Redevelopment oversight board puts on a slugfest

Fresno City Hall hosted all sorts of meetings on Thursday. I was at the best one – the Oversight Board. A dozen thoughts on the slugfest:

1.) The main task before the seven-member board was passing judgment on the proposed sale of 19 properties owned by the former Redevelopment Agency (RDA).

I’m sure you remember how the Oversight Board was born. Governor Jerry Brown some five years ago killed all of the state’s RDAs. He had a budget mess to fix. He wanted the slice of property taxes that RDAs had long used to clear blight and build affordable housing.

Killing RDAs, at least the one in Fresno, is proving as tough as killing a zombie.

Our Oversight Board is charged with making sure City Hall buries the Fresno RDA in a proper manner. That means keeping a sharp eye on the money. Other agencies, such as Fresno County and certain special districts, stand to get money from the dissolution of the RDA. So does City Hall.

You get the picture: The RDA (a city entity) owned land; the city must sell the land; the money from the sales is distributed to the appropriate public agencies; the Oversight Board (an advisory entity) gets to vote “thumb’s up” or “thumb’s down” on each proposed sale.

In the end, the state Department of Finance wields the biggest decision-making stick.

What did the Board do with the 19 proposed deals? Five were approved, one was dismissed as irrelevant and 13 were kicked back to staff for more work.

By this time, you’re saying to me: Why read your remaining 11 thoughts, Hostetter?

We’re talking about millions of taxpayer dollars when all these real estate deals are done. And there are two Board members – Fresno County Supervisor Debbie Poochigian, former Supervisor Doug Vagim – who worry City Hall is tempted to make sweetheart deals with favored developers.

2.) The meeting was held in City Hall’s Media Room, on the second floor. It’s not a big room. Then again, a big room usually isn’t needed for Board meetings. If I show up, there’s an audience of one.

Thursday was different. There were more than 30 people in an audience that included well-known local developers Darius Assemi, Terance Frazier and Cliff Tutelian. City Manager Bruce Rudd and Assistant City Manager Renena Smith were there, as well.

Right out the chute, Poochigian asked that three paragraphs be added to the minutes of a previous Board meeting. She wanted the official record to note that the Board had directed staff to put “for sale” signs on the properties.

The signs were to be in plain view for at least 30 days, and perhaps as long as 90 days. The duration wasn’t clear to anyone in the room. But such a detail was of little consequence to Poochigian. She just wanted everyone to know that the Board had given a clear and simple order to staff.

After some testy back-and-forth between Poochigian and Board Member Larry Westerlund (the city’s economic development director), the paragraphs were added.

3.) Why the big deal about a bunch of signs? Because, as the audience slowly (and painfully) learned, City Hall did a less than perfect job in getting out the message of these properties for sale.

It was never clear to me whether staff failed to put “for sale” signs on the properties; or put signs on some properties and not others; or got the signs up on all the properties but did so late in the game. But Marlene Murphey (executive director of the Successor Agency, the name of the entity that replaced the RDA) acknowledged that staff didn’t fully comply with the Board’s directive.

Some Board members then got to talking about how, back in mid-2012, government officials from the state on down began laying the ground rules for informing the public of properties to be sold. These rules kept changing. Pretty soon, things were in a huge knot.

Yet, City Hall had to act.

It was right about this time on Thursday that Board Chairman (and former Clovis Unified School District Superintendent) Terry Bradley told the story of his recent visit to Sacramento. Bradley had listened to a lecture from a good-government guru. The lecture’s theme: Common sense counts.

Talk about throwing a pebble into the ocean.

4.) By this time, we were getting close to a decision on the first of the 19 properties.

Actually, No. 1 was five separate properties bundled into one package. There were a handful of bidders.

The challenge was that one of the properties – 1.37 acres on Ventura Street – had two bidders. The others had just one bidder each.

You might think that’s great. A little competition would boost the price, leading to more money for folks at City Hall, the county, etc.

The parcel’s appraised value was $358,000. Somebody bid $368,000. Somebody else bid $385,000.

The Board on a 6-1 vote (Poochigian no) went with the $368,000 bid. Why? I couldn’t decipher the majority’s thinking. I think it had something to do with the $385,000 bid coming in late and unsolicited.

You say to me: “Unsolicited?! No one cares if the money is real.”

A majority of Board members cared.

Bradley asked if anyone in the audience wanted to speak.

“It’s very difficult to compete in this process,” said Robert Licon, a Fresno real estate agent. “I wish it were easier for the general public to participate and find out what’s for sale.”

Licon had had enough. He left.

“I know it’s a confusing process,” Murphey said.

5.) Remember how I said there were 19 proposed deals before the Board? Well, No. 18 was that $385,000 bid for the Ventura parcel.

That’s right – two of the 19 deals were essentially for the same piece of land.

Why didn’t City Hall simplify things by including the $385,000 bid in No. 1? I think it’s because the $385,000 bid came in so late.

Regardless, Bradley clearly was pleased to note that, since No. 1 was approved, everyone in the audience could toss proposal No. 18 in the trash can.

Licon by this time was well on his way home. I came to wish I had followed him.

6.) We staggered to proposal No. 2: About one acre on the northwest corner of Abby and Belmont avenues. The property is near the Mathews Harley-Davidson dealership.

The Samuel P. Mathews and Cara L. Mathews Living Trust wanted to buy the parcel for the appraised value of $174,000. The trust was the only bidder.

This deal was approved 5-2, with Vagim and Poochigian voting no.

By this time, it was obvious that the real issue before the Board wasn’t the deals and their specifics. The big issue was how Murphey and City Hall went about offering these publicly-owned parcels to the public for sale.

It turns out that there were three Board-approved ways for the city to get the word out: Request for proposal (RFP), open market solicitation, auction.

It wasn’t clear to me how each of the three would work. Doesn’t “open market solicitation” sound a lot like an “auction”? And near as I could tell, the RFP option was simply City Hall contacting selected folks and asking if they wanted to make an offer.

And what about those “for sale” signs – which option do they fall under?

The Board went round and round, then gave the Harley-Davidson folks what they wanted. Vagim and Poochigian voted no.

7.) Next up was No. 3 – the kidney-shaped parking lot at Fresno and H streets, catty-corner to the Crest Theatre. And it’s hear that we get a handle on how the administration of Mayor Ashley Swearengin views at least some of the old RDA’s properties – as assets to help further the Mayor’s vision for Downtown.

Nothing wrong with that. She elected to pursue her vision. But some Board members wondered: Is she playing by the rules?

The parking lot (1.36 acres) is south of the old Hotel Fresno. We all know about Hotel Fresno – empty for many years, a home to pigeons, Downtown’s worst eyesore, full of potential if only someone had $20 million or so.

Well, Southern California-based APEC International wants to turn the building into a residential/commercial affair. The backstory is complicated. Bottom line – APEC needs parking. The old RDA has the big kidney-shaped lot right next door.

Why don’t the two sides get together and cut a deal, with APEC paying the appraised price?

That’s exactly what happened.

The deal before the Oversight Board: APEC will pay $710,000 for the lot once all the other project details (financing, primarily) are in place.

8.) “I thought the Harley-Davidson deal was a sweetheart deal,” Poochigian said. “This is above and beyond that.”

Her point: Why not put the lot on the market and see if the city could get a better price, thus delivering more money to various entities such as the county and special districts like the local Flood Control District?

(The schools are involved, too. But, as Bradley has explained at many Board meetings, local schools don’t actually get extra money from the RDA’s demise. It has to do with the way the state funds education. For every dollar the schools get from the RDA’s dissolution, the state simply sends one less dollar our way.)

Poochigian’s comment did not sit well with Westerlund.

“You’re cutting your nose to spite your face,” Westerlund.

His logic: A bustling Hotel Fresno building spurs Downtown revitalization, which spurs growth, which raises tax collections, which helps tax-spending entities such as the county.

As to this this nose-and-face analogy, Poochigian said, it applies in this situation “only if you’re the city representative.”

To put the parking lot on the open market risks a bidding war, Westerlund said

“All we’re doing is driving up the cost of doing this project,” he said.

Council Member Oliver Baines, whose District 3 includes the Hotel Fresno, dropped in during the debate. He told the Board that putting the kidney-shaped lot into APEC’s hands at the appraised value will help bring “continuity” to a complex but vital project.

The vote: 4-3 in APEC’s favor. Vagim, Poochigian and Bradley voted no.

9.) Bradley then jumped to No. 19. This had to do with several small parcels connected to the bullet train project. This one was approved 7-0.

The calm before the storm.

The Board then swerved to lucky No. 13. This is the small (0.61 acres) parking lot at Inyo and Fulton streets, at the south end of Fulton Mall.

This lot is a part of a larger footprint that local developers Mehmet Noyan and Frazier are trying to put together. They want to build a mixed-use high-rise that includes affordable housing.

The Noyan-Frazier project is to be part a larger revitalization effort at the mall’s south end. The mall’s revitalized southern portion is supposed to jump-start growth in the mall’s other five blocks. This mall-length growth is supposed to take off because the mall will soon cease to be a mall – city officials are planning for a March 3 groundbreaking on a project that will turn Fulton between Tuolumne Street and Inyo into an old-fashioned street again. In theory, the return of Fulton Corridor to its former glory can’t help but spur the Hotel Fresno project to greatness. Pretty soon, all of Downtown is thriving – and Swearengin, although termed out of office long before everything is finished, will have kept her 2008 campaign promise.

So, the Board had before it an offer of $328,000 for the Inyo/Fulton lot. The proposed buyer: The City of Fresno.

The plan, the board learned, was for the city to sell the lot to Noyan/Frazier for $1 once the developers had all their other financing in place. The board was told that doing this deal could only help the developers as they seek financing further up the government food chain: See! Fresno City Hall is 100% on our side.

Once again, the concern among several Board members (Poochigian, in particular) was process. Why should the Board cut a deal with specific developers rather than put the parcel on the market and see what happens?

And, once again, the proposal’s defenders (Westerlund, in particular) said the Board would best fulfill its legal duty not by seeking the highest price for a parcel but by getting a fair price for a parcel that, in the hands of strategically-minded developers, would generate the highest long-term value for the public.

All well and good, Vagim said, but the fact remains that “the city did nothing” to push the parcel to the wider public.

Frazier didn’t have Baines in his corner. So, he went to the public microphone himself.

“This project is the catalyst for our Downtown,” Frazier said. “That whole project is going to be over $100 million. The more we delay, the more problems we’re going to have.”

The Board agreed to let the city buy the parcel from itself for $328,000. The vote: 5-2, with Vagim and Poochigian voting no.

10.) By this time, we’d spent more than two hours on property deals – and we’d done only six of the 19.

Bradley runs a tight ship. If nature calls, you leave the action. The Oversight Board doesn’t believe in breaks.

I thought: We’ve got another three or four hours of this.

Not to be. Bradley up to this point had generally seen things in much the same way as City Hall’s Westerlund and the Successor Agency’s Murphey. This wasn’t the case 100% of the time. Bradley’s no vote on the APEC/Hotel Fresno deal almost certainly was bracing to lone wolves Vagim and Poochigian. But with No. 13 out of the way, Bradley tapped the stack of remaining deals and dropped the Chairman’s hammer.

“I am not going to support any of these because we did not follow our guidelines,” Bradley said.

Those guidelines, as noted above, involve the manner (fairness, persistence, transparency) of letting the public know about the sale of old RDA properties.

Granted, some of the deals already approved by the Board had the air of being behind-closed-doors agreements. But, as I noted above, there was considerable confusion among some Board members and staff as to how to follow guidelines that seemed to change incessantly.

Bottom line: There was little doubt that the 13 deals still before the board had not complied with the Board’s own guidelines.

Bradley’s idea: Kick the 13 remaining parcels back to Murphey and her staff. Murphey would then decide how best to let the public know that these (and other RDA properties) are for sale.

Oh, one other thing – those “for sale” signs would go up in abundance.

Poochigian was satisfied. Westerlund wasn’t. The latter Board member, however, saw that the tide had turned. By a 7-0 vote, the Board tossed everything back in Murphey’s lap.

11.) These Oversight Board meetings have been going on for more than four years. Some strange things happen at them. A divided board once voted to sue itself.

Once Bradley said he wouldn’t support action Thursday on the remaining 13 deals, it was obvious that everything had changed. In addition to directing Murphey to do a better job of marketing old RDA properties, the Board said it didn’t like the appraisals. Most were years-old snapshots of the real estate market. Time to get new appraisals, the Board said.

All of this meant that the particulars of the remaining 13 deals were essentially outdated and worthless. Everyone would go back to the drawing board.

But that didn’t stop some Board members from saying: Hey, look at the audience. Lots of people are here. Maybe they want to talk about the 13 deals that just died a quiet death.

And that’s what happened.

It really didn’t take that much time. Tutelian, Assemi and Frazier spoke. Frazier neatly summed up the afternoon.

“As taxpayers, we don’t know what you’re talking about.”

12.) I’m with Frazier. This is a head-scratcher.

For example, the city will pay $328,000 for the parking lot at Inyo/Fulton. Where’s the money coming from? Turns out that the City Council approved this purchase in December when the Mayor came up with a mid-year budget revision. The city had about $8 million in extra money. The Inyo/Fulton lot was part of the spending list.

City officials tell me the $328,000 will come from proceeds from several city-owned real estate deals, including the corner of the Selland Arena parking lot where the new Cosmopolitan restaurant is going.

There’s been some talk at City Hall that the Noyan/Frazier project at Inyo/Fulton is getting no general fund money. Near as I can tell, the real estate deals that will foot the $328,000 bill are producing money that otherwise would go to the general fund. Instead, the money will go to buy a parking lot that will be sold for $1.

I don’t dispute the anticipated value of the Noyan/Frazier project. I do suggest the connection between developer incentives and the general fund can be opaque but very real.

Here’s another example of a head-scratcher.

City Hall also put in bids on three of the 13 properties kicked back to Murphey.

•  0.69 acres on H Street. Granville Homes bid the appraised value of $300,000. City Hall bid $310,000.
• 2.81 acres on Mariposa Street. Pacifica Enterprises and Granville each bid the appraised value of $1,650,000. City Hall bid $1,660,000.
• 1.38 acres on Merced Street. Tutelian & Company bid the appraised value of $510,000. City Hall bid $520,000.

First of all, there was no indication on Thursday that, if the Board had approved each deal for the highest bidder, the city planned to give Granville, Pacifica or Tutelian the same break it gave to Noyan/Frazier and sell the properties to them for $1.

Second, what’s with this streak of City Hall luck? Three times in a row, a bidding war involving public assets results in City Hall edging the private sector by a mere $10,000?

Bradley told Murphey and staff to get moving on the sale of remaining properties held by the old RDA. He said it would be best if the deals are brought before the Board in groups of six or eight rather than 20 or so.

Maybe that’s when the head-scratching stops.