Running Horse deal could be risky: Fresno CA Bee, 10/18/07

If Trump pulled out, city would own the land; Autry says he would need commitment first

By Brad Branan and Robert Rodriguez

Fresno Mayor Alan Autry said Thursday that his plan to help Donald Trump buy Running Horse would require pledging city property as collateral.

In a meeting with The Fresno Bee editorial board, Autry and City Manager Andy Souza explained how the city will attempt to buy the properties that make up the unfinished course and resell the property to Trump.

Autry said he wants to expedite the sale of the bankrupt project before the PGA Tour gives up on the possibility of locating a tournament in Fresno.

The city has the legal authority to pull the deal together faster than Trump, including possibly using eminent domain if property owners won't willingly sell, Autry and Souza said.

Yet legal and real estate experts say the plan is tricky and could face legal challenges.

Walter Lauritzen, a real estate agent and part-time business instructor at California State University, Fresno, said the city must make sure Trump is willing to buy all the parcels.

"It is risky," Lauritzen said. "If, for whatever reason, Trump decides he does not want to buy the property, then the city could end up owning it and taking a big hit. I'm sure the city has attorneys that will make sure that doesn't happen, but it is still a risk."

Trump attorney Michael Cohen has said his employer supports the city's plan.

Autry said he won't commit city funds to the project until he has a binding agreement with Trump: "We will have a contract that says he will buy this."

Autry said he will provide details of the proposal to the City Council in a closed-door session Tuesday. Five of the seven City Council members would have to give the proposal their support to approve the financing.

The administration wants to use a loan to finance the purchase of the properties, Souza said. The city would use the Running Horse property and some of its own, such as the Saroyan Theatre, as collateral.

The city could pull the deal together by January, and possibly secure the PGA tournament for 2009, Souza said.

Autry held two fingers a short distance apart and said, "We're this close to having Tiger Woods tee off in southwest Fresno."

The city's plan depends on buying 33 of 38 lots Trump needs from whoever acquires them in a foreclosure auction scheduled for Oct. 26. The remaining lots would have to be acquired from separate owners.

The city plans to negotiate directly with property owners and hopes to buy land without the use of eminent domain, Souza said.

The city hasn't made "any promises to use eminent domain. It's an option," Souza said. Only three properties have homes, and only one owner is firmly holding out, Souza and Autry said.

Legal experts said the proposal raises questions.

Attorney Richard Harriman of Fresno said state law allows cities to use eminent domain for public-use projects, such as extending sewer lines or creating a city park.

"But what we are talking about here is the taking of property from a private landowner and transferring it to a private developer without competitive bidding," Harriman said. "I don't think that is fair and I doubt it is legal."

Autry said he doesn't see any problem working solely with Trump because no else has come forward with a credible offer.

There is also a question of whether it is proper for the city to commit to eminent domain before holding a public hearing.

"If a landowner says they are not going to put up with this, the city is looking at two and a half years of litigation," Harriman said.

Development consultant Dirk Poeschel of Fresno said the issue of fairness in the bidding process can be worked out by structuring the bid in a very specific way.

"The city could develop a process where they can ask for someone who is interested in developing a PGA course," Poeschel said. "Those who can do that, submit your proposal."

Poeschel said the advantage for the city to buy Running Horse is that it has a vision for that piece of property and will work to see it realized.

"The disadvantage is that they can overpay or buy something that the marketplace does not want," Poeschel said.

Fresno CA Bee: http://www.fresnobee.com