In another debate over a request for pre-annexation, Mayor Ignacio Velazquez carried the vote during the Dec. 19 Hollister City Council meeting against two housing projects, one of which was at the expense of local builder Hugh Bikle, whom Councilwoman Mickie Luna described as the one person who got the city back on its feet after the 1989 earthquake.
The resolution concerning the Bikle's project came out of a Dec. 5 closed session. The council had decided it would not approve a tax-sharing agreement with the county that was different from the Master Agreement for Tax Transfer upon Annexation of June 2011, and would allow, through a separate settled agreement, Maple Park LLC to pay $8,366 per parcel instead of $11,035.57.
The city and county are currently in litigation—Maple Park LLC is not part of the tax-sharing agreement—over the legality of the additional amount that the city pays the county for the “privilege of annexing properties.” In an ironic twist of a law versus how it is enforced, the code permits individual agreements, but in practice, once a master property tax-exchange agreement is in place, cities, districts and counties can no longer negotiate single, ad hoc agreements.
City Counsel Brad Sullivan explained that the city has requested that the county allow it to terminate the master agreement, but the county refused, forcing Bikle to team up with the county to approach the city council to bring forward an individual request for a tax-sharing agreement. Included in the resolution was another request to annex Bikle’s property on Buena Vista Road.
Sullivan gave background on the tax-sharing agreement issued prior to council discussion. He said in April 2016, a judge overturned the tax-sharing agreement between the city and county. He said the agreement was re-considered and would be up for a hearing March 27, 2017, to determine whether or not there is an agreement.
“Right now there is a master tax-sharing agreement and there are two matters before the council,” Sullivan said, explaining the two issues before the council. He said one developer (Doug Ledeboer) had requested an approximately 25 percent discount of the payment made to the city that is then passed on to the county.
“In the other matter, they’re (Bikle) wanting to pay the full amount ($11,035.57), which by right and by law they have the ability to do because the tax-sharing agreement has been reinstated by the court. The difference, and why it needs to come to the council for approval, is instead of paying under protest and then suing for a refund, the applicant is saying he will pay the full amount if the new master tax-sharing agreement is a lower amount or the city is still holding, he will refund the difference to them.”
Sullivan said the proposal means the Maple Park project will not have to sue the city, forcing it to defend itself because it would have paid the full amount. He said that because the applicant had not been able to attend the Dec. 5 closed session to argue his case, it was now on the agenda for the council to hear comments from Bikle or his attorney, and then vote on it.
Velazquez commented that he was surprised to see it on the agenda because it was understood there would be no more discussions until there is a fair tax-sharing agreement in place. Councilman Raymond Friend said he thought that when the council had discussed the project during the closed session there was no tax-sharing agreement. Sullivan told him that the agreement was reinstated in October. Velazquez asked Sullivan if he was right in understanding that the reinstated agreement allowed the county to charge applicants a fee, but the city and county had yet to work out how those fees would be shared. Sullivan further explained the reinstated agreement’s future would be determined at the March hearing. He said that the tax-sharing agreement was, therefore, technically in effect.
“Until we have that (tax-sharing agreement) finalized with the county, let’s not adopt these projects one by one,” Velazquez insisted. “Let’s get an agreement with the county so we’re not having this issue every time.”
Friend commented that at the time the council had first considered the project, there was an agreement with LAFCO to annex.
“We had an agreement at the time, then a judge says we don’t have an agreement, now the judge comes back and says we do have an agreement, but that shouldn’t matter,” Friend said. “We approved those annexations.”
Velazquez told Friend that the properties had not been annexed and Sullivan said LAFCO had not made the final approval. Friend wondered how LAFCO could not have approved it when the council had agreed to it. Sullivan explained that because the court had invalidated the agreement a consultant was brought on to determine what the shortfall, if any, would be in development over the protracted time it would take to come up with a master agreement.
“That’s why anybody annexing now can go under the master tax-sharing agreement,” Sullivan said. “However, the Maple Park applicant wants to pay something less, so that has to come before you.”
Again, Velazquez said he is not anti-growth, but wanted to make sure, as a city, there is a fair tax-sharing agreement with the county. He said that’s what he understood came out of the closed session. Sullivan reiterated that Maple Park is negotiating under the existing tax-sharing agreement, not the one that may result from the court hearing.
Councilman Karson Klauer said to Sullivan, “We have an agreement with the county.”
“Correct,” Sullivan responded.
“We don’t like it,” Klauer said.
“Correct,” Sullivan said.
“This agreement that’s being proposed is between the city and county for a specific project,” Klauer said. “Do we have a mechanism for getting out of the tax-sharing agreement we do not like?”
Sullivan said they would be going to court and the city had sent a letter to the county stating that the city considered the proposal under discussion was, in essence, a termination of the master tax-sharing agreement. He said the county is saying to the city, “It’s our money, what does it matter to you?”
Councilman Roy Sims asked why the original master plan would invalidate the project. Sullivan said that in the plan in 1990, 2000 and 2010, the city agreed to pay the county to annex properties, and it would receive 25 percent of the property taxes. Award Homes and the city sued the county despite an agreement in which the city would pay the county and then try to collect it from applicants. In fact, the city actually does not have the authority under the California Constitution to collect the fees. The thinking now is that all the issues will be settled at the March 2017 hearing.
Sims asked Sullivan whether city approval of more projects would invalidate the city’s arguments in court. Sullivan said he didn’t think it would hurt the city, theorizing that the ultimate result would be that the mitigation fees would be greatly reduced. Sims wondered, then, why the applicant would want to pay anything if there was a chance the fees would be reduced or nullified. Sullivan said he didn’t want to speak for the applicants, who were in the audience, but said one has been waiting to pull building permits for almost nine months.
“These are home builders and they want to build now and not have other fees go up,” Sullivan said. “They want to capture what is still a bull market for home prices. If the fee goes down, the county, if they have the money, or if the city hasn’t turned it over yet, will refund that to them.”
Councilwoman Luna wanted to hear from Bikle to give him a chance to tell his side of the story. She said she wanted him to speak because of the recent controversial public comments about the housing situation in Hollister.
Bikle said he was trying to develop homes near the post office that would be far more affordable than those being built along Fairview Road and other locations. He said he has been a builder for 50 years. He asked the council to approve the settlement agreement between the city, county and Maple Park LLC.
“We need to approve this settlement agreement and not tie it to the termination of the tax-sharing agreement,” he said. “These are two separate issues. And tying the two together by saying you don’t get to annex unless you terminate the agreement simply results in us not getting annexed.”
Bikle reminded the council that it was the city that asked for the annexation more than a year ago; that LAFCO recommended approving it 10 months ago; and state law, as well as the city’s and county’s general plans, require the property to be annexed because it's totally surrounded by the city.
“It’s bad city business to have an island served by the county surrounded by the city,” he said. “That kind of island, by law, belongs within the city.”
He said the LAFCO approval was contingent on him either to agree to the conditions in the master plan (the $11,035.57 fee) or negotiate a separate agreement with the county. He said the county wanted to go with the separate agreement.
“We negotiated in good faith and got the approval of that separate agreement, which is contingent on the city’s approval,” he said. Bickle continued, "If the city agrees to go along with the separate agreement, it does not violate the master agreement. They have no connection. I’m not required to pay the city, but the city is required to pay the county. I encourage you to renegotiate it (master agreement), but it has nothing to do with us.”
Bikle said he had no desire to take advantage of the agreement and that he is willing to pay the city the fee that the city is required to pay the county. He said the settlement agreement protects the city by guaranteeing he will pay the amount that it passes on to the county and that the county cannot demand more from the city.
Attorney Christine Kemp concurred with Bikle’s reasoning and added that he had also agreed to waive all legal rights to protest the fee. She said the county agreed to the lesser amount because of the smaller sizes of the homes and that each of the three parties are assured of payment due. She said Bikle was prepared to have the certificate of completion recorded within 30 days if the council approved the resolutions.
Recently-elected Mark Medina, who will take a county supervisor seat after Margie Barrios retires in January, said the council should take into consideration that most of the developments taking place around Hollister that have been approved are being done by “out-of-towners,” who build houses, then “pack up and leave.”
“Mr. Bikle has been here for decades,” Medina said. “He builds houses. He does a lot of volunteering and charity work in Hollister. These are the types of developers we want here to benefit our city.”
Medina went on to address the tax-sharing agreement, reminding the council that it had met with the supervisors at San Juan Oaks, and even with a negotiator present there was no resolution. He said he hoped that would change because the two need one another.
“When we make decisions it has to be what’s best for both, not just the county or the city,” he said. “The houses that Mr. Bikle is anticipating building are less expensive. Please consider a developer who has roots here and that he has been waiting a year for this project. At one time, it was a project that everybody liked and he’s now caught in the middle of the bickering between the county and the city. Hopefully, we are not going to make him pay for that.”
Because the majority of comments concerned Bikle and his project, the other project was almost overlooked until Doug Ledeboer of KDH Group, commented that his group came to Hollister three years ago to meet with planners, city officials and the public.
“We heard the city needs more affordable housing,” he said. “I’m singing the same song as Mr. Bikle in that most of the new housing is around $500,000. What I was hearing was a need for housing for the firemen, police, school teachers. We embarked on a mission to find the right piece of property to do that.”
He said the property they found was zoned medium density and with smaller lots, the homes would be more affordable. He said the owners had already applied for annexation and the environmental document went through the process and was approved by the city council. He said the council did not take action on the annexation because of the litigation between the city and county.
“We’ve been on a hold for about a year,” Ledeboer said. “We think we’ve got a project that we’d love for you to see, but we can’t even show it to you. We’ve been working with county counsel for about eight months and the city attorney as well. We’ve come up with an agreement that I think works for everybody. We just want to bring a project in front of you that I think you’re going to like, but our hands are tied and we can’t do that.”
He asked the council to approve the part of the resolution that pertained to his project, which would simply allow him to show it to the council.
Velazquez was not swayed by either Bikle’s or Ledeboer’s requests or Medina’s reasoning. He stated that even though the county and city are approaching an agreement, there’s still a long way to go. Klauer said he was concerned why it was taking the county so long to hammer out an agreement with the city.
“I think that the master tax-sharing agreement we have with the county is garbage,” Klauer said. “It’s not based on anything factual. The fact that we agreed to it several years ago was a mistake. I think that the additional amount is completely made up and that’s the reason the county is willing to negotiate on it.”
Klauer apologized to Bikle, saying he likes the project and has supported it in the past, but he did not think the city was getting a good deal from the county and that it was unlikely the city would get a better deal.
Luna spoke in support of Bikle by reminding everyone that after the 1989 Loma Prieta Earthquake that damaged an entire downtown city block, Bikle was the one person who helped bring the city back.
“I remember so well if anybody is dedicated to this city, he is,” she said, then made a motion to approve the resolution. Councilman Friend seconded it, but it failed to earn a majority vote as Klauer, Sims and Velazquez voted against it.