Statement of Eye on Sacramento to Sacramento City Council on Phony Land Values Used in Arena Deal

Statement of Eye on Sacramento to Sacramento City Council on Phony Land Values Used in Arena Deal

Tuesday, December 17, 2013

I’m Craig Powell, President of Eye on Sacramento, the watchdog organization that keeps an eye on what you do and barks when you go off course. Last week, we barked loudly when your city treasurer announced a plan to sell arena bonds just 14 days before the anticipated June 3rd election on the arena initiative, an action that could, under current California law, legally invalidate the initiative and tyrannically cheat city voters of their constitutionally protected right to an election on the initiative under the California Constitution and the 1st, the 5th and the 14th Amendments to the U.S. Constitution, assuming the measure qualifies for the ballot.

Tonight, we are barking loudly again, this time to reveal an ongoing scheme by city officials to deceive the voters and taxpayers of this city about the true value of a major parcel of real property that you plan to give away to the Kings owners as part of the arena deal, one of seven such properties in the city’s gifting program to billionaires. I refer to the value that your staff, namely assistant city manager John Dangberg, assigned to a 60-acre parcel of prime freeway frontage, commercially zoned vacant land that lies between Haggin Oaks Golf Course and Business-80. Mr. Dangberg’s misrepresentation of the value of the 60 acres appears on page 9 of his key March 26th staff report to the council, the evening you approved the arena term sheet.

Your staff, specifically Mr. Dangberg, represented that the 60 acres had a market value of $3.9 million or $65,000 acres based on an undisclosed “broker’s opinion” of value. In violation of standard and prudent city policy for large real estate transactions, the city failed, despite EOS’s warnings, to obtain independent appraisals of the seven properties involved in the billionaire gifting-program, an action that would protect the interests of the city and its taxpayers, the folks you are supposed to be serving.

On November 1st, Inside magazines published my “Inside City Hall” column on this matter. It noted that two prominent and respected local developers had privately stated that the actual market value of the 60 acres was four to five times the value placed on it by city staff, namely between $15 and $18 million (between $250,000 and $300,000 per acre).

Tonight we observe the folly and danger of skipping independent appraisals in your frantic rush to shovel city taxpayer money out the door to billionaires.

We want to draw the attention of the media and the public to Agenda Item 5 on your consent agenda this evening which seeks your approval of a deal to sell a 9.15-acre parcel of land that adjoins the 60-acre Haggin Oaks property to Rapton Investment Group for a price of $4,305,000 or $470,049 per acre. (A Mel Rapton dealership currently leases the land from the city). Unlike your staff’s valuation of the 60-acre property, the city secured an independent appraisal for the sale of the Rapton parcel and the appraiser found that that parcel has a current market value of $467,760 per acre, more than seven times the phony $65,000 per acre valuation your staff placed on the adjoining 60 acres of land that a council majority wish to give away to billionaires.

Perhaps Mr. Dangberg will claim he was simply mistaken back in March when he represented to the public that the 60 acres was worth only $65,000 per acre. The facts tell quite a different story.

Our research reveals that two years ago, in February 2011, the council approved the sale of another parcel of land that adjoins the 60 acres, this time a 5.12-acre parcel of vacant non-freeway frontage, commercially zoned land that the city sold to Chrysler for a price of $2,336,224. (Agenda Item 3 on the consent agenda of the February 22, 2011 council meeting.) The price paid by Chrysler was $456,294 per acre and, again, the city commissioned an independent appraisal to support the purchase price.

Who signed the grant deed on behalf of the city in the Chrysler sale? It was John Dangberg.

Now there is some difference in value between the Rapton and Chrysler parcels, on the one hand, and the 60 acres of land involved in the arena deal, on the other. The Rapton and Chrysler parcels are along existing public roads and have utility services in place and the 60-acre property has neither. But there no way in God’s green earth that such off-site improvements increased the value of such land from $65,000 per acre to $467,000 per acre. The opinion of the two prominent local developers that the undeveloped 60 acres are currently worth – without off-site improvements – between $250,000 and $300,000 is a much more accurate assessment of its real current value.

There is also a four-acre parcel of developable freeway frontage, commercially zoned property located directly across the Business-80 freeway from the city’s 60 acres that is currently listed for sale. The four-acre parcel sits along Auburn Blvd. It is listed for sale by Ken Noack Jr. for $4.2 million, a price of over $1 million per acre.

So, Mr. Dangberg had personal knowledge from his involvement in the Chrysler sale of the likely fair market value of the 60 acres of land when he falsified its value in the crucial March 26th staff report on the arena deal. It appears that he understated the value of the 60 acres – and the resulting higher cost to city taxpayers – by somewhere between $11 million and $14 million, and perhaps by an even larger amount. Only an independent appraisal of the property would establish the actual extent of Mr. Dangberg’s misrepresentation.

That brings us to Agenda Item 30 on tonight’s council agenda, where Mr. Dangberg is suddenly asking you to remove the 60 acres at Haggin Oaks from the arena deal and substitute in its place three pieces of property in the downtown and midtown areas. He is asking you to trust him that the three substitute parcels are worth just $3 million. But the evidence shows that neither you nor the public can trust Mr. Dangberg anymore on such matters. Again, no appraisals were obtained. He is again apparently relying upon a broker’s opinion of value, a broker whose income is dependent, in part, on a steady flow of property sales business from city officials like Mr. Dangberg. Such an arrangement, as the evidence clearly shows, is an invitation for abuse.

Mr. Dangberg’s cover story for the sudden switch, as revealed in his staff report, is that it would allow for faster reuse of these three under utilized properties. That may be one explanation, but it’s not the most plausible explanation.

What we believe is most likely occurring is that when Mr. Dangberg became aware that the Rapton sale would be coming before you and the public tonight, he realized that folks like EOS would likely spot the sales price of the Rapton property, its appraised value and the fact that it adjoins the 60 acres involved in the billionaires give-away program. Public discovery of the details of the sale of the Rapton parcel would likely expose Mr. Dangberg’s misrepresentation of the value of the adjoining 60 acres. So we suspect that he quickly contacted the Kings owners to alert them that the charade was about to be revealed and that they acted in concert to quickly rejigger the arena deal to remove the smoking gun – the 60 acres – and hide the pea under another shell, this time under three other unappraised city properties.

In response to these stunning revelations, Eye on Sacramento recommends that you take the immediate following steps:

(1) That you suspend Mr. Dangberg immediately pending a thorough investigation into the extent of his involvement in what appears to be a scheme to deceive the public and cheat the city and city taxpayers out of over ten million dollars of property value;

(2) That you promptly appoint a blue ribbon investigatory task force comprised of respected Sacramento citizens who have had no prior involvement in the arena issue and direct it to review the extent to which city staff deception has infected valuation of the properties and other assets you plan to hand over to billionaires in the give-away program;

(3) That you grant the task force investigatory powers, including the power to issue subpoenas to compel the appearance and public testimony of witnesses under penalty of perjury, except where task force members determine that the search for truth would be better served by closed testimony of witnesses.

(4) That the city engage an independent law firm experienced in conducting internal investigations to thoroughly examine these matters and to advise the investigatory task force in the performance of its duties; and

(5) That the city direct that the investigatory task force to complete its work and issue a report on its findings to the public within 120 days.

This matter has undermined the public’s confidence in the city’s handling of the arena deal. No longer can citizens trust that city staff are providing fair and honest assessments of the costs and risks of this deal to the city and its taxpayers. The only avenue available to you to restore such trust is to clean house, expose the extent of the deception and commission an independent review of every element of the arena plan, including the true extent of billionaire give-away program and the viability, risks and taxpayers costs of the proposed arena bond financing plan.

The extent to which the public has been and continues to be deceived in the arena deal will eventually be fully exposed. If you do not take prompt action to clean your own house, we suspect that other government officials will intercede and do it for you.

If you have questions regarding this matter, please contact Craig Powell by phone at (916) 718-3030 or via e-mail at craig@eyeonsacramento.org. For updates, visit EOS’s website at www.eyeonsacramento.org.

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