Synopsis: A missed deadline cost the City of Morro Bay the chance to obtain a 10-acre multi-million dollar property at no charge. The land might have been used for affordable housing, a park, or for water storage. Now, the land is to be sold at public auction and its future use is unknown. The deadline was reportedly missed because, according to the responsible city staff member, he did not have time to fill out the necessary forms.
In 2008, because the City of Morro Bay missed a deadline for filing critical documents, an opportunity to acquire a multi-million dollar parcel of government property free of charge was lost. The property will now be offered for public sale, and the auction is expected to take place during the summer of 2011. The pending sale brought the matter to the attention of residents, who have asked how this could have happened. According to one concerned resident and landowner the property that the city might have acquired could be worth as much as ten million dollars.
The 10.6 acre parcel, located on Panorama Drive between Yerba Buena and Rennel Streets, lies within city limits. It was once used by the U.S. Navy as a fuel storage site. Jet fuel was transmitted by pipeline from the site to the Lemoore Naval Air station. That use stopped in the early 1990's. The property was then cleaned up to remove chemical contamination from the soil and water, and was made available for acquisition by interested public agencies.
For several years, the city had the opportunity to acquire the property under the provisions of Public Benefit Conveyance Legislation. Under the terms of the legislation, the property would have been given to the city at no charge, and could have been used for various purposes including public housing, a park, or public health facilities such as water storage and transmission.
City Notified of Property Availability
The city was first notified of the availability of the property in 2003. On November 4 of that year, then-Capital Projects Manager Bill Boucher wrote a staff report stating, "We have been notified by the US General Services Administration (GSA) that the Navy property along Panorama Drive is being disposed of as surplus by the Federal government. As a public agency, we are at the head of the line for acquisition, should we so desire.
"There are a number of possible public uses to which the parcel can be put, including conversion of the existing fuel tanks to store potable water, a public housing project and open space/parkland."
Describing the property, Boucher said, "The site is approximately 10 acres located in the northeast portion of the community along Panorama Drive between Yerba Buena and Rennel Streets. The property also comes with the appurtenant on-shore intake pipeline and the 94 mile long pipeline from the site to Lemoore, which will not be severed from the acquisition." Boucher further noted that, "Numerous documents have been prepared regarding the physical and environmental conditions of the property, pipelines and appurtenances. Those documents are being sent to us now and would need to undergo scrutiny in the decision-making process."
Acquisition Process Started; then Stopped
Several letters were exchanged between Morro Bay city staff and government officials. In a November 14, 2004 letter to Clark Van Epps, of the GSA, Boucher formally indicated that the city was interested in acquiring the property stating, "The City of Morro Bay herewith expresses interest in acquiring the referenced property.
"While our city council has not yet made a policy determination for the ultimate use of the property, we propose the property be used for public benefit uses including, but not necessarily limited to, potable water storage, transmission and appurtenant facilities, public housing, open space, and potentially economic development. With more than one use contemplated, we would prefer to pursue the acquisition via negotiated sale."
An August 4, 2004 invoice from Marine Research Specialists for "Review of Navy Fuel Depot Site Contamination issues, Professional Services and Expenses through 31 July 2004," shows that the city had been investigating environmental issues. The city had received a large number of environmental sampling and monitoring reports from the GSA.
In a letter to then-City Manager Robert Hendrix, received October 27, 2004, Van Epps stated, "We have completed all of our tasks and are now in a position to negotiate the sale of the property. To begin, we will need a 'resolution' from the City of Morro Bay authorizing acquisition and confirming that funds are available for the purchase. Please confirm the identity of the representative authorized to act for the city in negotiations."
Documents appear to indicate that in late 2004, communications regarding acquisition of the property ceased.
City Revives the Issue in 2007
In a December 5, 2007 memorandum to city staff members Andrea Lueker, Bruce Ambo, and Susan Slayton, Boucher said, "As you may recall, the U.S. General Services Administration (GSA) has been charged with the task to dispose of the 10-acre parcel in Morro Bay along Panorama Drive formerly used as the Navy Fuel Depot. This matter has been sleeping for more than 3 years but is rapidly coming back to the forefront."
Boucher stated that a sticking point for the city had been the GSA's requirement that the city acquire both the property and the attached pipeline to Lemoore as a single package. He also noted that the council had given the staff no direction regarding potential uses for the property, although Water funds were allocated for further investigation of the matter.
Regarding communication with the GSA, Boucher said that, "We made no commitments to GSA on our intent and have had no discussion since that time." Regarding the value of the land, he stated that, "The value of the land is likely in the millions of dollars."
Boucher also indicated that a GSA representative had told him that, "They intend to dispose of the fuel pipeline 'as is' and it can now be separated from the property acquisition." However, government sources indicate that the GSA has always intended to sell the property and the pipeline together.
Regarding disposition of the property, Boucher noted that, "If we, or another public agency, formally express interest and commit to its long-term intended use, the property cannot then be sold on the open market" and, "If we, or any other public agency, do not express interest the property will be sold on the open market."
A December 21, 2007 memorandum from Boucher to city staff members Bruce Ambo, Andrea Lueker, Susan Slayton, and Dylan Wade and to City Attorney Rob Schultz described the manner in which the city could obtain the property at no cost. "The types of acquisition the city may be eligible for are through a public benefit conveyance (potentially at no cost) if the property would be used for eligible public purposes or a negotiated sale (at appraised fair market value) for no use restriction.
In the event we choose to pursue acquisition through a public benefit conveyance (PBC), our intended use would be subject to the sponsoring and approval of the Federal agency responsible for that sort of use (i.e. national Park Service for park use, HUD for self-help housing)."
2008 – Council Instructed the Staff to Acquire the Property, but They Failed to do so
In February, 2008, the City Council instructed city staff to acquire the property, and on February 29, 2008, a letter was sent to Clark Van Epps, of the GSA's Property Disposal Division. Epps was advised that, "The City of Morro Bay herewith provides your agency with this Notice of Interest to acquire the referenced surplus Federal property under a Public Benefit Conveyance. The city wishes to acquire the 10.6 acre parcel in fee title and does not desire to acquire the pipeline easement parcel."
The deadline for form submission, specified in communications from Van Epps, was not met. In April, 2008, then-Morro Bay City Council Member Betty Winholtz asked then-Public Services Director Ambo how the staff was progressing on the project to acquire the property for the city.
According to Winholtz, Ambo responded that he had missed the deadline to submit the required forms because he didn't have enough time to complete them. Ambo did not explain why he did not ask for assistance from the council or other staff in order to meet the deadline for acquiring the valuable property.
In a letter to Ambo, received by Morro Bay Public Services on July 1, 2008, Van Epps confirmed that the city had lost the opportunity to acquire the land at no cost, but offered the city the opportunity to purchase it. Van Epps stated, "This letter is a follow on to our letter of March 26, 2008 in which we informed you that if the City of Morro Bay ("City") is interested in the property known as the Defense Fuel Supply Point (DFSP), Estero Bay Facility, the city should directly contact and work with the sponsoring agencies: Department of Housing and Urban Development (HUD) or the National Park Service (NPS); regarding your interest in one of the Public Benefit Conveyances because they establish the timelines and guidelines.
"Since neither HUD nor NPS has received a completed application for the property, we are willing to offer the property to the City of Morro Bay by negotiated sale. In our letter dated October 27, 2004 to the city manager of Morro Bay an "Offer to Purchase Real Estate and Acceptance" was included as a courtesy we have attached another copy. Should the City of Morro Bay like to proceed with a negotiated sale please complete the Offer to Purchase and return within the next 20 days.
If for any reason we are not informed of your intentions by end of the 20 day period we will continue with our disposal process and make the property available for public sale."
On July 17, 2008, Ambo responded to Van Epps. Appearing to still believe that the land could be obtained at no cost, Ambo stated, "As you may recall, our city council has given the staff direction to develop self-help affordable housing as a primary use, and a portion or the entire parcel for park and recreation use as a secondary use. This letter is our formal Notice of Interest to acquire the property for self-help housing, and if that residential use is determined to be infeasible due to environmental site contamination, then would like to acquire the site for park, recreation and open space area. It is also our request that the acquisition price be fully discounted by 100% pursuant to the allowable discount provisions for self-help housing and park and recreation areas." Ambo also stated that the city's "critical path on this project is the site environmental investigation and remediation."
Van Epps responded in a letter received by Public Services on August 6, 2008, stating "We are in receipt of your letter of July 17, 2008. The time period for submission of public benefit applications has expired as the City of Morro Bay did not meet the time frame that was specified in the original screening notice dated February 1, 2008. Therefore, the property known as the Defense Fuel Support Point (DFSP), Estero Bay Facility is no longer available for public benefit conveyance.
"As we mentioned in our previous letter of July 1, 2008, we are willing to offer the property to the city by negotiated sale."
Environmental Contamination Concerns – a Non-Issue?
Ambo's reference to environmental investigation and remediation has raised questions in some residents' minds. Use of the site as a fuel supply depot ceased in the early 1990's. Documents from several government agencies show that by 1995, considerable environmental testing and remediation work had been done on the property. The attached pipeline, cited by some city staff as a major environmental concern, was evidently not a significant concern to the Regional Water Quality Control Board (RWQCB) or the Department of ‘Toxic Substance Control (DTSC).
In a July 17, 1995 letter from Roger Briggs, of the RWQCB, to Jack O'Donovan, of the Defense Fuel Supply Center, Briggs stated, "Based on the information contained in the Report, we believe the inspected pipeline areas do not present a significant threat to ground or surface water quality."
Briggs further noted that, "Except for the Cardiff Stud Farm Area, we concur with the Report's recommendation that no further action (i.e. additional investigation or remedial work) is required along the JP-5 pipeline at this time. Please note that Mikos Fabersunne of the Department of Toxic Substances Control has also reviewed the report and concurs with this letter. "
In an October 18, 1996 letter to Jose Salcedo of the DTSC, Roger Briggs outlined the RWQCB's conclusions regarding the Panorama Drive property: "We have reviewed the subject closure report prepared by Fluor Daniel GTI and received September 27, 1996. The report summarizes the results of an environmental risk assessment and focused feasibility analysis performed. The investigation evaluated the potential risk hazards and health effects upon the general public through possible exposure to on-site subsurface jet fuel hydrocarbons in residual concentrations and possible remediation technologies."
Indicating that the RWQCB had no concerns about water quality issues related to the property, Briggs said, "Based on the information provided, no further water quality related actions are necessary at the Estero Bay DFSP facility. You are reminded, however, other state and local agencies may have comments or concerns regarding health and safety issues which must be addressed."
In a December 20, 1996 letter to O'Donovan, Salcedo stated, "The Department of Toxic Substances Control DTSC) has completed its review of the Risk-Based Closure Report (September 23, 1996) for Defense Fuel Supply Point (DFSP) Estero Bay Facility.
"Based on the risk calculations in the report, the site will not pose a risk to any receptors under the current use scenario.
"The site is a Total Petroleum Hydrocarbon (TPH) for which the Regional Water Quality Control Board (RWQCB) has jurisdiction. The attached RWQCB comments indicate there are no threats to future water quality. DTSC concurs with RWQCB in the belief that natural biodegradation will continue to effectively reduce TPH concentration in the soil and groundwater. Therefore, the approach is approved by DTSC.
"DTSC understands that the site will be transferred to civilian use after closure. If the site were to be converted to typical residential use, DTSC recommends reassessing the potential benzene contamination in the soil."
These documents appear to indicate that only a reassessment of benzene in the soil on the property was considered necessary and that otherwise, neither the RWQCB nor the TCSB believed that there were any significant environmental contamination risks associated with the property or the pipeline.
City Chooses Not to Buy the Property
By the time the matter was brought back to the city council in August, 2008, the opportunity acquire the property free of charge was gone. At that time, the council could only consider whether to spend millions of dollars to buy it during a time of severe budget constraints.
According to City Attorney Rob Schultz, the council was concerned about potential need for costly environmental cleanup, possibly indicating that they had not been provided with the information contained in the 1996 Briggs and Salcedo letters. The potential cost of environmental cleanup might not have been a major issue in a transaction in which a parcel worth many millions of dollars was to be obtained for free. It could, however, have been a major issue when added onto a multi-million dollar purchase price.
Schultz also cited issues regarding possible resistance to use of the property for a homeless shelter. However, that was only one of several possible uses for the property. There were other options including self-help housing, a park, and a water storage facility. Also significant is the fact that while uses such as those were mandated under the law that would have allowed the city to acquire the property free of charge, no such restrictions were associated with purchase of the land – and purchase was the only option left in August, 2008.
Concerns for the Future
The property auction, expected to be held this summer, will be open to all interested parties. Some residents are extremely concerned about who might buy the land, given the fact that it includes two large fuel storage tanks and a pipeline to the Central Valley.
Some residents are also concerned that this city staff failure to acquire a valuable asset for the city is just one more in a long string of incidents in which the performance of Morro Bay city staff members has fallen short of expectations – incidents that have and may continue to cost Morro Bay taxpayers a great deal of money.
