat checks disguised as routine expenses.

We’ve learned that the City Manager has a huge treasure chest he can dip into at will without Council’s knowledge, oversight or approval… and we’re about to find out if it’s even legal.

We discovered that our appointed Cal Domestic Board Members unanimously approved combined stipends from Cal Domestic and their for profit subsidiary Cadway totaling a potential $24,000 a year income. That’s 3 or 4 times Council’s base stipend.

Council has been requested to require these public servants to file the annual CA Form 700 Statement of Economic Interests and Council is balking. Unless they call a special meeting, which they won’t, they’ll miss the deadline and face a formal complaint being filed with the FPPC.