Council’s 400 block vote used outdated appraisal

Council was unaware of higher value when it gave developer a deep discount

Between June 2016—when the Hollister City Council entered into an exclusive negotiating agreement to sell the 400 block of San Benito Street—and its vote a year later to sell the property, the price jumped by 77 percent. Council members may have been unaware that they were selling the public land at a deep discount for private development, depriving public agencies of $300,000.

A 2015 appraisal valued the land at downtown Hollister’s busiest corner at $390,000. In September 2016, however, an updated appraisal placed the property’s market value at $690,000. The second appraisal, obtained by the Free Lance through a public records request, was not publicly disclosed before the council voted to revise the sale terms and dispose of the property.

City Manager Bill Avera said the council was “probably” not made aware of the $690,000 valuation when it voted to sell the real estate on June 5, 2017. He did not provide the Free Lance with any documentation indicating the council had been notified of the second appraisal.

The final sale of the property to the Community Foundation for San Benito County and local builders the Del Curto Brothers Group is on hold because of the upcoming vote on the proposed 400 block plan next November.

Avera said he believes the city is stuck with the $390,000 price despite the updated $690,000 appraisal.

“The deal was already done during the exclusive negotiating agreement,” Avera said. “They wouldn’t have had discretion on that anyway.”

Mayor Ignacio Velazquez said by phone Tuesday that he had never heard about the $690,000 valuation. Vice Mayor Karson Klauer and Councilman Jim Gillio confirmed they also never knew of that valuation before the Free Lance informed them of the higher appraisal on Tuesday.

“From the very beginning I’ve said something’s wrong with the whole deal, not only the purchase price but they’re waiving all the impact fees for the project, which I thought was wrong,” said Velazquez, who has recused himself from all votes relating to the 400 block because of his ownership of the neighboring Vault.

The mayor’s recusal does not prohibit him from knowing all facts related to the deal.

“It’s been one heck of a sweetheart deal for a few people,” he said.

Councilman Ray Friend did not respond to requests for comment.

Councilwoman Mickie Luna declined to comment for the article. Luna also declined to comment on whether or not she was aware of the second appraisal in 2016.

The City of Hollister used the $390,000 appraisal value during the request-for-proposal process to sell and develop the San Benito Street site. An agreement was eventually struck with the Community Foundation for San Benito County and local builders the Del Curto Brothers Group.

Because of Velazquez’s successful petition drive this summer to halt the sale of the city-owned property, the City Council agreed earlier this month to place the fate of the 400 block in the hands of city voters next November. Avera said the council’s action froze the process, but did not kill it.

“The council didn’t void the development agreement,” Avera said. “We also have a tolling agreement with the developer that says the dates and performance standards in the development agreement are suspended until the vote in November.”

The Community Foundation and Del Curto Brothers Group planned to build a new headquarters for the nonprofit and a mix of retail and condominiums on the vacant lot. Velazquez has argued the 400 block should remain as open space, which could be used for pop-up restaurants and outdoor entertainment.   

The price for the property could remain at $390,000 if voters decided to stay the course and continue with existing plans for the 400 block at next year’s general election. However, another appraisal could be required after the election because of the time passed since the last one was made.

Appraiser Steve Loos conducted the original appraisal of the grassy lot on Oct. 26, 2015, and placed the fair market value then at $390,000.

City staff asked Loos to provide an updated appraisal in September 2016, three months after the Community Foundation and Del Curto Brothers Group had entered the exclusive negotiating agreement with the city.

“Generally, banks or financial companies won’t accept appraisals more than six months old,” Avera said. “We needed to have an updated appraisal. That just verified or validated the fact that the value of the property was at least $390,000.”

Community Foundation CEO Gary Byrne confirmed the agreed amount of $390,000.

“That’s what we were asked to put a bid in for,” Byrne said.

Loos, the appraiser who has an office in Hollister, declined to answer questions for this story and said his work was exclusive with his client, the City of Hollister.

The Free Lance obtained a letter sent from Loos to city staff in the development services department on Sept. 18, 2016 through a public records request.

The Sept.18 letter said the appraiser’s opinion of the site’s market value in 2016 was $690,000.

Loos calculated that at $35 per square foot multiplied by the 19,673 square feet of land that make up the empty downtown lot.

The document says the analysis and conclusions found in the appraisal were “significantly” based on information obtained from the city and county’s planning and building departments.

“This information was used by the appraiser to form an opinion as to the legal physical nature and the current and future potential uses of the property,” Loos said in the letter. “This analysis does not indicate that any particular level of development potential exists or is guaranteed.”

There’s also the question of the tax sharing entities who are still owed their money from the lack of development on the 400 block property for almost 30 years.

The tax sharing entities—which include San Benito County, Gavilan Community College, Hazel Hawkins Memorial Hospital, San Benito High School District, Hollister School District, San Benito County Water District and the County Office of Education—either did not respond to requests for comment, declined to comment or weren’t immediately available for this story.

“What happens if the sale doesn’t go through and it’s never sold? Then the tax sharing entities get nothing, forever,” Byrne said.

“Maybe today it’s appraised at $1 million or it could go down to $400,000,” Byrne said. “An appraisal is just what someone places value on, it doesn’t mean it has to be sold for that.”

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