As part of the decision to approve plans for a new aquatic center, the City Council had a lot of questions about the legality and legitimacy of changes to the city’s deal with the developer that will build it.
The water park plans were part of changes to the development agreement with The Surland Cos. to build the Ellis community. The changes were the subject of a special meeting Tuesday and were approved 4-0 by the council.
During the negotiation to build the public water park, which the council asked the developer to do in August, Surland asked for changes to its 2013 agreement with the city involving residential growth allotments — an initial allocation to build a property given by the city before a home building permit is issued.
Right now, through the city’s growth management ordinance, Surland can apply for up to 225 RGAs a year for a maximum of 2,250 across the Ellis development along Corral Hollow Road between Valpico and Linne roads.
Andrew Malik, director of development services, told the council that Surland sought the opportunity to secure more than 225 RGAs in a year from the city, if other developers had not claimed them. Surland also asked for building permits with a 24 month duration instead of the standard 6 months with ability to apply for two six month extensions.
The deals also gives Surland naming rights for the water park and other concessions.
The developer asked for each of the benefits in exchange for building the $45 million complex and turning it over to the city. Of the cost, the city plans to fund all but $10 million, which Surland already owes the city, by using money collected through Measure V — a half-cent sales tax increase voters approved in November 2016. City staff had no estimate for the annual cost to run the park or how much public access to the amenities would cost.
Mayor Robert Rickman designated Tracy lawyer Mark Connolly, representing landowner and farmer Mike Sandhu, as the official opposition to the proposal.
“This looks like a bad deal. There’s no real benefit to the city,” Connolly said. “A development agreement is not intended then, under the law — it’s not intended now, under the law — to do several things which this development agreement does. It gives Surland the right to bring other properties into the development agreement. That property is not identified. It doesn’t have any plans, any specifications as of when the development agreement is going to be recorded — as of tonight’s state.”
Connolly successfully sued the city and Surland in 2009 to block the first development agreement. In that case, the judge ruled that the agreement improperly allowed Surland to use RGAs on land beyond the Ellis footprint anywhere in Tracy’s sphere of influence.
The council asked City Attorney Tom Watson whether the new development agreement was legally defensible and could not be applied to other unspecified land.
“Mr. Connolly’s argument is based on speculation. Because this D.A. applies to a single piece of property as we sit here today,” Watson responded, adding that if future councils considered annexing property into Ellis, they would have to face that legal question at that time. “The discussion as to whether or not additional pieces of property could be added is different than as it sits here today, which is different than the 2009 litigation.”
Watson said that if the development agreement were challenged in court again, Surland would pay the legal fees.
Connolly also asserted that Surland could not build 2,250 homes on the land designated for Ellis and instead intended to control development across the city by brokering RGAs the company collected to others.
“RGAs cannot be transferred,” Watson said when asked by the council about this issue. “The development agreement will have to be amended to include additional properties by subsequent action of the council. They cannot be transferred. They’re not commodities.”
Surland founder Les Serpa addressed the accusation.
“We receive no more RGAs today than we did yesterday,” Serpa said. “Our annual amount stays the same.”
Serpa added that he had no intention to broker RGAs or try to push other developers out.
Rickman and councilwomen Nancy Young, Juana Dement and Rhodesia Ransom asked dozens of questions of Serpa, Watson and Malik and heard from 14 people during the almost four-hour meeting. Mayor Pro Tem Veronica Vargas recused herself from the hearing “out of an abundance of caution” because her former employer did business with Surland.
In the end, they were satisfied that the development agreement was proper and, in three different votes, supported motions made by Dement to approve the new development agreement with Surland.
“We got some clarification that put some mistruths to bed,” Rickman said after the meeting. “There has been a lot of information out there and we have received a lot of phone calls. One thing that we wanted to do was make sure everybody understood some of the things that were being said and what the truth was. I think both sides had very compelling arguments, but you make the decision based on the facts that you’re faced with.”
Rickman said the process was transparent and in depth.