$5.5 Million Sale of Grande Property Ends a Long Saga

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The Davis school board accepted a bid from local developer Don Fouts to purchase the school district’s Grande property for $5.5 million.

The property was the subject of a major controversy nearly a decade ago, but after pulling back from an initial land swap deal, the district worked hard with the neighbors to reach an agreement. On Monday night in fact, the vice president of the Grande Neighborhood Association, Rob Egel, praised the district for its “willingness to step in, and create something positive for our city, and positive for the neighborhood.”

In 2008, the Vanguard, as part of a four-part exposé on former district Chief Business Officer Tahir Ahad, detailed the Grande property controversy.

State law strictly governs both the use and requirements for sale of surplus property. The district cannot use such money for salaries or classrooms, but rather only for facilities.

In 1971, the Davis Joint Unified School District purchased the Grande property, which is located in North Davis, for the use of an elementary school in anticipation that Davis would continue to grow in a northern direction. They paid just under $60,000 at the time for that property; however, nothing was ever built and growth patterns in Davis have not continued north of the city.

The district, realizing that it would likely not use the property for a future school, began in the late 1990s to look into selling or exchanging the property. Those efforts moved into high gear in 2005.

Complicating any sale of school property is the Naylor Act, or Education Code sections 17485-17500, which governs the sale of certain land owned by a school district.

Under the terms of the Naylor Act, before selling the land, the district must “first offer it for sale or lease to the city within which the land is situated.” Moreover, “The selling price must be not less than 25% of the fair market value and not less than the school’s cost of acquisition, as adjusted for increase in the area cost of living3 and any improvements made by the school.”

There was a fear at the time that, due to the Naylor Act, the school district could lose the property and gain just 25 percent of its worth. As a result, the school district went to great efforts under the leadership of Superintendent David Murphy and Tahir Ahad to avoid an open sale that would risk a potential invocation of the Naylor Act. These tactics raised serious ethical and perhaps legal concerns.

From the start, the district met in closed door sessions and in secret during discussions involving the sale of the Grande property. Instead of noticing the public via the public notice section of the newspaper, as is generally required for such sales of public land, the notice was buried in the classified section of the Davis Enterprise where few would be looking for such a public notice.

The arrangement that Superintendent David Murphy and Tahir Ahad had employed by October of 2005 was a land swap that involved a UC Davis property that was the home of Fairfield Elementary School. This piece of property that the university had not wanted was offered to Davis Joint Unified for at least three years prior to this land exchange. The university had been willing to simply give DJUSD the Fairfield School property at no cost.

Instead, the school district entered into an agreement with BP Equities in which BP Equities would pay the school district $4.5 million for Grande in exchange for helping the school district to acquire the 10-acre site west of Davis. In essence, Davis Joint Unified would trade BP Equities the Grande property in exchange for $4.5 million and the Fairfield School.

The land exchange generated a large amount of controversy in the community. Under pressure for the seemingly sub-market value sale price, the offer was raised on November 22, 2005, to $5.5 million and the deal was locked in.

Immediately, flags were raised. The initial asking price coincided with an amount that the district lost out on, losing matching funds from the state when they missed the Montgomery Elementary school deadline.

The revised sales figure seemed low. A West Sacramento developer would threaten to sue the district. John Whitcombe had a trade of 160 acres for Grande. A third proposal offered anywhere from $7.5 million to $10.5 million and offered to front the development costs.

The existence of these higher offers caused former Davis Mayor Maynard Skinner, who was in attendance at the November 22, 2005, meeting, to proclaim angrily that the district had just “kissed” away $2.5 million.

Interestingly enough – the $5.5 million that was offered the district at the time is the exact amount that the district ended up accepting nearly ten years later.

But the problems with the Grande deal were not merely fiscal in nature. There were also severe procedural problems with the manner in which this deal came down. As the Vanguard reported in 2008, from all appearances the District simply did not follow the procedures that were outlined in the Education Code for the sale of surplus school property.

Education Code section 17466 specifies that ordering the sale or lease of any property must be done in open session at a regular open meeting. However, this by all accounts did not occur.

Section 17232 requires that the process must be open and remain open for no less than 60 days. The provision includes for the transfer of property in addition to outright sale.

Furthermore, the education guidelines stipulate that “a request to waive the bidding process for a lease or sale of surplus real property” must assure a number of things including that “no other state code section or another agency’s jurisdiction will be nullified in order for the request to become effective.” Furthermore, “waiver requests generally indicate that districts have complied with the Education Code requirements but have been unsuccessful in selling or leasing the property…” Education Code section 33050, et seq.

In fact, the district did not request any such waiver. It certainly did not go through the normal process and failed to get a viable offer. No effort was ever made to go through a public, open bid process as the stipulation for waiver would seemingly require.

Furthermore, even if granted the waiver, the district still must go through an open public process at a “regular open meeting” and “the governing board will announce, at a public meeting, the applicants deemed to be qualified.”

Basically, the Davis School District did not follow the Education Code in the original Grande property agreement with BP Equities. It was a secretive, closed door process that appears, to this non-lawyer, to have violated each of these provisions of the Ed Code.

With a new board in place in the fall of 2005 and Board Members Gina Daleiden, Sheila Allen, and Tim Taylor on the board, the concerns of many in the community led the school board to re-examine the issue on March 16, 2006.

Jim Provenza would move to withdraw from the agreement. Tim Taylor seconded that motion.

Mr. Provenza, now a county supervisor, issued a lengthy statement: “I have an ethical concern about going forward because I feel that the process from the beginning was flawed. And it’s not because of anything that Mr. Purcell did, he was negotiating with Tahir Ahad in good faith, but our process I believe was flawed from the beginning.”

The Vanguard spoke with Sheila Allen back in 2008: “My recollection of why we reversed the decision—I think it was in my first meeting—is because I didn’t think it was the best deal for the taxpayers and the students of the district. I thought that we could do much better financially with an open process for the community.”

Gina Daleiden told the Vanguard, “The consensus was that Grande would be much more valuable sold as entitled property instead of as raw land which was what the first sale/exchange was to be. Particularly if the school district as a public entity could find a way to work cooperatively with the city as a public entity to help us along with the entitling of that property we would really increase the value to the developer who would eventually buy the entitled land.”

By December 2008, the city, school district, and Grande Neighborhood Association had worked out a deal with the district and the city to develop a 41-unit subdivision which reflects the basic density of the surrounding neighborhood.

The Vanguard reported at the time that, by working with the city, the district helped the neighbors to identify a longstanding safety issue. There were still some details that needed to be worked out, but the neighbors were comfortable enough with the process and the commitment of both the city and DJUSD to addressing the issues, that the project was moved forward and fast-tracked.

But history, of course, would intervene. December of 2008 was nearly three months after the collapse of the US economy and the fall of the local real estate market. The school district would wait nearly six years – interestingly enough, right at the end of the terms of Sheila Allen, Gina Daleiden, and Tim Taylor – before agreeing on a sales price at the same amount that the 2005 deal was to take place.

Of course, the district had no idea when they pulled out of the agreement in 2005 that the real estate market would collapse three years later. There was also the questionable legality of the original agreement. Finally, the neighbors were bitterly opposed to the original plan for the project and, by working with the neighbors, they have the full backing of the neighborhood behind the current project.

—David M. Greenwald reporting

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About The Author

David Greenwald is the founder, editor, and executive director of the Davis Vanguard. He founded the Vanguard in 2006. David Greenwald moved to Davis in 1996 to attend Graduate School at UC Davis in Political Science. He lives in South Davis with his wife Cecilia Escamilla Greenwald and three children.

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21 thoughts on “$5.5 Million Sale of Grande Property Ends a Long Saga”

  1. SODA

    1 Does 5.5 seem low for 41 homes?

    2 Why are neighbors ok this time around; no site plan yet I am sure?

    3 How dense will 41 homes be?  Fouts Homes have a certain characteristics; wonder if the entire parcel will ?

    1. David Greenwald Post author

      The whole thing seems a bit odd considering part of the controversy in 2005 was we didn’t get what we could have and yet at the last minute the school board sells off the property for exactly that price.

      1. Barack Palin

        The whole thing seems a bit odd considering part of the controversy in 2005 was we didn’t get what we could have and yet at the last minute the school board sells off the property for exactly that price.

        Not really, in inflation dollars we got about $1 million less than the 2005 offer.

    2. South of Davis

      SODA wrote:

      > How dense will 41 homes be?  

      If you look at the aerial photo in this post and count the homes it looks like 41 homes will be about as dense at the homes around the parcel.

  2. Michael Harrington

    Where’s the independent appraisal report by an outside expert as to the FMV ?  The article does not touch on this, but there must be one?  The land is entitled with a map, ready to go?

  3. Tia Will

    I am also a little curious about the timing. With such a contentious issue ongoing over such a long period of time, I wonder why this decision is being finalized immediately before a major turn over of the board.  Can anyone shed some light on the timing ?

    1. hpierce

      You answered your own question.  With a new Board, four, if not five of the members would have to be “brought up to speed”, and probably at least two of them would demand that we go back and revise entitlements up to 46 to “increase value.  That would be, in effect, ‘uneducated’, and potentially disastrous.  If you have advised a patient to undergo a medical procedure that you believe is very important to their well being, and if you only came to that recommendation after being very familiar with their background, medical history, etc., and you are reassigned, transferred, should your patient wait to get a new physician assigned and wait for the new physician to go through your same learning curve?  And perhaps suffer increased pain, morbidity or death while waiting for the new physician to figure things out?  If so, glad I’ll never have you as a primary care physician.

  4. DanH

    This packet includes a map of the proposed development. 41 single family lots. The access street opens on Grande Avenue opposite Mercedes Avenue. The housing density is similar to that of the neighborhood surrounding it. Greenbelt and bike paths are provided in a style similar to the rest of North Davis. I will miss the open field on Grande Avenue but this plan isn’t so bad. No apartments, quickie mart or mini-mall.

    http://city-council.cityofdavis.org/media/default/documents/pdf/citycouncil/planning-commission/agendas/20141022/05-grande-school-site.pdf

     

     

     

    1. Rich RifkinWDE 73

      The housing density is similar to that of the neighborhood surrounding it. 

      Not even close, Dan. The density of the new development is 58% higher than the neighborhood surrounding it. If the new lots were sized equally to those in its area, there would be just 26 lots, not 41.

      Arguably, given the desire in Davis to preserve ag land, higher density is the right way to go. Also, smaller lots with smaller houses are going to be more affordable than larger lots with larger houses. (I suspect, though, that Mr. Fouts will build large houses on these small lots, because that provides the best return on investment.)

      1. South of Davis

        Rich wrote:

        > Not even close, Dan. The density of the new development

        >is 58% higher than the neighborhood surrounding it. 

        If you print the photo in this post and cut out 26 homes (and streets) from the area to the right or left and place them on the vacant lot it barely covers half the space.  Am I missing something did Founts only buy part of the lot in the photo?

        1. Rich RifkinWDE 73

          The 58% higher density–meaning 158% of the single family home lot density of the surrounding neighborhood–was calculated by city staff back when the parcel map was agreed to. I think that photo may be misleading as a representation of the Grande neighborhood.

      2. DanH

        The housing density looks a little higher than that of Covell Park to the east. I agree, infill development is vastly preferable to developing or surrounding farm land. The current trend in single family housing is to cram the largest possible house onto any lot minimizing front, back and side yards. This trend seems to be ubiquitous in California. These homes will be very attractive to young Davis families. Children will be able to bike or walk to North Davis Elementary without using a single street.

        Don Fouts built the Pasa Robles infill in South Davis.

        https://www.youtube.com/watch?v=Lbajw_I9uC8

  5. Anon

    “it seems like they sold low – why sell it now rather than waiting another two to three years for the market to fully rebound?”

    Yes, that would be my question.  Why would anyone sell low, if they can wait a few years and sell high?  I almost get the feeling the outgoing school board was determined to sell this property, and were afraid the new incoming board might not agree.

    1. South of Davis

      Anon wrote:

      > Yes, that would be my question.  Why would anyone sell low,

      > if they can wait a few years and sell high? 

      Realtors don’t want anyone to know this but the value of real estate does not just keep going up every year.

      I was recently talking to a guy who bought in South Davis for just under $600K in 2000 (the dot com boom) and was told his home was worth about $400K in 2003 (the dot com bust) in 2006 (the real estate boom) he was told it was worth over $600K, but in 2011 (the real estate bust) he was again told it was worth about $400K.  He said that according to Zillow (that will show the ups and downs of every home in Davis) that his home is again worth over $600K in the real estate boom 2.0 (an increase of about $3K/year in the last 15 years)…

    2. wdf1

      Anon: Yes, that would be my question.  Why would anyone sell low, if they can wait a few years and sell high?  I almost get the feeling the outgoing school board was determined to sell this property, and were afraid the new incoming board might not agree.

      That is exactly what this outgoing board did.  When they came in, the Grande property was almost ready to sell, but they scuttled it.

       At the time, some of the new trustees said they believed the board could get more than $5.5 million for the property. source

      The difference now is that there is less money available for facilities upgrades and maintenance, and more pressure to address those facilities issues.  And worth noting what South of Davis notes, that the value of real estate does not just keep going up every year, especially in the shorter term.  Worth noting that the district bought the property in 1971 for almost $58,000.

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