By Deb Murphy
Inyo County comes up with solution to LADWP lease issue …. and hopefully the message will reach the right eyes.
The Inyo Board of Supervisors took a decidedly proactive step at Tuesday’s meeting, approving, with some additions, a letter to the Los Angeles Board of Water and Power Commissioners outlining issues with the city’s Department of Water and Power’s stance on both ranch and commercial leases and coming up with solutions.
During a mid-November presentation to the Board by Aqueduct Manager Jim Yannotta, Chairman Jeff Griffiths was adamant the department could come up with a lease policy that would be good for both Los Angeles and Owens Valley.
“You have stories and stories of lawyers on Hope Street,” he said in reference to the department’s head office. The County’s letter was crafted by County Counsel Marshall Rudolph, attorney Greg James and Chief Administrative Officer Kevin Carunchio in the one-story administration building.
The correspondence addressed the City’s insistence the lease policy changes were necessary to comply with both the City Charter’s requirement for a competitive bidding process and the Charles Brown Act, passed specifically to ensure a viable economy in an area with very little privately owned land. The primary lease policy issues centered on family transfers and a one-time third party lease transfer.
The letter points out that “as a proprietary department, the Department of Water and Power has tremendous discretion as to the terms and conditions imposed in its leases,” and goes on to quote from the Act: “upon a finding that the public interest will be furthered….the local agency may sell or lease the property without advertising or calling for bids.”
Other letter highlights:
The definition of “family” in a family lease transfer for both ranch and commercial leases should be expanded to sustain the generational culture in the valley.
The restrictive one-time transfer policy discourages capital improvements and, according to the County Assessor, potentially results in “lowering the associated possessory interest tax levied,” lowering tax revenues to area school districts and other public entities.
Current commercial lessees should be offered “the opportunity to purchase the leased property at a reasonable price.” An alternative would be a “lease to own” agreement providing lessees or owners access to financing for capital improvements.
The process of selling land not necessary for the department’s water and power functions should be streamlined “to the extent practicable and then clearly articulated in a written policy for dissemination to lessees.” The letter stresses the need for reasonably appraised land values.
Twenty- or 30- year leases would resolve a whole bunch of problems.
Leases should be renewed prior to the end of the lease term.
If leased land is to be sold and has no connection to a municipal water supply, the property should “be supplied with a secure and stable water source.”
The department should either “restore or maintain the buildings it owns” in the valley or encourage lessees or buyers to restore and maintain them.
“The letter doesn’t just ask,” said Supervisor Matt Kingsley, “it gives DWP a way to structure the leases. It helps them find a path so the City can do the right thing.”
“It allows Los Angeles to do what they said they wanted to do the last time they were here,” said Supervisor Dan Totheroh.
Letter from Inyo County Board of Supervisors
December 13, 2016
The Honorable Mel Levine, President, and Honorable Commissioners
Board of Water and Power Commissioners
City of Los Angeles Department of Water and Power
111 North Hope Street
Los Angeles, California 90012
SUBJECT: Lease Policies for Los Angeles-owned Properties in Inyo County
Dear President Levine and Commissioners:
The Inyo County Board of Supervisors sincerely appreciates the Los Angeles Board of Water and Power Commission’s responsiveness to our October 25th letter regarding the consideration of a resolution approving a Policy that provided for one-time assignment and family transfer policies for leases of Los Angeles-owned properties in Inyo County and changes to ranch lease rent and fees.
Also, the Board of Supervisors commends your Board for its decision to exclude commercial leases from the Policy and to eliminate the administration fees for the ranch lease fee increases. Thank you.
ince October, your staff has made presentations to our Board, as well as the Bishop City Council, regarding the status of the LADWP business leases and business permits in Inyo County and, on
November 22nd, held a meeting with the Department’s business lease and permit holders in Inyo County. We also appreciate these initial outreach efforts to your commercial lessees.
The purpose of this letter is to share key observations and suggestions concerning LADWP’s ranch and commercial real estate lease policies and Los Angeles-owned vacant buildings and parcels in
Inyo County and the Owens Valley. These suggestions are intended to result in policies that are beneficial to the City while ensuring that any changes to past policies improve the economy and
environment in the Owens Valley.
As you know, the Inyo County economy is constrained in large measure because the City of Los Angeles owns and controls over 300,000 acres of land within and surrounding Owens Valley
communities and the federal and state government owns much of the rest of the land within the County. As a result, less than two percent of the County’s land mass is privately-owned.
Consequently, LADWP’s policies governing its ranch leases, commercial leases, and vacant buildings and parcels have a great impact on the County’s economy and environment. Thus, at this
time, the Board of Water and Power Commissioners has a unique and historic opportunity to consider the establishment of long-term policies regarding the leasing and sale Los Angeles-owned properties
in the Owens Valley that are lawful, beneficial to the City and will help improve the economy and environment in the Owens Valley.
Before outlining our suggestions regarding the land use policies, we would like to address the question of whether LADWP’s lease policies need be as restrictive as advocated by your staff and
attorneys. We note that the September 29, 2016 staff report to your Board concerning your October 25th consideration of “One-Time Assignment and Family Transfer Policies for Rental Agreements
Located in Inyo County” states that LADWP’s Owens Valley leasing policies have been in effect for some 80 years, but it is now believed that:
These long-standing practices are considered to be at odds with the competitive bidding requirements in the Los Angeles City Charter and Administrative Code, which require leases to be awarded pursuant to open and competitive bidding procedures or
submission of proposals, unless an exemption applies.
Department staff has offered a similar rationale as to the need to change LADWP’s longstanding lease policies and practices during recent meetings in the Owens Valley. However, as a Proprietary
Department, the Department of Water and Power has tremendous discretion as to the terms and conditions imposed in its leases.
Perhaps more importantly, the Charles M. Brown Act (California
Government Code sections 50300-50308) recognizes the unique circumstances in the Owens Valley where a considerable portion of the agricultural and commercial properties are owned by a local
agency [such as the City of Los Angeles] located in a distant part of the state.
In view of this unique situation, the Act “applies to local agencies governed under general laws or charter” (Government Code Section 50301) and it provides that “upon a finding that the public interest will be furthered and with the approval of the legislative body, the board or officer having charge of real property belonging to the local agency may sell or lease the property without advertising or calling for bids (Government Code Section 50306) [emphasis added]. Given LADWP’s status as a Proprietary epartment and the clear provision of the Charles M. Brown Act, there does not appear to be a need,
as stated in the September 29th report, to “reconcile LADWP’s historical leasing practices in Inyo County and the contracting requirements of the City.”
The Inyo County Board of Supervisors certainly recognizes and respects the Board of Commissioners’ role and responsibility for setting, evaluating, and changing LADWP policies. However, for the past several decades, LADWP’s staff and attorneys, the Board of Water and Power Commissioners, and the Los Angeles City Council have inherently and implicitly determined that LADWP’s past practices and policies for leases in the Owens Valley to be in the public interest of both Los Angeles and the Owens Valley. If the public interest has been served by LADWP lease policies that have, until recently, remained unchanged, and these policies have benefitted both the City of Los Angeles and the Owens Valley, the question arises: Why is there a need to restrict those
lease policies and practices now?
As explained below, the one-time assignment and family transfer policies contained in the recently adopted ranch lease policy and in the commercial lease policy that has been proposed are not in the
interest of the long-term interests of the City of Los Angeles or the Inyo County economy.
Rather than affirming the ranch lease policy, and rather than considering the new, more restrictive commercial lease policy, we ask your Board of Commissioners to consider reaffirming or formalizing lease policies that are essentially consistent with the policies of the past. However, if your Board desires to develop more comprehensive land use policies that support the people of the Owens Valley and the Inyo County economy, we respectfully offer the following suggestions for your consideration and incorporation.
Restricted Family Transfer of Ranch and Commercial Leases. Many of LADWP’s commercial nd ranch leases have been retained by families for generations and these families have shown
themselves to be exemplary stewards of the land and of City-owned property. Restricting family ransfers of leases from parents to children, grandparents to grandchildren and between spouses,
seems unnecessary and, possibly, detrimental to the City’s interest and the environment – especially if the family has to give up its lease and, thereafter, the property is leased through a public bidding
process to a party with no ties to the community or the land.
At the very least, if family transfers must be restricted, the policy should allow for transfers from parents to their children and/or to a surviving spouse of a deceased child, between siblings, from parents to grandchildren and/or to surviving spouses of a deceased grandchild and between spouses. Also, the policy should be very clear as to ow the family transfer policy works when there is a transfer to or from a family corporation.
At present, there is much uncertainty concerning such corporate transfers.
Restricted Assignment to Third Parties. Limiting lease assignments to a one-time assignment to a on-family member obviously decreases the value of the agricultural or commercial business operating on the leased property – which is a detriment to the local economy.
For instance, if onetime assignment has already taken place, and if the assignee has no family members that want to take over the lease, the assignee’s incentive to invest and improve the leased property is vastly decreased since the assignee knows that at the end of his or her tenure, he or she cannot sell or transfer the lease
or the improvements on the lease. Such a disincentive to improve the ranch or commercial lease results in less revenue to the City at the end of the lease, and harms the economy and the environment
of the Owens Valley.
Also, the County Assessor informs us that there is a potential for a devaluation of businesses located on LADWP property to result in lowering the associated possessory interest tax levied on the business which, in turn, would result in lower tax revenues to Owens Valley schools and other public entities.
Sale of Commercial Leases to Willing Buyers. Any new commercial lease policy should provide that, if LADWP determines that a property is not needed for City purposes, the existing commercial lessee should immediately be offered the opportunity to purchase the leased property at a reasonable price. However, if the lessee does not wish to purchase the property, or if for some reason the lessee is unable to purchase the property, the lessee should be able to continue to lease the property and the lease should include an opportunity to enter into a “lease-to-own” agreement.
Such a sale will result in the City being relieved of its obligation to serve as a landlord of a property that is no longer needed
and in the City receiving reasonable compensation for the sale of the unneeded property. Moreover, such a sale will provide the new owner with the option of obtaining long-term financing for
improving the property. Improvements to the property will enhance the aesthetics of our communities and the economy of the Owens Valley.
Clear and Simple Sale and Valuation Process. The current process of purchasing land not needed for Department purposes from the City is at least perceived to be, if not actually is, complicated and time-consuming. We encourage the processes of selling land to be streamlined to the extent practicable and then clearly articulated in a written policy for dissemination to lessees.
Also, LADWP’s current practice of requiring that potential parcels to be sold by LADWP be appraised at the highest possible market value in advance of a sale has greatly diminished the likelihood of the
parcel being sold. If LADWP property is not needed for Department purposes, then LADWP should determine a reasonable price for the property so that the property is “priced to move” and so that
LADWP is promptly relieved of its obligations to own and manage the property.
This is reinforced by the Charles M. Brown Act, which refers specifically to sale of property at a “reasonable price.”
That term appears to give the City broad latitude to determine a fair price without regard to appraisals or other such methodologies.
Longer Lease Terms. LADWP’s current policy of limiting the term of both ranch and commercial leases to five (5) years makes if practically impossible for a lessee to obtain long-term financing to
improve the leased premises to expand the business. This situation directly degrades the aesthetics of our communities, the economy of the Owens Valley, and may adversely affect the environment of the
lands subject to the ranch leases. We urge your Board of Commissioners to work with the CityCouncil to support the ability of lessees to expeditiously enter into leases of terms of 20 and even 30
years if so desired by the lessee.
The granting of such long-term leases would help to resolve the
transferability issue since such a tenant with a long-term lease should be allowed to transfer or assign the lease to a qualified lessee or assignee. Also, a long-term lease policy should allow the lessee to
have the opportunity to enter into a “lease-to-own” agreement. Further, it is very important that LADWP abandon its past practice of requiring that as a condition of entering into a long-term lease,
the lessee must agree that the lease will be offered for sale to the highest bidder at some point during the term of the lease.
Because of the uncertainty as to whether a lessee will be the successful bidder, such a requirement is a strong disincentive for a lessee to enter into a long-term lease and it inhibits the ability and desire of the lessee to obtain long-term financing to improve the property.
Certainty in the Leasing Process. In recent years, both ranch and commercial lessees have not had leases renewed prior to the expiration of their leases, forcing the lessees to become “hold over”
tenants with no certainty that their leases would be renewed. Obviously, such a situation places the lessee in an untenable position. In the future, whether a lessee has a 5-year lease term or a long-term lease, LADWP’s lease policy should provide that the lease will be renewed at a reasonable time in advance of the termination of the lease term.
Access to Water. If property identified as not needed for Department purposes is not, or cannot, be connected to a municipal water supply, this circumstance should not prevent the sale of the property.
In such circumstances, LADWP’s policy regarding land sales in the Owens Valley should provide that the property, if sold, will be supplied with a secure and stable water source through a license or
lease agreement in order to support the continued viability of the property.
New Leases and/or Sale of Vacant Buildings and Parcels. In addition to policies focusing on existing leased property, we note that many commercial buildings and parcels owned by LADWP
remain vacant. There is no apparent need for LADWP to continue to own such parcels. These Los Angeles-owned vacant buildings and parcels in the Owens Valley manifest the “Broken Windows”
theories promulgated in the article of the same name appearing in the March 1982 issue of the The Atlantic magazine by James Q. Wilson and George L. Kelling.
The article, in part, states:
. . . one unrepaired broken window is a signal that nobody cares, and so breaking more windows costs nothing. . . . vandalism can occur anywhere once communal barriers – the sense of mutual regard and the obligations of civility – are lowered by actions that seem to signal that “no one cares.”
As further noted in the International City/County Management Association white paper “The Revitalization of Vacant Properties: Where Broken Windows Meet Smart Growth:”
Neighborhood decay and blight happens at a rapid rate in those communities plagued with abandoned buildings and vacant properties. . . . Property developers and business owners become reluctant to invest in these neighborhoods. . . . Therefore, a
neglected property allowed to remain in such condition is a signal to the community that no one cares.
We ask LADWP to be a responsible landowner by restoring and maintaining the buildings it owns in the Owens Valley or by providing incentives for lessees or purchasers to restore and maintain the buildings using the leasing and sale tenets outlined above.
We fully understand that there may be other ways to accomplish the goals outlined above. We would sincerely appreciate the opportunity to discuss our suggestions and other ideas and needs with you,
your staff and with the Owens Valley lessees in more detail.
In that regard, we ask to be notified in advance of any Board of Water and Power Commissioners action to adopt land-use policies affecting the County of Inyo and the people and economy of the Owens Valley.
Thank you for your consideration of our suggestions. We look forward to working together to develop policies that are consistent with the law and that benefit the City and the Owens Valley.
Jeff Griffiths, Chairman
Inyo County Board of Supervisors