City of Fontana lost $31.8 million on sale of Ventana property | News

For many years, city leaders have been enthusiastic about the prospect of bringing new businesses and housing to the mostly undeveloped area of northern Fontana.

In particular, they were looking forward to the implementation of the Ventana at Duncan Canyon Specific Plan, a project area bounded by the Interstate 15 Freeway on the north and west, Citrus Avenue on the east, and the Southern California Edison power line transmission corridor on the south.

And now finally, Ventana may soon begin to come to fruition, and ultimately provide many benefits — but at a very heavy price.

Two years ago, after a review of the fair market value, the city lost $31.8 million on the sale of the Ventana property, according to an audit report that was revealed earlier this summer.

Fontana Chief Financial Officer Jessica Brown, along with Jonathan Foster of the accounting firm DavisFarr, mentioned the huge loss during a City Council meeting in which the city’s delayed 2021 annual comprehensive financial report was unanimously approved.

“The Ventana property had been identified as being sold, and it was sold for a substantially less amount than it was purchased for,” Foster said in an overview of the otherwise positive audit at the meeting.

Mayor Acquanetta Warren and City Manager Matt Ballantyne identified Ventana as having been a redevelopment project. The state officially dissolved redevelopment agencies in 2012.

“When there was a transition, it gave agencies an opportunity to acquire that asset, and I want to confirm that certainly we did do a study at that point in time which determined the value of that property, and that’s what we sold it for, based on that study,” Ballantyne said during his comments at the meeting.

—– BROWN SAID LATER during a phone interview that when the multi-million dollar loss was first discovered, her immediate thought was: “This has got to be a mistake.”

But Brown, who has been employed by the city for less than a year, researched the background of the circumstances and confirmed the following details:

• The Ventana property was added to the city’s capital assets in 2014 in the amount of $43.4 million and was included in the fixed assets since.

• In October of 2019, the city entered into an exclusive negotiation agreement with HDO4, LLC for the purpose of negotiating a disposition agreement for future development of the property.

• Between October of 2019 and July of 2020, the city engaged with Keyser Marston, a real estate economics advisory firm, for the purposes of preparing a land value analysis to assist in forming the basis for establishment of the Ventana property’s fair and reasonable market price.

• Keyser Marston’s analysis determined the fair market price of the Ventana property to be $11.57 million (partially attributed to the land previously being approved for industrial uses and the conditioned sale increased the residential density).

• Then in July of 2020, the city approved a disposition agreement with HDO4, LLC which included the sale of the land for $11.57 million, which resulted in the $31.8 million booked loss for the city, as indicated in the audit report for 2021.

Brown noted that the city carried the land as a capital asset for six years, as the city was unable to negotiate any agreements for development due to the cost of the land for potential developers.

Despite the significant loss, the city is estimating that eventually, the property will produce about $54.8 million in additional property taxes, sales taxes, transient occupancy taxes, and development related fees to the city within the first 20 years of active use. This not only makes up for the loss, but the city would net approximately an additional $23 million during this time period because these revenues would not be realized with undeveloped land, the city said. Additionally, it is estimated that the development will also create an estimated 657 new full-time equivalent jobs for the city.

Considering these factors, Warren said in an email that from an overall perspective, Ventana was a wise and worthwhile sale.

“The project will help to further the goals and objectives of the City’s general plan by creating new housing, jobs and stimulating economic diversity in the City,” Warren said.

She added: “The Keyser Marston analysis estimated that the development of this land will assist in providing the consumer support necessary for neighborhood-scale retail and commercial opportunities. Based on these factors, I am confident we made a prudent decision.”

Despite the $31.8 million loss, the city remains financially healthy, the DavisFarr audit said.

—– THE DEVELOPMENT OF VENTANA has been a goal for city officials for more than 15 years.

Back in 2006, then-Mayor Mark Nuaimi said the Ventana project would be “an entirely new type of development” for the city.

“By combining office space with commercial, open space and a high quality living product, this concept project sets a new standard of development for our community. The Ventana project serves both as a community gateway and a well-designed master development to provide employment, living, entertainment and recreational opportunities for the residents who proudly call Fontana home,” he said at that time.

However, plans for Ventana (as well as some other city projects) were delayed by the nationwide recession which devastated the area starting in 2008.

But the project then received a boost in 2015, when construction of the Duncan Canyon interchange at Interstate 15 was completed, providing easy freeway access to the area which would include Ventana.

“We’re calling this project the Gateway to the Future, and rightly so, but it is so much more than that. This is the Gateway to the Inland Empire,” Warren said during the ribbon cutting ceremony for the interchange.

Still, it took until July of 2021 for the City Council to approve a 257-unit attached multi-family project within Planning Area 6 of the Ventana Specific Plan.

“We just made history,” said Warren at that time. “This Ventana project has been a long-time standing project that we all have been looking forward to.”

The development by Frontier Enterprises includes one-, two-, and three-bedroom units, a recreational room and 6,493-square-foot fitness center, clubhouse and pool area, multiple seating areas, walkways throughout the community, and large open plazas.

Then in July of this year, HD04, LLC sought a modification of the existing land use designation to support a proposed specific plan amendment for the 102-acre area. The amendment, which was approved by the City Council, established the six planning areas with a total of 476,500 square feet of commercial uses and 1,671 residential dwelling units.

When the Ventana Specific Plan is complete, it will have a corporate office corridor located adjacent to the freeway, both north and south of Duncan Canyon Road, according to the city’s website. It will include mid-rise offices, multi-story buildings, hotels, quality business restaurants, and other complementary commercial uses, the website said.

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