It’s not all Oakland A’s news this week! Over in the last California city to shovel hundreds of millions of dollars at the local baseball team as a sweetener for a “private” stadium construction deal, Anaheim city attorney Rob Fabela told the city council yesterday that the city faces a choice: Reopen bidding on the Angels Stadium site to affordable housing developers, or pay a $96 million fine.
The state housing agency said the city might have violated state law by not making the land available first to affordable housing developers and not securing the exclusive negotiating agreement with the Angels that might have exempted the city from the current version of the law. The city argues it was in fact negotiating exclusively with the Angels, even in the absence of a signed agreement, and that the project meets the state requirement of 15% affordable housing on development of public land.
However, if the agency and city cannot resolve the issue, Fabela said the council could consider putting the land up for bid among affordable housing developers, a process that he said “certainly could” undo or delay the Angels deal. That would not necessarily mean that affordable housing developers would be interested, or that the city could reach a deal with any of them.
Fabela said of the potential $96 million state fine, “Obviously, that would be a lot of money,” which it obviously would be. Apparently the fine, previously reported as 30% of the sale price, would indeed be on not just the $150 million in cash Angels owner Arte Moreno is providing, but also the $170 million in parks and affordable housing that is being counted as a payment-in-kind.
The L.A. Times’ Bill Shaikin goes on to note that if the city were to pay the fine, it would be left with only $54 million from the sale of its land, thanks to all the discounts Moreno got on the property. Since the land’s value has been appraised at $500 million, that would be $446 million subsidy Anaheim would be handing over to Moreno — or, to be more precise, a $350 million subsidy plus paying off the state $96 million as a penalty to make the deal happen. Or the city could see if any affordable housing developers would rather pay for building in the parking lot once the Angels’ lease is up (currently set for 2029, but Moreno has two five-year extension options), collect fair market value, and then figure out what to do about the Angels that doesn’t involve $446 million in land discounts. It’s not clear how long the Anaheim council has to make up its mind, but I know which one I would suggest, if they asked me, which they won’t, even if public commenters to the council do sometimes quote me.
California Department of Housing and Community Development findings were preliminary. City’s staff position, Surplus Lands Act of 2019, not 2020, applicable based upon City of Santa Monica case where there was no exclusive negotiating agreement (had expired), HCD found Santa Monica to be in compliance with 2019 SLA via a “constructive ENA.” If escrow hasn’t closed, City Attorney Robert Fabela estimates escrow will not close until end of year or early next year, HCD’s final determination is city is in violation of Surplus Lands Act, city may remedy by sending notices to re-open bidding to affordable housing sponsors and applicable government agencies (yes, this is complicated by the sale to SRB Management Company, entity controlled by Angels owner Arte Moreno. https://local.anaheim.net/docs_agend/questys_pub/25685/25715/25717/25858/25870/2.%20Letter%20of%20Understanding25870.pdf
https://ballparkdigest.com/2020/06/01/moreno-asks-for-additional-time-for-angel-stadium-redevelopment-plan/ ). If however escrow closes and HCD’s final determination is city is in violation of Surplus Lands Act as determined by the courts (any legal fees due to litigation resulting from sale will be borne be SRB Management – 9:24), City Attorney Robert Fabela didn’t find to be probable due to parties ability to delay the sale transaction while city resolves HCD issue, per statute city is subject to penalty that is 30% of purchase price.
http://anaheim.granicus.com/player/clip/2664?view_id=2&redirect=true
Time Frame: 8:38 – 9:31. City Council and City Staff discussion only.
https://docs.google.com/gview?url=http://records.anaheim.net/cityclerk/0/edoc/2398679/07-20-21_Action%20with%20Comments.pdf&embedded=true
No public comments on issue. Only correspondence received on issue (below).
http://records.anaheim.net/CityClerk/0/doc/2397741/Page1.aspx
So in short, Anaheim has until escrow to either back out of the sale or convince HCD that it’s kosher, or else they have to pay the $96m?
Until final determination by HCD, next city action is unknown. Currently, City Attorney Robert Fabela is working with HCD to determine what available remedies are (whether notices sent out, rescind the transaction, etc). Further, City Attorney Robert Fabela stated “he is reaching out” to SRB Management Company as to legal fees, “however city has not crossed that threshold yet” and specifically stated “SLA as determined by courts.” Lastly, City Attorney Robert Fabela stated, “HCD is in experimental phrase of exercising new powers granted to it in September 2019.”
AB1486:
https://www.hklaw.com/en/insights/publications/2019/09/new-california-surplus-lands-maps-and-legislation
In other arena news, Arizona Coyotes in talks with Tempe on new arena
https://www.azcentral.com/story/news/local/tempe/2021/07/22/arizona-coyotes-talks-tempe-new-arena/8052304002/
Phoenix Business Journal weighs in.
https://www.bizjournals.com/phoenix/news/2021/07/22/could-the-coyotes-build-a-new-arena-in-tempe.html
So, a simple question from a non-California resident:
Is the affordable housing consideration requirement (if that’s the correct term for it) just the “Denny Green rule” of the California Development industry?
In other words, does Anaheim actually have to legitimately consider any AH proposals and weigh the pros and cons (preferably publicly) of same on merit?
Or do they just have to accept some mailings, not bother to open them, and then 3 minutes after the deadline for AH proposals has passed announce they are going to sell the land to Moreno at less than FMV anyway?
It looks like Anaheim would be severely limited in its grounds for rejecting an affordable housing bid, though I suppose they could try claiming that “not willing to let Arte Moreno build on the site” qualifies as disagreeing on lease terms:
https://www.hcd.ca.gov/community-development/docs/sla_guidelines_final.pdf
Grounds for local agency to reject offer:
(A) A local agency may reject an offer when the local agency and buyer/lessee
cannot agree on sales price or lease terms.
(B) A local agency may reject an offer when priority is given to a competing
offer that includes a greater number of affordable units or, in case of a tie
in the number of units, the lowest average level of affordability consistent
with Government Code Section 54222.5.
(C) A local agency may reject an offer when the interested entity is not
responsive to a local agency’s reasonable conditions or restrictions as
described in the NOA, where consistent with these Guidelines and the
SLA, and such conditions or restrictions are reviewed by HCD.
Interesting, thank you. So, at worst, this may actually force Moreno/the City to build enough AH units to match the ‘best’ of the acceptable bids (assuming there are any)?
I generally find that these sorts of requirements (while well intentioned – like Glendale’s $700m lease break fee for the Coyotes) can be easily defeated or circumvented by even moderately capable lawyers working for billionaires.
Maybe this time it will be different.
Redevelopment of the San Diego Arena rebuild/development ran afoul or this rule as well.