Indio land deal wise? Palm Springs CA Desert Sun, 3/25/07

City defends purchase, says revenue covers possible loss

By Xochitl Peña

After spending more than $14.5 million to buy land near the Indio Fashion Mall and transform the area into a hip, outdoor shopping and entertainment center, city officials are poised to abandon their plan and sell the property - even at a loss.

The city used eminent domain and negotiated tirelessly to secure 20 acres of land behind the mall - paying 370 percent more than the appraised value for 11 pieces of property alone since July 2005, a Desert Sun analysis of city records found.

However, unless a deal is reached with the mall's owner, City Manager Glenn Southard is under instructions from the City Council to put the property - about the size of six La Quinta Costco stores - up for sale. The city is working on an appraisal, but Southard estimates the land the city bought for $14.5 million could fetch $10 million to $15 million.

Regardless of what happens in negotiations, Southard said Indio is better off having bought the land and converted it to retail use. And even if the city sells the land at a loss, Southard said the difference could be made up easily through sales, property and hotel taxes.

City officials say improvements to the land behind the mall will jump-start development along the city's Highway 111 corridor - one of several priority areas for the city's retail future.

Southard defends the above-market price purchases. He said the city owed businesses and residents behind the mall compensation for razing a neighborhood, relocating people and, in Al Meza's case, 18 years of property taxes.

"They paid me for all the damage, for all the business I lost. They made me bulldoze. They left me hanging for years," said Meza, who received $1.25 million for his 1-acre property that housed a business. His land was appraised at $450,000.

Southard said the city is making the right moves.

"We're required by law to take into consideration things like relocation expense, goodwill, the pain and suffering of some of the actions," he said.

While Southard thinks it would be great if the two properties could combine for one development, he added, "I don't think there's anything magical about it being together."

But some residents and mall owner and developer Richard Weintraub say the city failed to protect taxpayers' interests.

"I know they paid many, many times too much for (that land). There's no question," Weintraub said.

Weintraub, Southard and two City Council members have met since February to see if their original plan - to build a large lifestyle center along Highway 111 that would rival The River in Rancho Mirage - can come to fruition. In the past, negotiations haven't gone well, but both sides meet Monday with a mediator to see if a deal can be made.

Not only would the city risk losing money, but it could be forced to rethink plans for one cohesive development.

"At this point, it would take close to a miracle to find a way to make this thing a large single project," said City Councilman Mike Wilson, who has served on the City Council for nearly 12 years.

Sore spot
The Indio Fashion Mall is a touchy subject for longtime residents. They remember watching a neighborhood, comprised mostly by African-Americans and Latinos, leveled for what would wind up being a failed mall expansion in the late 1980s.

The city spent $8 million back then to acquire most of the property behind the mall through eminent domain to help then-owner David Miller, the founder of Miller's Outpost clothing, double the mall's size.

Cities are able to use eminent domain to acquire private property for public use. In this case, the city approved the process to help with the expansion of the mall. But Miller's financing for the project fell through

Thus, the city never finished total acquisition, leaving 11 properties behind.

The city renewed efforts to buy those remaining parcels after Weintraub bought the mall in November 2003 and announced elaborate plans to transform it into a lifestyle center, with outdoor shopping, water features and places to dine.

"I thought great things would happen," said Indio resident Robbie Sanford, "and nothing's happened."

Weintraub announced earlier this month that he would submit to the city plans for renovating the mall's interior and exterior within 60 days.

But he says he would still like to create a mixed-use lifestyle center for Indio by combining the mall property - about 20 acres itself - with the 20 acres the city owns behind it.

However, the price the city's considering for that land is too much, he said.

"That is way out of the ballpark of what I think it's worth. Not even marginally close," he said.

The land behind the mall is only worth $2.3 million, according to a 3-year-old appraisal study Weintraub says he has. He has not provided that study to The Desert Sun.

Maggie Montez, senior vice president with Indian Wells commercial brokerage firm CB Richard Ellis, disagrees with Weintraub's assessment. Based on her knowledge of local market trends, she says the price is about right.

"I think it's a good, solid site to take to market. Indio has come a long way in the last decade, and I think Indio has proven itself," she said.

Rudy Herrera, a commercial and home developer with projects in Indio, agreed the asking price is right for a project that would include Highway 111 frontage.

But it would be challenging, he said, for a developer to buy the city's land and work with Weintraub - not from a personal standpoint but as a professional with a different vision.

Southard said other developers are showing interest in the land though.

Selling to another developer is shortchanging residents on what they were promised initially, former City Manager Tom Ramirez said.

Ramirez, who was Indio's city manager when Weintraub bought the mall in 2003, said the intent was always to expand the mall to the south.

"There were never any details. We were working on an agreement when I left," said Ramirez, who resigned in July 2004.

"I'd like to see that mall expand. If it doesn't, then the mall will dry up and won't attract good retail."

Decades of effort
The city's acquisition of the 20 acres behind the Indio Fashion Mall is almost complete, ending where it began in the 1980s - with the use of eminent domain.

Since July 2005, the city has negotiated for the 11 remaining properties behind the mall, spending $6.56 million and paying more than the appraised value for some parcels.

In one extreme case, the city paid 1,228 percent above the appraised value for Mount Zion Church of God in Christ.

City officials say they spared no cost to do right by those residents left in limbo for years.

For Meza, his property was appraised at $450,000. But the city also ended up paying $800,000 for attorney fees, 18 years' worth of property taxes and the cost of making him raze his convenience store and car wash.

Indio is close to clinching the final piece of its 20-acre puzzle.

On Wednesday, City Council unanimously approved condemnation on a 14,450-square-foot vacant parcel because of title issues with its owners. Most are in favor of selling the land.

But because some original owners are deceased, the land can't be sold without court intervention via eminent domain.

Meanwhile, the city continues talks with Weintraub behind closed doors.

Whatever happens, an end is in sight for almost 20 years of uncertainty.

Palm Springs CA Desert Sun: http://thedesertsun.com