Political Economy

The city built miles of storm drains and sewers; it paid for water mains to deliver city water; it put in street lighting; it built artificial vernal pools; and, last but not least, it created a tapestry of attractive parks as an amenity for the new development. Even the county of Sacramento jumped into the pot, contributing $1.4 million toward the floodway, and donating swamp to "replace" wetlands lost to Live Oak.

It was an extremely unusual arrangement. Where most developers pay a large proportion -- or all -- of their pre-development "hard" costs, Live Oak II seems to have paid almost none. Essentially, the government capitalized Live Oak's venture.

Once the major flood control and environmental disputes were put to rest, over the next nine years, the city of Sacramento bent over backward to change its own laws in favor of Live Oak's needs. Against the recommendations of city planners and the Planning Commission itself, Mayor Anne Rudin and the Sacramento City Council allowed Live Oak to build single-family homes in an area that had been slated for apartments; granted Live Oak numerous building waivers that, according to the city itself, "reflected a substantial departure from the city's normal procedures"; and allowed Live Oak to escape posting millions of dollars in performance bonds, which are cash guarantees that a developer will do what it says it will.

In two of the more unusual transactions, the city bought separate parcels of unbuildable property from Live Oak.

The city's agreements with federal agencies required that 33 acres of the North Laguna Creek development be set aside as a vernal pool preserve. The parcel that Live Oak chose for preservation happened to be directly under several PG&E electrical transmission towers. Amazingly, the city volunteered to buy the parcel from Live Oak -- agreeing to pay for land the developer would otherwise have had to donate as open space.

And did the city ever pay.

In April 1988, a city-hired appraiser valued the parcel at $31,000. A few days after submitting this "final" appraisal to the city, the appraiser mysteriously changed the figure to $81,827. Even that price was too low for city officials. In the end, the city gave Live Oak II $155,000 for the property -- five times the original appraisal.

In the second instance of buying what might have been had for free, the city used state money to purchase a dozen acres of parkland from Live Oak II for $1.2 million; the city then created a park on the land. The park is one of the central amenities and value-adders for North Laguna Creek. Again, the process seems backward. Ordinarily, a developer would donate land he hoped the city would agree to make into a park. In this case, the city bought the land and built the park.

At the request of Live Oak Associates II, the city also annexed 400 acres of nearby farmland in which Live Oak had substantial holdings. That acreage needed water, and annexation would allow access to the city's distribution system.

And if all these favors were not enough, the Sacramento City Council allowed Live Oak to renege on a promise to set aside land for a school.

Originally, the subdivision plats for North Laguna Creek set aside 10 acres for a school. But then in September 1988, the City Council allowed Live Oak II to remap its subdivisions. In the ensuing remap, the developers took back the proposed school site so it could be sold for housing.

Local governments often favor developers who make campaign contributions. Political connections always play a role in gaining government assistance. But the North Laguna Creek development raises the question of degree of assistance. The government paid about $6 million up front for Live Oak's infrastructure. The rest was funded with tax-free bonds. Normally, before this type of debt can be used, private developers must, at the very least, pay for roads, sewers, and water mains. For some reason, Live Oak got an almost wholly free ride.

"Live Oak II's contribution in this deal looks to have been political, not financial," says Clint Reilly, a veteran of Sacramento politics who is running against Brown for mayor. "Where others would just walk away from a real estate deal dependent on government entitlements, Willie Brown plunges into a thicket of conflict without seeming to care about consequences."

After the federal government gave its environmental blessing, and the city of Sacramento showered North Laguna Creek with local entitlements and development freebies, a variety of governments stepped in to provide the new community with transportation. And Willie Brown was directly involved in providing some of that transit aid.

As speaker of the Assembly, Brown wielded tremendous power over California's transit systems. He made appointments to the governing board of the California Transportation Commission. He held the power of the purse over Caltrans. And in 1989, Brown sponsored a bill that provided millions of dollars in road improvements to state highways serving the ongoing development of Laguna Creek. But, more important, Brown's bill finally resolved a local transportation war.