Guest Commentary: City’s FAQ on the BrightNight Lease Option Is Misleading and Factually Incorrect – Part 1 of 4


By Alan Pryor and Richard McCann

On Tuesday night, 22 people called to comment to the City Council in opposition to the City of Davis entering a lease option agreement with BrightNight to develop a solar project on a parcel next to the City’s waste water treatment plan. After the controversy had risen to a high profile, the City Staff issued a “Q & A City of Davis Solar Lease 4/15/20” to defend its decision. Unfortunately, their response is misleading and filled with errors.

We go through the Staff’s individual responses, question by question in their order. Our responses address the gist of the question. You can follow the link to the Staff’s answers by themselves if you are interested, but you should have a good understanding of the issues after reading this article. Because answering these questions completely is a lengthy endeavor, we have divided this into three parts. This is part 1.

Q1.    Did the City enter into a lease for a solar farm?

The City’s Answer: The City did not enter into a lease. The City entered into a Lease Option Agreement with BrightNight, which gives the City and BrightNight the option to enter into a ground lease if certain specific conditions are met during the option period. This Lease Option Agreement is not a ground lease and is not the document that will govern the relationship, rights and obligations of the City and BrightNight during any potential ground lease entered into in the future. The Lease Option Agreement only details the rights and obligations between the City and BrightNight during the option period.

The Staff’s answer is simply disingenuous. The lease option agreement gives BrightNight the option to lease the land — the City does NOT have the option to NOT lease the land to BrightNight if BrightNight affirmatively exercises its option. Further, the option agreement expressly says, “…within thirty (30) days following the delivery by Optionee to City of the Exercise Notice, City and Optionee shall execute the following: (a) a Lease with respect to the Property, to be negotiated between the Parties during the Term, and approved by the City Council after compliance with all requirements set forth herein, based on the Term Sheet attached hereto as Exhibit “C” (the “Lease”)”  (Emphasis added). This functionally means the ‘terms” of the lease have already been negotiated. Staff and Council have otherwise implied the lease still needs to be negotiated, and they can get a better deal during that future negotiation. It is true that the Option Agreement does state “Both Parties acknowledge that the Term Sheet represents a preliminary agreement and that the Solar Development details will be determined based on the findings of the Parties during the Term.” However, only the “Solar Development details” will be finalized later. This has to do with the size and/or the type of the solar system.  This phrase does not at all indicate that term, pricing, and/or other contractual terms in the lease can be renegotiated.

Further, the Option Agreement expressly states that only 30 days are allowed for negotiation of the lease after the option is affirmatively exercised. That is hardly a sufficient period of time for a complex document to be finalized. Additionally,  the Option Agreement stipulates that “Notwithstanding the above, in the event that the Lease is not able to be placed on the agenda of a regularly scheduled City Council meeting within thirty (30) days following the delivery by Optionee to City of the Exercise Notice, the Lease will be placed on the agenda of the next available City Council meeting.”  This puts further pressure on the Council to accept the deal “as is” rather than have more time available to negotiate terms more favorable to the City.

If the lease option doesn’t include the important elements of the future lease, what if BrightNight decides to walk when more stringent terms are requested by the City? In that case the City will have given up five years of value on that land by waiting around when another developer might have stepped in and made a more substantial offer.

Q2.  Is the lease rate at market value? Were all uses considered?

The City’s Answer:  The City conducted market research to assess what the appropriate market rate should be. Staff looked at a number of things to try and determine what the appropriate lease rate should be, including:

  • allowable uses under Yolo County zoning
  • comparable solar lease rates
  • comparable long-term orchard rates
  • discussion with local land brokers/appraisers and Yolo County officials in an effort to ascertain values and determine how the lease rate should be derived

Staff has not provided any information to substantiate their claim that other uses with higher value were considered. Staff simply looked at the alternative use as agricultural land. The failure to look at alternatives, shows that the Staff did not consider how to maximize the value of that land. The next question is whether the Council was presented with this analysis before last week? And if so, it should have been presented publicly, not in closed session, because it was not part of negotiating limited price and terms for the specific agreement. All of this information is publicly available by State law and should be provided to the public and the Utilities Commission to prove that solar lease rates and the other mentioned factors were, in fact, actually considered.

Q3.  How was the lease rate determined?

The City’s Answer: Research recommended valuing the solar lease similar to a long-term orchard lease, which can also tie up the land for 50 years. According to the most recent Yolo County crop report, the average annual revenue per acre for orchard products is about $2,050. Using 22.5% as the property owner’s share of that revenue, the rental rate comes out to about $460 per acre per year. In the Lease Option Agreement with BrightNight, the City receives a rate of $454 per acre on the farmable portion of the premises.

The Staff’s method of calculating comparable income by relying solely on average orchard income in Yolo County grossly underestimates productive almond ranch income because the majority of almond orchards in the County are either older (20-25+ years) with declining yield or newly planted orchards(<5 years) that are just starting to dramatically increase yields. Modern productive almond orchards on close spacing with micro-sprinklers can easily produce average yields of 3,000 lbs of good almond meats per acre. Last year’s average price from the Blue Diamond growers’ co-op was about $2.25 to $2.50/lb for good meats, depending on the quality and variety. Thus, a modern productive almond orchard should generate between $6,750 and $7,500/year. Alan Pryor has personally leased an almond orchard for over a decade for 25% of revenue, and knows of others who have paid and/or received 30% of revenue for leasing high quality orchards in their peak. At 25% of $6,750 per acre/year to 30% of $7,500 per acre/year, this would produce an average per acre return of $1,687.50 to $2,250 or just about 4-5 times what the City is receiving for their leased acreage. That the Staff did not have sufficient information to develop this analysis reflects how this was hidden from the City process that would have better informed this negotiation.

Q4.  The City did not utilize the RFP process for this solar deal. Why?

The City’s Answer:  The City Council can seek a competitive process for leasing City land and/or buildings, or it can seek a negotiated process with one tenant. The process chosen depends on circumstances and the City Council’s priorities and goals. Some City assets have been leased through a competitive process and others have been leased through a negotiated process.

The short answer here is that the City did not decide to issue an RFP because it did not think it had to do so (or thought it could get away with not doing so).  For reasons that they haven’t explained, the City decided not to issue an RFP simply because they didn’t want to do the work that issuing an RFP requires.

The Staff’s lack of effort and diligence in maximizing City values and meeting its objectives is stunning. A quick Internet search yielded more than a dozen other large scale solar development companies with “infinitely” more solar development experience than BrightNight.  A quick phone call could have easily yielded a measure of interest from them. Why did Staff not call any of them? The same internet search turned up four different solar consulting firms that would have provided a free initial consultation to get an idea of prevailing rates.  Why did Staff not call any of them?  That is a question that Staff has not yet answered.

Q5.  Is a sole-source procurement process consistent with the City’s procurement policy?

The City’s Answer:  The City’s procurement policy, with its sole-source provisions, applies to the purchase of goods and services. In the case of the land lease, the City is not purchasing anything. It is selling an option to a possible future leasehold interest in a piece of City-owned property. The City is the landlord, not the buyer.

There is nothing to preclude the City from using an RFP process to lease this site, which likely would have provided a greater economic return. Has not the City ever solicited an RFP for leasing a property?  Although State law does clearly say that municipalities may lease property up to 55 years, it is silent on whether it has to use an RFP process or not.  But since Staff did such an inadequate market research, and their efforts to otherwise determine fair market value were so minimal, it only stands to reason that they should have used an RFP process to validate their very sketchy estimates of fair market value.

Further, with much more dire implications, the City claims that a lease of City land is exempt from the sole source contracting requirement, therefore not needed, or even necessarily prudent. Given that it also is claiming these can be negotiated in closed session, that means that the City can give away City property to friends and associates with no outside review or oversight.

Questions 6 through 15 will be addressed tomorrow, and questions 16 through 23 will be addressed Saturday


About the Authors:

Richard McCann:  Richard is a Davis resident and much of his work has focused on identifying market trends, and developing and assessing incentive structures in both energy markets and environmental regulations. He has analyzed and designed both wholesale and retail electricity pricing and identified key technological and institutional factors driving pricing factors. In particular, he has addressed both the market and environmental barriers to increased renewables energy development.  That work has included utility-scale, community or neighborhood, and customer-side resources. He also successfully persuaded electric utilities to institute asset acquisition programs that produced benefits for both specific customer classes and larger communities.  On water policy, he analyzed water transfer markets, water efficiency measures, and agricultural water management. And he has participated in a broad range of regulatory forums beyond energy and water, including air quality and greenhouse gases, and land-use planning.  He is a member of the City of Davis Natural Resources Commission,  a past member of the Utilities Commission, and a former member of the Technical Advisory Subcommittee of the city’s Community Choice Energy Advisory Committee which recommended a community energy agency.  That recommendation eventually bore fruit in the form of Valley Clean Energy (VCE), which saves Davis and Yolo County residents money on their monthly electric bill, with cleaner renewable energy to boot. Richard was just selected as a group member for city’s 2020 Environmental Recognition Award for his work on behalf of that Technical Advisory Subcommittee

Alan Pryor:  Davis resident Alan Pryor has a long career in commercializing large-scale alternative energy projects and other environmentally benign technologies. He is the founder and a director of Yolo Clean Air, a nonprofit organization that focuses on improving air quality for the benefit of environmentally sensitive individuals suffering from respiratory health problems – particularly children and senior citizens. He is also the current chair of the local Sierra Club Yolano Group (which has taken no position in this matter),  a member of the city’s Natural Resources Commission, and former Chair of the city’s Community Choice Energy Advisory Committee.

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Disclaimer: the views expressed by guest writers are strictly those of the author and may not reflect the views of the Vanguard, its editor, or its editorial board.

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7 thoughts on “Guest Commentary: City’s FAQ on the BrightNight Lease Option Is Misleading and Factually Incorrect – Part 1 of 4”

  1. Tia Will

    The current controversy reminds me of a situation the City of Davis has faced before. It has been six years since a differently composed City Council faced the controversial issue of the MRAP. A unilateral decision was made by the Police Department and the MRAP, a vehicle designed for use in foreign wars, was obtained for essentially the price of its transport to town. It seemed a good deal to those doing the procurement who I believe were acting in good faith for what they perceived as the benefit of the community. The major problem was that they acted without transparency and without assessing the community’s perception of the need for or willingness to accept such a device.

    Although there are major differences between these two transactions, I believe the core problem remains the same. A small group of city staff does what they consider to be adequate research and evaluation, present their view to the City Council without an adequate evaluation of the pros/cons/alternatives to their preferred action and urges that action be taken without transparency and community input. This process may be the norm in some communities, but we have evidence that this approach is not what the citizens of Davis desire. We should learn from past mistakes and if we are going to err, at least do so on the side of transparency and the building of community trust?


    1. Matt Williams

      MRAP is a very good comparable Tia.

      Within the realm of utilities it was easy to come up with other unilateral decision comparables like the DWR sale to Recology and the Astound/WAVE contract, but for many people those were under the radar events.  MRAP was a controversial issue that almost everyone in Davis was aware of.

      Thank you for pointing that out.

      1. Bill Marshall

        Perhaps a better comparison would be that cell tower firm that bamboozled some staff to allow them to put cell facilities wherever they wanted… other staff mitigated it a lot, but still…

        The leading staff folk who abetted it are no longer with the City, but not due to that.  Other factors… David might remember dates, players better than I… first time I got to meet David… he demanded records under PRA… bugged me… he could have just asked, and would have given him all the same records…

        I have a genetic/mental defect… you ASK me to do something, and it would likely get done, timely… you TELL ME I HAVE  to do something… well, then I get an “attitude”… will only do the minimum necessary, and will take my sweet time (within legal parameters) to do it.


  2. Dianne C Tobias

    Matt and Tia: am sure you’ve heard of the definition of insanity, repeating the same behavior expecting different results?

    It can be said our Davis community thinks and talks things to death, but not involving the commissions and community. What were they thinking?

    I did read in the beginning of the FAQ article that the Council took this up in Feb? Did the community not realize it between Feb and April? Thx for your diligence.

    1. Matt Williams

      Dianne, on February 11th the Council took up the issue in closed session, and then came out of closed session with the Mayor announcing,

      “Just came out of Closed Session and we actually do have a reportable action.  In Closed Session tonight On February 11, 2020 the City Council directed staff to move forward with a preliminary agreement to utilize 155 acres of the former Overland Flow Area, and Treatment Ponds adjacent to the Wastewater Treatment Plant for use as a photovoltaic generation site, which could generate up to 25 megawatts of energy. That is the only reportable action that we have out of Closed Session tonight.”

      That was the full extent of the communications that night.

      Then on February 19th at a Utilities Commission (UC) meeting, the Commissioners asked staff member Stan Gryczko about the announcement, the language of which staff had also included in the staff report for the item on “Alternate Uses for the Wastewater Treatment Plant Land” (see LINK).  Stan consistently replied to the questions that he was not authorized to talk about the matter.  In addition Stan and Councilmember Lucas Frerichs referenced over and over a press release that was going to be issued the next day (February 20th) that would answer all the questions being asked.  So, bottom-line, the UC Commisioners relied on Stan’s representation that the press release was coming, and ended the item with their questions unanswered.

      Unfortunately, for reasons as yet unexplained, the press release never was released by the City.

      The next communication by the City was the following March 22nd e-mail from staff to the Utilities Commisioners

      Land Lease of City property at WWTP – As previously mentioned by the Mayor, the City has negotiated and prepared a land lease option for a solar company to install and operate up to 25 MW solar facility on City property. This item was briefly mentioned during our last commission meeting however no further information was released given City staff had to shift priorities to adapt City services to life with COVID-19. The land lease is a 5-year option on the property while the company prepares a formal plan for approval. You can read the staff report here: I assume most of you have seen this report already since it is logical that Commission members receive Council agendas when they come out via the automatic email system.

      There were also meetings of the Natural Resources Commission on February 24th, where staff presented nothing to the NRC, which had been actively involved in the discussions about the alternative uses of the WWTP land.  But at that meeting nothing.

      So the simple answer to your question “Did the community not realize it between Feb and April?” is that there was awareness at a very high level, but the City actively squelched any more complete awareness.  The next communication by the City was the staff report for Item 9 of the March 24th Council meeting.



        1. Matt Williams

          Yes and no Dianne.  COVID-19 really didn’t affect Davis until early to mid-March.  So, during the COVID-19 period I would say it is definitely a high priority, but not as high as the other sky-high priorities the City has.  Imagine if the MRAP community dialogue were teleported in time to today.  In light of everything that is going on, would you think that MRAP would have a high priority?

          With that said, during all the time from mid-March backward, the statement “in light of everything else that is going on” would really not apply, and the first non-Brown Act compliant Closed Session on this item took place on December 17, 2019, and the well-orchestrated efforts to keep the project out of the public eye began months before that.

          And one last point, does losing $1 million plus of Revenue each year have a high priority?

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