El Paseo Project Update: Developer and City Staff Blatantly Violate Contract Provisions

El Paseo Project Update:

Developer and City Staff Blatantly Violate Contract Provisions

A close examination of the development contract for The Village at El Paseo San Gorgonio reveals at least three instances where the developer and City Staff have collaborated in changing the provisions of the contract without the required City Council approval. This places the Banning City Council members into the untenable position of having to rubber-stamp the changes without bringing it before the public for discussion (a Brown Act violation) or stopping the project until the differences can be ironed out and discussed before the public. That will certainly be distasteful for the two members who are in favor of filling the first construction phase with the Riverside County Parole/Probation Department and possibly the Riverside County District Attorney’s offices, as the citizens have been very vocal at the meetings against this change in the scope of the project.

 The first violation occurred immediately after the Banning City Council approved the original contract during the regular City Council meeting on Jan. 10th, 2012. Here is a link to that contract and the approval:

http://www.ci.banning.ca.us/ArchiveCenter/ViewFile/Item/772 

On page 93 (handwritten numbering) of that agreement it states:

 "G.        As a material condition of Seller’s conveyance of the Site to Buyer, Buyer shall adhere to the following general Project construction schedule (subject to mutually-agreed written amendment by the parties):

 1:         Vertical construction on at least one Phase shall commence no later than February 1st, 2014"

 By the time that the sale opened escrow, someone on the City staff had changed the agreement to read as follows, extending the start date by approximately 304 days: 

"G.        As a material condition of Seller’s conveyance of the Site to Buyer, Buyer shall adhere to the following general Project construction schedule (subject to mutually-agreed written amendment by the parties):

1:         Vertical construction on at least one Phase shall commence no later than December 1st, 2014"

 This is a violation of the approved contract, which states that any extension of critical construction deadlines such as start dates longer than 180 days must be approved by the City Council. This change was NOT APPROVED or even known by the council, and the developer is in default of the approved start date at the present time until such approval is put before the public for discussion and subsequently approved by Council action. That requirement is written into the contract agreement on page 110 (handwritten numbering) under (b) Extensions of Time which states:

 “The City Manager of Seller shall have the authority to approve extensions of time without City Council action if such extension does not exceed a cumulative total of 180 days.”

 This extension of the agreement approved by the Council on Jan, 10th, 2012 is 304 days, exceeding the mandated 180 day limit, and will need to be put before the public for comment and Council approval in order to be valid. The developer is currently in default and subject to other contractual provisions contingent upon this.

 The second violation is even more egregious, as it involves changing specific provisions of the contract for which it specifies that Council approval is necessary. There are signed agreements between the City staff and the developer which have bypassed this approval by the council and which invalidate the developer’s acceptance of a lease by the Riverside County Parole/Probation Department and the proposed placement of the Riverside County District Attorney in the lower floor of the same building.

 The contract outlines the approved use of each of four “Parcels” within the project. The one in violation is the “Retail/Office Parcel” which is described in the contract as follows on page 93 (handwritten numbering) under “Exhibit D”:

"EXHIBIT D" 

4.         The “Retail/Office Parcel”:        That portion of the Site consisting of approximately 1.85 acres to be dedicated to the construction and operation of a mixed retail and small offices complex.

The developer and city staff collaborated to ignore the requirement for multiple small offices and retail shops in order to accommodate the Riverside County Parole/Probation Department in the ENTIRE top floor of this parcel as a single tenant in place of multiple businesses and are actively planning on placing the RivCo District Attorney in the ENTIRE lower floor – a substantial and major change in the Parcel as described to the public and approved by the Council on Jan. 10th, 2012.

Page 114 (handwritten numbering) of the contract clearly states:

 "However, to the extent that Buyer proposes substantial revisions to any plan, drawing, or other document previously approved by seller, Buyer acknowledges that such substantial revision will require review by the City Council or such other legislative body(ies) as may be applicable and, in such circumstance, Buyer agrees to waive the time frames set forth herein if necessary. City’s review is intended to insure that the plans, drawings and related documents are consistant with the Project Concept (Exhibit D)."

City staff approved the change requested by the developer without obtaining the necessary Council review and approval, and has placed the developer in violation of the contract. The developer is not faultless, either, as the contract elicits his agreement that such review is necessary. This leaves both the developer and the City exposed to legal action, as until such review and approval is put to public comment and either denied or accepted by the City Council, the lease the developer signed with the County of Riverside is improper and invalid. The Banning City Council MUST act to invalidate this change until it is properly reviewed and agreed upon or be considered a party to the improper lease.

The third violation of the contract by both City staff and the developer is the most blatant of all. In light of the section quoted above from Page 114 (hand numbering) of the contract, there is a requirement that substantial changes be brought before the City Council to be reviewed and either denied or approved as adhering to Exhibit D of the Project Concept. Here is what is required of the “Hotel Parcel”: 

2.         The “Hotel Parcel”: That portion of the Site consisting of approximately 1.85 acres to be dedicated to the construction and operation of a single hotel tenant. The hotel tenant occupying the Hotel Parcel shall be subject to the reasonable approval of Seller. 

Here is text from two letters between City staff and the developer approving a change from a hotel to another office complex which bypass the required review by Council and public comment under the Brown Act. The first is signed by Andrew Takata and reads in part: 

“The City is in receipt of your letter received October 22nd, 2013, regarding the subject agreement and the “reasonable approval” requirement by the seller for the hotel tenant occupying the hotel parcel. In accordance with the agreement the City approves your request to change the use of the “Hotel Parcel” to a two story building subject to the approval of Technical Review 13-06 and any conditions required by the review.” 

This was never brought before the Council and the public as required by the clause on Page 114 (handwritten numbering) of the contract, and this change is a blatant co-operation between City staff and the developer to improperly and in stealth make that change for the developer’s benefit.

 Here is text from another letter signed by Zai Abu Bakar to the developer breaching the provisions of the contract approved by the Council on Jan. 10th, 2012.

"Ladies and Gentlemen: 

Your application to revise the Site Plan for Design Review #10-702 from a 29,955 square foot three story Hotel to a 32,200 square foot Office Building is approved, subject to the following conditions of approval attached to this letter." (There are no conditions attached to the letter) 

Once again, the Banning City Council must act on the improprieties of these unapproved changes and invalidate them until proper review and determination after public comment or be considered a part of the subterfuge. 

The big question to be asked is this: how does the City staff do an end run around the Council and make or allow such substantial changes to be made to a Development Contract? These City staff were certainly aware of the requirements and provisions, as was the developer. This is a particularly troubling turn of events, and one that the citizens of Banning need to be very vocal in requiring our City Council to address. 

It is particularly concerning that this was done behind the scenes when it is noted that Community reaction to the placement of the Riverside County offices in the Project has been almost unanimously negative. The citizens were sold a project to upgrade and revitalize the center of town and benefit their City. Instead they are being forced to accept a “Court Support” complex which benefits the developer, but leaves the citizens without the “Jewel” they were promised. I ask that every citizen who can find the time attend the next Council meeting and demand that this council deal with these issues and return the project to the one which was sold to the citizens of Banning as “The Village at El Paseo San Gorgonio”. 

Jeremiah