Tomorrow morning, the Orange Countywide Oversight Board will decide whether to approve a highly-irregular maneuver by the City of La Habra to purchase a residual redvelopment property after the public auction – conducted by the city – was closed, prompting allegations of bid-rigging and self-dealing by the La Habra City Council.
In November of last year, Goldenwheat Properties LLC was the highest of three bidders for the property – a 2.8 acre portion of the La Habra Marketplace shopping center – offering $56,500, which was more than twice the offer from the second place bid by the shopping center ownership. Goldenwheat has a tentative agreement with Tesla to build an EV charging station on the 2.8 acres.
After the bid solicitation was officially closed and reported to the county oversight board, the La Habra City Council the highly irregular step of voting to buy the parcel for slightly more than Goldenwheat Properties – offering $57,500, or more than twice the appraised value. Furthermore, the council ignored a subsequent offer from Goldenwheat to buy the parcel for $75,000 – despite state law directing municipal successor agencies to dispose of left-over redevelopment properties “in a manner aimed at maximizing value.”
A pattern emerges from a review of public documents concerning the disposition of this property of a La Habra city government bound and determined to secure the parcel by any means possible and calling into serious question whether the city had any real intention of selling it in a good faith public bidding.
After the state dissolved local redevelopment agencies in 2012, municipalities formed “successor agencies” to oversee to disposal of their redevelopment properties.
According to agendas and minutes going back to 2022, the county oversight board rebuffed various strategems employed by La Habra to purchase the parcel, insisting the city put the 2.8 acres on the auction block in a good-faith public bidding process.
Back in 2015, La Habra approved a plan for disposing of its redevelopment properties — known as a municipal jargon as a Long Range Property Management Plan (LRPMP). That plan called for selling it along with several other redevelopment properties. However, despite regular prodding from the county oversight board, La Habra had taken no action to sell off that parcel.
The matter began coming to a head in early 2022 as the OCOB moved to force the parcel’s sale. At the board’s January 25, 2022, Director Phil Yabrough stated his view that La Habra had demonstrated “no intention” to sell the property while adding the grant deed restriction confining the use to parking did not prevent monetizing its use by the placement of parking meters.
While the other board members agreed on the need for La Habra to sell it as soon as possible, they favored a more incremental approach. Miranda Cole-Corona, La Habra’s economic development director, told the the OCOB that the city council planned to take up the matter at its February 21, 2022 meeting. Base don that assurance, the county oversight board voted to give a deadline of February 28, 2022 to present a plan for selling it.
However, that deadline came and went as La Habra maneuvered to have the parcel transferred to the city without having to pay for it by amending the city’s LRPMP to change the parcel’s designation from “future sale” to “governmental use” without “any compensation to the taxing entities” – i.e. local school districts – so that the parcel could continue being used as shopping center parking. La Habra officials claimed that in their opinion, “sale of this property is not feasible” due to the restrictive parking covenant on the parcel.
Among the evidence cited by La Habra was a March 26, 2021 letter from CBRE – Valuation and Advisory Services stating their opinion the parcel has “no intrinsic value. The CBRE letter was addressed to Stephen Koen, Vice President of Property Management at DJM Capital – the owner of the La Habra Marketplace shopping center..
The OCOB rejected that request noting, among other things, that the legal deadline for doing so had expired back on July 1, 2016. La Habra knew the restrictive covenant was extant when it developed the LRPMP in the first place, but nonetheless designated it a “for future sale” property, which La Habra officials conceded was a mistake.
Rebuffed in its attempt to get the 2.8 acre parcel for free, on June 2 of 2022, the county oversight board directed La Habra to to either declare or not declare the parcel “exempt surplus land” and complete the prescribed legal processes in either case by October 18, 2022.
La Habra’s response was…to do nothing, despite the city receiving written instruction from the state government to follow the direction of the county oversight board.
The county oversight board finally held a special meeting on October 19, 2022 to address La Habra’s obstructionism.
Two La Habra officials – Economic Development Director Miranda Cole-Corona and Community Development Director Susan Kim – were present. When asked about the inaction and radio silence from the city regarding its direction from OCOB, Kim blamed the state Housing and Community Department for not yet making a detemination whether the parcel was “exempt surplus land” and apologized for the city’s failure to communicate with the OCOB during the preceding 14 weeks, saying it “simply got lost in the shuffle” and “was not intentional.”
At that point, OCOB basically let La Habra go with a warning to keep the oversight board actively informed.
By April of 2023, La Habra reported to the OCOB that the state had decided the 2.8 acre parcel was exempt from the Surplus Land Act, meaning the city would have to move expeditiously to put the lot out to bid with the goal of “maximizing value.”
Over the course of the next several months, La Habra hired the necessary legal, real estate brokerage and appraisal consultants and conducted a public solicitation process. An appraisal of the parcel – for which the La Habra Redevelopment Agency had paid $2.5 million in June 1990 in a thinly-veiled subsidy to the shopping center developer – determined it was worth $30,000 due to the grant deed restricting it to parking uses.
The appraiser, Anderson & Brabant, relying on information from the city that the parcel can only be used 1 to 3 days a year for “brief civic events,” appraised the value as $30,000.
“We estimated the the market value of the land owner’s fee interest: in the 2.8 aces to be “equal to about 50 percent of the full fee interest” – determined by the appraiser to be $11,300,000 – for one to three days a year, which “correlated at $30,000.”
The solicitation was conducted in the Fall of 2023.
By November 7 of 2023, La Habra received three bids:
- $27,500 from Goldenwheat Properties LLC
- $25,000 from LH Borrower, LLC
- $25,000 from Southwest Group Properties
Goldenwheat 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 front for the shopping center owner – bumped its bid slightly to $27,500 while Southwest Group Properties stuck with $25,000.
The Orange Countywide Oversight Board met a week later on November 14. According to the meeting minutes OCOB members were told by Cole-Corona, La Habra’s economic development director, that three bids for the property were received, and the city had that day requested a Best And Final Offer (BAFO) from each bidders.
It’s clear from the minutes that oversight board members fully expected the winning bidder to be one of the three. There was no indication given that La Habra still harbored the desire to buy it. Cole-Corona told OCOB Director Phil Yarbrough that Lan Habra would “provide all three offers to the Oversight Board in accordance with the Oversight Board’s previous resolution.”
Director Brian Probolsky stated that “he would hope that La Habra does not provide preferential treatment to any bidder.”
During the next several days, La Habra City Council members – acting in their dual capacities as councilmembers and directors of the city’s successor agency – decided to give themselves very preferential treatment by circumventing the bidding process altogether and buying the parcel out from under the highest bidder.
The sequence of events was reported last week in this OC Independent editorial.
On November 20, four days after receiving the BAFO bids, the Successor Agency of the City of La Habra met in closed session to consider the offers and then “requested staff to contact the City of La Habra (City) to determine if the City had any interest in purchasing the property,” according to the December 18 staff report.
Bear in mind that the Successor Agency Board of Directors is comprised of the La Habra City Council members, and the Successor Agency’s executive director is La Habra City Manager Jim Sadro. It’s the same decision makers wearing different hats. In other words, the city council directed itself to ask itself if it wanted to buy the 2.8 acres.
The city council replied to itself in a closed session meeting on December 4, and Successor Agency Executive Director Jim Sadro sent a letter to himself offering to buy the parcel for $57,500 – just a thousand more than Goldenwheat’s bid.
The city’s bid was fast-tracked to the Planning Commission, which approved it with no discussion on December 10, and the offer was agendized for the December 18 city council meeting.
Naturally, Bob Wheatley, president of Goldenwheat Properties and clearly the highest bidder in the bid solicitation, was unhappy with the city council’s decision to hijack the process.
“I must express my deep concern about the integrity if the bidding process,” Wheatley told the council, noting that the success agency is legally obligated to conduct “process in good faith to solicit proposals from interested parties.”
“The question to you was the solicitation conducted in good faith?” Wheatley asked, saying the councilmembers closed session meetings on November 20 and December 4 “raise concerns.”
“A bid was offered by the city for $1,000 higher than the Goldenwheat bid after the bidding was closed,” noted Wheatley, asking “what is the public purpose for the city to own” part of a shopping mall parking lot.
“The sequence of events raises serious questions about bid rigging and self-dealing,” said Wheatley.
Still, Wheatley decided to light a candle rather than curse the darkness, and offered to increase his company’s bid by 32%.
“You have an offer before you from my company to increase our bid to $75,000, making us the highest bidder again,” Wheatley told the councilmembers.
After all, if the city council can make a bid after the bidding is closed, why can’t Goldenwheat Properties?
La Habra City School District Board of Education member Dr. Susan Pritchard also raised concerns about the city council’s conduct, especially since a large percentage of the proceeds from the sale of such residual redevelopment properties goes to local school districts.
She noted that in June 2022, La Habra reported to the county oversight board that the value of the property was $2.5 million.
“Why is it now being undersold, per the city’s own evaluation of little more than a year ago, by more than $2.4 million less?” she asked.
“More importantly, if the land value a little more than a year ago was $2.5 million, how much more would [La Habra City, Lowell Joint and Fullerton Joint Union] school districts receive from the sale?” Pritchard asked the council.
Councilmembers had little to say in response to these valid and serious concerns beyond soliciting pro forma reassurances from staff.
“In your opinion do you feel that we have done everything under the legal guidelines expected by the La Habra City Council and the…successor agency?” Councilman James Gomez asked City Attorney Dick Jones.
“The answer is ‘yes’,” Jones responded, before immediately qualifying his answer: “Let me indicate to you that I’m not – our firm is not handling this particular matter. It’s being handled by outside counsel who has assured mine they are following all the legal requirements.”
Mayor Darren Nigsarian brought up the question of the parcel’s value in a question to City Manager Jim Sadro: “There’s this erroneous figure – something of a couple of million dollars in terms of the value of this parking lot. What was the actual., official appraised value of that land, Jim?”
“The value of the land with the parking restrictions that are on the deed restrictions, was appraised by an outside appraiser for $30,000,” said Sadro.
“That’s a little bit different than two-and-a-half million, isn’t it?” said Nigsarian – while failing to address why he supported paying twice the appraised value for a parcel for which the city has little real use.
With that, Gomez moved to approve the purchase, and the council unanimously approved it.
There’s also the non-inconsequential issue of the potential illegality of the city council’s closed session meetings whee they voted to purchase the property – which were not properly convened or adjourned, nor was public comment taken – all violations of the Brown Act.
Whether this brazen action by the La Habra City Council will be allowed to stand will be resolved tomorrow at the Orange Countywide Oversight Board, approximately two years after it began in earnest.
