Angel Stadium sale is deemed illegal by state housing agency

The Angel Stadium sale was declared illegal Wednesday by California's state housing agency, which gave the city of Anaheim 60 days to redo the deal or make the land available to interested bidders.

That could put the city in the position of scrapping the deal and starting over, suing to pursue it, or paying almost $2 from every $3 in cash from the sale toward state fines.

Two years after celebrating an agreement in which a neighborhood would sprout on the long-dormant parking lots surrounding Angel Stadium and the Angels would remain in Anaheim through at least 2050, the city is now faced with the prospect that the deal might disappear, the parking lots could remain empty, and the team could leave town in eight years.

The city also has been sued by a citizens group alleging the deal violated state transparency laws. In the wake of the latest development, one city councilman suggested Anaheim start the sale process anew.

“Why not just start from scratch and do a much more transparent and open process?” City Councilman Jose Moreno said. “It gives us the chance to make a better deal for the people of Anaheim.”

Mayor Harry Sidhu said in a statement that the city would "remain committed to our stadium plan" and expressed frustration that a deal that would expand affordable housing would be vetoed by an agency with a mission to expand affordable housing.

"We are undeterred," Sidhu said.

Angels owner Arte Moreno — no relation to the councilman — runs the development company that agreed to buy the 150-acre site from the city for $150 million in cash. It is uncertain how much of a delay Moreno might be willing to tolerate or how much more money he might be willing to spend to nail down a deal that the city had projected would close in “late 2021 or early 2022.”

Marie Garvey, spokeswoman for the development company, said the company had no comment at this time. Mike Lyster, spokesman for the city, said Anaheim had “many potential paths forward” but said it would be “premature to discuss any specifics at this time.”

Under a state law called the Surplus Land Act, public land made available for sale should first be offered to affordable housing developers. If Anaheim chooses not to make the stadium land available to developers beyond Moreno, the California Department of Housing and Community Development said the city could comply with the act by setting aside 80% of the land for housing and reserving 40% of those housing units as affordable.

The state agency said the city had violated the Surplus Land Act in three ways: by not properly classifying the land as surplus; by not making the land available to other developers; and by not notifying the agency of such availability and any negotiations before reaching the sale agreement with Moreno’s company.

The agency specifically rejected the city’s argument that the most recent version of the law did not apply because the city and the Angels were exclusively negotiating before a benchmark date of Sept. 30, 2019. The City Council approved the sale on Dec. 20, 2019.

In fact, the agency said, the City Council had voted against entering into a binding and exclusive negotiating agreement on Jan. 15, 2019. Beyond that, the agency said, Moreno’s company was not formed until Nov. 20, 2019.

The city said Tuesday that the agency had rejected a proposed compromise in which affordable housing units would be added elsewhere in Anaheim, expanding the total project to hit a state target of 25% affordable housing.

Megan Kirkeby, deputy director of the state housing agency, said the agency would have preferred 25% affordable housing on site, so as not to segregate lower-income families away from the stadium area. Kirkeby also said the agency considered at least some of the proposed additional affordable housing “already in the pipeline.”

Moreno, the councilman, said he was unaware that the city had made such a proposal before Tuesday and he would not have supported it. In promoting the deal, city officials had touted that the affordable housing units would have been integrated into the stadium development, not isolated into a section of it. The addition of off-site blocks of affordable housing would have represented a step backward, Moreno said.

“That’s the wrong message to send to our city,” Moreno said.

Kirkeby said the agency would like to see the project completed, with more than 5,000 housing units proposed amid shops, offices, hotels, entertainment options, and a new or renovated ballpark.

“There’s a lot to like here,” she said. “We are not throwing up our hands. We are stewards of the law.”

That compelled the agency to find the sale in violation of the law, after months of discussions had failed to reach a resolution. The 60-day window could include renewed discussions.

However, she said, “I can’t engage in any more, ‘Give us another 60 days to come up with an offer.’ ”

In July, Anaheim City Atty. Rob Fabela said the City Council could consider putting the land up for bid among affordable housing developers, a process that he said “certainly could” undo or delay the Angels deal. That would not necessarily mean that affordable housing developers would be interested, or that the city could reach a deal with any of them.

The Angels control development on the site until as far as 2038, which the city argues would make the site unattractive to other potential developers. In a letter to Kirkeby on Wednesday, Fabela warned that the agency could force the city to leave the parking lots vacant until then, rather than allow for the construction of thousands of homes on the property.

“HCD’s threat to engage in actions calculated to frustrate or delay the pending transaction seems fundamentally at odds with HCD’s mission of increasing the supply of affordable places to live in California,” Fabela wrote.

The site was valued at $500 million in a city-commissioned appraisal, but only with the stadium demolished, the Angels gone, and the team’s development restrictions gone as well. The city and Moreno’s company agreed on $320 million as the sale price, and the city later credited $170 million toward the inclusion of parkland and affordable housing within the project.

That discounted the cash price to $150 million. If the city proceeds with the deal as is, Anaheim could be subject to a fine of 30% of the sale price — that is, $96 million. Kirkeby said her agency also could refer the matter to the state attorney general, who could seek an injunction to stop the sale.

It is not uncommon for state legislators to introduce a bill that exempts a specific project from state law. In this case, that kind of legislative end run has been floated, but it is considered unlikely because the two state legislators who represent the area where the stadium sits — Assemblyman Tom Daly, a former Anaheim mayor, and Sen. Tom Umberg — previously had warned that the sale “may not be in the best interest of the taxpayers of Anaheim.”

The city said Tuesday that it “continues to maintain” that the most recent version of the Surplus Land Act “does not apply to the stadium site.” The city also said the housing agency’s interpretation of that act has “created confusion across our state.”

If the city wishes to pursue that argument, it could do so in court. On Tuesday’s City Council agenda, the closed session on this issue was justified under a section of state law that allows nonpublic discussion when “the legislative body of the local agency has decided to initiate or is deciding whether to initiate litigation.”

This story originally appeared in Los Angeles Times.