09:37 AM PST on Monday, January 18, 2010

The Press-Enterprise

Special Section: San Jacinto Probe

San Jacinto officials — some now indicted in a sweeping corruption probe — approved permits for a developer also ensnared by the criminal charges, leading county transportation officials to spend thousands more to acquire land for a major regional route, court documents and officials confirmed.

Stephen Holgate, a local developer and one of 15 people indicted in a sweeping campaign corruption probe, was given permits in 2006 to develop property that city and transportation officials knew was part of the planned Mid-County Parkway.

The route one day will connect San Jacinto and Interstate 215 in Perris.

The parkway is considered the artery that will pump millions of dollars into San Jacinto by jumpstarting commercial development, city leaders have said. But construction is not expected to start until 2014.

Mention of the parkway and nearby commercial developments are sprinkled throughout more than 3,800 pages of grand jury transcripts, covering 129 witnesses and 25 days of testimony.

Prosecutors allege Holgate and other developers laundered cash through campaign coffers — notably Jim Ayres’ failed 2006 State Assembly bid — to curry favor with San Jacinto council members.

Court documents indicate Holgate went to work developing a plan for a shopping center at the intersection of Highway 79 and the Ramona Expressway, the corner where the proposed parkway would go, even though the six-lane road would likely cross his path.

He discussed the project with city officials and the Riverside County Transportation Commission in early 2006.

Transportation officials immediately noted how Holgate’s development would impact their ability to build the planned parkway, said Cathy Bechtel, project development director for the commission.

They sent a letter to city officials outlining how the project would affect the parkway.

At the time the city had a preferred route for the parkway and the transportation commission had identified land that would be needed. But San Jacinto Interim City Manager Tim Hults said turning down a developer opens the city to legal challenges.

“Developers have a plan and we cannot just tell them not to design projects because we might need it,” he said.

In the case of land along the parkway, everyone knows where the parkway is likely to go, he said. But when someone comes in with a development that fits the city’s master plan, there is little they can do to stop it, based on what could occur.

Many agree it is a complex area of the law and public policy where the best interests of the community often conflict with the rights of property owners.

The city approved the Gateway project in April 2006 and Holgate was able to pull building permits needed to prepare the site for construction. Jim Ayres made the motion to approve the agreement, which included Holgate’s company, Shelbran Investments, giving the city $300,000 for a new fire station.

Hard Sell

Believing construction on the 700,000-square foot shopping center planned for the site could start soon, Bechtel said the transportation commission purchased some of the land from Holgate so they wouldn’t have to spend more buying it later, after it was developed.

“If we think a project is going to go forward, we can purchase property to hold as potential right of way,” Bechtel said.

The transportation commission paid $22.6 million for nearly 37 acres of Holgate’s site, said commission Deputy Director John Standiford.

No appraisal of the land without the permits was ever conducted. But transportation, city and business officials agree the land was much more valuable with the permits, as opposed to without.

So far, nothing has been developed on the property.

Holgate in 2008 tried to sell another parcel to the commission, but Bechtel said the agency balked, partly because it didn’t want to spend the money at the time. Officials also weren’t convinced Holgate was moving forward with the development, despite having city permits.

Developers often speculate on where regional transportation officials will put a road, Bechtel said. They will buy land near the road and then wait until the land becomes more valuable.

Complex situation

Many developers have a stake in the parkway’s success. Thousands of homes are planned along the route, both inside and outside the city limits, said Hults. Shops, offices and medical centers are also in the works.

Hults said there was little San Jacinto officials could have done to keep Holgate from receiving permits, thereby driving up the price of his property.

“It certainly wasn’t intentional on our part,” Hults said of the higher purchase price.

But cities do have a lot of discretion when approving projects, especially large commercial ones that probably require some waivers from city code, said Alejandro Camacho , a law professor at the University of Notre Dame and UC Irvine, who specializes in environmental and law-use law.

As projects grow in size, especially commercial ones that have requirements for how close buildings to can be to the road, or height requirements that determine how tall roofs can be, Camacho said cities and developers often negotiate. Developers often ask for waivers to local rules and cities comply, Camacho said.

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