Council Votes 5-4 To Approve Exchange of City-Owned Public Service Yard For Privately-Owned SE LB Open Space/Wetlands...After Defeating Motion 3-6 For 30 Day Delay
LCW Partners, LLC Statement Says It Looks Forward To Potential Exchange of Its Remaining Wetlands At A Future Date
Moments Before Final Vote, City Auditor Doud Invited To Speak, Warns of Costs, Potential City Subsidizing Deal
SE LB open-space/wetlands (2nd St/Studebaker, looking toward Studebaker/Loynes). LBReport.com photo
(Aug. 5, 2009, updated Aug. 6) -- After more than two hours of Council discussion and public testimony, the City Council voted 5-4 (Yes: S. Lowenthal, DeLong, O'Donnell, Andrews, Lerch; No: Garcia, Schipske, Reyes Uranga, Gabelich) on August 4 to exchange the city-owned Public Service Yard for 37.77 acres of privately-owned SE LB open space/presumed wetlands on terms recommended by city management.
At the request of Councilman O'Donnell, the Council included a statement of "intent" -- not legally binding on future Councils -- that the current Council intends that the property be preserved in perpetuity as open space.
Immediately prior to the 5-4 vote approving the deal, the Council voted down 3-6 a substitute-substitute motion seeking a 30 day delay (Yes: Schipske, Reyes Uranga, Gabelich; No: Garcia, Lowenthal, DeLong, O'Donnell, Andrews, Lerch).
Councilman Robert Garcia (in whose 1st dist. the Public Service Yard is located) and Councilwoman Suja Lowenthal said nothing during the more than two hour Council item.
Mayor Bob Foster didn't exercise his veto...which could have stopped the transaction and required six Council votes to override.
During the Council discussion, City Auditor Laura Doud was seated in the Council Chamber. After the motion for a 30 day delay failed, Councilwoman Gabelich asked that Auditor Doud be allowed to speak; Councilman O'Donnell (whose motion to approve the transaction was up for a vote) initially ignored Gabelich's request as did Mayor Foster.
When City Auditor Doud showed no signs of leaving, Mayor Foster addressed her in a less than welcoming tone: "Ms. Doud, do you have a quick comment? I think this has been pretty thoroughly discussed."
City Auditor Doud came the podium, and told the Council in pertinent part:
Webcast screen save: City of LB website
City Auditor Doud: ...The one thing I do have concerns about is the cost of this. At the time we did our cost-benefit analysis, a lot of these costs were unknown at the time. Now they're a lot more transparent to see that the relocation cost and the cost to rent and especially the cost to construct a new Public Service Yard are significant. So those costs do concern me and then just the final concern that I have on the deal is really the State's ability to come forward with the money, it's very uncertain, we don't know, and if they don't come forward then of course we'll be owning it, and if they do come forward and it's less than the value of the Public Service Yard, then obviously the City would be subsidizing this transaction...
"Thank you, Ms. Doud; appreciate it," said the Mayor...and called for the final vote: 5-4 to approve.
Shortly after the vote, LCW provided the following statement to LBReport.com:
"LCW Partners would like to commend the City Council for voting to approve the wetlands exchange tonight. This was not an easy business transaction for all involved and was a long and arduous process. Many hours and money were spent by both sides to reach the agreement tonight. Even with all the discussion that occurred, we think it was a positive outcome for the city. We look forward to the potential exchange of the remaining wetlands owned by LCW Partners at a future date."
Image source: Aug. 4, 2009 LB city management staff report
Image source: Aug. 4, 2009 LB city management staff report
LCW Partners spokesman Mike Murchison added the following comments: "On behalf of LCW Partners, and after watching the exchange and debate, we believe it was a very healthy debate tonight. It opened up some areas of discussion that maybe were not discussed in the past but we can keep moving forward and we think it's the right time to do so."
City staff opened the item with nearly half hour presentation by Public Works Director Mike Conway. Mr. Conway's presentation compared valuations of the properties and recited indemnities that he said LCW, Partners, LLC would provide to the city, and vice versa.
Public testimony
Almost every speaker opposed or declined to support management's proposed transaction. Most urged a thirty day delay; some opposed the deal outright. Among the speakers:
Los Cerritos Wetlands Land Trust Executive Director Elizabeth Lambe. Audio, click here.
Webcast screen save: City of LB website
Ms. Lambe questioned the City's valuations and reiterated concern about lack of legal assurances that the property would in the future be used as open space. Ms. Lambe said the issues aren't small and are at the heart of the ability to protect the wetlands and must be addressed before a vote is taken. She noted that the state of CA is prohibited from paying more than fair market value although the city is not...and if the city takes a big financial hit in the transaction, future Councils may be tempted to sell off the wetlands or use them for purposes other than protected habitats. Ms. Lambe urged the Council not to vote on the transaction until these questions are answered.
Mr. Jensen opened his remarks by noting that he's now a Third district resident...and likened city staff's presentation to fiction. He called the proposal "one of the most fiscally irresponsible schemes this city has considered," challenged city management's valuations and concluded that the proposed exchange would ultimately cost the City over $10 million. Noting that this comes at a time when City Hall is proposing to lay off police and firefighters, Mr. Jensen said voters can show whether they disagree with what the City is doing "as they did with Measure I" (on which he also challenged City Hall's numbers). Mr. Jensen ended his testimony by stating that if the Council approves the deal, the public can only resort to the ballot box.
Mary Parsell, 1st VP/Conservation Chair of the El Dorado Audubon Society, and said "there are just too many questions"...and asked if the agreement regarding mineral rights would mirror the agreement now in effect between the Los Cerritos Wetlands Authority and Signal Hill Petroleum on the 66 acres of Phase I property (formerly owned by Bryant on either side of the San Gabriel River).
Belmont Shore Residents Association President Mike Ruehle. Audio, click here. Mr. Ruehle said an agreement to indemnify the city made by an LLC means little, arguing that small LLCs can just walk away leaving the city (as surface landowner) effectively holding the bag. Mr. Ruehle noted that Mayor Foster and Councilman DeLong had accepted campaign contributions from sources linked to Tom Dean and related business entities. Ruehle charged that the proposed land exchange is testament to the power of those contributions...and called it a gift of public assets.
LB environmentalist Ann Dennison. Audio, click here. Ms. Dennison said "there is no one more interested in acquiring those wetlands than I am" but urged a vote against the proposal or a 30 day postponment, saying the City isn't getting a fair appraisal and the state conservancy can't acquire the wetlands for less than fair market value.
SE LB community activist Tarin Olson (critic of a developer's current plan for the Seaport Marina site at PCH/2nd St.). Audio, click here.
Webcast screen save: City of LB website
Ms. Olson read a letter from a law firm raising CEQA and gift of public resources issues (first reported Mon. Aug,. 4 by LBReport.com).
Mr. McCabe questioned city staff's valuation and delivered cautionary testimony about city reliance on the LCW, Partners LLC. LLC's are special purpose companies, Mr. McCabe said...and the Council is deceiving itself by relying on an indemnity from a company that might not be around for the long term.
Appraiser David Robertson. Audio, click here. Mr. Robertson's apparisal (done for Tom Marchese) was cited among other appraisals by city management. Mr. Robertson advised the Council to get a proper, independent appraisal.
Sierra Club LB-area president Rudy Vietmeier. Audio, click here. Mr. Vietmeier defended city staff's valuation (comparing it to the Louisiana Purchase which some considered too costly at the time) but acknowledged that lack of legal protection ensuring the property's use as open space was a problem and urged a 30 day delay.
Wetlands advocate/LCWLT boardmember and University Park Estates homeowner Tom Marchese. Audio, click here.
Webcast screen save: City of LB website
Mr. Marchese criticized the proposed transaction and disputed management's valuations, charging that city officials persisted in misstating material facts including the property's current zoning...which Mr. Marchese said hadn't been approved by the Coastal Commission.
Mr. Leitch urged Council approval of the transaction...and read a letter into the record that stated in part, "...[I]f the city is unable or unwilling to approve the LCW exchange this evening, LCW will elect not to expend further time, effort or expense in pursuing the land exchange and instead will concentrate on pursuing other alternative courses of action regarding the LCW property."
Council statements following public testimony
Councilman Gary DeLong made a motion to approve management's proposed transaction, saying [paraphrase] that he knew of no better proposal to acquire the wetlands. He said former Councilman Doug Drummond regretted not getting the wetlands into public hands...and said acquiring the wetlands would give the city more control over their future development. He said the Council's options were either to take the deal or have no deal. Audio, click here..
Councilman Dee Andrews asked city management what effect a thirty day delay would have, Councilman DeLong answered instead, telling Andrews that if the Council didn't approve the proposal, the landowner had indicated it wouldn't pursue a wetlands exchange further. "Thank you," Councilman Andrews replied...and didn't speak further. Audio, click here.
Councilwoman Gerrie Schipske said the exchange was a good idea that has gone bad; said the original deal was "cloaked in a false sense of urgency" in February 2009...and yet "here we are in August...and we now hear the owner will walk away" if the Council doesn't approve the deal. Councilwoman Schipske said the City's role isn't to "bail out a developer" and while wetlands are priceless, "remediation is not." Audio, click here.
Councilwoman Rae Gabelich displayed an itemized listing of costs to the City of LB in the transacton. The costs to the City approached $20 million ("just from what we've identified here") and the potential proceeds from the sale of the wetlands is $1.5 million to $9.5 million. "That doesn't seem like a very good deal to me," Councilwoman Gabelich said.
Councilwoman Gabelich also noted that an item in management's report indicates the City will be required to reimburse the refuse fund (with money or more land)...and she asked how much that would cost. Mr. Conway responded that this could cost $2.4 million more. Audio, click here..
Councilwoman Gabelich then made a substitute motion to have LCW Partners to negotiate directly for sale of its wetlands to the state conservancy...so the City wouldn't bear these costs.
Councilman Patrick O'Donnell responded by indicating that he believes management's proposed exchange would be a good deal for the city in the long run. He made a substitute-substitute motion (countering Gabelich) that was basically DeLong's motion to approve...but with legally non-binding "intent" language on future open space use of the property that doesn't bind future Councils. Audio, click here.
Management's proposal doesn't include a deed restriction or other language legally binding future Councils regarding open-space use of the property...and Councilman O'Donnell's "intent" verbiage is likewise not binding on future Councils, simply reciting that it's the current Council's intent that the property be preserved in perpetuity as open space.
Realizing O'Donnell's motion was basically DeLong's management-supportive motion with non-binding "intent" language attached, Councilwoman Gabelich withdrew her motion to let Councilwoman Reyes Uranga to make her own substitute motion seeking a 30 day postponement.
These were the two motions ultimately voted on: first, the Uranga motion seeking a 30 day postponement [failed 3-6] and then O'Donnell's motion (basically DeLong's motion to approve management's proposal with non-binding "intent" language attached] which passed 5-4.
Prior to the votes, Councilwoman Tonia Reyes Uranga criticized the record of another Dean-related LLC, noting what it said it would do when it sought Council approval for a WLB crane storage facility...and comparing it with what she said had been done since the firm received Council approval. Reyes Uranga urged a 30 day postponement. Audio, click here.
Councilwoman Gabelich then engaged in follow-up questioning that produced a number of additional revelations. These included potential City costs of $2.2-$2.8 million to clean up the Public Service Yard if LCW or a new owner wanted to use the site for activities that might disturb the soil or build new buildings. Mr. Conway noted that LCW had originally proposed to use the facility for very heavy truck storage and use that he said "minimized city [remediation] exposure." Whether that use is allowed when a current Council-directed moratorium expires [expected before the end of the year] and a CUP process is put into effect [by a separate Council action] remains to be seen, Mr. Conway said.
"Have resources been identified to pay for [possible remediation] costs exceeding $2.2 million," [for potential new uses] Gabelich asked? "No, they have not," Public Works Director Conway said. "I think that says a lot right there," Councilwoman Gabelich said.
Under further questioning by Gabelich, Deputy City Attorney Richard Anthony said that if LCW Partners, LLC were at some point dissolved and tried to make distributions to its members that exceed its liabilities, the City could sue the members to seek repayment, which would require the City to take legal action.
Vice Mayor Val Lerch began by asking management if the Public Service Yard would move regardless of what the Council did. Public Works Director Conway responded that this has been management's "long term intent" [without mentioning that it's ultimately a Council decision]. Lerch then asked about selling the Public Service Yard and declared on his own that this would be "one-time" money that wouldn't prevent layoffs or solve the City's long-term debt problem regardless of whether it's sold or not.
After declining to engage in a colloquy with Councilwoman Gabelich on the issue (Mayor Foster is heard off-mike quieting Gabelich), Lerch changed the subject and said it was his intention that the City be protected from paying relocation costs of the Public Service Yard. He said cost has now been "taken out of the equation" because RDA will loan $500,000 in funds (now proposed to pay LCW rent instead of temporarily relocate the facility) and RDA would be reimbursed if the wetlands sell for at least $7.9 million. [Unmentioned: there's no state money to buy/reimburse LB for the wetlands now or in the immediate future.]
Vice Mayor Lerch then said that looking in the "long range," he believes acquiring/protecting the wetlands is a long term [benefit] for the City. The following are his exact words, transcribed from on-demand audio, below:
We have over and over again bought land through Redevelopment and through this City where we've held onto the land for a period of time and then developers come along and said, 'I've got a great plan for your community that will enhance your community' and we sold that land for a dollar, two hundred dollars, on what we paid for it.
Prime example is in Rae's district at the Trader Jo's. Developer came in and said 'you got this land, I got something that'll work for the city,' and we gave the land to 'em. We're doing the same thing at Artesia and Atlantic Ave. Bought all of that land and the restaurant people are going to come in and build restaurants on it and we're going to give them the land because it's going to be good for the community.
I see this as the same thing. At three years, four years down the road from now, if we've got a developer who's going to give us a good plan with wetlands, I don't have any problem with giving it to them for a dollar, because it's going to benefit the community. And whether or not some developer ends up today making a profit is not my concern.
My concern here is to make sure that long range this City is protected, wetlands and so on and so forth.
So if we end up giving it to 'em for a dollar because wetlands are more important ten years from now, it's what's been done hundreds of times in this city, so I don't see what's the big deal.
LBReport.com plans much more on multiple aspects of this major story.
Background
On Feb. 10, 2009, a City Council majority (Schipske and Gabelich dissenting, 1st dist vacant) voted to authorized city management to finalize to conclusion -- without further Council or public review -- an agreement to swap 33.77 acres of LCW-owned land (indicated below) for approximately 12.1 acres of the city owned Public Service Yard.
Immediate prior to that vote, a Council majority voted down (3-5) a motion by Councilmembers Gabelich and Schipske, backed Reyes Uranga to have the private entity pay $500,000 in taxpayer costs to relocate city agencies from the city owned property and to disclose to the Council and the public the terms of the final contract before approving it.
The Feb. 10 Council-majority approved transaction was halted by the City Attorney's office after a Public Records Act request by University Park Estates homeowner and wetlands advocate Tom Marchese uncovered City Hall emails (released by the City Attorney's office and first reported by TheDistrictWeekly.com's Dave Wielenga) disclosing how senior city management had negotiated the proposed transaction.
The City Attorney's office subsequently indicated that Councilmembers had not been informed of certain "material facts" prior to voting on Feb. 10 to approve the transaction.
City Attorney Bob Shannon directed that Councilmembers first discuss the matter in closed sessions...culminating with an "up-or-down" Council vote (re-vote) on the deal...which occurred on Aug.4.
