One of the last major hurdles for development to begin on property that has been snarled in legal battles and lawsuits for almost a decade was cleared last week.
The Central Lathrop Specific Plan – the renamed Richland project that kicked off a bitter battle between the development firm, the city and contractors who were owed millions – will soon be cleared for a variety of development to occur including retail, commercial and residential homes.
And once a bond restructuring is completed that will make it easier for Saybrook, LLC and Lathrop Land Acquisition LLC – the companies who bought up the majority of the land that was involved in the failed project and has been working with city staff to bring a suitable project to fruition – to continue with their plans. The extensive tract of land along I-5 and around the existing, isolated Lathrop High School will be on the track towards completion.
According to the staff report prepared for the council, previous landowners had been granted the right to bond for up $200 million against the property because of its value once developed. But after taking out the first allotment of $58 million in bonds in 2006, certain property owners stopped making principal payments just one year later, and still haven’t made a payment to the issuer of the bonds – with $3.35 million due currently, and $49,750,000 worth of the principal bonds still outstanding. Because of the length of time of the delinquent and defaulted payments, the owners of the bond are owed an additional $21,075,914.
As of September 1, 2016, there was more than $58 million of outstanding special taxes, penalties, interests and fees associated with the initial bonding, and the City of Lathrop has taken 12 actions against 40 parcels of land within the community facilities district, and received judgements on three of them. According to the report, they are working on obtaining the Writs of Sale from the court.
Of the six remaining actions, hearings have been set for later this month and next month for the city to prove the judgement amounts to the court. It is unlikely given the delinquent amounts, according to city staff, that the properties would clear a foreclosure sale.
The City of Lathrop was named a party to the lawsuit filed against Richland Planned Communities in 2008, and stepped in as a mediator in a $5.8 million settlement by the development firm that included a $500,000 contribution by the city to the three major contractors who were owed $3 million for unpaid work. The city’s contribution to the settlement was paid for by the New York-based bond companies who issued the $50 million in bonds that the city and development interests are now seeking to restructure.
Signs of the depth of the original project’s unraveling began to emerge when contactors approached the Manteca Unified School District to inform them that when Lathrop High School opened, it would do so without a suitable hookup to the city’s existing sewer system because work on the sewer lift station nearby was being halted due to non-payment by the developer.
Development interests that took over the project – and secured the majority of the initial bonds issued by Oppenheimer California Municipal Fund and Capital Research and Management Company – paid for the completion of that lift station last year.
The majority landowners of the project currently hold 92 percent of the bonds, but for any sort of restructuring to take place, permission from 100 percent of the bond owners is needed. With the council’s blessing, City Manager Steve Salvatore will work with staff and special counsel to reach out to the remaining 8 percent in order to undergo a process that could resolve the matter satisfactory to not only allow development, but also remove any negative impacts that the defaulted bonds may have had on the city’s ability to borrow money in the open market.
To contact reporter Jason Campbell email email@example.com or call 209.249.3544.