The Cypress City Council effectively traded a 1.1-acre tract of former redevelopment agency land to a Seal Beach development company that once employed City Manager Peter Grant, dismissing concerns about the transactions since the employment was 17 years ago.
The action came at the Council’s last meeting in March.
At issue is a “narrow and deep” tract of land located at 5732 Lincoln Ave. in Cypress that the city apparently purchased a decade ago in 2013.
In a presentation by Planning Director Alicia Velasco, she said the tract is approximately 100 feet wide by 515 feet deep. It’s located on the south side of Lincoln Avenue between the post office and an RV storage facility. This property was purchased by the city’s redevelopment agency in 2003, she said.
“It was envisioned that it would be part of a larger future affordable housing site with the goal of maybe an adjoining property to get that with located on Lincoln Avenue that didn’t happen,” said Velasco.
“And, because redevelopment funds were used to purchase the property, the state said to spur affordable housing the property needed to be disposed of by cities, or at least in the process by October of 2023,” she added.
The city’s planning official said not only did the state say that the city needs to dispose of the property but then also has a rule called the surplus land Act which outlines the process that the city must use to dispose of these types of properties.
“The goal of the surplus land act is to spur affordable housing development. So as part of that, the surplus land act I’ll go into a bit of background on what that is, it is state law, and it requires that cities must offer their properties to land housing sponsors, projects must restrict the units to 25% affordable and below income bracket,” she said.
She said on June 12, 2023, the City Council declared the Lincoln Avenue property surplus.
And then right after that on June 14, a notice of availability was issued and submitted to over 100 housing sponsors and it was also posted on the state website for surplus land.
According to Velasco, only three entities responded, including Olson, Affordable Housing Partners and one other companies. She said only Olson ultimately “submitted an actual, qualified proposal.”
Several asked questions like why not award the tract to Habitat for Humanity to make all of the tracts on this property affordable.
Michael Valentine, OC CEO for Habitat for Humanity, appeared at the meeting to say they have already built 22 homes in Cypress, cutting the ribbon on the latest just last week.
“I understand there’s a property that was part of the Surplus Lands Act and we were, I guess, our organization was informed but during a time we had a transition in leadership, so we missed out on this one,” said Valentine.
Velasco said after posting, there were three responses, one from the Olsen company, one from Affordable Housing Partners and then lastly from the Link Companies. Only the Olson company submitted an actual qualified proposal, she said.
“Affordable housing sponsors withdrew their application and the other stopped responding to our request for information,” said Velasco.
Olson has been in business for more than 35 years and has completed more than 100 public/private partnerships, Velasco told the Council.
“The proposed project consists of 20 units which will be for sale. Five of those will be restricted to households in the low-income brackets. The units will be two bedroom, two bathroom and roughly 1200 square feet.
There will be at least 8500 square feet of open space on the property as part of the project and the project does meet all zoning requirements. This project was presented to the city council in November of last year. It was then submitted to the state for review and approval the state has to repeat review the surplus land at projects like I mentioned, the state reviews not only the project, but also the process that the city went through. The state did approve the process and the project in January,” said Velasco.
She said the purchase and sale agreement includes the following terms: the sale price of the property is $1.62 million. The city would then contribute those proceeds to the project as a subsidy for the five low income units.
Each affordable unit requires roughly a $625,000 subsidy $325,000 coming from the city and $300,000 coming from the Olsen company. The homes must remain affordable for 55 years which is a requirement of state law, said Velasco.
Olson will apparently build 15 additional units on the remainder of the land for market-rate housing with no additional payments to the city.
In an email to the Council before the meeting, local activist George Pardon was incredulous about the transaction, reminding the Council that City Manager Peter Grant was once employed by the Olson.
“I was very surprised to read that the city is basically giving this property to Olson Urban Housing so they can provide 25% of the units in the affordable category,” said Pardon. “To my knowledge, previous builders in Cypress that have included affordable housing in their projects such as Bonanni and Melia were never given property,” he said.
“In fact, Melia Homes paid the school district $1.8 million per acre for the property at Moody and Orange and 50% of those units are in the affordable category. If the City was going to give away the property, did the city consider providing the property to Habitat for Humanity? Habitat has built at least one project in Cypress and 100% of those units are in the affordable category,” he said in the email.
“I do recall from a LinkedIn account that I found regarding Peter Grant a number of years ago, Mr. Grant served as the Director of Development for Olson Homes from January 2005 to December 2006,” he said.
Council member Frances Marquez again expressed concern that the city needed to enforce a conflict-of-interest system where conflicts of interest, or the lack thereof have to be documented for qualifying transactions.
“Mr. Mayor, I disclosed to the council in November that I had 17 years ago been employed by the Olson company. Marquez has known that for months and to insinuate that that’s a revelation that you received over the weekend is appalling,” said Grant.
“Councilmember Marquez you know better,” he added.
“I can tell you with all confidence that there is absolutely no conflict of interest,” said City attorney Fred Galante.
“Excuse me, I don’t remember hearing that and it wasn’t emphasized in the presentation to us,” said Marquez, noting that this is just another example of why the city needs to implement a conflict-of-interest system so that key city officials can document potential transaction conflicts, or the lack thereof, for qualifying transactions.
“Please, please do not accuse anybody on city staff of unethical behavior,” said Minikus.
“I have a right to ask questions,” said Marquez.
In addition, she said the Cypress School district’s minority enrollment is 80% and 43% of students are economically disadvantaged and are eligible to participate in the Federal Free and Reduced meal program, indicating a growing population that need affordable housing.
“I just feel like we’re opening the door to free land knowing full well that there are developers who have built in the city without, you know, when they had to purchase the property. I just would like for us to reconsider,” she said.
Mayor Pro-tem Bonnie Peat made the motion to approve the purchase and sale agreement with Olson and also agreed with Marquez and Council member Anne Hertz-Mallari to look for ways to perhaps work with Habitat for Humanity to add affordable homes in the city.
All three Council members attended Habitat’s most recent home ribbon cutting last week and Peat said while the Lincoln tract may not have been right, the city still has high hopes for Habitat for Humanity.
“Habitat for Humanity offers great things for us,” said Peat, noting that the city will continue that dialogue as well.
