Five hundred years ago, Italian author and of modern political science Niccolò Machievelli wrote the seminal classic, “The Prince,” promoting “the ends justify the means” to achieve political objectives – a philosophy frowned upon by those who believe in fair play and open government.
The idea that the “ends justify the means” may be exemplified in the City’s recent purchase of 3.8 acres (the Fox Green property) for $5.3 million. Some argue purchasing the property the City has coveted for many years (which may pave a way out of the Village Entrance controversy and serve as a sort of parking space “bank” for future City needs) is justified.
But do the “ends” here justify these means?:
Did the City “rush” into buying this property?
On Oct. 29, the City Council made the surprise announcement that it was “in escrow” to buy Fox Green after it had informed the public that no major action would be done about the Village Entrance until after the Nov. 12 workshop.
Was there an impermissible “cloak of secrecy” around this deal?
The City crafted a scheme to buy the property hiring a real estate agent to act as a “secret agent” to negotiate on its behalf without disclosing the agent’s association with the City. Was this permissible under the “Brown Act.” CAL. GOV. CODE § 54956.8 :
Prior to the closed session, the [City Council]. . . shall hold an open and public session in which it identifies its negotiators, the real property . . ., and the . . . persons with whom its negotiators may negotiate. (Emphasis)
The City Attorney opined that the assumptions about The Brown Act are “wrong,” but he did not elaborate. It seems that a full explanation is in order.
Is the City overpaying for this property?
The last time the property sold at market was May 23, 1997, for $522,500 and was sold at a foreclosure sale on March 31, 2011 for $548,537. In 2011, the City paid for an appraisal (the last appraisal on record), indicating a value of $2.4 million. The $1.4 million per acre the City is paying fails to take into account that only about 1/2 acre is usable space.
Why didn’t the City buy the property when it went into foreclosure in 2011?
The City claims there were “senior” lines and a “lis pendens” (lawsuit) at the time of the foreclosure sale. However, a thorough records search indicates only about $2 million of liens. Furthermore, the lis pendens is moot as it was actually withdrawn two years before the foreclosure sale with no other recorded lawsuits. This contradicts the real estate agent on the current deal who stated the liens were between $3-4 million. Yet despite repeated requests, no evidence has been provided substantiating these numbers, and regardless, all liens in 2011 were far less than the $5.3 million the City is now paying.
Did the City owe the public a fiduciary duty to obtain a current market appraisal?
Under basic fiduciary responsibility, the City Manager has a duty to spend the Public’s money by trying to acquire property for the least amount of money. The conventional basis to determine value is an appraisal by a qualified “MAI” appraiser, or at the very least use its original $2.4 million as the basis for its first offer? Thus, why didn’t the City order a current appraisal and use that as its basis when deciding to purchase this property? Furthermore, did the City owe the public a consistent standard for purchase of real estate with public funds considering it obtained an appraisal in 2011 when it was merely interested in the same property?
Did the City rely on unsubstantiated representations?
The City justifies its $5.3 million price on a so-called “MAI” appraisal of $8.2 million done in 2009 under dramatically different market conditions. Critically, why did the City ignore the December 2012 comp of nearby developed property that sold to the College of Art and Design for $2.9 million?
Should Mayor Pro Tem Pearson have disclosed her personal business relationship with the secret agent for the City and/or recused herself from voting on the matter?
At the Nov. 5 Council meeting, it was revealed that the secret agent the City was using to negotiate for the property was the same real estate agent who handled the sale and purchase of Mayor Pro Tem Elizabeth Pearson’s homes. Questions remain about the circumstances how and why the City chose this particular real estate agent, and while not unlawful, why didn’t Mayor Pro Tem Pearson disclose her business relationship or recuse herself when it came time to vote on the matter?
I recently asked one of our councilmembers, “Do the ends justify the means in politics?”
“Never,” was the quick retort, to which I rhetorically replied, “Except when it comes to the Village Entrance?” Machievelli must be smiling in his grave.
Alan Boinus is a 25-year resident of Laguna Beach and is a marketing entrepreneur. He can be heard regularly on Sunday mornings at 8 a.m. on Laguna Beach radio, KX93.5 on the show “Clashing Heads,” with co-host Jim Kennedy.