By Shawn Raymundo
Proposals from developers looking to purchase or lease city-owned property near Talega, turning it into a gas station with a convenience store and car wash, have prompted some criticism from members of the public who question the potential use for the site.
The city council on Tuesday, Dec. 10, heard from the three developers offering to buy the 2.29-acre parcel, which, according to the city, could sell for approximately $5 million to $7 million. If the council instead opts for a lease option, annual rent could gross approximately $200,000 to $325,000.
Sales-tax revenue generated from the proposed gas station complex could also provide the city $180,000 to $320,000 a year. Additionally, annual revenue from property taxes could yield about $15,000 to $25,000, the city explained in a report to the council.
The site in question is located on the southwest corner of Avenida La Pata and Vista Hermosa, adjacent to the fire station. Considered a gateway location because La Pata connects San Clemente to San Juan Capistrano and Rancho Mission Viejo, a gas station, the city notes, could serve an influx of traffic produced from the new residential and commercial developments.
With the Mobil on Avenida Pico and Camino Vera Cruz being the only gas station in the area, Talega residents have told the council that they want another fueling station and car wash, Mayor Dan Bane and Councilmember Kathy Ward stressed during the meeting last week.
“I understand the concerns about the uses, and gas stations are by no means a sexy use, I can acknowledge that 1,000%,” Bane said. “But I went back to Talega, and I can tell you I heard repeatedly that we need more gas stations.”
Bane also noted that the reason for having the applicants—Fountain Head Development, Property Nine Development and Heslin Holdings—present their proposals at a council meeting was so the public knows what was being considered.
“That’s where I am tonight. To be clear, I didn’t come in expecting to make a decision tonight,” Bane said before motioning to table the consideration until the council’s meeting in late January.
During the council’s meeting, representatives from Fountain Head, Property Nine and Heslin gave the council an overview of what their potential plans for the site were. Each company proposed a gas station, convenience store and car wash, as well as partnering with coffee companies such as Coffee Bean to operate onsite.
Because car wash sales aren’t subject to sales taxes, each of the three companies is offering a financial inducement to the city. Both Fountainhead and Property Nine have committed to giving the city $75,000 a year, while Heslin said it would remit $25,000 annually.
According to Fountainhead’s proposal, it’s offering to buy the land for $7 million or enter into a ground lease for $325,000 a year with rent escalating by 5% every five years. The company anticipates to provide the city a total of $268,300 in sales taxes annually. That figure includes revenue from the fuel, convenience store, coffee company and car wash.
Property Nine’s proposal included two options for the city: an outright sale of the land or a combination of a sale and a lease agreement. According to the developer, the city could either sell the property for $6 million or sell it for $3 million while also leasing it for $100,000 a year for the first five years. The annual rent would increase to $110,000 between years six and 10.
Property Nine notes that the city stands to gain $9.23 million over the first 10-year period from both an outright sale of the land and tax revenue. If the city opts for the 50/50 sale and lease option, the city could look at a 10-year revenue projection of $7.28 million.
Over a 35-year period, however, Property Nine projects that the city would receive a total of nearly $20.2 million through the simple property sale and tax revenue, and roughly $19.7 million under the 50/50 split option.
As for Heslin, the company’s proposal states that under a long-term ground lease option, it would pay $200,000 annually in rent, whereas, through a purchase offer, it could pay the city $6 million for the land. Heslin anticipates its fuel, convenience store and car wash revenues to give the city close to $177,000 in annual sales-tax revenue.
According to the city, it received a total of 15 qualified offers for the site, with most of them representing proposals for gas stations. Others included charter schools and assisted-living facilities.
During the public-comment portion, some local residents and business owners voiced concerns over the proposals, as well as the criteria in which the city narrowed down its selection of developers vying for the site.
Sara Peterson, a San Clemente resident and owner of local favorite Zebra House Coffee, was particularly concerned with the amount of “big box and commercial” operations popping up around town.
During the meeting, Peterson also announced that she’s expanding Zebra House, as she recently secured a long-term lease for space directly across the street from the proposed gas station. Her concern, she noted is with the developer’s decision to partner with a coffee chain on the site.
“I am concerned about another big box operation going directly across the street and whether that’s the highest and best use of the real estate and certainly the impact that it will have on local businesses obviously, particularly mine,” she said. “I also don’t know if it’s particularly the best use of space to have a competing concept directly across the street. It feels like there’s a lot better things that we can do with our space.”
Bree Hughes of OC Real Estate raised the issue of how the bidders were finalized by the city, telling the council that she was the only business owner who submitted a proposal, yet wasn’t selected among the best offers.
“At the time of submitting our proposal, we were assured that as locals we would be considered. . . . I am, in fact, the only local operator who submitted an offer. We are the only end users who submitted an offer,” she said, later imploring the council “to reconsider the proposals you have in hand.”
Councilmember Laura Ferguson later touched on those concerns, citing a letter the council received from NNN San Clemente, LLC. According to Ferguson, that letter echoed some of Hughes’ trepidations, as the company was previously told by the city’s planning commission that a car wash use was most likely not compatible with the land-use zoning of that site.
Ferguson asked City Manager James Makshanoff whether NNN San Clemente had excluded including a car wash in its own proposal because of the information it received from the planning commission.
“I can’t remember if they did because of that reason,” Makshanoff replied. “We haven’t had a conversation with the planning commission.”
Ferguson then asked Makshanoff to look into the issue, to which he agreed that the city would dive into it.
Addressing the reasoning for selecting the three bidders currently being considered, Bane explained that there was a “precipitous drop” in the prices offered between those developers and the others.
“It was a pretty precipitous drop from the highest grouping of $5 million to $7 million, and then you look at senior living and other uses, and those were like $4 million or $3 million or less for that site,” Bane said.
“So, part of what I would think the public expects from us is if we’re going to sell public property for use, what are we getting monetarily?” he said in elaboration. “What I always hear is ‘what is our budget doing? How are we going to pay for more deputies?’ And that was a huge factor for us in looking at this.”
The discussion and consideration of the proposals are scheduled to come back to the council during its next regular meeting on Jan. 21.
Editor’s Note: An abridged version of this story was published in the San Clemente Times’ Dec. 19, 2019 edition.
Shawn Raymundo is the city editor for the San Clemente Times. He graduated from Arizona State University with a bachelor’s degree in Global Studies. Before joining Picket Fence Media, he worked as the government accountability reporter for the Pacific Daily News in the U.S. territory of Guam. Follow him on Twitter @ShawnzyTsunami and follow San Clemente Times @SCTimesNews.