Price Comparison Shopping or Wheeling and Dealing?

Daley Ranch was a main topic of discussion at last Wednesday’s Escondido City Council meeting. Rick Paul, Treasurer of The Friends of Daley Ranch, opened the subject under Oral Communications, at the beginning of the meeting. He noted the history of the ranch, which was purchased by the City of Escondido in 1996 for parkland. In 1997, the city received approval from state and federal agencies to establish the ranch as a conservation land bank. That is, when a new building development damages natural habitat, the developer is allowed to mitigate that damage by purchasing credits from a conservation land bank, such as Daley Ranch. For more information see: https://www.escondido.org/daley-ranch-conservation-bank.aspx It was city policy to put all revenue from the sale of such credits, over and above what was necessary for maintaining the park, into a fund to expand or improve the park.

Paul explained that the fund had been used over the past few years to do major improvements to Daley Ranch. But, when former Mayor Sam Abed and the previous council found out that the use of the Daley Ranch revenue was a matter of policy, not ordinance, they acted to divert the income from Daley Ranch into the city’s general fund. Paul added that, if there had not been a change of the fund’s distribution, there would have been enough to buy an adjacent property—a property now being considered for development.

The next discussion about the ranch occurred during Consent Calendar Item 4: Request to Authorize Sale of Daley Ranch Mitigation Credits which had been pulled by the public and the council. Consent Calendar items are supposed to be fairly mundane items that ordinarily do not require discussion, such as approval of the minutes. (Well, actually the approval of the minutes was also pulled for discussion during this meeting—but that’s another issue for another blog.) So, when I see items like this on the Consent Calendar, I suspect someone hasn’t given the item the priority it deserves.

Attorney David Ferguson spoke first. He said that he had spoken to his clients, the developers of the North Ave. Estates project, and potential purchaser of the mitigation credits. Ferguson had suggested that instead of paying the Fallbrook Land Conservancy $290,250, they should pay the City of Escondido that amount for 8.15 habitat credits. Ferguson had been successful, and glad that he had been instrumental in being able to enrich Escondido’s coffers by over a quarter of a million dollars.

Now in the description of this item on the Agenda, it is clearly stated that “[t]he proposed sales price represents a discount of $166,926 from the established Daley Ranch credit prices…” This price had been approved by the former council last January. https://www.sandiegouniontribune.com/communities/north-county/sd-no-daley-ranch-20180202-story.html

Rick Paul spoke again. He had reached out to the Fallbrook Land Conservancy, and asked them if they knew how much money they had left on the table with their proposed $290,250 sale. They did not know. Paul said he did not care whether Fallbrook or Escondido received payment for the credits, but to proceed with this sale would set a terrible precedent for the city, leaving the city open to future lowering of the land bank values. If the council voted against the item, Paul believed that Fallbrook would also ask a higher price.

Councilwoman Olga Diaz noted that Fallbrook decided pricing on a case by case basis. She also noted that at that January meeting the council had acted to prevent the underground market of mitigation credits by their ordinance that requires 75% of any profit that buyers of their mitigation credits make from resale to be returned to the City of Escondido.

Councilman John Masson said he would abstain as he had previously worked for this developer.

Councilman Mike Morasco said he felt it was not acceptable to accept hearsay. Ferguson said that if the city said no, the developer would go back to Fallbrook, but that if the city did so proceed it would be the last time he ever tried to do anything nice for Escondido. Morasco was assured by staff that the price of $290,250 was not an outlier of pricing.

Councilwoman Consuelo Martinez said she was not familiar the issue, and wanted more information.

City Manager Jeff Epp pretty much argued that a bird in the hand was worth two in the bush. It would be an immediate $300K or so in the General Fund.

Diaz said she felt it would be a mistake to not stick to the standards agreed to by the council and city staff, she did not want to cheapen the product.

Morasco noted that the city had a lot of credits to sell, and had not sold much since they had raised the price, and all markets will vary.

Assistant City Manager Jay Petrek explained that when the city had determined what the price of the credits should be last January, they had based their calculations on published pricing, adding that many conservation blanks did not publish their pricing, and that there was a lot of wheeling and dealing.

Diaz protested any such wheeling and dealing over this limited commodity.

Petrek said it was a matter of price comparison shopping.

Mayor Paul McNamara asked Petrek to explain again how the city had derived the pricing for the mitigation credits. After Petrek responded, McNamara said he believed that this was a commodity that was limited, and the price unlikely to decrease.

Epp said that the city had an ample supply, and might not see another offer for years.

McNamara said that was a chance they would take.

The item failed with “three no votes, Morasco voting yes, Masson abstaining.”

I feel a bit sorry for Ferguson. I believe he really thought he was doing the city a favor. His client would certainly not see any saving by buying their credits from Escondido rather than Fallbrook. Had the old council still been in place, I’ve no doubt that the council would have approved this measure. I can’t say I blame Ferguson for his reluctance to “do a nice thing for the city of Escondido.” But, I’m glad that the new council is making decisions independent of the “good ole boy” philosophy that has so long reigned in council decisions.

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