“I’m not leaving the Sweetwater folks $34 million in the hole,” said Marc Litchman, a controversial figure who holds the title to Sweetwater Union High School District land.
While Litchman’s statement might appear friendly to most, it flaps like a toreador’s cape in the face of the district.
The $34 million refers to Sweetwater’s cumulative purchase price of the L Street property in western Chula Vista.
When the district purchased the property in 2005, it quickly transferred the title to Plan Nine Partners/California Trust for Public schools, a 501(c)3. Litchman is CEO for both entities.
The nonprofit status of the trust allowed the district to purchase the property with tax-exempt bonds.
Critics say that the exchange agreement between Sweetwater and Plan Nine was designed to keep L Street out of the public’s hands. They also contend that the annual fees and expenditures of Plan Nine are excessive and needlessly drain money from the district.
According to the agreement under which the title was transferred to Plan Nine, the purpose was “to develop a modern administrative center, corporate yard and adult school facility.”
Under former superintendent Ed Brand, the district gambled on a real estate venture to prepare three pieces of district property to be flipped to developers for high-density housing.
To that end, Sweetwater chose to hire a team of consultants, E2ManageTech, to work with the City of Chula Vista to get zoning changes and develop apartment plans for district-held property, including L Street.
E2ManageTech was also tasked with meeting with Litchman's attorney and modifying the cumbersome L Street agreement. E2ManageTech is gone now — but Litchman isn’t.
After the district wrote over a million dollars’ worth of checks to E2ManageTech, they bought out their contract in September for $750,000.
Were the results of this huge expenditure worth it? Only one piece of the district’s property was entitled and no developer bids materialized.
The first step the district took to undo the agreement was to stop paying Plan Nine’s annual fee.
The result was not what the district hoped for — Plan Nine’s attorney sent a notice of default letter to the district and copied the two banks carrying the L Street bonds.
On July 18, the attorney for Plan Nine Partners wrote:
“The Trust and Plan Nine Partners entered into these transactions as an accommodation to the District with the intent and stated purpose that educational facilities would be developed within a reasonable period of time….
“Eight years later, none of this has happened. The District has abrogated the Exchange Agreement, refused to provide [Plan Nine Partners] with any reasonable or alternative plan for paying off the Bonds thus relieving [Plan Nine Partners] from the liability related to the L Street Property and the Bonds…
“The District’s failure to fulfill its obligations under these agreements poses a considerable threat to the non-profit status of the Trust and [Plan Nine Partners], thus undermining the tax- exempt status of the bonds.”
The other result was that Litchman sallied forth in the South Bay to engage community members in discussions about the best use for the L Street property.
Litchman, who is critical of the district’s “speculative real estate deals,” believes the district should develop L Street for public benefit.
He has gained support from several soccer leagues in the South Bay for a soccer stadium, training center, and public school, and has held discussions with prospective developers. The district didn’t seem to like that. So, in early October, the district responded to Litchman by dangling dollars.
According to Litchman, interim superintendent Tim Glover, CFO Karen Michel, and an attorney for the district traveled to Los Angeles to meet with him and the attorney for the California Trust for Public Schools. The district offered fees for 2012–2014.
Though the district ultimately reneged on the deal, it was an expensive feint. Aside from staff time, lost work time, attorney fees, the district is also obliged to pick up the tab for California Trust’s attorney.
Litchman likens the Plan Nine Partners/California Trust relationship with Sweetwater to “a bad marriage from which neither can escape.”
In August, Sweetwater posted its position on the "bad marriage":
“Currently in discussions with [Plan Nine Partners] and the [California Statewide Communities Development Authority], the District has proposed termination of the relationship with [Plan Nine Partners]. With the consent of [Plan Nine Partners] and the consent of all other parties, including the [development authority], the District proposes to replace [Plan Nine Partners] with its own non-profit corporation, Sweetwater Financing Corporation.
“This is subject to obtaining tax-exemption status for the Sweetwater Financing Corporation from the Internal Revenue Service…. The district looks forward to receiving the tax-exempt status for the Sweetwater Financing Corporation in the next few months.”
Litchman says that after watching all the costly errors the district has made as stewards of district property, he’s not going to walk away.