Jeff Jardine: The road to red ink

05/31/2014 6:41 PM

05/31/2014 11:17 PM

Someday, perhaps within the next decade or so, the North County Corridor expressway will become a reality. It will provide a major transportation link from Highway 99 in north Modesto to Highway 120/108 somewhere east of Oakdale.

It will enable trucks to move goods that sustain local economies. It will send tourists to the hills. And it will represent the culmination of decades of ideas, planning, controversy, frustrations, failures and, ultimately, success.

At this point, officials peg the road’s cost at roughly $357 million. Whatever the figure, add at least $2 million more to it. Why?

Because before local transportation officials settled on building the new expressway south of Riverbank and Oakdale, the state spent nearly $5 million to buy 24 properties, most of them north of the Stanislaus River, for the Oakdale Bypass. When it comes to taxpayer dollars, the bottom line is all-inclusive.

A project first conceived as early as 1954, the state wanted to reroute 120 into a strawberry field north of the Oakdale Cheese Factory, across rangelands and the river to connect with 120/108 at the old Ardis Ranch about 5 miles east of Oakdale. The California Department of Transportation began acquiring land in 1989, and continued to do so until 2006. A year later, Stanislaus County transportation officials opted for the more southern North County Corridor plan and scuttled the Oakdale Bypass. That meant divesting the properties already purchased for the now-abandoned route.

“We’re not in the business of real estate, per se,” Caltrans spokeswoman Chantel Miller said. “Once we’ve declared excesses, we try to get them out of our inventory.”

The state had the properties appraised for sale for a 2011 auction, but found no takers. When it repeated the process in August 2013, buyers emerged for eight of them.

It made a $2,600 profit on a home on Gilbert Road it bought for $267,400 in 1996 – not exactly the kind of return you’d want on a 17-year investment, but the state originally bought the land fully intending to build a road on it.

Ka-ching? Not so fast. The remainder of the sales that day resembled the short sales of the housing collapse and saddled taxpayers with the losses. A property purchased for $771,000 in 1989 sold for $331,000 – a $440,000 drain. A house on 60 acres the state bought for $841,000 from Ron and Christa Schumaker in 2002 sold for $603,000. Say goodbye to $238,000. Losses from the other sales ranged from $136,000 to $98,000.

The final tally from the 2013 auction: red ink totaling $1,351,400.

Three other properties failed to sell at the same auction and will be offered again during the 2013-15 fiscal year, Miller said. Of the other 13, one will be kept available for possible use as part of the North County Corridor project. The rest – among them property the state bought in 2005 for $800,000 and another piece acquired in 2004 for $558,000 – will be reappraised and cleared for sale at some point, and it is unlikely many of them will break even, let alone turn a small profit.

There are a couple of obvious reasons for such losses:

• When the state bought many of those properties, real estate values were at or near their peak. When it sold them last year, values had bottomed out and were just beginning to rise a bit.
• In at least four instances, the state bought properties that contained homes and other outbuildings. The state razed the buildings, thus devaluing the properties when it came time to resell.

George Rose, an Oakdale developer, bought four lots in 2013 he had passed on in 2011. “I paid $160,000 more (combined) than I would have if I had bought them two years earlier,” he said. “But the state doesn’t understand real estate.”

Had the homes and buildings remained intact, the land values would have been higher.

Only two of the eight still have homes, which the state eventually rented before selling. One tenant was a Caltrans employee, a practice that is allowed, Miller said, as long as the employee’s job doesn’t include managing the property.

Some properties were rented or leased for grazing or farming. Indeed, major stretches of the once-planned Oakdale Bypass route are now almond orchards. Miller said the state turned over 24 percent of its rental income to Stanislaus County in lieu of the property taxes the county lost when the otherwise exempt state bought the lands.

County Assessor Don Gaekle said the county lost about $29,000 in property tax revenue since the state bought those properties.

• None of the previous owners negotiated first-right-of-refusal clauses in their sales agreements, and all were completed before the state passed Senate Bill 1650, which provides that right to owners for property sold to the state after Jan. 1, 2007. So none regained their properties.

Among those who bid at the 2013 auction were Gary and Lorri Williams, who purchased the home next door to their own along Gilbert Road. It was the only sale that returned a profit to the state. Lorri Williams watched as the homes across the street were leveled, septic systems ripped out and a swimming pool filled only for those properties to be dumped at far below what the state had originally paid.

“Our tax dollars at work,” Williams said.

She said the state offered them $18,000 for the front portion of their own property years ago. So she had their place appraised.

“It had an $800,000 market value,” she said.

Two doors away, Glenna and Cliff Rodgers in 2002 put off negotiating with the state for their 3-acre ranchette complete with a custom home, metal fencing and horse barns.

“The state came in and offered us $300,000,” Glenna Rodgers said. “Our pipe fencing was that much.”

Herman Meyer, an attorney who lived across Gilbert Road until his death last year, urged them to hold out as long as possible.

“Herman kept saying, ‘Don’t sell! Don’t sell! Don’t sell!’ ” she said. “We didn’t.”

Hence, the state didn’t buy their place, meaning the state now won’t have to sell it. Based on the numbers so far, that is a good thing for taxpayers.

The North County Bypass’ final price tag will be high enough as it is.

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