LAKEPORT – Tuesday's lengthy Board of Supervisors meeting ended with a surprising development, with the board adjourning into an emergency closed session after a developer hinted that the county could wind up in court if it refused a request to supply a new fast food restaurant with sewer services.
Barry Johnson of Superior Acquisitions went to the board Tuesday afternoon to ask that the county allow a new Carl's Jr. restaurant built on Dam Road off of Highway 53 to be hooked up to the Lake County Sanitation District system.
Special Districts Administrator Mark Dellinger had given Johnson a conditional “will serve” letter for the development. The restaurant is located in the city of Clearlake, which granted the project's building permit.
But the sewer system in the area is inadequate and needs significant upgrades, which are outlined in a recently completed county study that Johnson paid $18,000 to help fund. Upgrades to infrastructure are needed, which Johnson pledged to support financially.
After more than an hour of discussion, when both the board and Johnson pressed Dellinger for a number that would fund upgrades to get the restaurant online, Dellinger estimated between $200,000 and $250,000.
“I'm going to tell you something, if I walk out here today without a reasonable decision, you'll spend $200,000 on attorneys fees, because I'm going to get sued, and then we all get sued,” Johnson replied.
The board's response to Johnson's statement was silence. They looked to County Counsel Anita Grant, who suggested they adjourn to closed session to discuss the potential litigation, which they did after voting unanimously on an emergency motion to add the closed session to the agenda.
Johnson's statement may have had additional concern for the board, considering he filed a lawsuit earlier this year against the city of Lakeport. He has alleged the city broke contract with him when it sold the property under the Vista Point Shopping Center to the mayor's son-in-law.
What led to the exchange at the board meeting was a lengthy discussion in which both Johnson and board members voiced frustration and some bewilderment about how the situation developed.
Dellinger said the county's sewer system is facing several challenges, including regulatory action by the state regional water quality control board. Within the last two months, Special Districts finished paying $60,000 in penalties due to system spills and discharges.
“This project, along with some others that would connect into the system, would make that problem even worse,” he said.
Adding to the situation was the different layers of local governments and agencies involved. While the city of Clearlake permitted the building, it is up to Special Districts to provide the sewer services. While Johnson had paid for a study to look at needed system upgrades, he also had paid Highlands Water District $40,000 in connection fees and mitigations to assist in expanding the system's capacity, and made the necessary fee payments to the Lake County Fire Protection District.
Johnson said he is providing build-to-suit spaces for several retail users besides Carl's Jr., which he said cost a little over $2.4 million, including the building itself, infrastructure, and improvements onsite and off.
Carl's Jr. will require the sewer capacity of seven single family dwellings, according to an engineer's estimate, although Johnson said it was closer to four or five.
While there was concern over the Carl's Jr. hookup, Board Chair Ed Robey asked Dellinger if seven separate individuals who wanted to build homes came and sought hookup permits, would they get them. “Individually, yes,” said Dellinger.
That's because the board didn't want to hurt people building homes, but wanted larger developers to pay their way, said Dellinger.
The board approved preparation of an interim master plan a few months ago, said Dellinger, and the plan – which is almost complete – will tell the county what they need to do to improve the system.
“The challenge to us is we can't build capacity one gallon at a time,” said Dellinger.
He said he spent more than a year trying to do advance planning with the city of Clearlake on sewer issues, but a large developer backed out which changed the landscape of who would be involved with paying for the upgrades.
An ongoing problem
Supervisor Jeff Smith said he's been involved with the project from the beginning, having spoken with Johnson and met with his business partner, Dave Hughes. Smith said he had asked Dellinger and Grant to work with Hughes and Johnson to come up with a solution.
“We've known there's been issues down there for some time,” he said of the sewer system, where some pump stations have overloaded it with rainwater runoff during the winter.
Since 2005, 196 single family dwelling equivalents – including two apartment buildings – have been built into that portion of the county's sewer system, said Smith. There also are five small developments that may occur as well.
Nearby Starbucks and Walgreens developments could bring in as many as 30 more single family dwelling equivalents, he said.
Estimates to bring the system into proper shape range between $1.2 million and $2.4 million, said Dellinger.
Supervisor Anthony Farrington pointed out that what is being required of Johnson has been required of other developers.
Farrington clarified that Johnson had paid for the capacity analysis and capacity expansion at a treatment facility, but hasn't paid for capital improvements or performed the work. The amount Johnson is required to pay for the capital improvement construction is $31,000, although that number appeared to fluctuate significantly during the meeting.
There was a suggestion to let Johnson transfer hookup capacity from the former Outrageous Waters water park, which Superior Acquisitions owns.
Dellinger said that transfer might work, and could satisfy state regulators, but there is a need to make improvements for other future capacity needs.
Johnson said the Carl's Jr. is the only project he's involved with that can come online this year. Others in the pipeline aren't scheduled to be completed until 2009, 2010 and even 2011. He guaranteed that all developers involved are willing to participate in upgrading the system.
Dellinger said the conditional will serve letter he wrote to Johnson was “unprecedented” for Special Districts, which has never offered such a letter before completing a hydrological analysis and capacity study.
He said, because of Johnson's deadlines, he had written the letter but noted that certain obligations were required before occupancy, which could include everything from upgrading pipes to adding a new pumping station.
Dellinger said his department was scrambling to see what could be done to allow Carl's Jr. to move forward.
Johnson assured the board he was willing to pay his fair share to help upgrade the sewer system.
Supervisor Denise Rushing said money wasn't the key to solving the problem, it was properly building and running the system.
Rushing said she didn't know where to being when assessing the situation.
“This is bizarre, that we could have a restaurant be built on a will serve letter, conditional or not, and then not be able to hook it up,” she said.
The question now is how to solve the problem, she said. “There's probably a reason why you don't write conditional will serve letters, and this is probably it.”
Rushing said she didn't understand why Clearlake would grant building permits with no sewer capacity, and why the state's Department of Health hadn't slapped a moratorium on the area.
“Well, what's it going to take? How do we get this done?” she asked.
Dellinger said the interim master plan is nearly ready to go, and then the county can select an engineer to design the upgrade and work can get started.
“No one has said this yet, but Carl's Jr. is sort of the innocent victim in all of this,” said Robey.
Hughes said the restaurant is ready to open now, and had wanted to have a special opening this Friday before the holdup with the connection became clear.
“I'm floored that we're even having this discussion, because this shouldn't happen,” he said. “We have in our community retail/economic opportunities that are going to go away.”
Some opportunities, such as an Aaron's Furniture store, already have gone away because Hughes said Superior Acquisitions couldn't deliver a developed space in the necessary timeframe due to the sewer capacity issue, which he said isn't a new problem.
Johnson said he has completed developments in numerous other communities around the state, helping extend sewer systems and completing other mitigations.
Supervisor Rob Brown said he felt the county needed to find a way to work out the situation in order to help bring in new jobs.
Smith said he took responsibility for the conditional will serve letter Dellinger gave Johnson, saying he had urged Dellinger to find a way to work with the developer. He said he began to have second thoughts about a month ago because he realized it was setting them up for a problem. “This is a lesson learned as far as I'm concerned.”
Rushing asked about interim solutions. Dellinger said they could install a temporary pump station, use ultrasonic monitors on manhole covers and call on pumper trucks to truck collected sewer output to pumping stations. He said he had budgeted funds to cover such emergencies.
A proposal was made about having Johnson supply a full faith and performance bond to ensure the work is done, which Grant said would set out timeframes and offer the county some security.
Robey wanted to craft a solution on Tuesday, and asked Dellinger if it was possible to let Carl's Jr. hook up and work out the details later.
Dellinger, however, wanted a few weeks to discuss the situation with his engineer so they could come up with a figure for Johnson's share of the system upgrade.
Johnson said he has paid $70,000 in penalties to a bank because he couldn't deliver on the Aaron's development, and he's facing similar risk with Carl's Jr. That's money, he said, that he could have paid to the county. “We're willing to come to the table and participate in the big picture.”
Shortly afterward, Dellinger offered the ballpark figure of up to $250,000 as Johnson's share, which precipitated Johnson's response regarding the potential for litigation.
Trying to find a solution
Robey asked why they couldn't just try to reach an agreement. “We were heading there until we get hit with a veiled threat,” said Brown.
Johnson said he wasn't threatening the board, but pointing out the reality of the situation.
Brown said he didn't succumb to threats.
“And no board member up here does,” said Smith. “As soon as that's mentioned, Barry, it's like any threat of litigation.”
Smith then asked Grant to quickly draft an extra item to allow the board to go into closed session to consider potential litigation, which Robey said the Brown Act allows them to do.
The board went into closed session and emerged a short time later, with no report from the session given.
Hughes asked if Johnson could agree to put up a $50,000 deposit to be applied to the mitigations, an offer the board didn't seem willing to take in light of the meeting's developments.
Brown said the board wasn't saying the restaurant couldn't hook up, but in light of Johnson's comment about litigating the board wanted a specific mitigation amount to offer.
Robey also was concerned about taking action in light of what he perceived as a threat from Johnson. “I, for one, do not want to send a message that someone can threaten us with litigation and all of a sudden we jump like a scared rabbit.”
“I don't think that was the intent,” said Hughes.
Smith asked if Johnson had any requirements still to be met for the city, and he said yes. In light of that, waiting a week shouldn't do any harm, Smith added.
The board agreed to place Johnson's request on the agenda at 11:45 a.m. Tuesday, Sept. 23, at which time they'll continue searching for a solution.
E-mail Elizabeth Larson at
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