Earlier this week, the county body charged with overseeing to sale of residual redevelopment properties unanimously rejected at attempt by the La Habra City Council to hijack the auction of part of a shopping center parking lot. La Habra’s irregular and possibly illegal maneuvers prompted allegations the La Habra City Council engaged in bid-rigging, self-dealing and Brown Act violations – in addition to simple incompetence in conducting the public bidding.
At the center of the controversy is a 2.8-acre portion of the La Habra Marketplace shopping center. La Habra’s redevelopment agency had purchased the parcel in June 1990 for $2.5 million as a thinly-veiled public subsidy of the property owner’s re-development of the center. At the same time, the city agree to a grant deed restriction limiting use of the parcel to public parking – which dramatically devalued the parcel.
Following the abolition of redevelopment agencies in 2012, local governments were required to form Successor Agencies to dispose of their redevelopment properties. The parking lot parcel was designated as “for future sale” by La Habra, and is the last redevelopment property in the La Habra Successor Agency’s portfolio.
After years of foot-dragging and resisting direction from the Orange Countywide Oversight Board to sell the property, La Habra finally agreed to put the parcel on the auction block in fall of 2023 with the goal of “maximizing value.”
La Habra gave no indication it planned to bid on the property itself.
As part of that process, the the city-hired appraiser valued the parcel at only $30,000, due primarily to the grant deed restricting it to parking uses and relying on information from the city that the parcel can only be used 1 to 3 days a year for “brief civic events.”
- $27,500 from Goldenwheat Properties LLC
- $25,000 from LH Borrower, LLC
- $25,000 from Southwest Group Properties
The top bidder, Goldenwheat Properties, had a tentative deal with Tesla wants to turn the parcel into a Tesla charging station, which would seem to be more or less consistent with the deed restriction.
After bidders were asked to submit a best and final offer (BAFO), Goldenwheat Properties LLC was still the top bidder , more than doubling its offer to $56,500. LH Borrower LLC – a shell company owned by the shopping center owner – bumped its bid slightly to $27,500 while Southwest Group Properties stuck with $25,000.
So, when the bidding had officially closed, Goldenwheat Properties was the highest bidder.
During the next several days, La Habra elected met in closed session on November 20 and December 4 and decided to bypass the auction it had conducted and buy the parcel for $57,500 – one thousand more than Goldenwheat Properties.
Bob Wheatley, the president of Goldenwheat Properties, protested this maneuver at the December 18 meeting of the La Habra City Council, pointing out that the city was subverting the good-faith requirement of the public auction and alleging the city had engaged in self-dealing and bid-rigging.
“The City of La Habra did not act in good faith as directed by this board,” Wheatley told the council. “The sequence of events raises serious questions about bid rigging and self-dealing.” Since the city had de fact e-opened the bidding, Wheatley distributed a letter to the councilmembers containing a formal offer of $75,000 – nearly $20,000 more than the city’s proposed purchase price and two-and-a-half times the appraised value.
The city council brushed aside Wheatley’s offer and voted unanimously to approved buying the parcel for $57,500. Immediately following that vote, the council voted in its role of the Successor Agency to approve the sale – but without adjourning the council meeting and convening as the Successor Agency, constituting another violation of the Brown Act.
Matters came to a head at the January 16, 2024 meeting of the Orange Countywide Oversight Board, where consideration of La Habra’s attempted purchase was on the agenda.
Another wrinkle in this weird drama came to light during public comments.
Goldenwheat Properties LLC President Bob Wheatley – the apparent highest bidder in the public auction – asked the oversight board to reject La Habra’s proposed purchase of the parcel and instead approve its sale to his firm.
He was followed by Mary Lou Adame-Martinez, who told the board that her husband Salvador Martinez, acting through their broker, submitted a bid of $100,000 on October 24, 2023 while the bidding was still open to the broker hired by the city to conduct the bid solicitation process.
Adame-Matinez said their broker subsequently followed up city’s listing agent three times, but his phone inquiries were never returned, nor did he receive a reply to his e-mails.
“Our buyer [Salvador Martinez] submitted a bona fide offer in good faith in the bidding process for the La Habra parking lot,” Adame-Martinez told the county oversight board. “His offer was not only ignored, but it was never presented.”
“Our bid is the highest bid, and as such our buyer should be awarded this property,” said Adame-Martinez. “We are beyond upset that this type of behavior has taken place.”
“Not only do we feel discriminated [against], but this is a true disservice, not only to Salvador as a buyer, but to the people of La Habra that have entrusted those elected to follow a due process,” said Adame-Martinez. She then asked the oversight board to accept her husband’s bid or else they would pursue legal action “against any and all parties involved in this transaction.”
The oversight board watched video of the La Habra City Council’s handling of the bidding process at its December 18, 2023 meeting, where it brushed aside Wheatley’s offer of $75,000 and voted to buy the parcel for $57,500.
“Wow,” said county oversight board Chair Brian Probolsky, after watching the council’s deliberations.
Oversight Board members expressed frustration with La Habra’s conduct and skepticism toward the city’s sincerity and competence. At one point, a La Habra city official was unable to explain why the city even wanted to buy the parcel in the fist place, let alone pay twice the appraised value for acreage the city said has little value.
“It seems like the city wanted to hold on to that property, and the question would be ‘why’? [since] they never made that offer before,” said Director Dean West.
Miranda Cole-Cordova, La Habra’s economic development director, couldn’t provide an answer to the “why?”.
“I can’t speak for the city,” said Miranda Cole-Cordova, “I think as part of our process we — I don’t know that if we’d have come to the oversight board with the $30,000 – I think we kind of needed to go through the process to find out what the open market thought the value of the property was, so that’s how we landed where we are today.”
“When did you become aware of the Martinez’s bid?” asked Director Phil Yarbrough.
“Just now,” said Cole-Cordova. “I was unaware that there was a fourth bid. I only received the three bids from the broker. I did not receive a fourth bid.”
“So the broker did not tell you about the bid?” asked Yarbrough.
“No,” Cole-Cordova replied.
“Under what authority does [La Habra] go out for re-bid after November 7, after final bids were supposed to have been submitted?,” asked Yarbrough.
The La Habra successor agency’s outside counsel, Seth Merewitz of Best, Best and Krieger, basically said the successor agency could do whatever it wanted.
“[State law] pushes to the successor agency to handle that process. And they’re really able, under the law, to handle the process in any way they choose,” said Merewitz.
“Did the city of La Habra review the bids before coming in with their offer – after the final bid of November 7?” asked Yarbrough.
“I can’t speak to what was said in closed session,” said _______.
“Can you speak to that?” Yarbrough asked Cole-Cordova.
“No,” she said.
“I’m interested in finding out if the bid from the Martinez’s was done properly, and if it is acceptable,” said Yarbrough, noting that it was submitted while the bidding was open. “The reason why it [wasn’t] presented to the city is bizarre to me, because it is the highest bid,” said Yarbrough.
“Well, it’s made clear that nobody in the room knows the answer to that,” said Probolsky. “Assuming that we vote to reject this, we’ll probably have to take this up at a later meeting – again,” said Probolsky.
“Right – but we’ll have to have a determination as to the legality of the bid up to November 7, and not the complete chaos that happened afterwards,” said Yarbrough.
“The chair will work with staff to fill in the blanks. We’ve had a lot of discussion here so its pretty clear what some of the things are that we’ll need to have to move forward,” said Probolsky.
The board then voted unanimously to reject La Habra’s offer.
According to sources, the most likely next step will be for the Orange Countywide Oversight Board to provide very detailed and specific direction to La Habra to hold a good faith, transparent public bidding solicitation – along with direction about what “good faith” and “transparent” mean.
Other potential consequences include legal action from foiled bidders such as GoldenWheat Properties and the Adame-Martinez’s.
The universal opinion from observers of this process is that the La Habra City Council acted in a high-handed, arrogant and reckless manner that will likely have negative legal consequences for the city.