Supes Rubberstamp Brooktrails Scam-A-Rama
by Mark Scaramella, March 2, 2011
As expected, Supervisor John McCowen brought up Mendocino County’s participation in the perpetual sales of “unbuildable” Brooktrails lots to unsuspecting buyers.
When these unsuspecting buyers tardily figure out that there is not now nor is there likely to ever be sewer and water hook-ups to the little country parcel they've usually bought sight unseen, they stop making payments on it, and the little lot goes into tax default where the County of Mendocino briefly becomes its owner for unpaid property taxes and fees. The County of Mendocino puts the parcel up for auction, the same crook, er real estate firm that sold it to the previous unsuspecting buyer, buys it again for next to nothing and soon sells it again to yet another unsuspecting buyer. The same crooks, er, real estate salesmen, buy these Brooktrails lots in big batches.
Supervisor McCowen had pulled the tax foreclosure sale item from the consent calendar and precisely, irrefutably explained the problem to his colleagues.
“Many of these lots are routinely tax defaulted,” began McCowen, half expecting his colleagues to be sympathetic to his carefully researched analysis. “They are auctioned by the County. They are purchased often by speculators or unsuspecting members of the public. They currently are under a water moratorium. For many of them sewer is not available under any circumstances. They are postage stamp sized lots where it would not be feasible to do septic. So without sewer they are essentially unbuildable. People purchase these either directly, thinking they’re getting a bargain, or they purchase them from a speculator who bought them, often over the internet, pay exorbitant, inflated prices, then they start making the inquiries they should have made in the beginning. They found out they bought a worthless piece of ground. They quit paying on it. Eventually it tax defaults. We sell it again at auction, speculator buys it up, resells it. I suspect some of these lots have been sold multiple times over the last 30 years, and, so, I’m looking at this as if the County in a sense is essentially complicit in fraud in that we know we are auctioning worthless lots, some cases picked up by speculators, marketed to unsophisticated people. For the Brooktrails lots about half the names of the owners are Hispanic or Asian surnames. I think at a minimum, if we’re going to be selling these lots we should do everything we can to notify the public of the true condition of them. And I know that’s not in the economic interest of the County. But I’m asking the question, Is it ethical to just sell these lots on the open market or at open auction without providing the information about serious material defects that we know affects the value and the buildability of these lots?”
Supervisor John Pinches immediately took issue.
“First of all, Supervisor McCowen, you call them worthless. Keep in mind that Brooktrails Vacation Village Subdivision, as it was originally called, was never envisioned for lots to build houses on it. It was envisioned that they would sell these lots for people in the Bay Area who wanted to come up and have a place to camp on. Set up a camp, spend the weekend and leave. It was only later on that people started really building houses. So these lots, you know, if you look at a map view, they are not really worthless, and they do sell, I mean, I… And another thing, I don’t think it’s up to the County, we don’t have any legal or ethical obligation that, you know, if somebody wants to buy a lot and thinks they’re making a good deal at a tax sale and try to sell it for sale and then make a couple thousand bucks on it to sell it to a buyer that’s not as aware as they were, well so be it! That’s kind of a part of America, you know what I mean? There’s no guarantee when you buy anything. I mean it’s… I don’t know why we need to change this process.”
McCowen didn’t budge.
“Well, the guarantee in this case is that many of these lots are essentially worthless.”
Pinches didn't budge either.
“The real advantage here is if Brooktrails Community Services District gets themselves, as part of their specific plan, they want to do lot mergers. If they [Brooktrails] had a few extra bucks they should come to the tax sale, buy them for back taxes and merge them and it helps them get to their goal, their specific plan, it’s a real opportunity.”
McCowen remained unconvinced.
“Well, they’re participating in the scam too because, although there are only water hookups currently available for about 1785 homes, and there’s just 15 or so still available, this specific plan says that ultimately there will be 4,000 lots at build out, but in reality there are over 6,000 lots currently on the ground and they’re collecting assessments from every one of them for sewer, water, fire. So they’re getting money off these lots when they will never be providing services to them. I just don’t think it’s…”
“Well,” Pinches said, “if they catch on fire… Just cause there’s not a house on it they still get protected from fire. Some of them are potentially available to hook up to sewer. These are not all off… off-system lots.”
Board Chair Kendall Smith, looking at County Counsel Jeanine Nadel, interrupted: “I think we understand the issue now. Let’s go to Counsel for comment on this.”
Pinches ignored Smith and continued to McCowen: “What do you propose to do different, is the question here?”
Ms. Nadel weighed in.
“I think actually there is some disclosure. There is disclosure. The property is sold as is. There is a disclosure regarding moratoriums. And it’s a situation where the buyers need to do their due diligence before they make any purchases, you know, I don’t know what else to say.”
Can you say SCAM, Counsel?
McCowen pressed on.
“Well, we may make that disclosure to the speculator buying the lot who already knows that situation. That disclosure doesn’t carry forward when they sell it on the internet. And I’m thinking that there should be a deed — some notice stamped on the deed so that when someone is signing all the papers at escrow it hits them right in the face.”
Ms. Nadel sighed her big martyred sigh. You'd might have thought she'd just bought fifty Brooktrails lots herself.
“Well, if you’re not comfortable with moving forward with this right now, we certainly can continue it… I don’t know that we even have the option to do that. All I know is that it is an as-is sale and we have no liability for, you know, anything with respect to the condition of the property. So…”
McCowen, maestro of the last word, “I would appreciate it if the Board would continue it and dig into it a little more and get more information about what our options might be because I personally do worry about the ethical implications of just rubber stamping these.”
Chair Smith to her colleagues: “Is that fine? For the Board to…”
Pinches wouldn’t even let Smith finish her question.
“No, it’s not fine,” Pinches grumbled. “I don’t want to hold it up. There’s no reason to hold it up. I mean, property is bought and sold every day… We’re not representing this property like a real estate agent or a real estate listing. We’re just selling it to recover our back taxes on it. Which ultimately helps your Teeter Plan, too. You know that?”
The Teeter Plan is a reference to Mendo’s historic overborrowing against anticipated delinquent tax and penalty payments for years. The overborrowing got the County into some serious debt which is being better managed now, but they're are still millions in the red.
McCowen: “Indeed. But it’s really taking money under false pretenses.”
“I don’t believe that,” Pinches declared. “They’re advertised as a piece of property. You come and bid. Nobody has a gun to your head when you bid on these pieces of property. You can bid a little or a lot for them, whatever. But they do have value. It’s not like we’re selling pieces of property with no value.”
Pinches was beyond argument. But McCowen still thought he might be able to convince the other Supervisors.
“The primary value is to the speculators who then resell them on the internet for a significant price when they’re not worth the taxes. That’s why people defaulted on them. Out of all the parcels in Mendocino County, is it reasonable that two-thirds of all the tax-defaulted properties — and that’s a pretty constant number, two thirds or more — are located in this one little section of our vast county? There’s obviously a problem with these…”
Pinches shifted to a new target: Taxes.
“Well, the problem is you've got the Community Services District assessment, you got sewer assessment, you got the water assessment, now you have the new school bond assessment up there in Willits that just passed… the special tax rate on these properties is probably the highest there is in any place in the County. But sometimes people get tired in these economic conditions and they don’t want to continue to pay these big tax assessments then they say, OK, we’re going to lose our investment and that’s why they end up here [on the tax auction list]. But that doesn’t mean that there’s no value.”
McCowen was finished arguing: “I’ll move that we continue this item to — do we have to say a date certain, or to a future date…?”
Nadel: “I would say until March 1st.”
McC: “…to March 1st to receive further information about how many of these lots are located within Brooktrails and what would be our options to provide further disclosure of the condition of these properties.”
Chair Smith: “Is there a second?”
Silence… More silence…
Smith: “Hearing none, the motion fails for lack of a second. Do we have any other motion to move forward on this?”
Pinches: “I’ll make a motion that we approve the item. Item number 8” — the item approving the list of parcels for foreclosure auction.
Supervisor Hamburg seconded.
Smith called for the vote. Everybody but McCowen said “Yes.” McCowen barked, “No!”
“Motion passes 4-1 with Supervisor McCowen dissenting,” Smith said.
The perpetual sale of unbuildable Brooktrails lots by Mendocino will continue because the County of Mendocino, 4-1, makes a few bucks on the default sale.