By Mark Gutglueck
The schism between the City of Industry and the company it chose two years ago to oversee the development of the Tres Hermanos Ranch Solar Project, San Gabriel Valley Water and Power, has expanded full blown into an irresolvable dispute.
The apparent upshot of the division between the city and company, which has been in evidence for months, is that the previously declared intention to blanket a considerable portion of Tres Hermanos Ranch with solar power panels will not be fulfilled anytime in the immediately foreseeable future.
Rustic 2,450-acre Tres Hermanos Ranch and its rolling hillsides, canyon creeks, oak woodlands and pastures which straddle the Los Angeles County/San Bernardino County border has remained undeveloped and teeming with owls, bobcats, mountain lions, skunks and opossum for generations, even as urbanization has encroached on it from Chino Hills to the south and east and Diamond Bar from the north and west. In 1978, the City of Industry Redevelopment Agency purchased the ranch from the heirs of Oil baron Tom Scott, former Los Angeles Times Publisher Harry Chandler and California pioneer John Rowland for $12.1 million. For a generation there was loose talk about the City of Industry using the property as the site for a huge reservoir and other industrial utility-related purposes which never came to fruition. In 2012, as the consequence of state legislation which closed out all of California’s county and municipal redevelopment agencies, the City of Industry lost its control of the property, as authority over it passed to the so-called successor to its redevelopment agency and an oversight committee charged with distributing the redevelopment agency’s assets and/or the proceeds from the sale of those assets to the local governmental and taxing authorities such as school districts, fire districts, water districts and so forth. There ensued speculation and concern that the ranch would be sold to developmental interests which would be intent on converting the property to either or both residential and commercial subdivisions. Indeed, in 2015, GH America Inc. and its partner, South Coast Communities of Irvine, gave indication of their interest in acquiring the property for what would essentially be residential development. The following year, they firmed that expression of interest into a $101 million offer to take Tres Hermanos Ranch off of Industry’s successor agency’s hands. While the successor agency was considering that offer, the City of Industry tendered its own offer of $100 million for the land, which is not contiguous to the City of Industry, but more than eight miles distant from it, a distance which includes the entire breadth of the City of Diamond Bar. This prompted rumors, intense ones, that the City of Industry was on the brink of engaging in a bit of profiteering by using agency-to-agency privilege to get commitments from Diamond Bar, Brea and Chino Hills to radically upzone the property in terms of the intensity and density of permitted development, and then spin it off to a developer who would construct a massive subdivision there. Diamond Bar’s current zoning restrictions would allow 624 residential units to be constructed on the 700 acres of Tres Hermanos Ranch in Diamond Bar. Chino Hills currently has land use restrictions on the 1,700 acres of Tres Hermano Ranch within its jurisdiction which envision no more than 657 residential units there. Nevertheless, those zoning restrictions could be altered by mere majority votes of those respective city councils, and there were rumors extant that by engaging in efforts to support existing members of both cities’ city councils in upcoming elections or by similar efforts to back the candidacies of challengers to the existing incumbents, Tres Hermanos development project proponents could effectuate a change of attitude on those councils whereby they might get an entitlement to build 10,000 to 15,000 residential units on the ranch’s 2,400 acres.
Any concern about that potentiality was abruptly allayed, however, when on August 24, 2017, the oversight board to the successor agency to Industry’s redevelopment authority in a narrow 4-3 vote, called for selling the property to the City of Industry for $41.65 million. The sale carried with it a deed restriction that prevented the property from being used for anything other than a so-called “public purpose” and preservation as open space.
Ultimately, it would be revealed, the City of Industry’s declared “public purpose” would consist of utilizing the ranch as a hosting ground for a 450-megawatt capacity solar farm. An analysis of the generation capability of the state-of-the-art solar panels available for use currently indicated that roughly 73.5 percent of Tres Hermanos Ranch’s 2,450 acres – 1.801.4 acres – would need to be devoted to the footprint of the solar panels, leaving some 648.6 acres of open space. That analysis was not an official one, however, as the City of Industry was not forthcoming with anything beyond the most general of information and detail with regard to the solar field proposal.
A sizeable contingent of Diamond Bar and Chino Hills residents, who previously were less than sanguine about the prospect of the property being developed residentially, was no less dismayed with the City of Industry’s declared intention to convert the property to an industrial-scale electrical generating facility.
In defiance of normal standards of public disclosure that attend the operation of governmental entities, the City of Industry provided virtually no information about the proposed project. Only belatedly was it revealed that long before the city’s acquisition of the Tres Hermanos property the city had entered into a highly secretive arrangement with La Jolla-based San Gabriel Valley Water and Power, headed by William Barkett, to lease the ranch property to the company for $1 per year, extend to the company a 65-year option on continuing the lease of the property and an exclusive right to develop the solar farm on the property, and provide Barkett with loans and other funding for feasibility studies and preparations relating to the solar project, what was essentially a commitment of public financing of the company’s efforts in the initial stages of the project’s development. In exchange, San Gabriel Valley Water and Power committed, once the solar plant was functioning at capacity, to make an annual payment of $4 million to the city for the use of the property along with the sale of the energy to be produced there to the city and City of Industry-based businesses at bargain basement rates.
The city was able to play the terms of that arrangement close to the vest in large degree because of the nature of the City of Industry, which, despite its 12 square miles of land area, boasts a population of just 207, at least 167 of whom are in some fashion associated or intertwined with the city in some fashion or other, either as elected or appointed officials, family members of elected or appointed city officials, are city employees or family members of city employees, or live on or operate businesses upon city property. The city defiantly ignored requests from the public, press or other entities for information about the project, whether those requests were made informally or pursuant to the California Public Records Act.
Similarly, San Gabriel Valley Water and Power was tight-lipped about the project and virtually all of its features and details.
Two relatively deep-pocketed entities with an interest in the project – the cities of Diamond Bar and Chino Hills – used their standing and the leverage they possessed to first push for information about the project that was being withheld and secondly challenge the project itself. Indeed on the same day that the oversight board voted to sell the property to the City of Industry, the City of Chino Hills dashed off a request to the California Department of Finance to undertake a 60-day review to determine if the sale of Tres Hermanos Ranch to the City of Industry was legal, and reject it if any anomalies were discovered. Four days later, the City of Diamond Bar sent a similar letter to the California Department of Finance. Both cities called for the sale to be vacated, as the price – discounted by some $59 million from what GH America and South Coast offered – qualified as what both cities alleged was tantamount to a gift of public funds. Ultimately, the procedural challenges Chino Hills and Diamond Bar officials had initiated through the California Department of Finance failed to stem the project. Undaunted, on October 20, 2017 the City of Chino Hills filed a legal action in Sacramento Superior Court that sought to enjoin the City of Industry from proceeding with the solar project at Tres Hermanos Ranch, the first of what would eventually be six yet-unresolved lawsuits by Chino Hills and Diamond Bar relating to the project in which the cities contend Industry failed to comply with a number of land use procedures and environmental requirements before giving San Gabriel Valley Water and Power authorization to proceed.
Ironically, while the City of Industry and San Gabriel Valley Water and Power were presenting to the world a united front in resisting making anything more than minimum disclosure with regard to the project, it is now known that San Gabriel Valley Water and Power was similarly holding out on the City of Industry, even while it was spending its money profligately.
Information first surfaced that San Gabriel Valley Water and Power was not handling the project in a way that was in keeping with the City of Industry’s expectations when it was revealed in December that Barkett/San Gabriel Valley Water and Power had burned through some $14 million in carrying out preliminary planning on the project and had spent another $6 million in legal fees and other nondescript expenses, and had yet to produce anything tangible in terms of physical assets on the ranch grounds or anything indeed beyond conceptual plans and projections as to generating capability. The city satisfied San Gabriel Valley Water and Power’s billing for that work and those expenses, but when Barkett and San Gabriel Water and Power continued to work on the project apace thereafter and submitted invoices for services relating to the solar farm proposal exceeding $1.5 million over the next two-and-a-half months, the city balked at making those payments.
By January, momentum in the City of Industry had swung against San Gabriel Water and Power as well as against three of the Industry staff members most closely identified with championing the solar project – then-City Manager Paul Philips, then-City Clerk William Morrow and Anthony Bouza, an attorney the city was employing with regard to the solar farm’s development and legal issues. On January 25, the city council adjourned into closed session and took up a discussion of firing all three. Sufficient support to sack Morrow and Bouza manifested. Nevertheless, the council fell short of a necessary third vote to pull the trigger on Philips, as Mayor Mark Radecki and council members Abraham Cruz and Catherine Marcucci were unwilling at that point to join with Cory Moss and Newell Ruggles in handing Philips his walking papers.
On the morning of February 27, however, the council convened into a specially-called closed session meeting at which the only topic of discussion agendized was “public employee discipline/dismissal/release.” At that point, the entirety of the council voted to terminate Philips.
With Philips out of the way, city officials pressed San Gabriel Water and Power to provide it with the full range of documentation on the work it had performed to date, including surveys, feasibility studies, system and component specifications, plans, blueprints, legal inquiries and communications regarding permit applications, as well as environmental document preparations, including communication with the California Public Utility Commission and the California Energy Commission, and the like. The company, which at that point had not been paid by the city for three months, did not comply. The city thereafter seized upon the stratagem of using an arcane application of authority municipalities possess, the issuing of a legislative subpoena, which in this case demanded the company produce an exhaustive record of its work with regard to the project.
San Gabriel Water and Power defied the subpoena, maintaining that that it was overbroad in its scope, that the city is seeking proprietary information and that the city was not in compliance with the proper procedure in issuing the subpoena, including having the mayor endorse the subpoena.
In response, the City of Industry has moved to revoke entirely the lease agreement with San Gabriel Water and Power. This essentially terminates San Gabriel Water and Power’s exclusive right to develop the solar farm.
Unclear at this point is whether the City of Industry has abandoned entirely its intent to develop the solar farm. The terms of the city’s acquisition of the property last August included a restriction preventing the property from being used for any purposes outside of public use, which would seem to preclude freeing the property up for residential or commercial development. If the city abandons the solar project, a layman’s interpretation of the deed restriction is that the City of Industry would need to come up with an alternative development proposal that would meet the definition of “public use.” Also unclear is what legal leverage the city has in recovering from San Gabriel Water and Power either the “loans” it provided the company to allow it to proceed with the project development, or in the alternative to acquire the fruits of those efforts, consisting of the research, studies, plans, legal groundwork and applications for permits and licensing for the project which was completed by San Gabriel Water and Power using financing provided by the city. Equally unclear is whether any of the applications made by San Gabriel Water and Power are transferable to the City of Industry.
By Mark Gutglueck