Happy Holidays! Here’s an update on what went on at City Hall in November.
NOVEMBER 12 PLANNING COMMISSION MEETING. Commissioners Jon Zich and Karen Klepack were absent.
Presentation/Another Brown Act Violation. This was the same Housing Element Implementation Update that was given to the City Council last month. Anna McGill gave a short presentation, then fielded questions and comments from the Commissioners. Either someone decided or forgot to take public comments, which is yet ANOTHER! Brown Act violation by the City. Section 54954.3 of the Government Code (which is part of the Brown Act) provides that the public may comment on agenda items before or during consideration by a legislative body. In this case, Chair Adam Ereth skipped over public comment and continued to the rest of the Agenda. This was brought up by resident and former City Council Member Jay Humphrey in his public comment, but was never addressed by Ereth or the City Attorney, which is surprising. The City needs to make a better effort to follow the laws covering public meetings.
Consent Calendar. There were three items on the Consent Calendar, which is supposed to be for routine matters, but one of them was NOT routine and should NOT have been on the Consent Calendar, and that was the General Plan Conformity Report and Resolution for Proposed Acquisition of Real Property Located at 778 Shalimar Drive. This item concerns the City’s desire to purchase a four-plex apartment building next to Shalimar Park. There was very little information presented about the City’s intentions for the future use of the property, but the Assistant Director of Economic and Development Services, Scott Drapkin, indicated that it would be for park expansion. Since the property isn’t zoned recreational, the Planning Commissioners were asked to weigh in on the General Plan conformance should the City turn the property into a park. This required looking at one goal, two policies, and one objective of the Open Space and Recreation Element (OSRE). However, this property is not within the boundaries of the areas identified as park priorities. Adding to Shalimar Park would nominally aid the City in adding to its goal of 4.26 acres of parkland per 1,000 residents.
The City did not request that the Planning Commission determine that the purchase is consistent with the goals, policies, and objectives of the Housing Element. Specifically, Goal HOU‐1.2, which states the goal to “[m]inimize the displacement risk for existing residents when considering approval of future redevelopment and public projects.” Given the discussion the following week at the City Council meeting, the Planning Commissioners may need to revisit this matter because the park expansion requires the demolition of four apartments.
There was considerable questions of Staff and discussion among the Commissioners and this item took nearly 45 minutes of time, which is straightforward evidence that items such as this should NOT be placed on the Consent Calendar. A motion was made by Ereth, seconded by Commissioner Russell Toler, and passed by a vote of 5-0.
Public Hearings: There is only one public hearing and that was the Conditional Use Permit to Operate Animal Hospital and Associated Uses at 1520 Ponderosa Street. This is a new location for Priceless Pets’s animal hospital. The adoption center on Newport Boulevard will remain there. Since this property is currently zoned for an auto dealership with a car wash and minor repair shop, the CUP is needed for the new use. A motion was made by Ereth, seconded by Commissioner David Martinez, and passed by a vote of 5-0.
NOVEMBER 19TH CITY COUNCIL MEETING. Council Member Andrea Marr attended the meeting remotely, as she was ill, and Council Member Arlis Reynolds was absent.
CLOSED SESSION. The City Attorney stated that direction was given in the Closed Session, but no vote was taken. This included the purchase of 778 Shalimar, which was also on the Regular Agenda under New Business. Since a lot of information is already available about this item, including the deal terms and purchase price, why bother to talk about it behind closed doors?
REGULAR SESSION: In a public comment near the beginning of the meeting, resident Jay Humphrey brought up an article in the Orange County Register about the cost of rental housing in cities across the country. The article stated that Costa Mesa was ranked Number Two in cities our size for the cost to rent a three-bedroom house in the United States. That is a strong statement about how UNaffordable housing is in Costa Mesa. More on that below.
Consent Calendar. The Consent Calendar had 15 items on it. Items 9 and 10 were pulled by members of the public. These items relate to traffic signals, one for synchronization and the other for signal modernization. After clarification of the location and funding of the projects, both of those items were approved by a 6-0 vote, as was the remainder of the Consent Calendar.
Public Hearings. There were two public hearings:
1. Issuance of Tax-Exempt Bonds for Mesa Vista Apartments. This item concerned the issuance of up to $25,000,000 in tax-exempt bonds by the California Statewide Communities Development Authority (CSCDA). These bonds provide financing for the acquisition, construction, improvement, and equipment of an 87-unit multifamily rental housing project at the Mesa Vista Apartments (the former Motel 6 at 2274 Newport Boulevard). The units are permanent supportive housing for veterans dealing with homelessness.
There was a short presentation by Nate Robbins, Neighborhood Improvement Manager. After the presentation, outgoing Council Member Don Harper asked some important questions that helped me understand what this item was really about.
As part of the funding of the project by bonds issued by the State, there are tax credits that the developer sells to a financial institution that can use the credits, and the developer uses the proceeds of that sale to fund its project. Once the project is complete, the rents from the project are used to pay off the bond debt.
The purpose of this hearing was for the public to comment on the issuance of the tax credits and the project in general and is required under the Tax Equity and Fiscal Responsibility Act of 1986. Why was the City involved? Because the law prescribes a perfunctory hearing for input by the public. The City isn’t responsible for the debt; that is the responsibility of the developer, so there is no fiscal impact to the City. The City Manager reviewed the financials of the developer to get assurance that the developer is a nonprofit and is solvent so it could receive nontaxable bond financing.
Like all public projects, this one is way more expensive than what a private developer would spend to build it. $44m is a lot of money for 87 units, but the City isn’t responsible for it in the long run. That responsibility lies with the operator, Mercy House, and the State and County. If a neighbor has a problem with the project after it begins operation, the first step is to go to the City, but with a bureaucracy this large, it will take time for the public agencies to remedy any problems.
This is a complicated transaction and it is surprising that no Council Member other than Harper asked questions. The Agenda Report left out critical information that Harper managed to pull out of the City Manager and Mr. Robbins. There was one public comment, and then Mayor John Stephens went directly to asking for a motion. Outgoing Council Member Jeff Harlan moved to approve the recommendation of Staff, which was seconded by Manual Chavez. When asked to speak on his motion, Harlan stated he “ . . .always liked this project. The importance of affordable housing cannot be overstated.”
How ironic! This is guy who gutted the City’s affordable housing ordinance against the recommendation of the City’s expert. He also masterminded Measure K, which has done NOTHING to bring affordable housing to Costa Mesa, despite assurances from Harlan that it would. It is no wonder that we see luxury housing projects being built here driving up rents, as Mr. Humphrey stated.
The motion carried by a vote of 5-1, with Harper voting “No.”
2. Development Impact Fees Annual Report and Analysis for FYE 6/30/24. California State law requires that the City give a report annually on its Development Impact Fees. There was a short presentation by Staff, comments by Harlan, and then Stephens asked for a motion. He looked over to Chavez and said “Alright.” I don’t know what the motion was, as it wasn’t audible or it was edited out of the recording. I also don’t know who seconded that motion. The minutes will likely reflect it, but it was odd that nothing was either verbalized or retained in the recording. The motion, whatever it was, passed by a vote of 6-0.
Old Business. There was only one item here, which was the second First Reading for the Beekeeping Ordinance. The revised ordinance clears up some of the issues the Council and the public had with the prior version. The changes are discussed in the Agenda Report. After a presentation by Officer Stephanie Selinske, she fielded questions from Chavez and Harper. The public comment period followed at which a representative of Coastal Corridor Alliance spoke about its letter to the Council requesting a limitation of hives near public parks. He was followed by several beekeepers and residents who made suggestions to change the ordinance further.
A motion was made by Chavez to approve Staff’s recommendation to adopt the revised ordinance, with two changes: (1) mention native bees, in some capacity, in the “Best Practices” document, and (2) apply a 500 ft buffer zone to Fairview Park, Talbert Park, the Randall Preserve, and the Upper Newport Bay Nature Preserve. The motion was seconded by Marr. The City Attorney requested that language be added to the ordinance that the fees assessed for beekeeping would be set by resolution of the Council. That was acceptable to Chavez and Marr. Harper questioned the limitation of two beehives and asked that language be crafted to include a reasonable number of hives given the availability of space. The Council Members found it difficult to wordsmith language, so a motion was made to reopen public comment in order to get input by an expert in the audience. That expert suggested some language he felt was appropriate. Then other members of the public made comments, some for a second time, which extended the discussion further. Chavez repeated his motion to include the expert’s additional language, with Marr approving. The motion passed 6-0. The ordinance must return for a second reading before it can be incorporated into the Municipal Code.
What I found interesting is that on the first first reading for the ordinance, Mayor Stephens was so concerned that folks with a bee sting allergy might not get notification of the existence of a hive, yet at this meeting he was completely silent on the removal of the provision requiring signage. Perhaps he forgot about his earlier rant and proclamation that he wouldn’t approve the ordinance without it.
New Business. There were three items.
1. Award of Citywide Parkway Maintenance, Street Rehab and Slurry Seal Project. The first was the approval of a project to maintain parkways, and rehab/slurry seal streets. There are also some pedestrian and bicycle improvements. If you want to see if your street will be improved, here are the maps: https://costamesa.legistar.com/View.ashx?M=F&ID=13559522&GUID=63D6D3C1-C9AD-415B-B94C-E000D649BA52
The project also includes resurfacing the asphalt play area at Balearic Park to include new facilities, which may be pickleball and basketball, but there will be community outreach before that decision is made.
The cost for this project is about $10.5m (including a 10% contingency), most of which is paid by the gas tax and Measure M2 funds. Upon a motion by Harper to approve Staff’s recommendation and seconded by Stephens, this was approved by a vote of 5-0 (Marr had left the meeting).
2. Approve the Acquisition of 778 Shalimar Drive, Costa Mesa for Evaluation of Community Service Public Uses. When this acquisition came to the Planning Commission early in the month, the Agenda Report there made it sound like it was for expanding Shalimar Park. When it arrived at the City Council, the project had morphed into “community serving public uses” which we were told perhaps was for park expansion, or maybe it would be affordable housing, or maybe it would be for a community center. That’s a lot of “maybes” and a “perhaps” to be spending over $1,725,000 on, if you ask me. On top of that cost will be the cost to relocate the 19 tenants.
It is the City’s plan, once it acquires the property, to demolish it, as the building is in poor condition and would take extensive work and money to bring up to code compliance. I will add that this building has reached its lifespan and demolishing it is the right thing to do.
At the Planning Commission meeting, no information was provided about the tenant relocation process. At this meeting we were finally able to see the relocation plan. In August, the City hired Monument Row for one year “to provide right-of-way support services in connection with the relocation of the occupants residing at 778 Shalimar Drive.” The tenants can get moving expenses and a rent differential based on fair market value, if they move into a property with higher rent than the subject property. The City is rehabbing a property on James Street and intends to offer that as a relocation location. The relocation timeline shows the process taking over six months and the close of escrow is contingent upon the relocation taking place. According to the City, the cost of the relocation of tenants is not known but should not be “significant.”
The City Council approved the budget appropriation of $1,500,000. Where will the other $225,000 come from, and what about escrow fees, broker’s commission and other incidentals that typically come up during escrow? I guess the City will come up with those monies when the time comes.
The City Council agreed to release all contingencies, including appraisal and inspections and to allow the City Manager to execute any agreements, disclosures, amendments, etc. Since the City is aware of the dilapidated condition of the property, it will be curious to see what it does if the Phase I or Phase II reports indicate a need for costly remediation work. If this was a project I was investing in, I wouldn’t agree to release contingencies because often additional environmental work is the reason for a price reduction during escrow. The City isn’t getting the property that cheap and it should have held that card.
Harper was the only Council Member who asked questions about the cost of relocating the tenants, about a projected cost for the project(s) the City is considering, and what the market rate capitalization valuation on the property showed (this is an estimate of the purchase price of the property based upon rents at market rate). The City did not have the later done. Harper did one and the property value came to $960,000 (which is, coincidentally, what the seller paid for the property about 10 years ago), so according to him the City is overpaying to the tune of $765,000. That’s a lot of money! Since the rents were released to Harper in Closed Session, I don’t have the numbers to verify his calculations, but he’s a numbers guy, so I guess I’ll have to trust him on this.
Since the City doesn’t know if it will make the property into a park, or a community center, or something else, the cost to construct the facility is unknown. According to the Assistant City Manager Cecilia Gallardo-Daly, the future use of the property will be determined by a community outreach process. While those are nice words, what we’ve seen in other outreach processes is a vision that is steered through outreach to a predetermined outcome.
The City has been working on this plan for some time! It would have been helpful to see documents like the appraisal and inspection report to know if the deal is a good one. Further, there must be some concept of what the City wants to do with this property, or it wouldn’t be buying it. Adding more parkland to this area wouldn’t hurt, and the loss of a few dilapidated market rate housing units won’t likely make a difference, but if we are going to construct a new community center, that will cost a significant amount of money more and it would be nice to get at least a guestimate.
Stephens moved to accept Staff recommendations, which was seconded by Chavez. Stephens cited gang activity in this area as the reason for the project. He would like to see a community center there and to explore the concept of putting housing above that. He doesn’t like the idea of expanding the park. He wants a safer Costa Mesa, but didn’t elaborate on how this project will make this area safer. Chavez’s comments didn’t add much, other than he wants the City to be more involved in helping the Shalimar area residents “find their future.” He thinks the community input into what it wants on the property will somehow do that. Okay…but how will that work?
Harper stated he would be voting “no” because he called the project a “patch” that wouldn’t help improve the community. He cited the lack of code enforcement on the rundown properties in the area. Code enforcement only looks at a property when it gets a complaint, and folks hesitate to complain to the City about their landlord failing to maintain their property. Properties that don’t get fixed cause the other properties to devalue. He also cited his opinion that the City is paying to much for the property saying, “it’s easy to spend when it’s not your money.” He would have voted “yes” had the purchase price been closer to the market rate.
Harlan, who had been quiet until this point, had to jump in and defend the project. He repeated the thought that the project is in an area with “severe and significant and persistent public safety issues.” “We need to start somewhere. We can’t wait for the perfect big plan.” He, along with Stephens and Chavez, are happy to spend over $1,725,000 on the “concept of a plan.” But how will the project improve public safety? Not Stephens, not Chavez, not Harlan, ever explained how.
Stephens tried to defend the valuation of the property and the City received a broker’s opinion with listing of comparative properties. It would be curious to see those comps, but that wasn’t included in the Agenda Report, and while comps are interesting, they aren’t the only way to value a property. I always take comps with a grain of salt because they are cherry-picked by a broker who is earning a commission on the deal, and whose best interests are served by a higher purchase price. Stephens tried to compare the price of a single-family home to what the City is paying for this property, but that’s apples and oranges to anyone who has been involved in commercial real estate.
Then Stephens returned to the claim that the City would be helping kids stay out of jail with this project and that the project “will multiply in terms of the public safety in that area over generations and generations.” Again, how does that work? And why is it that the Downtown Recreation Center, which already offers afterschool programs and is four blocks away, hasn’t solved the public safety problem?
Then he said, “I don’t want to be snarky.” But he was, and frankly, he should be embarrassed of what he said next. “Look at I, it's, it's his last time to vote, no, and all that stuff. It's also my last time to be snarky because years ago, when I was, uh, believe it or not, I was a high school student and I, and it will come as no surprise to you that I, I took, I participated in debate and I remember what the debate coach used to tell me. ‘Whenever you can't think of another argument always say, it's too expensive.’”
So, if cost is no matter, should the City build a little Taj Majal there? And is the advice of a high school coach the reason why we should discard common sense and fiscal responsibility to go forth with a really expensive project?
At this point Harper said, “I have a comment. And I am a little tired of your snarkiness. John, I had to listen to ‘I hardly ever do something’ for four years. I've listened to you be snarky about the experience I have in, in land development. I've heard those comments. And you know if you don't have a vision, you don't think beyond little places, you don't get anywhere. And the fact that I'm concerned about the fiscal responsibility of a city spending taxpayer money, I don't think that deserves your comment. Not at all. You know, you can't say ‘Oh, we're gonna save 10 lives because we're gonna build a community center.’ There's nothing that says that. Where's that data? Where's that argument that that's out of? It's unbelievable. So, I'm the only one here that's done development. The only one, I think, that understands it and sees a bigger vision. For 30 years I've been here in this community and listen to people talk about ‘when is the West Side going to get developed, when is it going to change?’ This just patches a problem. It just patches a problem. That's all it does. And you can talk about your intentions, and this is an opportunity in front of us, but you lack vision.”
Those last words that he and the other City Council Members lack vision are the truth. I, and several other residents, have been pointing this out to them since 2016, and the Council, along with City Staff, have never developed a vision. Sadly, I don’t see that changing because we have a Mayor and (now former) Mayor Pro Tem who are so entrenched in the bowels of the Orange County Business Council, they will never see past the effluent to acquire a vision.
While I support the idea of purchasing the property and improving it and the Westside in general, at what cost should the City do this? And what will be the vision of how this project improves the West Side? There is already a land use overlay that enables developers and investors to build new residential units, but only a few residential projects have been built or are being processed. Many of the apartment buildings on the Westside have reached their lifetimes of use and the City isn’t doing anything to enforce code compliance and maintenance unless a complaint is filed. The lack of development in the area is mostly due to the economics of lack of return on buying expensive land, coupled with the instability of availability of materials and labor during the pandemic, along with high cost of borrowing money, but is the City really doing anything to help with the high cost of building housing? And in terms of improving public safety, wouldn’t some extra policing be more effective and cost less?
If the City decides to go beyond expanding the Shalimar park improvements, it needs to show its hand on what it is contemplating. If the City is going to go into the business of building new housing, it should engage a nonprofit, such as Habitat for Humanity, so it can benefit from the knowledge and experience of a professional in this area, rather than trying to reinvent the wheel and costing the citizens a ton of money while it learns.
Using the excuse of public safety as a reason to buy the property is just a smokescreen and I hope the residents aren’t fooled by the platitudes of a few politicians. I wish the Mayor was more concerned about fiscal responsibility than he was with building a monument to put his name on.
The motion passed 4-1, with Harper voting no and leaving immediately. If you thought there were some fireworks on this one, yes, indeed there were. But the fireworks didn’t stop there. We were at the three-hour mark of the meeting with one item to go.
3. Adoption of Salary and Benefit Resolutions for the Costa Mesa Division Managers Association Confidential Management Unit and Executive Employees. The City Council was asked to approve negotiated salary raised for these groups of employees, along with allowing a market analysis in February 2025 for the Energy and Sustainability Manager, Neighborhood Improvement Manager, Public Affairs Manager and Recreation Manager.
There was a presentation by Kasama Lee, the Human Resources Manager. Sandwiched in that presentation was a raise for the City Manager. Did I miss that in the Agenda Report? No. It wasn’t mentioned in the Agenda Report, but it was included on page 7 of the last of three resolutions the City Council was asked to approve. The raise would be 3.75% in Jan 2025, 3.75% in January 2026 and 3.5% in January 2027. That one was about to cause a kerfluffle.
The increase in the cost of these raises over a three-year period is $995,567.
Chavez asked about the raise for the City Manager, and the fact that, in the past, the City Manager received her salary adjustment after a review by the City Council. Ms. Lee told the Council that in the past it has been both done separately and included in the Managers and Executive Employees resolution. The City Manager did not receive her performance review in the Fall, so it seemed odd that her raise would go into effect without a performance review.
Without any more questions, Stephens made a motion to go forward with Staff’s recommendation, but with the exception to exclude the sections of the resolution that deal with the City Manager’s salary. He cited the section of her contract that says that adjustments to her salary are to be made after a review by the Mayor and City Council. He then directed that the evaluation be done in the first quarter of 2025. That motion was seconded by Harlan. Chavez requested clarification and Stephens proceeded to read to Chavez when the last salary increases were to take place, only he initially mixed up the months January with July and had to correct himself.
Loren Gameros asked for help from the City Attorney. She pointed to the contract with the City Manager (the contract and amendments were later provided to the public in “supplemental material” for the meeting. Gameros asked questions about the timing of the review. It came up that the City has been consistently late in performing the review of the City Manager. Gameros expressed disappointment in that, and the fact that no one notified City Council Members that they were late in performing the review. In that light, Gameros said he would not be supporting the motion. Chavez pointed out that there were only four members of the City Council left, and that it really needed to be a unanimous vote.
The City Attorney pointed out that the City Council is responsible for timely performing the review of City Manager’s performance. She also indicated that performance metrics were supposed to be established, and they have not been created. There was a lot of going back and forth about whether to keep the City Manager in the resolution or drop her out. If they didn’t approve the other raises, that wouldn’t be fair to those employees, but including the City Manager would not follow the terms of her contract. At that point Chavez said he supported Gameros and made a substitute motion to accept Staff’s recommendation which included the raise for the City Manager. Harlan pointed out that the raise was not just for one year, but for three and that set a precedent for other negotiations. Ultimately Gameros crafted a motion where they would move Staff’s recommendation, with the exception that the City Manager would receive a raise for 2025, and that the City Council would then perform a review of her performance before agreeing to the increases for years 2026 and 2027.
While it was interesting to watch this being done in the sunlight of transparency of a public meeting, ordinarily we don’t see salary negotiations done in public because that is an item that can, and should, be handled in Closed Session. This was all pretty awkward with the City Manager sitting right there. I feel this was really poorly contemplated and handled by the City Council and the City Manager.
There was one more meeting I attended this month and that was the Finance and Pension Advisory Committee on November 13. The meetings for this committee are at an inconvenient time for me to attend (4:00 p.m.), but a couple of items caught my attention, so I made of point of being there. I usually keep up with this committee by reading the minutes. That fact that the minutes weren’t attached to the agenda, and therefore the public was not allowed to review them at the same time the committee members, caught my eye. Yes, that is a Brown Act violation (again!). The second item was a review by Chandler Asset Management, one of the investment advisors used by the City, of the funds it manages. The investments the City makes of nearly $67m are conservative, but have still been earning income at a decent rate. Chandler charges the City a management fee (versus charging fees by transaction), so it keeps the fees down. I hope the City posts a hard copy of Chandler’s presentation with the minutes of the meeting, because it was very interesting.
WHAT’S COMING UP? Not much. Except for the City Council meeting where the election winners were sworn in and one Planning Commission meeting earlier this week, there isn’t another City Council meeting planned until next year.
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