On November 19th the City Council voted to move forward on an agreement with Cal Fire to exchange a parcel in Stillwater Business Park for Cal Fire’s property on Cypress Avenue close to City Hall. This basically means we’re finally selling another lot at Stillwater.
Here is the video for the City Council decision to trade a Stillwater lot to Cal Fire for their building on Cypress Street. No cash in deal for city. No underlying debt reduction. No new jobs. No increase to tax base. Under this deal the City actually owes Cal Fire $1million in addition to the Stillwater lot when the transfer is complete. City pays this to Cal Fire by 5 years of rent credits to Cal Fire for remaining in the Cypress Street building. Seems like a wish and a prayer instead of a smart business decision. I voted no but was outvoted 4-1. I hope it works out the way the other council members believe, but I have my serious doubts.
Posted by Michael Dacquisto on Monday, November 25, 2019
The Council voted 4-1 ( Dacquisto dissenting) on this land exchange agreement, which required some reading of the fine print to understand. Essentially, Stillwater Lot #11 is worth $900k less than Cal Fire’s Cypress property. In order to make a fair exchange, the City will agree to provide Cal Fire free rent on their current property over the next five years while they build out their new facility at Stillwater. This free rent situation is valued at 14.6k/monthly in potential income, which, over the five years, will equal the $900k more this property is worth as compared to the Stillwater property.
This is described in the staff report as a “financially neutral situation”.
“The City Council directed staff to negotiate a property exchange agreement that would not impact the general fund” reads the staff report given to the Redding City Council. But wasn’t the whole point of selling a parcel at Stillwater to reduce the impact on the general fund? I mean didn’t we want to get some money out of it?
Oh . . . . they mean no NEGATIVE impact on the General Fund. They mean they won’t lose YET MORE MONEY on Stillwater this way.
Kudos, Council. Applause. Stopping the bleeding is a good goal.
Although, as Mr. Dacquisto pointed out “the day after the proposal is signed the city is now indebted to Cal Fire for approximately a million dollars.” Well there is that.
And, as Mr. Dacquisto also pointed out, there is the possibility that the City could lose even more money on Stillwater by agreeing to this deal. If CalFire manages to construct and occupy the property sooner than five years from now the City will then have to make up the difference between the values of the properties either by reducing or eliminating impact fees or paying CASH. Since impact fees are estimated to be $160,000 for the property, if it takes CalFire less than 4 years to develop their property Redding will owe them real money.
The Staff Report also goes on to state “There will be some transactional costs associated with the agreements that will be paid from the General Fund (escrow fees, environmental assessments, etc.); however, the agreements allow for the property exchange to take place without a significant impact on the General Fund.”
How much for these transactional costs, paid from the General Fund? Unknown. And certainly those amounts could have been included in the Staff Report, couldn’t they? I mean have you ever bought a house without estimating the fees before signing the paperwork?
Stillwater was bought and developed by the City at a cost estimated to be between 23 million and 40 million, depending on whether you believe City leaders or the Grand Jury. (Full disclosure: I was one of two lead writers on the Grand Jury’s Stillwater Report, but am sworn to secrecy on the confidential details acquired through our investigations so I am careful to only use publicly available information here.) The initial financial investment into Stillwater Business Park, made by the City using bond debt, was intended to stimulate the economy in Shasta County by providing more local jobs.
It’s not clear that Cal Fire, an organization already operating here in the County, meets this intent in any meaningful way. While Cal Fire intends to employ several hundred at their new facility, City staff member Mr. Vaupel could not provide any estimate on the number of these jobs that will be new. And noticeably, the staff report on the purchase agreement fails to mention whether this deal meets Stillwater’s intended purpose.
It’s also not clear how good for the City this exchange really is. I mean, yes, they get a valuable piece of property in the exchange (after five years or so) but it kind of reminds me of the deals my 17 year old tries to shaft me with.
Him: “Hey want this $100 Macy’s card? I’ll sell it to you for only $75. I don’t need to buy anything at Macys.”
Me: “I don’t need to buy anything at Macy’s either. So no, I don’t think so. But thanks.”
Him: “But you’d basically be getting a free $25.”
Me: “Actually I’d be throwing away $75 because I don’t have any use for a Macy’s gift card.”
Him: “But there are so many great things to buy at Macy’s”
Me: “ Why don’t you buy them then.”
And so on.
Yes, potentially this deal is sweet because the land the City of Redding is gaining is more valuable than the land they’re getting rid of. And, as Julie Winter told the Council “if we don’t use it we could certainly sell it.” Julie’s series of questions on the topic to Mr. Vaupel read like lines in a play, pre written and rehearsed, then carefully delivered to get the best response.
In contrast to Julie Winter’s studied aspect, Barry Tippin, Redding’s City Manager, seemed quite transparent that this land exchange is, in large part, driven by a desire to own Cal Fire’s Cypress property, which he stated “Councils have always sought to acquire.” “We are here tonight because of broader policies, not just specific to Stillwater. It’s about achieving more grand scale policies put forth by previous City Councils.” Mr. Tippin said.
Let me guess, do these “grand scale” policies involve the City of Redding expanding its current Taj Mahal facilities and spending yet more money on employee, administrative, and maintenance costs?
Wow. This deal is looking less “financially neutral” all the time.
But Tippin wasn’t committing to keeping the property, stating that we “could sell the asset, put that to that (Stillwater) loan . . . You could lease those facilities out, take that lease money and put it to that loan.”
Yes, Mr. Tippin. You could. And Mr. Dacquisto seemed to think this might be the only way to make this deal palatable. Unsurprisingly, such intent to sell or lease the property to pay off loan debt at Stillwater is absent from the City Council’s motion on this matter.
So I’ll believe it when I see it.
It would be the right thing to do though, since according to the Grand Jury the City of Redding is spending almost $1 million annually on maintenance and loan debt repayment for Stillwater. But, wait, the City won’t even be able to sell their new Cypress property for five more years since Cal Fire will still be renting it back, for free.
Despite all this, according to Ms Winter’s statements on Tuesday night, at the very least we have gained something valuable . . . appearances! Someone will have purchased a property at Stillwater and will likely begin building on it soon. This has got to raise the image of the City’s bereft Stillwater property, making it more likely that others might buy in soon, right?
(She refers to this as a “win-win”.)
But this sounds a lot like the reason we sold the first Stillwater parcel to Lassen Nursery back in 2015. Despite the lack of new outside jobs Lassen Nursery would bring, getting somebody to start building at Stillwater had to be a good thing, people in charge seemed to think. Several years later Lassen Nursery is still pending, indefinitely, on a build at Stillwater and the City is still looking for someone, anyone, who will make this look like a cool place to buy and build.
So what do we have here? We have a land exchange deal that is unlikely to bring significant numbers of new jobs to Shasta County, that fails to pay off any of the bond debt that’s owed from the General Fund annually, and that allows the City of Redding to acquire yet another property to renovate, fill with staff, and maintain.
What a bargain.
Wasn’t it only a year ago the Council was voting to declare a fiscal emergency? Apparently we’ve come a long way since then; far enough to begin to dream of fulfilling the “grand scale policies” only imagined by past Councils. Maybe it’s the vision of potential new sales tax dollars dancing in Councils heads.
I didn’t vote for you Mr. Dacquisto, but I’m certainly with you on this one.
What SHOULD the City do with Stillwater? I’d love to hear your ideas in the comments.