During public comment at the March Sweetwater Union High School board meeting, Jacqueline King, a resident of Chula Vista who has worked in real estate development for 36 years, addressed the trustees regarding the district’s quirky surplus property deal on L Street.
King asserted that the district has “an abominable record of managing property” and regarding L Street transactions, “the layers of ownership and the crazy financial deals that you [Sweetwater] put together…are being looked at not only by the state but by the federal government as well.”
In 2004-05 the Sweetwater school district, with superintendent Ed Brand at the helm, concocted a complex real estate scheme to purchase property on L Street in Chula Vista—ostensibly to build a new district office and corporate/bus yard.
On February 1 2005 the loan agreement for L Street was signed. The property was purchased for $25,415, 000 in variable bonds, with another $8,235,000 in variable bonds to finance the payments and interest for subsequent years. But the name on the loan documents is not Sweetwater Union High School District, rather Plan Nine Partners LLC. (The property is now said to be worth $12 million.)
On the same day, February 1, 2005 the district signed a lease agreement to lease back the property from Plan Nine.
In 2004, in anticipation of the land acquisition deal, the district tied several pieces of surplus property (Third Avenue, Fifth Avenue and Moss Street) to the ill-fated L Street property in a land exchange agreement signed by Ed Brand and Marc Litchman of Plan Nine Partners LLC/California Trust for Public Land.
Regarding these elaborate transactions, one source suggested the point was to circumvent the education code and public participation: “The district could have gone by the high road — they picked the low road.”
The high road — or what normal California school districts do, is dispose of surplus properties (like L Street in Chula Vista or Third Avenue) in accordance with California Education Code (Section 17388), often referred to as the 7-11 plan.
This means that an advisory committee of no fewer than 7 and no more than 11 parents, students, and members of the business community meet and decide the best use of the district property and take their recommendations to the trustees.
In a recent interview, Litchman of Plan Nine Partners/California Trust gave his interpretation of the logic behind this byzantine deal-making.
Litchman said that initially, in 2004-2005, the district wanted to develop district headquarters on L Street. However, district offices cannot be built with school bond construction money.
So the idea was to develop condos or apartments on some of the district’s surplus land and use the capital generated to build district headquarters on L Street.
The district, according to Litchman, brought him into the deal because they wished to avoid the 7-11 education code process which would have made the district’s surplus property available for other public entities to purchase. Litchman also said the process is lengthy and expensive.
After the property was purchased, the real estate market tanked. According to Litchman, “the cost of labor and materials to build the headquarters had skyrocketed as a result of the real estate boom.”
Litchman says that his board (California Trust for Public Schools) believes “the highest and best use of the land is public use.” To that end, Litchman is pursuing the idea of developing a state-of-the-art soccer facility for youth clubs and league soccer on L Street.
Litchman says, “We [the Trust] feel we are serving the district’s needs by assembling a plan for them that shields them from an enormous financial loss while at the same time providing much needed services.”