ALL STAR DODGE : yet another Redevelopment Disaster on Banning’s books ?

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7/20/10 – In July of 2009 the Banning’s Community Redevelopment Agency (City Council) unanimously voted to purchase the vacant All Star Dodge property for 1.2 million dollars – without an appraisal. Now, one year later, the  property – located on the corner of 22nd and Ramsey Street – continues to sit vacant with no end in sight.

As previously reported by the Banning Informer , Banning’s Community Redevelopment Agency has in the past used millions of taxpayer dollars to subsidize a multitude of properties, all of  which ended up turning into complete Redevelopment Disasters (view story).

Due to foreclosure proceedings, the Banning taxpayer’s (subordinated) secured positions have been wiped out in each and every case. Consequently, the taxpaying public has lost their entire investment in all of those projects . With the All Star Dodge purchase, this trend now appears to continue.

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PURCHASE WAS BASED STRICTLY ON “HOPE” RATHER THAN REALITY

When the CRA decided to purchase the vacant Dodge property, they based their decision on hope that somehow down the line a deal could be struck with a user. Apparently the City was talking to a business located in Beaumont selling motorcycles . First off, this raises an ethical question whether or not the City of Banning should engage in a policy of attempting to sway businesses away from its neighboring City of Beaumont,  rather than attract all new businesses to the Pass.

Besides this ethical aspect, it turns out that – at the time of purchase – the City did not have any agreements in place with the potential user . This fact alone goes to show that the Banning Redevelopment Agency is run by five amateurs , none of which follow even the most basic business principles.

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WHAT WOULD A PRUDENT BUSINESS  MAN HAVE DONE ?

Common sense dictates that buying a property without an appraisal is NOT a prudent way to conduct business. This is why the Grand Jury has faulted   the City for purchasing the All Star Dodge property without any appraisal (view report). In their answer to the Grand Jury ( view ) the City responded that they have no intention whatsoever to stop this imprudent practice : the City’s response states unequivocally that they “do not concur with all of the Grand Jury’s recommendations”.

Besides that, it does not take a rocket scientist to figure out that buying a property on hope alone is never –ever – a good idea. A prudent real estate investor would have secured the property not by purchasing it outright, but rather by putting it under contract contingent upon first finalizing a deal with the potential user.

Rather than spending 1.2 million on purchasing the property “on spec” , the purchase contract should have committed the City to a non-refundable deposit ( for example $ 10,000 – 50,000 ),  that would be released to the seller in case the deal falls through. In exchange for putting up such a deposit, the City would have received the right ( but be under no obligation) to purchase the property at the agreed upon price during the agreed upon (extended) contract period.

These types of arrangements are commonplace in the commercial real estate industry ;  but apparently no one on the Banning City Council has ever heard of them. This goes to show that a bunch of incompetent amateurs, lead by an uneducated buffoon (Chairman Don Robinson), are running the affairs.

If only basic business principles would have been followed, the citizens of Banning would NOT be sitting now with yet another useless property that generates no revenue, but rather costs the City thousands of dollars every month in interest payments – with no end in sight.

The Council should have put the horse before the cart : they should have secured the user before they secured the property.

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ENORMOUS LOSSES  CONTINUE TO ACCUMULATE FOR THE TAXPAYER

The Grand Jury has determined that by buying a property without an appraisal, all  five City Council members have failed to prudently safeguard public funds. In absence of an appraisal, there is the distinct possibility that the City overpaid for the Dodge property.

Furthermore, it is no secret that at the time of purchase ( July of 2009 ) we were already in a “down market” for real estate . This down trend  has since accelerated. Since the purchase of the All Star Dodge dealership there is now an additional large car dealership sitting vacant in Banning : Ramsey Ford, located a few blocks away, has since also gone out of business.

More vacant commercial property means lower and lower real estate prices. If it was sold today, there is no possible way that the $ 1.2 million spent on the All Star Dodge property could be recovered. Today the property is probably worth no more than half the amount spent last year, resulting in a presumed loss in value of approximately $ 600,000 to date – money that just went “out the window”. It seems that the taxpayer, once again, is left holding the bag .

But there is more :  By purchasing the property the City also took it off the tax roll . Rather than receiving property tax revenue every month , the City is committed to a $ 7,307.60   monthly payment *. This equals payments of $ 87,691.20 a year ….. money that the City cannot afford to spend in these difficult economic times.

At this time the City claims to still be in continued “negotiations” with the same Beaumont motorcycle dealer. But there comes a point in time when endless negotiations eventually make for a “stale”  deal….  at that point, all participants are just “beating a dead horse”, mainly  because they do not want to face reality ; and it is this reality that may soon provide us with further evidence of the gross incompetence of the Banning City Council, all across the board.

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NOTE : For an in depth discussion of this and other issues regarding the Dodge purchase, please listen the the “PASS POLITICS” radio show of 3/3/10

* SOURCE : Video of session  (click here) – skip to 1Hr: 09 Min mark – statement of then City Manager, Brian  Nakamura