New parks are usually a slam-dunk political win for local elected officials, but the recent purchase of two-plus acres in Vista has some residents questioning whether their City Council is spending public funds responsibly.
The five-member board unanimously agreed to pay more than $2 million for the patch of ground south of state Route 78, which is currently zoned for a single-family home and assessed at $301,000.
The June 27 purchase was approved without the benefit of an independent appraisal — a decision experts say violates one of the basic tenets of real estate investing.
Nathan Moeder, a principal in the San Diego consulting firm London Moeder Advisors, said a government agency should have a professional valuation before deciding how much to pay for real estate.
“It’s typical that a city always gets an appraisal when they are buying a piece of property,” he said. “The city has to have a justification as to why they are paying a certain price.”
Moeder said the $2.1 million purchase price agreed to by Vista council members sounded fair based on the potential for a zoning change.
“It’s a low-density land value,” he said. “But that doesn’t negate the need for an appraisal.”
An independent appraisal generally costs between a few hundred and a few thousand dollars, depending on the property and depth of the analysis.
Council members who agreed to discuss their vote said that the community needs more park space and that the 2.27 acres at 536 Matagual Drive are worth more than $2.15 million in cash that the city agreed to pay.
“In a financed residential sale or even financed commercial sale inspections, appraisal, disclosures and financing are standard contingencies,” said Councilmember Joe Green, who works as a real estate broker in Vista.
“This was/ is a cash sale with no financing and no appraisal requirement,” he said.
But some taxpayers are concerned that city officials entered the transaction without formally appraising the property value.
“Most people want to know who came up with the price as a competent, independent appraisal firm should have been brought in,” Vista resident John Burke said.
Burke objected to the purchase price being $1.5 million over the assessed value and said he was concerned that real estate best practices “seem to being bypassed.”
The property, which includes an 810-square-foot home, is currently assessed at $301,810 for tax purposes, according to the San Diego County assessor.
The online real estate database Zillow says the Matagual Drive property is worth $622,400; Redfin values it at just over $786,000.
County records show the seller is Thomas E. Shadle, who bought the property in 2011 for $250,000.
Shadle, who did not return several messages left for him last week, is a member of a prominent Vista family whose roots in the community go back decades.
The late Milo Shadle, the Shadle family patriarch and Thomas’ father, was an attorney and real estate broker who served on numerous local civic boards and was elected to the Vista Hall of Fame nearly a decade before he died in 2001.
Bob Willingham of the Kidder Mathews real estate brokerage represented Thomas Shadle in the sale. He said the assessed value of a parcel has little bearing on its market value, and the asking price for property was $3.65 million.
“The sellers decided to sell the property at a steep discount to the asking price as they felt it would be a great amenity to have a public park in that location,” Willingham said in a statement.
“In real estate, you value property based on its ‘highest and best use’,” he said. “I believe that any reasonable person would agree that a freeway frontage lot has a highest and best use (of) something besides E-1, estate lot residential.”
Willingham also represented the seller in 2019, when the property was offered as a hotel site — without any formal rezoning or building permits.
The proposed deal fizzled after community members organized to oppose the planned development.
Residents are concerned about the city’s purchase of the property without performing an appraisal.
(John Gastaldo/For The San Diego Union-Tribune)
Resident Bill Hayden said he is bothered the city did not hire an appraiser before agreeing to the $2.1 million purchase.
“My main concern is that the city of Vista is paying way above market value for that lot,” he said. “I don’t have a problem with a park going in there, within reason,” he said. “We pay property taxes to the city of Vista, so indirectly that is part of our money they are giving away.”
According to city spokesperson Fred Tracey, the land was formerly in escrow by two different builders for more than $3.5 million. Community opposition doomed both projects.
Tracey also said council members directed the city staff not to secure an outside appraisal.
“Despite the common practice, following the council’s directive, an appraisal was neither needed nor requested,” he said. “This decision was primarily driven by the concern among our elected officials that a future council might rezone the property for high-density development.”
Mayor John B. Franklin declined multiple requests to comment on the purchase. So did Councilmember Katie Melendez.
Councilmembers Corinna Contreras and Dan O’Donnell said they supported adding the Matagual Drive property to the city’s inventory of publicly owned land. But they declined to explain why they approved the deal without an independent appraisal.
“At the end of the day, land is a valuable commodity and they aren’t making any more of it,” O’Donnell said in an email. “We were able to purchase this land without exhausting city resources and many future generations will benefit.”
Contreras said the park deal was too good to pass up.
“There was urgency in the opportunity to expand public land and the council deemed the process used to purchase the land as acceptable,” she said.
Good-governance experts say the best practices in purchasing by government agencies call for independent valuations or competitive bidding when shopping for products and services. Not only that, the process should be open and transparent, they say.
“The criteria relating to the procurement exercise must be set in advance, be fair and be publicly available,” according to the Organisation for Economic Cooperation and Development, an international group that develops policy standards for 37 democracies around the world.
“The evaluation procedure should be made public and the evaluation process must be transparent,” the group said in a white paper. “The integrity of the evaluation process must be protected at every stage of that process.”
Government agencies can run into serious problems when they purchase real estate without the benefit of an independent appraisal.
The city of San Diego, for example, agreed under former Mayor Kevin Faulconer to pay $7 million for a failed indoor skydiving center without obtaining a formal property valuation.
The center, which features a pair of huge wind tunnels in the building’s interior, has been used as a homeless-services center. San Diego officials now have conflicting opinions about converting the property to affordable housing.
The city of San Diego also has struggled with its lease-to-own purchase of the former Sempra Energy building at 101 Ash St., which has been unsafe to occupy for years despite having been appraised by the seller at $67 million.
The Ash Street appraisal was based on faulty assumptions and the year before the city approved the 2016 agreement the prior owner sold a 49 percent stake in the building for $20 million.
John Pelissero is a senior scholar at the Markkula Center for Applied Ethics at Santa Clara University. He said public agencies should hire an independent appraiser for any property they purchase whether the appraisal is required or not.
“Public officials have an ethical responsibility to be good stewards of taxpayer funds and should know prior to a land purchase that the price is fair, reasonable and in the public interest,” Pelissero said.
In Vista, Tracey said the city will hire a consultant in the next few months to “spearhead engagement initiatives with the community to solicit suggestions about what features they want to see included in the park.”
The staff hopes to present the city council a proposed development plan and budget next spring, Tracey said. Once that plan is ratified, the project will be put out to bid, and construction could begin by the end of next year.
“The city council will decide the process for naming the park at a later date,” Tracey said.
Escrow is due to close on the sale Aug. 30.
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