Angel Stadium sale is deemed illegal by state housing agency

The Angel Stadium sale was declared illegal Wednesday by the state housing agency, which gave the city of Anaheim 60 days to redo the deal or make the land available to interested bidders.

That could put the city in the position of scrapping the deal and starting over, suing to pursue it, or paying almost $2 from every $3 in sale profits toward state fines.

Two years after celebrating an agreement in which a neighborhood would sprout on the long-dormant parking lots surrounding Angel Stadium and the Angels would remain in Anaheim through at least 2050, the city is now faced with the prospect that the deal might disappear, the parking lots could remain empty, and the team could leave town in eight years.

The city also has been sued by a citizens’ group alleging the deal violated state transparency laws. In the wake of the latest development, one city councilman suggested Anaheim start the sale process anew.

“Why not just start from scratch and do a much more transparent and open process?” City Councilman Jose Moreno said. “It gives us the chance to make a better deal for the people of Anaheim.”

Angels owner Arte Moreno — no relation to the councilman — runs the development company that agreed to buy the 150-acre site from the city, for $150 million in cash. It is uncertain how much of a delay Moreno might be willing to tolerate in a deal that the city had projected would close in “late 2021 or early 2022.”

Marie Garvey, spokeswoman for the development company, said the company has no comment at this time.

“We remain committed to the stadium plan and have many potential paths forward,” city spokesman Mike Lyster said. “It would be premature to discuss any specifics at this time.”

Under a state law called the Surplus Land Act, public land made available for sale should first be offered to affordable housing developers. If Anaheim chooses not to make the land available to developers beyond Moreno, the California Department of Housing and Community Development said the city could comply with the act by using 80% of the land for housing and reserving 40% of those housing units as affordable.

The state agency said the city had violated the Surplus Land Act in three ways: by not properly classifying the land as surplus; by not making the land available to other developers; and by not notifying the agency of such availability and any negotiations before reaching the sale agreement with Moreno’s company.

The agency specifically rejected the city’s argument that the most recent version of the law did not apply because the city and the Angels were exclusively negotiating before a benchmark date of Sept. 30, 2019. The City Council approved the sale on Dec. 20, 2019.

In fact, the agency said, the City Council had voted against entering into a binding and exclusive negotiating agreement on Jan. 15, 2019. Beyond that, the agency said, Moreno’s company was not formed until Nov. 20, 2019.

The city said Tuesday that the agency had rejected a proposed compromise in which affordable housing units would be added elsewhere in Anaheim, expanding the total project to hit a state target of 25% affordable housing.

Moreno, the councilman, said he was unaware the city had made such a proposal before Tuesday and said he would not have supported it. In promoting the deal, city officials had touted that the affordable housing units would have been integrated into the stadium development, not isolated into a section of it. The addition of off-site blocks of affordable housing would have represented a step backwards, Moreno said.

“That’s the wrong message to send to our city,” Moreno said.

In July, Anaheim City Attorney Rob Fabela said the City Council could consider putting the land up for bid among affordable housing developers, a process that he said “certainly could” undo or delay the Angels deal. That would not necessarily mean that affordable housing developers would be interested, or that the city could reach a deal with any of them.

The Angels control development on the site until as far as 2038, which the city argues would make the site unattractive to other potential developers.

The site was valued at $500 million in a city-commissioned appraisal, but only with the stadium demolished, the Angels gone, and the team’s development restrictions gone as well. The city and the Moreno’s company agreed on $320 million as the sale price, and the city later credited $170 million.

That discounted the cash price to $150 million. If the city proceeds with the deal, Anaheim could be subject to a fine of 30% of the sale price — that is, $96 million.

It is not uncommon for state legislators to introduce a bill that exempts a specific project from state law. In this case, that kind of legislative end run has been floated, but it is considered unlikely because the two state legislators who represent the area where the stadium sits — Assemblyman Tom Daly, a former Anaheim mayor, and Sen. Tom Umberg — previously had warned the sale “may not be in the best interest of the taxpayers of Anaheim.”

The city said Tuesday that it “continues to maintain” that the most recent version of the Surplus Land Act “does not apply to the stadium site.” The city also said the housing agency’s interpretation of that act has “created confusion across our state.”

If the city wishes to pursue that argument, it could do so in court. On Tuesday’s City Council agenda, the closed session on this issue was justified under a section of state law that allows non-public discussion when “the legislative body of the local agency has decided to initiate or is deciding whether to initiate litigation.”