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Wednesday, December 17, 2008

District Does Grande Property the Right Way and It Will Pay Off

Last night at the Davis City Council meeting, the City Council heard from the school district for the first time about the 41-unit proposed development on DJUSD property that the district has been hoping to sell for some time in order to provide some additional facilities money through the California Education Code’s provisions for the sale of public surplus property.

The result of the meeting was a unanimous 5-0 by the council to move the process forward. At the conclusion of the item, a good sized number of the Grande Property neighbors stood up and cheered. It was the end of a long process, but the last year and a half of this process has marked a model for government agency inter-cooperation between the school district and the city and an equally impressive model for government agency-neighborhood cooperation.

It was only just over one year ago, in their November 18, 2007 Op-Ed in the Davis Enterprise, that former DJUSD Board Trustees Marty West and Joan Sallee accused the newer school board with fiscal mismanagement regarding the Grande Property. They wrote:
“When we left the school board in December 2005, the finances of the school district were in good shape. 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 In early 2006, the board majority rescinded the $5.5 million contract we had signed to sell the Grande Avenue site, thus jeopardizing funding for building a student commons at the high school and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.”
The Vanguard has largely debunked that argument with a detailed recount of the Grande issue that was run on March 10, 2008 as the third installment in the Vanguard Investigation into Tahir Ahad and the dealings of the DJUSD Business Office under his leadership.

In 2005, there was no chance that the neighbors would have stood up and cheered. The early process was marred by neighborhood complaints and backdoor deals, the likes of which are still not fully known even after the Vanguard's investigation.

The gist of the arrangement was a shady three way trade in which the district fearing the city to the invoke the Naylor Act and require sale to the city at below market, tried to swap the land with UC Davis property near the Fairfield school and then sell the land to a Bay Area based developer.

From the March 10, 2008 Vanguard:
The arrangement that Superintendent David Murphy and Tahir Ahad had employed by October of 2005 was a land swap that involved a UC Davis property that was the home of Fairfield Elementary School. This piece of property that the university had not wanted was offered to Davis Joint Unified for at least three years prior to this land exchange. The university had been willing to simply give DJUSD the Fairfield School property at no cost.

Instead, the school district would enter into an agreement with BP Equities in which BP Equities would pay the school district $4.5 million in exchange for helping the school district to acquire the 10-acre site west of Davis. In essence, Davis Joint Unified would trade BP Equities the Grande Property in exchange for $4.5 million and the Fairfield School.

Coincidentally, this $4.5 million happened to be the same monetary amount that the district lost out on matching funds from the state when they missed the Montgomery Elementary school deadline. Questions have arisen as to whether the speed, urgency, and also secrecy of this deal had something to do with that lost funding.

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.
In the meeting when the board rescinded the original sale, Board member Provenza expressed his concerns for the process:

“I have an ethical concern about going forward because I feel that the process from the beginning was flawed. And it’s not because of anything that Mr. [Brian] Purcell [from BP Equities] did, he was negotiating with Tahir Ahad in good faith, but our process I believe was flawed from the beginning."
While that deal was approved by the previous board featuring Ms. West and Ms. Sallee, the newly elected board featuring Gina Daleiden, Sheila Allen, and Tim Taylor joined fellow board member Jim Provenza in rescinding the deal in early 2006, much to the chagrin of Joan Sallee and Marty West, who nearly two years later were raising the issue again last November.

It is interesting to note a letter from the Grande Neighborhood Association still posted on their site from September 2005:
"We also learned that Tahir [Ahad] and B.J. [Kline] were working under the impression that the neighborhood endorsed development of the Grande site for 48 homes (Alternative B that we discussed during the neighborhood meeting and potluck in June). We told him that was not the case - the neighborhood supported the concept of the other alternative, which had 33 homes, and was generally consistent with R-1-6 zoning (like that on the west side of the Grande site)."
Note the lack of communication between the two parties. Also note the fact that the district and neighborhood ended up splitting the difference in density right down the middle, with the neighborhood making it a point to give the district last night 41 units which the district wanted quite badly.

Since the time of that letter and the eventual board decision to go ahead with the sale, the district has completely changed its approach. They have met extensively with the Grande Neighborhood Association. They have worked out a deal with the district and the city to develop a 41-unit subdivision which reflects the basic density of the surrounding neighborhood.

Several neighbors came up and raised minor concerns with the plan but were thankful to the district for working with them on their concerns. The biggest concern was the safety issue of bikes pouring out onto Grande Avenue.

So the city council moved one of the lots, lot #9 it was called, which sat on the outside of the development. They agreed to turn that lot into a community gardens in order to allow bike traffic to flow there rather than through the more heavily traveled Mercedes Road which would flow into the new subdivision.

By working with the city, the district helped the neighbors to identify a longstanding safety issue. There are still some details that need to be worked out, but the neighbors are comfortable enough with the process and the commitment of both the city and DJUSD to addressing them, that the project has been moved forward and fast tracked.

One of the issues still be resolved is that the school district would like to prioritize affordable units for their own employees. That will have to take place by lottery and the district has agreed to indemnify the city should the issue of discrimination come up.

All of these issues should be addressed by January when this comes up for a second reading to the ordinance.

Many involved describe this as a win-win-win scenario for all involved. The school district has worked extensively with the neighbors to produce an acceptable development proposal. The district and city have worked close together rather than against each other as typified the early part of the process where the district tried to pull a shady deal out of fear that the city would invoke the Naylor Act.

Instead what we will see come forward is a fully entitled property that will hit the market. Even given the economic downturn and collapse of the housing market, there is nothing more rare in Davis than fully entitled property. As such, when the district puts it on the market, the selling price will well-exceed the $5.5 million that the district would have gotten had they gone through with the sale. Even at that time, there were credible offers, and the Vanguard has seen these in writing, from credible local developers for as much as $8 to $9 million. They sold it quickly to avoid public scrutiny.

From this standpoint alone and from the standpoint of working with the neighbors to gain approval, the district has contradicted the complaints of its two former board members.

But in all likelihood, the district will get far more than the $5.5 million. A prospective owner will quickly recognize that they do not have to build immediately, but rather they can buy the property and wait for the right market. The value is that they know this is Davis property and that the land is fully entitled and they only need to go ahead with the development agreement to make a huge profit.

It is a winning solution for all involved and shows the value of transparency and cooperation. This is the model now for how to do business whereas the previous process was the very model for how not to do business.

---David M. Greenwald reporting