STATE OF CALIFORNIA - BUSINESS, CONSUMER SERVICES AND HOUSING AGENCY GAVIN NEWSOM, Governor
DEPARTMENT OF HOUSING AND COMMUNITY DEVELOPMENT
DIVISION OF HOUSING POLICY DEVELOPMENT
2020 W. El Camino Avenue, Suite 500
Sacramento, CA 95833
(916) 263-2911 / FAX (916) 263-7453
www.hcd.ca.gov
December 8, 2021
Robert Fabela, City Attorney
City of Anaheim
200 S Anaheim Boulevard
3rd Floor
Anaheim, CA 92805
Dear Robert Fabela:
RE: Notice of Violation of the Surplus Land Act Regarding Property Located at 2000 East Gene Autry Way and 2200 East Katella Boulevard in Anaheim, CA.
The California Department of Housing and Community Development (HCD) hereby issues this Notice of Violation, pursuant to Government Code sections 54230.5 and 65585.1, to the City of Anaheim (City) regarding the City’s disposition of the property owned by the City at 2000 East Gene Autry Way and 2200 East Katella Boulevard in Anaheim, CA (Property).
Violation #1: The City Violated the Surplus Land Act by Failing to Declare the Property as “Surplus Land” or “Exempt Surplus Land” pursuant to Government Code section 54221(b)(1), and HCD Finds the City’s Exemption Claims invalid.
Government Code section 54221(b)(1) requires that a local agency declare land as either “surplus land” or “exempt surplus land,” as supported by written findings, before a local agency may take any action to dispose of it.
Government Code section 54221(b)(1) states:
“Surplus land” means land owned in fee simple by any local agency for which the local agency’s governing body takes formal action in a regular public meeting declaring that the land is surplus and is not necessary for the agency’s use. Land shall be declared either “surplus land” or “exempt surplus land,” as supported by written findings, before a local agency may take any action to dispose of it consistent with an agency’s policies or procedures… (Emphasis added.)
To date, the City has not provided any documentation to HCD demonstrating that the City has declared the Property as either “surplus land” or “exempt surplus land” before it took action to dispose of it, including but not limited to negotiating and entering into Purchase and Sale Agreements and Disposition and Development Agreements with SRB Management, LLC.
Furthermore, the City has not established that the Property qualifies as “exempt surplus land” pursuant to any of the subdivisions set forth under Government Code section 54221(f)(1).
Argument for Constructive ENA and “Grandfathering” Exemption Found Invalid
HCD has considered the City’s arguments set forth in its June 14 letter that “the City and the principals of Angels Baseball were parties to an exclusive negotiating agreement prior to September 30, 2019” (pg. 3) and therefore met the “grandfathering” exemption provided in the statute, meaning that “the Amended SLA, including its notice, findings and procedural requirements, does not apply to the transaction.” (pg. 5).
Based on the evidence submitted by the City, HCD finds that no substantial evidence of any exclusive negotiating agreement with SRB Management, LLC existed prior to September 30, 2019. Most notably, (a) on January 15, 2019, Anaheim City Council Member Jose F. Moreno moved to require a binding ENA and the motion failed; (b) SRB Management, LLC was not formed until November 20, 2019; and (c) in prior correspondence from the City dated November 27, 2020, the City represented to HCD that there was no exclusive negotiating agreement prior to September 30, 2019.
Argument for “Valid Legal Restriction” Exemption Found Invalid
In its January 25, 2021 letter, the City argued that the Property constitutes exempt surplus land under Government Code section 54221(f)(1)(G) because the Property is subject to a lease between the City and the California Angels LP that constitutes a valid legal restriction.
Government Code section 54221(f)(1)(G) provides that “surplus land that is subject to valid legal restrictions that are not imposed by the local agency and that would make housing prohibited, unless there is a feasible method to satisfactorily mitigate or avoid the prohibition on the site” constitutes “exempt surplus land.”
The existing lease is not a valid legal restriction for at least three reasons. First, the properties the City wishes to sell to SRB include more than just the property currently being leased.
Second, even if the parcels surrounding the leased premises are subject to a license to use provision, the City has not shown that the lease would prohibitively restrict its ability to offer the site for housing development under the Surplus Land Act with the current lease in place. Most notably, the fact that the City reached an agreement to develop housing on the Property demonstrates that there was, in fact, a feasible method to satisfactorily mitigate any prohibition of housing on the site. Third, even if we assume that an existing lease qualifies as a “valid legal restriction” under Government Code section 54221(f)(1)(G), the fact that the City is a party to the lease and the owner of the leased Property makes any such restrictions “imposed” by the City.
Thus, the Property does not qualify as “exempt surplus land” under Government Code section 54221(f)(1)(G) as argued by the City in their June 14, 2021 letter.
Violation #2: The City Violated the Surplus Land Act by Failing to Send a Notice of Availability pursuant to Government Code section 54222.
Government Code section 54222 requires that a local agency, prior to disposing of property or participating in negotiations to dispose of that property, must send a written notice of availability to certain local public entities, CalHFA certified housing sponsors, and other local agencies.
Government Code section 54222 states, in relevant part, as follows:
[A]ny local agency disposing of surplus land shall send, prior to disposing of that property or participating in negotiations to dispose of that property with a prospective transferee, a written notice of availability of the property to all of the following:
(a) (1) A written notice of availability for the purpose of developing low- and moderate- income housing shall be sent to any local public entity, as defined in Section 50079 of the Health and Safety Code, within whose jurisdiction the surplus land is located.
Housing sponsors, as defined by Section 50074 of the Health and Safety Code, that have notified the Department of Housing and Community Development of their interest in surplus land shall be sent a notice of availability of surplus land for the purpose of developing low- and moderate-income housing. All notices shall be sent by electronic mail, or by certified mail, and shall include the location and a description of the property.
The City provided no evidence that it sent any notices of availability to the statutorily required entities.
Violation #3: The City Violated the Surplus Land Act by Failing to provide HCD the information and documents required by Government Code section 54230.5(b)(1) prior to agreeing to terms to dispose of the Property.
Government Code section 54230.5(b)(1) requires that a local agency, prior to agreeing to terms for the disposition of surplus land, “provide to the Department of Housing and Community Development a description of the notices of availability sent, and negotiations conducted with any responding entities, in regard to the disposal of the parcel of surplus land and a copy of any restrictions to be recorded against the property pursuant to Section 54233 or 54233.5, whichever is applicable, in a form prescribed by the Department of Housing and Community Development.”
The Purchase and Sale Agreement and Disposition and Development Agreement establish that the City has agreed to terms for the disposition of the Property. HCD never received a description of any notices of availability sent, negotiations conducted, or a copy of any restrictions to be recorded against the property.
Next Steps
Under Government Code section 54230.5(a)(1), the City has 60 days from the date of this notice of violation to cure or correct the alleged violation as follows:
1. Utilize the “Land transferred for affordable housing by a City or County” exemption per Government Code Section 37364 or 25539.4, including but not limited to the main actions below:
• Set aside 80 percent or more of the area for development of housing • Affordability covenant of 30 years or more with 40 percent of the total number of those housing units affordable to lower-income households • Half of these affordable to very low-income households
2. Utilize the “Mixed-Use Exemption” per Government Code section 54221(f)(1)(F)(ii), including but not limited to the main actions below:
• Declare the land “exempt surplus”
• Put the site out for competitive bid with invitations to participate sent to all entities identified in Government Code section 54222(a)
• Apply covenant requiring at least 25 percent affordability for lower-income households per Government Code Section 54221(f)(1)(F)(ii)
3. Follow standard Surplus Land Act protocols, including but not limited to the main actions below:
• Declare the land “surplus”
• Post a Notice of Availability for 60 days to entities listed in Government Code section 54222; HCD maintains a list of these entities on its website:
https://hcd.ca.gov/community-development/docs/AB1486DeveloperInterestList.xlsx • Engage in good faith negotiations for 90 days with any entities that respond to Notice of Availability
• Submit documentation to HCD prior to agreeing to disposition terms per Government Code section 54230.5(b)
• Based on responses to Notice, apply applicable affordability covenant for lower- income households.
Sincerely,
Megan Kirkeby
Deputy Director, Housing Policy Development
STATE OF CALIFORNIA - BUSINESS, CONSUMER SERVICES AND HOUSING AGENCY GAVIN NEWSOM, Governor
DEPARTMENT OF HOUSING AND COMMUNITY DEVELOPMENT
DIVISION OF HOUSING POLICY DEVELOPMENT
2020 W. El Camino Avenue, Suite 500
Sacramento, CA 95833
(916) 263-2911 / FAX (916) 263-7453
www.hcd.ca.gov
D
ecember 2, 2021
VI
A ELECTRONIC MAIL
Robert Fabela, Esq.
City Attorney
City of Anaheim
200 South Anaheim Blvd
Anaheim, CA 92805
[email protected]
Am
rit Kulkarni, Esq.
Meyers Nave
707 Wilshire Blvd Fl 24
Los Angeles, CA 90017
[email protected]
Allan Abshez, Esq.
Loeb & Loeb LLP
2 Embarcadero Center
San Francisco, CA 94111
[email protected]
C
alifornia Evidence Code section 1152 Communication
RE: P
roposed Disposition of City-owned Property per “The Big A: 2050” — HCD’s Response to Proposal for Resolution
D
ear Robert Fabela, Amrit Kulkarni, and Allan Abshez:
Thank
you for your email dated November 11, 2021, confirming in writing the City of Anaheim (“City”) and SRB Management, LLC’s (“SRB”) proposal to resolve the parties’ respective positions pertaining to the proposed disposition of 2000 E. Gene Autry Way and 2200 East Katella Boulevard (collectively, “Angels Stadium Property”). The Department of Housing and Community Development’s (“HCD”) response to that proposal is presented below.
In general terms, the proposal made by the City, in coordination with SRB, increases the covenanted affordable units from 777 to 1,295. This proposal demonstrates a laudable effort to raise the City’s commitment to 1,295 restricted units, which we understand is intended to translate into an allocation of 25% of the total contemplated housing units for the project to affordable housing, purportedly in accordance with Government Code section 54222.5 of the Surplus Land Act. Upon review of the specifics of the proposal, however, HCD has serious concerns that the proposal’s significant divergence from the Surplus Land Act statute would not justify withholding the issuance of a Notice of Violation.
For example, both Government Code section 54222.5 and the “mixed-use exemption” in Government Code section 54221, subd. (f)(1)(F)(ii) include a benchmark of restricting at
least 25% of housing units developed on surplus land to lower-income households, as defined in Health and Safety Code section 50079.5. The proposal presented to HCD, on the other hand, contains no lower-income housing on site, and appears to rely solely on moderate-income housing units on the surplus land to ostensibly achieve that benchmark. Although undefined in the proposal, any “moderate-income” housing units, which are generally defined as housing units restricted to 80-120% area median income (AMI), would therefore exceed the lower-income AMI thresholds allowed under the law.
And while HCD appreciates the City’s efforts to deliver affordable projects sooner rather than later, the proposal suggests that all of the lower-income units would be off-site and therefore not run with the disposed surplus land. This would not satisfy the Surplus Land Act’s requirement that the restrictive covenant be recorded against and run with the subject surplus land. And any potentially acceptable disposition of the surplus land here must include a covenant that is in full compliance with the applicable requirements of the Surplus Land Act and in the form specified in HCD’s Guidelines.
While HCD has previously expressed a willingness to be flexible in its consideration of proposals for substantial Surplus Land Act compliance here, in recognition of the parties’ respective legal positions and the uncertainties of potential litigation, as well as in furtherance of HCD’s and the Surplus Land Act’s foundational goals of maximizing affordable housing production, the current proposal is simply a bridge too far. For that reason, HCD must reject the City’s proposal and reiterate its position that the framework for any resolution here requires substantial compliance with the Surplus Land Act, such as, among other things and without limitation, applying a covenant to the disposed land conforming restricted housing units on site to the percentages of lower-income households set forth under section 54222.5 or under the “mixed-use exemption” provided by section 54221, subd. (f)(1)(F)(ii). If the City is willing to explore those options, HCD is prepared to provide technical assistance to help the City navigate and achieve compliance with the procedural and substantive requirements of the Surplus Land Act in doing so.
To understand HCD’s position, it may be useful to summarize the status of its investigation and the ongoing discussions the parties’ counsel have had over the last three months concerning the proposed disposition. On August 26, 2021, the parties’ counsel met via videoconferencing at HCD’s request to discuss HCD’s pending letter advising the City that, although it did not appear at that time that HCD had all the information necessary to complete its administrative investigation, it did appear that the proposed disposition would likely violate the Surplus Land Act. At the City’s and SRB’s counsel’s request, HCD agreed to withhold issuance of that letter and to have the parties’ counsel engage in candid discussions regarding their respective legal positions and explore possibilities for resolution.
Over the course of those discussions, HCD informed the City and SRB that the purpose of its reaching out and engaging in those discussions was to obtain as much information as possible to assist with HCD’s ongoing investigation and, to the extent the facts revealed it to be possible, explore any framework for a potential resolution given the uncertainty of litigation and the representation from the City that its current agreement with SRB was intended to comply with the spirit of the Surplus Land Act. These meetings have been somewhat productive, but positions have not changed. The City
and SRB have made clear their belief that the sale of the Angels Stadium Property did not implicate the Surplus Land Act, and that even if it did, the sale complied with the spirit of the Surplus Land Act. Meanwhile, although additional information and context behind the contemplated sale was provided during these discussions, HCD’s position remains firm that any ultimate disposition of the Angels Stadium Property must achieve compliance with the Surplus Land Act or meet one of its statutory exemptions.
The parties’ counsel all agreed that any resolution must fit within the parties’ respective frameworks. For HCD, this means that any resolution must achieve substantial compliance with the Surplus Land Act, be justified by the Surplus Land Act’s intent to maximize affordable housing opportunities on surplus public lands, and address the concerns of third parties that the ultimate disposition lacked transparency. For the City and SRB, it was represented to HCD that while the value proposition of the sale must remain constant, the City and SRB could otherwise be flexible enough to satisfy HCD’s concerns. However, in light of the proposal submitted by the City and SRB and how far apart our respective positions are, it does not appear that the parties’ respective frameworks are reconcilable.
Please let me know if you have any questions.
Sincerely,
Megan Kirkeby
Deputy Director, Division of Housing Policy Development