West Park developer misses $1.75M payment to Stanislaus County

07/11/2012 1:53 PM

07/11/2012 9:29 PM

West Park investors on Tuesday failed to make good on a $2.75 million promise made to Stanislaus County when developer Gerry Kamilos finessed a "final" extension three weeks ago, throwing the ambitious project's future into question.

The breach of contract could doom Kamilos' vision for a huge industrial complex with 13,000 jobs on a former naval air base near Crows Landing, according to a letter Wednesday from the county to Kamilos.

"Failure to deposit the required funds is ground for termination of the agreement," reads the letter from Chief Executive Officer Monica Nino to Kamilos. It adds that "the Board of Supervisors may elect to terminate the agreement unless funds are promptly deposited into the county treasury by today (Wednesday)."

Kamilos downplayed the delay Wednesday, but sidestepped a question on when the money might arrive. "Everyone is pushing as fast as we can," he said.

He said his partners had trouble completing a venture buyout with Lehman Bros., which continued to control a significant portion of West Park financing after seeking bankruptcy protection in 2009.

Kamilos hopes to give valley growers more Pacific Rim export opportunities by running local products on short-haul trains to the Port of Oakland. Asian imports could come the other way, unloading onto trucks at an inland port on the former air base.

West Park put $1 million in a trust account the day before the critical June 19 vote; Kamilos called it a "good faith" gesture, while critics equated the money to a bribe. The remaining $1.75 million was due by close of business Tuesday.

"It's not here," county Assistant Executive Officer Keith Boggs said Wednesday afternoon. The money had not arrived by 5 p.m. as demanded in Nino's letter, he said Wednesday evening.

"At this point," Boggs said, "I don't know what leadership is planning to do."

What's next step?

Termination is not automatic. County Counsel John Doering said that could only follow a vote by a majority of supervisors and it was not clear Wednesday how that might occur, or whether the issue might go away if the money arrives in the next day or two.

County supervisors have been impatient with West Park's lack of progress; two supervisors, Jim DeMartini and Terry Withrow, have argued to pull the plug on the 2,930-acre project. As the June 19 hearing began, Withrow suddenly recused himself to avoid a conflict of interest tied to his wife's part ownership of land near the project, and the others voted 3-1 to grant another extension until Jan. 31 for crucial environmental documents.

Supervisors made clear that the $2.75 million carrot factored into their votes.

The "Cost Reimbursement, Deposit and Forfeiture Agreement" says investors would lose all but $375,000 of the total if Kamilos fails to deliver studies by the January deadline. The county would use the forfeited money to pay for its own environmental impact report, financial feasibility study and other key documents while trying to land another master developer.

DeMartini, whose district includes the county's West Side, said Wednesday: "It is long past time for the board to start over again. As far as I'm concerned, we're through with (Kamilos)."

Dick Monteith, West Park's most ardent supporter on the board, preferred a cautionary approach. "We're waiting for the money. We'll wait to see what happens," he said.

When granting Kamilos a supposedly final 15-month extension in March 2011, Supervisors Vito Chiesa and Bill O'Brien had warned Kamilos not to seek another. Three weeks ago, Chiesa and O'Brien reasoned that sticking with Kamilos makes more sense than starting over with someone else. Neither supervisor was available for comment Wednesday.

Past legal skirmishes

A Bee review of court records revealed that Kamilos or his companies have faced six lawsuits over the past couple of years, all saying they were forced to sue because he broke agreements to pay them. Three were brought by firms helping with West Park.

Two Lehman senior executives were hard to reach last week because of the July Fourth holiday, Kamilos said, and his company completed Lehman's West Park buyout about 2 p.m. Tuesday.

He previously declined to identify investors replacing Lehman's interest.

A $27 million federal transportation grant application said a Chinese conglomerate, Beijing Construction, would match that amount in a private investment, and Spinnaker Energy Group pledged $3 million for a solar farm component.

"We're working with our partners to get the funds to the county as quick as we can," Kamilos said. "It's just a lot more complicated than anybody had anticipated."

Bee staff writer Garth Stapley can be reached at gstapley@modbee.com or (209) 578-2390.

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