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Lance Schulte People for Ponto
Lance Schulte, of People for Ponto, stands at the site for a potential coastal park on March 1, pointing to amendments required by the city for Hudson Advisors to develop the land. Photo by Steve Puterski
Carlsbad Carlsbad Featured Cities News

Ponto property owner issues warning letters to city, residents

CARLSBAD — A law firm representing the owner of an 11-acre parcel many Carlsbad residents hoped to develop into “Ponto Park” recently made one thing clear — the land is not for sale.

Michele Staples, of the Jackson Tidus law firm, sent two letters to the Carlsbad City Council — the first letter on Jan. 23 and the second on Jan. 29 — the second being three days after the Jan. 26 council meeting featuring an agenda item regarding the park.

Staples said the owner has not engaged in any fashion with the People for Ponto or other resident groups about a potential sale. One of Staples’ letters cited public comments made during a Jan. 26 council meeting that left an “incorrect impression” the owner is interested in selling.

However, Lance Schulte, of the People for Ponto, provided The Coast News with a number of emails from 2019 showing the resident group and Hudson Advisors have discussed a possible transaction.

Michael Sebahar, who is part of the resident group, emailed Todd Kenny on March 24, 2019, outlining a proposition for a deal, funding options and more. Jon Barkan, senior vice president for Hudson Advisors, an asset management company out of Dallas, Texas, responded two days later about a possible sale.

Schulte said the group made an offer to Hudson Advisors for the same price as the 14-acre parcel south of Avenida Encinas bought by Kam Sang several years ago. Schulte said Sang paid $1.4 million per acre.

“It would be helpful to have a written response from the Owner confirming their intention to sell including and if possible, terms that would be acceptable to them,” said Peter Lewi, a nearby resident and real estate attorney who is working pro bono for the group, in an email to those working on behalf of the owner on Aug. 17, 2020.

The land is owned by LSF5 Carlsbad Holdings, an apparent subsidiary of Hudson Advisors. Staples cautioned the city that public comments regarding downzoning, designating the park as an open space or lower-density residential use, or any other actions leading to a potential decrease in value, may trigger a legal battle with the landowner.

The City Council, in a 4-0 vote (Councilwoman Priya Bhat-Patel was absent) directed staff to bring back an item within six months with viable strategies regarding Planning Area F, the property at the center of the park, and other properties to preserve open space and recreation.

“The Ponto Property is in the unique position of being within walking distance of the Poinsettia Transit Station and the beach, in close proximity to neighborhood services, and compatible with the existing residential neighborhoods nearby,” Staples said in her letter. “Accordingly, the existing General Plan, zoning and Local Coastal Program Land Use Plan designates the Ponto Property for multi-family housing and general commercial development.”

The current proposed development is for 136 residential units (26 affordable) on the larger site, with commercial spaces on the smaller. The city, though, cannot reduce residential density on a property without concurrently rezoning another property to make up the lost units, according to the Jan. 26 staff report.

However, Lance Schulte, who is part of the resident group People for Ponto and former city planner in Dana Point and Carlsbad, said it is legal for a local municipality to change zoning without penalty. Additionally, he said the application is currently seeking amendments to the Master Plan and Local Coastal Program, which show the land is not officially zoned for its current use.

The letters state the value of the land is $14.8 million, which was confirmed by the San Diego County Assessor’s Office. However, Staples said the fair market value is $40 million, which stems from several offers to buy the land, for the 11-acre site bisected by Ponto Drive, just east of Coast Highway.

LSF5 Carlsbad Holdings does have an application on file with the city, according to City Planner Don Neu. He said the company is looking for a new developer in the meantime. The application is currently inactive, and no entitlements have been granted, Neu added.

Ponto Park
The Carlsbad City Council approved bringing back “viable options” for a potential Ponto Park during its Jan. 26 meeting. Photo by Steve Puterski

“We have data and documents that show the owner has for some time been trying to sell the property and has discussed selling with and to us,” Schulte said. “If the speculative investment fund property owner does not want to sell the property to us or the City, that is their choice.  Also, if the City does, or does not, want to ask the property owner if they want to sell, or to eminent domain the property, that is the City Council’s choice.”

In the letters, Staples said the city cannot downzone to prevent the development or lower its value to make eminent domain more affordable. Additionally, she said the city cannot use eminent domain powers to condemn the property, citing it would be an “unconstitutional taking of private property” by a government undertaking activities to depress the value of the property.

City staff also presented eminent domain as a potential option to secure the land. To be awarded eminent domain by a court, though, a government must prove the action furthers a public purpose with payment of just compensation.

But Staples warned the city to not explore eminent domain throughout the two letters.

Jan. 26 meeting

Councilwoman Teresa Acosta, who represents District 4 and the site of the proposed park, campaigned on bringing Ponto Park as championed by hundreds, if not several thousand, of residents, many from the San Pacifico development.

People for Ponto have spent years researching the issue, saying the city has made mistakes in its planning of the area, also noting the Ponto Vision Plan was rejected by the California Coastal Commission.

One of the reasons, Schulte said, is because the plan did not include the potential for a coastal park at the property.

The group has consistently said a park would be the best long-term play for the city to help increase its attractiveness to businesses and residents. One of the loudest complaints, though, is the southwestern quadrant of the city has no coastal park, a 6.6-acre park deficit and Ponto is the only location to support one.

Much of the parkland and open space required to be paid or reserved for by developers in the Ponto area has been push to Veterans Park off Faraday Avenue and Cannon Road.

“The City cannot properly downzone the Ponto Property to prevent its development or lower its value to make eminent domain more affordable,” Staples said in the letter. “Any such action would be arbitrary, capricious, and unreasonable, exposing the City to state and federal Constitutional challenges including inverse condemnation of private property and violation of the Ponto Property owner’s equal protection and due process rights, among others, in addition to a violation of state and local laws and policies prohibiting downzoning.”

Another reason a park is preferable over housing is the issue of sea-level rise and the erosion of the South Carlsbad State Beach campground, which sits atop a bluff between Ponto Drive and Poinsettia Avenue along Coast Highway, Schulte said.

Schulte sent the council a letter about sea-level rise on Feb. 25 outlining the impacts. He said the city’s Draft Local Coastal Program – Land Use Plan Amendment is planning to “significantly reduce” coastal open space and eliminate “high priority” coastal open space due to the sea-level rise.

Schulte said about 14 acres of beach area will be impacted from erosion by 2050 with more by 2100. The loss of the beach and campground will reduce the existing supply and compounds for open space.

Lance Schulte said People for Ponto made an offer to Hudson Advisors for the same price as the 14-acre parcel south of Avenida Encinas bought by Kam Sang several years ago. File photo

“The 2017 Sea Level Rise data and the impact it will have on ‘High-Priority Coastal Land Uses’ and the loss of those land uses at Ponto was never considered in the General Plan Update,” Schulte explained. “That will now be part of any City and CA Coastal Commission Amendments to the Existing LCP Land Use Plan and Zoning as required by the Existing LCP Land Use Plan Policy and Zoning regulations at Ponto.”

City treading lightly

During its Jan. 26 meeting, the council and staff were careful in how they discussed the proposed park due to its legal complexities, as warned by City Attorney Celia Brewer.

Brewer said it’s a very complex piece of property, although if directed by the council, the city would craft a “careful” legal strategy to protect the city from arguments of downzoning and other keywords. However, Brewer said the city would lose arguments of necessity and potentially be confined to a negotiated acquisition strategy, assuming the property owner is willing.

It’s why the council, via a motion by Acosta, put the item on a future agenda so Brewer and staff can develop a legal strategy. She said to acquire property, it must be appraised and then the city would develop a strategy, however, the city would pay fair market value.

At fair market value, according to Staples, the price tag is at least $40 million before construction costs, which would likely run in the millions based on the cost to construct Alga Norte Park and upgrades to Poinsettia Park.

Brewer also said the council must be careful as if it does something to devalue a piece of property and drive down the fair market value and making it cheaper by designating it open space, it would likely open the city to litigation.

“I think there is some legitimacy to the arguments made in the letter,” she added.

Councilwoman Cori Schumacher, meanwhile, asked about the legal exposure and potential of decreased land value. She said she wants to have a “very robust” conversation but wants to first understand the legal exposure for the city.

Schumacher asked about discussing the matter in a closed session, but the council must first hear the future agenda item before retiring to a closed session for any potential future discussions, Brewer said.

“This is an exceptionally challenging piece of property and we’d need to tread lightly and carefully,” Brewer said.

Another obstacle is since the property would cost in excess of $1 million and is currently zoned for residential, the issue would go to a vote by residents, according to senior city staffers. Brewer said in this scenario, it is likely the city could not proceed without working with the property owner.

As for the zoning, Jeff Murphy, the city’s community development director, said the residential zoning is still in place. He said in 2015, the City Council approved a Local Coastal Program Amendment to zone east of Ponto Drive as residential (R-23), west of Ponto Drive as general commercial.

The California Coastal Commission approved the LCPA in 2016. However, there is an inconsistency with the LCP, one priority for the city is to fix the policy, Murphy said.

As far as the property’s exemption under Proposition C, which requires a vote for a public project of more than $1 million and has four exemptions, Murphy said it’s not for the acquisition of parkland.

Schulte, though, disagreed with Murphy’s assessment saying the amendments before the city by Hudson Advisors show the land is not specifically zoned for the proposed use.

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