Transfer of Whispering Hills Development Agreement?

On September 18, the San Juan Capistrano City Council was presented with a request to assign the previously approved Development Agreement between the City and Whispering Hills LLC to a new partnership called Rancho San Juan Development LLC.

You can see a few other details of the City Council discussion at The Capistrano Dispatch, Beyond the Blackboard (blog).

Why should this be necessary? After all, the item placed before the Council says that Rancho is "wholly owned" by Whispering Hills LLC, so what is the point of such a transaction?

There could be several possibilities:

1. The future sale of Rancho San Juan Development LLC may be contemplated. The buyer of the entity would then be shielded from any past claims involving Whispering Hills LLC, having purchased a fresh and clean asset consisting of the land and the agreement to develop it. Of course, this leaves anyone with a claim (e.g., Capistrano Unified School District), holding an empty bag!

2. Whispering Hills LLC might be trying to transfer ownership of this property without triggering a property tax reappraisal by the County of Orange. The property was originally acquired for about $8000 per acre. By the time it was sold to CUSD, the "price" had escalated to $1,040,000 per acre, even though no development agreement existed at the time. However, more than a year after the sale to the school district, the City did approve the Development Agreement making the land significantly more valuable today compared to the purchase price. Merely selling the land will trigger a reappraisal and taxes would go up! However, it is actually the Development Agreement that makes the land valuable and transferring the Development Agreement will not get the attention of the Tax Collector. Neat trick! Sell the rights in the Agreement for $ millions and then sell the land itself at an artificially depressed price (under the cover of depressed market for such property).

3. Yet another possible motivation for this transfer would be to isolate the new owner from the messy property line dispute that exists between CUSD and Whispering Hills LLC, along with the related Attorney General's investigation. There are several areas where SJHHS has been built on land owned by Whispering Hills LLC, and these areas of dispute may cloud title to the property.

4. Another possibility is that the owners of Whispering Hills LLC are intent on terminating their obligations under the Development Agreement. This could easily be accomplished by transferring the Agreement to a new entity that would then simply allow the Agreement to expire (or through bankruptcy, the new entity would just disappear). This scenario seems far-fetched, unless the cost of the owner's obligations under the Development Agreement have grown to exceed the value of the Agreement itself, or the owners believe that the Development Agreement will expire before there would be any interest in actually developing the property.

Take your pick. No matter what happens, the community will be affected. The City of San Juan Capistrano has bent over backwards to accommodate this developer. Along the way, CUSD was simply raped (there is no more apt term for it). Now we are asked again not to "unreasonably withhold" permission for this developer to play his games.

The City should demand a full explanation for this transfer. It should demand an assurance that the transfer of the Agreement and the property occur together. It would not be "unreasonable" to re-open the Development Agreement itself as a condition of obtaining the City's consent to the transfer.

The City may be the only public agency that is in a position to ensure that the school district and County taxpayers are not being made victims by this transaction. Read more!