I have to admit I was pretty stunned to see that the school district sold the Grande property for $5.5 million, the same amount they had originally agreed to sell the property for back in 2005, before they rescinded that deal. As someone pointed out, given inflation, it’s actually a good deal less than that.
If you want the full history of this, read yesterday’s article on the sale which summarizes the history. If you want more detail, read the 2008 piece where the Vanguard, as part of a four-part exposé on former district Chief Business Officer Tahir Ahad, detailed the Grande property controversy.
To be clear and to be fair to all concerned – this was not just about money. The $5.5 million, as we laid out yesterday, included a very questionable land swap that was meant to subvert the Naylor Act. In addition, the district did not run the 711 process, the district was facing lawsuits, and the neighbors were unhappy with the development proposal.
By pulling back, the district was able to work with the city and the neighbors. They have a development agreement in place that was worked out in collaboration with those neighbors. It specifies the number of homes and affordable housing units.
All of that is good. But the money is still puzzling because it was not a small part of the initial controversy.
As we noted yesterday, when the land swap was first proposed, Davis Joint Unified would trade BP Equities the Grande property in exchange for $4.5 million and the Fairfield School.
The land exchange generated a large amount of controversy in the community. Under pressure for the seemingly sub-market value sale price, the offer was raised on November 22, 2005, to $5.5 million and the deal was locked in.
Immediately, flags were raised. The initial asking price coincided with an amount that the district lost out on, losing matching funds from the state when they missed the Montgomery Elementary school deadline.
The revised sales figure seemed low. A West Sacramento developer would threaten to sue the district. John Whitcombe had a trade of 160 acres for Grande. A third proposal offered anywhere from $7.5 million to $10.5 million and offered to front the development costs.
The existence of these higher offers caused former Davis Mayor Maynard Skinner, who was in attendance at the November 22, 2005, meeting, to proclaim angrily that the district had just “kissed” away $2.5 million. In fact, in 2008, when I talked to the former mayor, he was still very animated about the deal that had come down.
In November of 2007, former school board members Marty West and Joan Sallee, following the successful passage of Measure Q, the 2007 Parcel Tax renewal, wrote an op-ed arguing, “Any financial mismanagement that has occurred has been on the 2006 and 2007 school board’s watch. In early 2006, the board majority rescinded the $5.5 million contract we had signed to sell the Grande Avenue site, thus jeopardizing funding for building a student commons at the high school and modernizing Emerson Junior High School.”
This op-ed actually is what led to the Vanguard’s four-part series on Tahir Ahad and the Grande land swap.
In a 2010 letter, Ms. Sallee wrote, “I have largely kept silent when untruths have been told, or when I have disagreed with actions taken by school boards, following my own. But the outrageous comments about the Grande Avenue site made last week by Gina Daleiden and Tim Taylor require a response, because they are false and represent a revisionist history that I cannot abide.”
She continued, “The agreement made by the 2005 board regarding the Grande property was not, as Daleiden says, a ‘bad deal shaped under questionable circumstances.’ And several of Taylor’s comments are news to me.”
“When my term was over, the board had signed a legally binding contract with the developer for $5.5 million, plus an exchange of 10 acres around Fairfield Elementary School,” Ms. Sallee wrote. “Our board hoped to invest the money in the modernization of Emerson Junior High School, which today remains a woefully-inadequate facility. The new board rescinded the contract, paying a hefty financial penalty.”
“We worked long and diligently with the Grande neighbors to respond to their concerns, and I personally had several meetings with them. They were highly protective of land contiguous to their own and wanted housing appropriate to the neighborhood, a fair request,” she continued.
She continued, “But the process of land development is properly the domain of the city. The board felt that converting the parcel into lots entitled for development was something to be done later by the developer and the city with community input once the property was acquired. The board’s primary mission is and should be education and not real estate development.”
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Given this history, I found the settlement at $5.5 million to be a bit disconcerting.
Questioning one of the outgoing board members on this, they noted that this was not any sort of emergency sale, they put it up for bid and tested the market.
Okay I get that, but given that it was not an emergency sale, it makes the decision to sell now all the more perplexing.
So here are some concerns:
First, the three outgoing board members – Tim Taylor, Sheila Allen, and Gina Daleiden, along with Jim Provenza who left the board in 2007 to run for the board of Supervisors, were instrumental in undoing the original land swap deal. There is no doubt that that deal was of questionable legality and had it remained in place the district could have faced lawsuits.
Second, the price of the new sale is $5.5 million. When the land was previously sold at that price, one of the reasons for the reversal was that $5.5 million was said to be too low.
Sheila Allen back in 2008 said: “My recollection of why we reversed the decision—I think it was in my first meeting—is because I didn’t think it was the best deal for the taxpayers and the students of the district. I thought that we could do much better financially with an open process for the community.”
Third, it was not an emergency deal. The real estate market is just now starting to rebound – why sell it now?
Except that the three members who had deal with this issue for the last nine years are leaving.
That leads me to wonder if the reason that the property sold now has more to do with timing of the departure of the three board members and unfinished business than the best interests of the school district.
But I don’t want to end this on a negative. Whether the school board left money on the table in the future is debatable and the timing is curious, but there is no doubt that they did the right thing in 2005 by thwarting the illegal sale, doing the process the right way, and creating a development that the neighbors bought into.
That is a positive and, at the end of the day, we can live with $5.5 million that can now go to vitally needed facility repairs and upgrades.
—David M. Greenwald reporting
http://www.usinflationcalculator.com/
Here’s the figures.
What cost …..$5,500,000…….in 2005
Would cost… $6,686,541.22….in 2014
Here some clues about the “value” of undeveloped, ‘entitled’ land.
Only two “developers” even submitted an offer. Both are local, and both are “small time”. They do not have available the financing nor the size to take on much ‘risk’.
There is risk in the rising interest rates likely to occur, lenders are still goosey about lending on housing projects where the developers have neither the ‘inertia’, nor “mass” to be AA+ risks.
In order to create a Final Map, and final construction drawings to build the improvements, there will be additional “up-front costs” before a developer can actually get revenue from the sale of a single lot. Not to mention risks in the increasing costs of building materials and labor to build the streets, utilities, greenbelts, etc., AND the costs for design, materials, labor for the housing itself.
If mortgage interest rates start rising, buyers may well be able to afford LESS in a purchase price.
Because the DJUSD got the project SO entitled, a developer would have to fit THEIR idea of a marketable product onto the footprints of the lots DJUSD ‘designed’. Assumptions of what buyers wanted in 2008 may not be valid today. Any changes to existing TM lot configurations could open up a new series of clashes between the developer/City/neighborhood. Building codes have changed in the last few years, so what a developer would have to spend for what amounts to be the same product have increased.
Using Barack’s concept, $5,500,000 of construction cost in 2005 would be over $7,353,900. Note how much more than “inflation” that is. And my numbers were from Jan 2014 data, so it’s actually higher now.
I’m not saying that the District might end up with a higher dollar value later, but with all the risks, construction costs rising faster than “inflation”, likely interest rates increases, and the fact that there were only two ‘small time’ fish even attracted to the bait, I believe the District should more forward NOW.
Thanks for the insight. Not sure I totally agree, but I can see where you are coming from.
To me, it’s who takes the risk, and who might lose money for failure or profit for success. Think DJUSD should be risk-adverse, is all I’m saying. How many gamblers, way ahead in the game, end up losing money waiting for one more “run of luck”?
I agree with hpierce. This issue might more reflect on the fact that the district (and school boards) should have worked to get it right and get the sale back in 2005/2006. The district still owns Nugget Field, which is currently being used as soccer fields, mostly by Davis AYSO, if further assets need to be sold and/or if property values go way up in the future. I’m not certain, but I think they also own a parcel of land adjacent to Harper JH. The Grande property was sitting idle, growing weeds and rodents. The district needs the money now. And they are selling at almost 100 times the 1971 $ value.
Truth be told, DJUSD coerced the City and Developer to give them the Wildhorse site (nine NET acres, they insisted) publicly, under the pretext of needing a new school site, but all ‘in the know’, knew they were seeking a free asset that they hoped to parley into a small ‘fortune’ at a later date. History repeats.
Re: Harper, DJUSD only owns one ‘lot’ today, but much of the southerly portion has yet to be developed as part of the school.
I was told years ago that the “long range” plan for the city stopped at Road 29. EVERYTHING from 133 to Road 102 would be filled in eventually. Selling “excess land” is to me as short sighted as when the State sold all their highway land around Sacramento, leading to the Cluster of Traffic they have today.
The Grande site is too small to meet modern school site standards for a typical elementary school. It could have been a place for something like King High, or some other “specialty” use.
Thank you!
There are always needs unfulfilled, and the Cannery will be served by what? Are they setting aside land for their new citizens?
They don’t need to. There’s sufficient space in the existing schools.
Don wrote:
> There’s sufficient space in the existing schools.
And with birth rates dropping (dropping even more in the well educated demo that tends to live in Davis) we are just going to have even more space in the existing schools:
http://www.livescience.com/48995-us-birth-rate-hits-all-time-low.html