The city of Lancaster, departing from common government practice, did not appraise 22.5 acres of land it purchased recently from an investor and ended up paying 45% more than he had paid three years ago.
Lancaster officials contend they were not required to get an appraisal and even say the city got a good deal. But city critics have questioned the price, and officials at other government agencies said they believe state law almost always requires appraisals, in part to safeguard public funds.
Even with a steep plunge in Antelope Valley real estate prices in the past two years, the city bought the vacant land as a Joshua tree preserve for $1.1 million in December. The previous owner had paid $760,500 when land prices were at record highs during the real estate boom in late 1988 and early 1989.
"Even give or take $5,000 or $10,000 an acre, it is a beautiful piece of property we really wanted. I don't think the city came out on the short end of the stick," said Councilman Bill Pursley, who proposed the purchase to the council last August.
However, the deal prompted Lancaster Councilman George Theophanis, who opposed it and claims the price was too high, to accuse his colleagues of cronyism, a charge they denied in interviews. And on Tuesday, the five-member council rejected Theophanis' plan to mandate appraisals for all city land purchases.
The transaction also raised concern because it came at a time when the seller was delinquent on at least $25,700 in county taxes, had loan debts coming due, and was trying to persuade the city to rezone 12.5 acres of the land for residential development. That bid had stalled.
* The site is not among several Joshua tree areas previously designated by the city as a priority to preserve. Also, the council had voted in April, 1990, to "upzone" the site's other 10 acres to permit dozens of homes, and even city planners at that time said the area did not merit becoming a preserve.
* All council discussion of the purchase during several meetings last fall, including the final vote, occurred behind closed doors, and the price was not disclosed until later. Lancaster officials called that process legal and routine, but many other cities make such votes in public and air the price at that time.
* And, because of conflict-of-interest concerns, City Manager Jim Gilley had to abstain from the entire issue because he had had financial ties to former Lancaster Mayor Fred Hann, who is part of a partnership that had owned the site's 10-acre portion and was still owed money on it.
Joshuas, a spindly and ungainly tree, are the high desert's trademark vegetation and flourish in the area. Many Antelope Valley residents complain that rampant development has wiped out large stretches of their beloved trees, prompting preservation efforts.
Investor Joseph Rivani, who sold the land to the city after buying it from Hann and others, dismissed any notion of a behind-the-scenes deal and claimed he ended up making only a $15,000 to $20,000 profit on the sale after three years of loan payments, fees and consultants' costs.
Rivani, who said he owns numerous parcels in the area, acknowledged owing back property taxes on the site. But he said he never pays property taxes until he sells land. Rivani also acknowledged he had loans coming due on the site, but said he didn't have to sell the property to the city at the time.
Under the December purchase deal, the city paid Rivani about $375,000 in cash, promised to pay him $195,000 plus 9.5% interest by this July, and assumed his three outstanding loans on the property totaling $532,500 plus interest. One was for the $187,500 Rivani owed Hann's partnership.
Theophanis and some real estate agents and development industry officials in the Antelope Valley called the city's purchase price of $49,000 an acre high for today's market, saying $40,000 to $45,000 would have been more common. Rivani paid $33,800 three years ago. But no one has done an appraisal to know.
In late 1989, again at the peak of the real estate market, developer giant Kaufman and Broad paid only $20,000 an acre for three adjoining parcels, totaling 60 acres, where it is now building a 175-home subdivision. The city itself paid only $40,000 an acre for a separate Joshua tree site in late 1990.
State law says property that public agencies are considering for purchase "shall be appraised before the initiation of negotiations." And the only stated exception is when the property at issue has "a low fair market value," an assertion Lancaster officials did not make for their site.
Instead, Lancaster City Atty. David McEwen contends the law contains an implied exception that enables the city to waive an appraisal any time a property owner approaches the city with an offer to sell land at any price less than what city officials believe is its value.