City partners with developer on Heart of the City

By: NED RANDOLPH - Staff Writer | Wednesday, March 14, 2007 12:08 PM PDT ∞

SAN MARCOS ---- To spur development around Cal State San Marcos, the city will buy 21 acres from a development company for $13.4 million, with plans to resell the property to the company after it acquires enough land for a large mixed-use project near the university.

Under the arrangement approved unanimously Tuesday night by the City Council, the developer will have an option to buy back the land at 6 percent interest.

"I would encourage you to look at it as an investment," City Manager Paul Malone told the council.

The city currently earns 4.8 percent return on approved investments, he said, and by entering the deal, the city is essentially getting a "superior" return.

The developers, Mike McDonald and Gary Levitt, own or control 85 acres around the university and are working to acquire more.

McDonald is also developing the 100,000-square-foot center across from City Hall with an LA Fitness Center, several smaller retail buildings and a pocket park.

One of the hindrances to developing the area is the small individual land parcels, Malone told the council. More than 100 owners hold 140 acres, he said.

If the developer walks away from the deal, he said, the city will own the land and will have an opportunity to acquire the other parcels the developer has already assembled.

The land was appraised last month at $16.3 million, Malone said. Even if the deal falls through, the city will have $3 million in immediate land equity, he said.

The city will draw from its $55 million surplus to pay for the property.

"If that's not a good piece of land to secure, I don't know what is," said Councilman Chris Orlando. "This approach sounds like a modest investment that is spurring private development."

Resident Nina Patterson said the arrangement sounded more like backroom dealing without the public's knowledge.

"You're taking public funds and lending it to two private developers who can't bankroll their own project," she said. "This report is insufficient on what they plan on doing with the land."

She added that a bank would charge more than 6 percent.

"Why are we behaving like this with taxpayer funds?" she said.

Development Services Director Charlie Schaffer said that the investment allows the city to diversify its portfolio and enables the developers to move forward in assembling the rest of the land.

The area in question is part of the Heart of the City, which was a specific plan created in 1988 to help secure Cal State San Marcos and to spur high-quality development.

"I was unfortunately here back in 1987," said Councilman Mike Preston. "The philosophy was, if we zone it they will come. Fast forward 20 years, and it's a hodgepodge. We made a commitment to the university that we'd be a university town and we'd have things to do near the university, and we haven't done that."

The council also posted an opening for the Community Services Commission after the resignation of Kate Kovrig.

Kovrig has said she was upset with Desmond's public behavior toward her son, Neil Kovrig, who was a traffic safety commissioner.

Desmond on Jan. 23 chided the 24-year-old Cal State San Marcos student for speaking to a TV reporter about city parking problems. Neil Kovrig had appeared on an investigative news program, called the Turko Files, to respond to criticism by residents living near the university about parking shortages.

Desmond then failed to nominate him for a second term on the commission.

In her resignation letter, Kate Kovrig said, "I feel I cannot support the council and city staff at this time due to the unfortunate circumstances and unnecessary reactions by the mayor and some council members during the Traffic Safety reappointment process that took place at the council meeting Jan. 23."

Desmond said Tuesday he regretted Kate Kovrig's resignation and hoped that she would remain active in the community.

"It's unfortunate," he said. "I'm sorry she felt that way. I wish I would have handled the situation differently with Neil."

He added, "I should have handled it privately instead of publicly."

-- Contact staff writer Ned Randolph at (760) 761-4411 or nrandolph@nctimes.com.

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