Sweetwater school district’s weird, failed real estate deals

In 2005, in conjunction with a nonprofit group called California Trust for Public Schools, aka Plan Nine Partners, LLC, the Sweetwater Union High School district borrowed $25,415,000 and $8,235,00 in variable-rate bonds to buy property on L Street in Chula Vista.

In a 2004 U-T article titled “Sweetwater wheels, deals for new offices,” reporter Chris Moran described the complicated machinations the district was using to acquire the L Street property and make a profit from their surplus properties:

“The district would solicit developers to build homes on three plots of district land..the developers would lease the property from Sweetwater for a nominal fee —$1 per year…and build homes on it. That would allow developers to avoid huge upfront costs in land acquisition and property taxes while the homes were being built…the developers would agree to share with Sweetwater possibly tens of millions of dollars in profits from the sale of the homes….”

Aside from cutting the public out of taxes, the transactions would help the district avoid a cumbersome legality. The article stated: “Normally, the district would not be able to sell the parcels itself without declaring them surplus, which would give other public agencies the first chance to buy them….”

So, where have all these complicated and curious transactions taken the district? The L Street property, which ostensibly was going to be used for district offices, is now worth less than what was paid for it and the district is doing a lot of fancy dancing to recoup. Here’s how:

On March 12, 2012, then–interim superintendent Ed Brand asked the board to approve $347,500 “to begin the process of re-entitling the district non-school properties in preparation for future L Street development.”

Community advocate Kathleen Cheers protested the expenditure and pointed out that the district had spent millions of dollars on L Street property over the years. Nevertheless, in a 3-2 vote (Pearl Quiñones and Bertha Lopez opposed), the board approved the $347,500 and hired a firm called E2 ManageTech, Inc.

The firm produced a report, obtained by the San Diego Reader through a public records request. The L Street prognosis is not pretty.

“The district purchased the L Street property in 2005 at a price that exceeds the current value of the property by approximately $12 to $15 million. Since purchasing the L Street property, the District has been making interest only loan payments to its lender and it is estimated that over $6 million of expenses have incurred.

“These expenses include annual reoccurring fees that are paid to Plan Nine Partners and other bank and financing fees.”

The report details work done for the district that might surprise Chula Vista residents and Sweetwater employees.

The district is exploring development on their “surplus” properties: L Street, Fifth Avenue (on which the district offices currently reside), Third Avenue, and Moss Street. The district is working toward “shovel ready” apartments or condos on all of these sites and also looking at a place to rent for the new district headquarters.

Other details in the E2 ManageTech progress report included mention of the district's intent “to resolve liability due to P9 Partners” and "revise legal documents to eliminate the District’s financial obligation of $28 MM."

Also, the district is working with the City of Chula Vista to “identify candidate Brownfield sites for relocated Transportation Center” (Brownfields= environmentally compromised pieces of land). The Transportation Center is currently located adjacent to the district office on Fifth Avenue; relocating it would free up more property for development.

Meanwhile, the executive director of the California Trust for Public Schools/Plan Nine Partners, Marc Litchman, has been collecting princely sums for “owning” the L Street property.

According to the 2010 tax statement for the California Trust for Public Schools, Litchman was paid $115,611 salary. The trust had an automobile payout of $12,441, telephone bill of $3162, a print and publication expense of $2095, and postage and shipping that cost $1852. (California State Assembly member Bob Blumenfield sits on the nonprofit's board.)

According to the trust’s 2010 nonprofit tax statement, “The organization, through Plan Nine Partners, LLC, has facilitated the acquisition, renovation, construction and equipping of an approximately 23 acre parcel of industrial/mixed-use land located at the corner of L Street…. The organization leases the property to the Sweetwater Union High school district for use by the school district as administrative offices, corporate yard facilities and Chula Vista adult school campus.”

On Monday, Litchman is setting up interviews with Chula Vistans. He will be pushing a new scheme for the L Street property. Among other things, he will be proposing a soccer stadium and ten training fields.