MEETING #1680

4:00 P.M.

March 13, 2003

The Almost "Hole" Story

by William Cunningham

Assembly Room, A. K. Smiley Public Library

A Bit Of Prologue

No local issue in modern times has so transfixed the people of Redlands, and to a lesser extent the region, than the so-called “Donut Hole” controversy. Tens of thousands of words and nearly daily headlines filled, and continue to fill, the local press. And while the “Hole” is nearly two square miles in area with more than sixty individual property owners, all the events in the news have revolved around Majestic Realty and its 126 acre parcel.

Although the controversy has deeper roots going back more than twenty years, it is only the last decade, when Majestic Realty came on the scene, that saw seemingly unending litigation, a Majestic competitor suing the city over asserted favoritism toward Majestic, a second dropping efforts claiming interference from Majestic, another competitor’s representative sent to prison, the injection of well over a half-million dollars into Redlands’ politics in addition to several times that much spent to influence state and county legislation and elections.

Never before has so much money  been spent in political and legal efforts to gain advantage in a contest which pitted the state legislature and governor, the county and neighboring cities against Redlands.

Due to the fact that the story consists of so many interrelated events involving  many players this paper is more a recitation, a chronology, of those happenings rather than a full narrative which would have taken many times these pages and even more sorely tried the listeners and any possible readers.

While much that follows may be characterized as biased by my personal participation, I do believe that no one has greater knowledge of the events reported, in light of the fact that I have been an intimate participant and observer of city affairs over the last three decades - first from 1973 to 1987 as member of the board of education, with frequent interaction with the city, then from 1987 through 1999 as a member of the city council and, lastly, from 1987 til the present in a leadership role in The Redlands Association, a grass-roots organization which, among other activities, monitors city and county affairs.

While the story of the “Donut Hole” is far from complete and is probably decades from a last chapter, I believe the events recounted here are worthy of  timely telling.

Stories are best told from their beginnings.

Note: The facts, circumstances and events as set forth are true and correct to the best of my knowledge and belief. The conclusions that have been drawn represent my opinion based on those facts, circumstances and events.

The Almost “Hole” Story

The “Donut Hole,” itself, is an artifact created at the time when the Chapman family of Orange County  acquired what was, up until a few years ago, called Marigold Farms.

Stretching north from the Santa Fe Railway right-of-way to the Santa Ana River and bounded on the east and west by California Street and Mountain View Avenue, with the exception of a few small in-holdings, the property was roughly one square mile in area.

It had been assembled by Arthur Gregory in the first decades of the twentieth century.

It has been said that the Chapmans annexed Marigold to Redlands in the 1960's in anticipation that it would become commercila/industrial at some future time and to keep it from falling prey to an ever-expanding San Bernardino.

The net result of that annexation was to leave a county island, some two square miles in extent, between the Chapmans and the rest of northwest Redlands. This area, now colloquially known as the “Donut Hole,” lay between Lugonia Avenue on the south, the river on the north, Tennessee and California streets on the east and west, encompassing roughly two square miles, now about 1,100 acres,

Over time the city annexed the river-edge lands on the north for its sanitary landfill (which it acquired from the county in the ‘70s) and the municipal wastewater treatment plant, leaving the “Hole” a true hole.

In contrast to the row crops of Marigold Farms, the “Hole” was totally devoted to citrus.

The first major event affecting the “Hole” began in 1980, when a number of property owners, led by Louis Fletcher, among others, agitated to have all of the county area, which at that time also included lands extending south of Barton Road as well as the “Hole,” the Chapman property as well as most of northwest Redlands, plus the north portions of Loma Linda, about seven square miles in all, master planned for future development.

The property owners proposed to assess themselves a per acre fee, form a planning committee, hire consultants and come up with a forty year plan for development.

The overlying jurisdictions gave their blessings and the project was seriously underway in 1984.

One important fact needs to be kept in mind for later reference - the county agreed that its area would become a part of Redlands, if and when development occurred, and the county covenanted that the city would be responsible for infrastructure, particularly, water and sewer, its investment protected by automatic annexation at the time of development.

The city spent millions in good faith reliance on that guarantee.

The master plan, the East Valley Corridor Specific Plan, also known as CSA 110, was completed and adopted by the three jurisdictions in 1989.

At about this same time a series of events occurred that had significant impact, either directly or indirectly on the future of the “Hole.”

In no particular order they were: the creation of the City of Yucaipa; the closure of Norton Air Force Base, with the concomitant creation of the Inland Valley Development Authority (IVDA); the completion of the county’s new general plan; and the attempt by Loma Linda to annex lands to its east that were in Redlands Sphere of Influence, including most of San Timoteo Canyon.

In response, and as might be expected, a number of actions were taken by Redlands.

Although they had earlier voted down annexation in 1986, more than 400 residents of southeast Redlands  petitioned the city to annex them.  Measure N had been adopted which protected their rural lifestyle, and they did not want to become a part of Yucaipa, a likely development absent Redlands’ effort to annex.

Sponsored by Assemblyman Bill Leonard, the state had just created the Inland Valley Development Authority (IVDA), which included not only the former Norton Air Force Base but also all lands lying within three miles of the base’s perimeter.

The IVDA boundaries enclosed  approximately one third of the city, reaching south of Barton Road and east of Orange Street, including lower San Timoteo Canyon, the river wash lands south of the Highland city boundary, and the “Hole.”

Redlands had but one defense - to immediately sue to stop the formation of the IVDA - and simultaneously proceed with annexation of the lands in dispute with Loma Linda and Yucaipa. The lands next to Highland. And the “Hole.”

The threat of losing all property taxes from new development and acquiescing to the power of the right of eminent domain over a major fraction of the city to an outside agency, the IVDA, could not be accepted. And the loss of the canyons would violate their historic identity with the city and cause the city significant loss of investment on infrastructure to serve them.

Both to stop Loma Linda’s aggressive attempt to move eastward and to finalize the future of the canyon areas, Redlands applied for a competing annexation which included the petitioners’ area, all of Live Oak and San Timoteo Canyons in San Bernardino County west of I-10, as well as a significant area north of Barton Road.

After a prolonged battle, most intensely with Loma Linda, before the Local Agency Formation Commission (LAFCO), the city compromised, giving up two square miles of its sphere to Loma Linda but saving the canyons, most of the county lands north of Barton, and nearly all those threatened by annexation to Yucaipa. Seven square miles were added to the city.

The property owners in the river wash also agreed to annex, adding another several square miles to the city, including the current site of the Cemex aggregate processing plant.

A majority of the sixty odd “Hole” owners refused, and the city’s’s first attempt to annex the island failed.

The city’s IVDA suit, when finally resolved, excluded all of the cities of Redlands and Highland from that agency (Highland had joined us in the suit), created an airport authority separate from the IVDA and stipulated that as “Hole”  properties were annexed to the city the property taxes on that development, the “tax increment,” would be split fifty - fifty between the agency and the city, with the agency’s share to be spent for infrastructure improvements within the “Hole.”

The early nineties saw the collapse of the building industry. Many developers went under and properties were foreclosed.

Swimming against the tide, a group called Cities Pavilion approached the city with a proposed entertainment center which ultimately planned a hotel, restaurants, two ice rinks, a fitness center, a theater and  shops. The project was to be located on 57 acres on the east side of the intersection of Route 30 and San Bernardino Avenue. The project’s proponent was Jane Un, a San Timoteo Canyon resident who had been key to Redlands’ successful annexation of that area.

It was followed in July 1994 when the first ever major development proposal in the “Hole,” and the only one to this date, came to the city. Pat Meyer, a prominent local planner, developer representative and lobbyist met with city staff to present plans for a “power center” plus mall.

Majestic Realty of City of Industry fame had entered the picture. They pushed for accelerated approval for their center and associated mall on 126 acres immediately west of, and across the freeway (Rte. 30) from the Pavilion project. Proposed tenants in the project’s first phase, the power center, included Target, Barnes & Noble, several other name retailers, in the order of 40  shops  and a multi-plex theater.

The second phase, the “mall,” was to consist of three or four “majors.”

Essentially the project that is under construction today..

The project grew out of John Curci’s purchase of most of the property, which had been in bankruptcy court for many years, on the recommendation of J.J. Ramirez who had managed Curci’s citrus properties. Curci, the patriarch of the family that operated San Bernardino’s Carousel Mall, and in his eighties at the time, brought Ed Roski and his Majestic Realty in as the managing partner of the proposed enterprise. They acquired Ramirez’s remaining 55 acres in the block, made an agreement with Forest City, one of the major mall developers in the country, and started negotiations with the city. Annexation was initiated.

Things did not go well from the beginning.

Although the city had cut development impact fees in half to encourage development, Majestic found them unacceptably high and demanded greater concessions.

A second sticking point was their demand for a theater, immediately.

George Krikorian’s theater downtown was under construction after all the major chains had refused to build in Redlands. The city saw a downtown theater vital to the city core’s survival and felt that Krikorian must be allowed time to establish a customer base before facing competition. Plus the Pavilion project had approval for a second to be built after a delay.

Market analyses and common sense dictated that a third theater in this limited market would marginalize them all, with only the major chain having the resources to survive. Edwards Theaters, Majestic’s proposed tenant had dominated several markets, including the Ontario Mills. The city, after wooing Krikorian to build and hoping that his theater would be the catalyst for downtown’s revival, asked Majestic to wait a time before building a theater. They refused.

It was during this time that councilmembers from Chino contacted the city about their experiences in dealing with Majestic. They warned the Redlands council that Majestic’s promises were not to be trusted. Chino had spent in access of $10 million for infrastructure dependent on a Majestic promise to build a mall immediately after their power center. They charged that Majestic had reneged. Built warehouses, instead. And left Chino with massive debt and a reduced tax base to support it. They were especially vocal about a Majestic vice president, who was leading the Redlands negotiations at that time.

That same summer of 1994, Mayor Swen Larson met with a deputation of “Hole” landowners who proposed annexation on terms the city could not meet, namely: immunity from future initiatives; apartment development; city funded infrastructure; a fire station; and limits on impact fees.

Negotiations soon deteriorated to impasse. Majestic publicly condemned the city, withdrew from negotiations and at the urging of their two local representatives, Meyer and attorney John Mirau, took their project to the county in 1995, citing a new growth management measure as the reason, in spite of the fact that the measure placed no additional requirements on their project and Majestic had more than enough time to complete processing well before December, when the measure would have taken effect.

That spring The Redlands Association had circulated a  petition to place its second growth management initiative, Measure H, on the fall ballot  to strengthen the provisions of Prop R and Measure N and restore what had been lost to city council attack.

In June when the petition was presented and Mayor Larson moved to have it placed on the ballot, Meyer, assisted by three Majestic lawyers and the help of Councilman Foster and his allies, Pat Gilbreath and Gilberto Gil, successfully stopped Larson’s effort. The Foster forces, encouraged by former mayor Carole Beswick and city council candidate Ray Alexander, the chamber of commerce president, both opponents of growth management, then voted for a study of the measure’s impacts, which resulted in the city wasting more than $80,000 for a patently flawed document that merely served to delay the process. When the measure finally made the ballot, massive amounts of money flowed in to the opposition campaign. At first, the opposition’s local leaders, the Barbara and Larry Wormser and Shirley Harry, a local realtor, refused to divulge the money’s source. It was only when the required state campaign reports were ultimately filed that it was revealed that Majestic had spent more than $280,000 out of the roughly third of a million dollar campaign effort to defeat the measure. The opponents prevailed by 223 votes out of more than 13,000 cast. The proponents had spent less than $5,400 in defeat.

Ironically, the measure’s provisions would have had no impact on the Majestic project. It had its genesis in the city council’s emasculating Measure N, adopted by the people in 1987, when they adopted the new city general plan. After the city had spent more than $600,000, plus five years and hundreds of hours of a citizen committee’s and staff’s time developing the new plan, a new city council majority, led by Foster and Gilbreath, had trashed the plan and spent another $400,000 for a revised, urbanizing plan which violated the provisions of Measure N.

That led to litigation with the city attempting to overturn Measure N. The court downgraded it to a zoning ordinance but the Association was awarded fees of $6,345 by the court.

In the last weeks of the Measure H campaign, Councilman Foster sued fellow councilmember Cunningham and Association vice president Tex Moore over a campaign ad  in a deliberate attempt to injure and defeat both the measure and Cunningham’s reelection campaign.     The court threw out Foster’s suit as a sham without merit. It was later revealed that Foster’s Orange County lawyer was Majestic’s and the developer had paid all of Foster’s expenses, approximately $15,000. Cunningham and Moore represented themselves.

In the last analysis, the defeat of the measure quite likely turned on a little known incident in which many suspected Majestic’s hand, once again. All of the Association’s 6,116 pieces of mail, their single effort to reach a fraction of the city’s 35,000 registered voters and counter the myriad of material sent out by the opposition, the phone “surveys,” the “focus groups,” was sitting on the floor of the post office distribution facility on Thursday morning, two days after the election. Delivered to the Redlands Boulevard facility in plenty of time, eight days before the election, it is reasonable to assume that had voters received them, the election’s outcome would have been different.  We’ll never know, but legend tells us that a kingdom was lost for the want of a nail. Post Office inspectors never offered an explanation.

Geni Banda, a newcomer to city politics and Measure H supporter was elected. Cunningham was returned for a third term.

Although not revealed until after the election, in the spring of 1995, all of Cunningham’s records in the city clerk’s files were requested by an attorney associated with Majestic’s lawyers. Not long after, he received notification from the Fair Political Practices Commission (FPPC) that he had violated the law’s regulations twice, six years earlier - his participation in the canyon’s annexation and his voting to continue for two weeks a request from the hospital for the city to issue a bond in their behalf. Although the FPPC agreed that his participation in the canyon annexation was of economic disadvantage to him and that he desisted from further activity once learning of the regulations. He was fined $3,000, nonetheless..

A member of Majestic’s law firm, an important player in Orange County Republican politics,  had worked at the FPPC in the past. In a bit of irony, the chairman of the FPPC at the time was later fined $28,000 for infractions of the law after he left the commission and became a party lobbyist.

By early 1996 Majestic was back talking to the city.

In his last acts before leaving office, Foster had led his allies to offer half fees, drop the long-standing annexation requirement for city services and eliminate all landscaping requirements for Majestic if a wall or berm were put up around their parking lots.

Majestic was under additional pressure from Cities Pavilion, which had received concept plan approval the previous October.

At a workshop in February, the city offered Majestic a half fee subsidy. They turned it down, demanded more. Recognizing events were going nowhere, Mayor Larson joined Cunningham and newly elected Councilmember Geni Banda in restoring full fees.

That same month another mall developer, Harry Newman, approached the city with a proposal for a major retail center on California Street, north of the freeway. The “Redlands Fashion Center” would include a power center, a three story 1.9 million square foot mall, a Kaiser clinic, offices - covering several hundred acres in all. Newman asked for no city concessions.

In spite of the fact that from the beginning it was recognized that the only practical and economic source of water and sewer service to Majestic and the “Hole” was from the city, Majestic sought and received, over the city’s opposition, permission from the Santa Ana Regional Water Quality Control Board to build a “package” sewage treatment plant on their property. Knowledgeable observers all agreed that the cost was prohibitive and issues of disposal of sludge and effluent made the project impractical. Notwithstanding, Majestic continued to pursue the possibility.

May of 1996 saw the county, to accommodate Majestic, form a CSA (County Service Area) in the “Hole” in direct violation of their 1984 agreement with the city and their own general plan. Both Redlands and the East Valley Water District expressed concern about the contamination threat to their water supplies by the county’s proposed two wells and a “package” wastewater treatment plant next to Alabama Street. The county’s own department of health services refused to support the proposal.

In response Redlands challenged the county’s action as a violation of state environmental law, the creation of a special district with planning powers, and violation of contract.

In September the city re-instituted the long-time requirement of annexation for services. Majestic withdrew their annexation application at LAFCO.

Dennis Hansberger, who had opposed the city’s annexations and had encouraged canyon property owners to file suit to overturn the canyon annexation, was locked in a neck and neck race for county supervisor. He sought and received thousands of dollars in campaign contributions from Majestic.

By this time two of Majestic’s direct competitors were moving forward in the city.

Another power center, the “Redlands Crossing” project on the triangle now occupied by Home Depot, had started processing and was reputed to have signed tenants.

The second, the massive Redlands Fashion Center, was in negotiation with three major mall developers, eventually settling on the Taubman Company.

Hansberger narrowly won the supervisor’s race and Majestic again had a voice in county government which they have continued to flex till this day.

Majestic, once again announced immediate development. They hired former county supervisor Bob Hammock at a reputed $100,000 to head a public relations campaign, joining Meyers, Mirau, Gilbreath and Beswick.

Competition not only in the Redlands market, but regionally, was growing fierce.

Curci’s Carousel Mall had sued the City of San Bernardino over alleged favoritism to Inland Center. And Inland Center, itself, was casting worried eyes on events in Redlands.

Lewis Homes, a major developer in the county, took over the Redlands Crossing project. The Fashion Center developer, Taubman, deposited $150,000 of a promised $500,000 as support for downtown.

Threatened, Inland Center in San Bernardino entered the fray. They recognized that if either the Fashion Center or Majestic’s mall were to be built, they would be marginalized and faced with failure.

Not surprisingly, Majestic reopened negotiations with the city.

Events took an abrupt and dramatic turn. Inland Center had lured Robinson’s-May back after a brief two year absence with reputed subsidies and facility improvements costing $16 million. Both Majestic and the Fashion Center had pinned their development hopes on getting the store as the first “anchor” for their malls. The net effect of Inland’s success was to kill both Taubman’s interest in the Fashion Center and Forest City to apparently withdraw from Majestic.

Majestic was then left with Redlands Crossing’s competing power center to deal with.

Lewis Homes, after expending significant time and money, dropped its effort to develop the Redlands Crossing project, citing unspecified business tactics by Majestic. At last Majestic had the field to itself. They graded their site in anticipation.

But not for long.

By mid 1997 the Redlands Association’s third growth management initiative, Measure U, had qualified for the November ballot. The long-dormant Cities Pavilion received plan approval for a revised project.  Zelman, a real estate investment trust (REIT), represented by a Ben Reiling, had taken over the Crossing Project and had started processing. And a revised Fashion Center project promoted by Nu-Western Development, owned by Orin Ericcson, an Arizona mall developer, was back on the scene with the addition a large residential component north of San Bernardino Avenue to be developed by Kaufman & Broad.

Majestic continued playing the county off against the city. They sued the city for removal plus damages over a sewer line which had bisected their property for more than 40 years and which now directly affected their development plans. The city prevailed.

Redlands also won its lawsuit challenging the county’s formation of the CSA in 1996, its environmental impact report (EIR), the violation of its general plan and the East Valley Corridor Specific Plan.

Majestic was left with just two choices 1) come to the city, or 2) get the county to amend their general plan on spheres of influence.

Not long after, Majestic began construction of a water reservoir in violation of the court’s decision, which led the court to threaten the developer with contempt. Work stopped.

The city and Majestic resumed negotiations and it was agreed that all litigation would be put on hold while they proceeded.

Finally, after making every attempt to accommodate to their demands to no avail and learning Majestic had sued the city, once again, the day before he had unknowingly met with them,  Larson refused to meet with Majestic representatives the last months of his time in office, saying, “I’ll never meet with those —s again.”

Larson has since reported that he was approached by Majestic representatives with a $100,000 offer if he would run for reelection.

In November the city applied to LAFCO for annexation of Redlands East Valley High School, in response to the school district’s request;  Sunchase Homes west of the school which had requested annexation previously; the twenty acre Christian Home site, at their request; the Edison steam plant on San Bernardino Avenue; and Majestic.

Since either fifty percent of the registered voters and/or those holding fifty percent of the assessed valuation control annexation, Majestic would have been forced into the city.

Majestic countered with a separate annexation application.

In the face of tens of thousands of dollars spent in opposition by the Chamber of Commerce, the police and fire unions, a Bob Roberts developer PAC and “The Committee for a Livable Redlands,” led by Beswick, the Wormsers, Mirau and Meyer, the November 1997 election saw  Measure U and its two proponent candidates, John Freedman and Gary George win by comfortable margins. Councilman Gil was defeated.

In December Cunningham was elected mayor and immediately restarted negotiations with Majestic.

That same month Krikorian Theater opened to large crowds.

Meanwhile, the Cities Pavilion finalized a development agreement with the city and commenced clearing their site. Central to their plans was a theater.

Majestic then challenged Redlands Crossing’s EIR and project approvals in an attempt to stop the competing power center, at the same time offering a $2.5 million carrot if the city would slow the Redlands Crossing project down.

Majestic vice president Brook Morris, in a meeting with Cunningham and George, agreed to annexation under the city’s standard requirements with the understanding that a theater would not be opened within twenty four months of Krikorian. At that afternoon’s council meeting John Mirau repudiated Morris. The council, in response, did not act on Morris’ offer. For the first time it was recognized by those at city hall that there existed more than one Majestic camp.

Although they were well ahead in the race to be first to develop, in August 1998 the Redlands Crossing’s Reiling dropped out and soon after sued the city for damages, alleging unfair preference by city officials for Majestic.

Majestic then resumed the planning process in the city and deposited funds for a socio-economic study.

At Cunningham’s invitation, Roski and Curci meet with Cunningham and George and several weeks later, a second time with Cunningham and Banda. A deal was struck and Majestic’s attorney, Timmish Chaikovsky, worked into the night drafting the agreement. After conferring with Meyer and Mirau the following morning, Roski rejected the terms he had agreed to.

Chaikovsky, who had replaced Morris on the Redlands scene, bitterly complained to city officials, once again, that Meyer and Mirau were seeking control to frustrate all agreements.

Soon there was open speculation at city hall that the local Majestic representatives were seeking gain in delay and were hoping to use the developer against “managed growth” council incumbents in the 1999 election.

Majestic presented the city planning commission its development plans for their power center. The commissioners were so disappointed with what they were shown they decided to visit a Lewis power center in Rancho and Majestic’s in Chino. While not demanding all the upgrades needed to match the Lewis project, the commission required changes that Majestic complained would cost an additional million dollars. Nonetheless, Majestic made the required changes.

It was around this time that Cunningham was the subject of a field audit by the IRS. Every financial record for three years was scrutinized over a two day period at which both Cunningham and his wife were required to be present. No irregularity was found but it wasn’t until nearly a year later that he received formal notification.

In the fall of 1998 Majestic formed a property owner group in the “Hole,” the United Donut Hole Property Owner’s Association, or UDHOPA. Mirau then began wearing two hats as both attorney to the group and Majestic’s spokesman. The group’s “president,” Richard Kunihara, announced to the city the group’s minimum demands for annexation: 1) the city to pay all costs; 2) a guarantee of all rights for a period of thirty years; 3) exemption from the requirements of Prop R and Measures N and U; 4) all property taxes to be spent in the area; 5) completion of the Alabama Street bridge; 6) all municipal services made available on demand; 7) unlimited apartment development.

The developer, through Hansberger, who dominated LAFCO at the time, defeated the city’s annexations of the “Hole,” the steam plant, the Caltrans right-of -way and Redlands East Valley High School, with Hansberger criticizing the school board for bringing its request forward.

While the city had sought annexation of REV at the request of the schools, in spite of the fact that it would cost the city economically, the Facts referred to its annexation as a “land grab.”

With all other competitors out of the way - informal contacts continued with the Fashion Center’s proponents but nothing developed - in early 1999 Majestic turned its attention to the Cities Pavilion project. Pavilion’s “consultant,” Jane Un, was in bankruptcy court. Among her creditors was Meyer with a $3,000 small claim. Majestic put $185,000 into Meyer’s claim action. While both Meyer and Majestic denied Majestic’s involvement, their attorney confessed when the court demanded an explanation - the judge saying that his court would not be used for political vendettas in Redlands.

Un was later charged with real estate fraud relating to questioned notarization of documents and claims of illegally transferring property ownership. She eventually entered a “no contest” plea and was placed on probation.

At that time, Majestic brought its first suit against the city in an attempt to overturn the Pavilion’s approvals.

On the county level Hansberger led the supervisors to amend the county’s general plan to eliminate cities’ control over planning within their spheres of influence. While targeted at Redlands for Majestic, all county cities were affected and they protested, en mass. Redlands, Rancho and Fontana joined in a lawsuit challenging the county’s action, with Fontana later dropping out.

Rancho and Redlands subsequently prevailed at both the trial court and appellate level, thwarting the supervisor’s move.

About this time Cunningham was audited a second time, received a clean bill of health and was promised by the examiner a report to that effect. None was ever received.

Lowe’s, expanding to the west coast, and liking Redlands demographics, made an agreement with the city to locate on west Redlands Boulevard, a long-time blighted area. Offered large concessions and subsidies by San Bernardino to build there, Lowe’s extracted a sales tax rebate of fees from the city in a net amount of $291,000.

Led by Mark Bulot, whose father-in-law, Warner Hodgdon,  had been involved with Majestic in the creation of the City of Industry, Majestic’s base; Jim Rissmiller, active in running PACs in county politics funded by developer interests; and represented by Brad Hertz, an attorney associated with the law firm Majestic had used in the Foster lawsuit in 1995, a professionally run referendum campaign succeeded in gathering 5,000 signatures against the Lowe’s agreement.

The referendum was patently prohibited under state law and was stopped on a 4-1 council vote (Gilbreath opposed) after City Attorney McHugh cautioned the city council that proceeding would constitute a breach of contract with attendant exposure to large monetary damages.

While a number of individuals filed for the upcoming fall city council election, the field was soon winnowed by “mysterious” means to just two challengers of the incumbents Banda and Cunningham. They were a Kasey Haws, who had worked at one time for Majestic’s law firm, Latham & Watkins, and from which his San Bernardino firm was reputed to get referrals. Haws’ firm had also received more than $100,000 in fees that year from a “Hole” property owner, the LDS Church. And a Susan Peppler, who identified herself as a Sacramento “representative” for State Farm Insurance.

1999 also saw Majestic open a second front in Sacramento, promoted by local assemblyman Brett Granlund of Yucaipa and long-time political ally of Hansberger. Granlund’s bill, AB 1533, removed the “Hole” from Redlands’ sphere of influence and provided for duplicate utility services, leaving Redlands’ multi-million dollar investment stranded.

In defense, the city spent $30,000 to hire a lobbyist in the capital. Majestic used four lobbying firms and two Sacramento law firm at an estimated cost approaching $1 million.

Representations by the Majestic forces to legislators, led by Granlund and Mirau, centered on the allegations that the city had no investment in the “Hole,” was refusing to negotiate with the developer, and that the city was blocking any development there at the cost of needed local jobs to replace those lost when Norton closed.

The bill passed both houses.

No one knows how much was paid out by Majestic to legislators, but assemblyman Joe Baca received $8,000 from Majestic the day after the vote.

The bill was attacked as unconstitutional by the California League of Cities and many utility purveyors. Governor Davis finally vetoed the measure with the caveat that the city settle with Majestic or he would sign it the next time.

Davis had left the city in an untenable position, as Majestic now could, and simply did, refuse to negotiate.

The city, sued by Majestic three separate times to stop or delay the Pavilion project, prevailed in all three. Majestic was left with no more legal avenues. Pavilion, the developer’s last competitor, could proceed.

Jane Un had previously complained about a physical threat and the break-in of the Pavilion offices by unknown individuals. Later faced with Majestic’s interjection into her bankruptcy she then alleged that Majestic representatives were sitting in on witness interviews on her fraud charge. In apparent response Un became involved in a failed scheme to collect information from Majestic’s and Latham & Watkins’ trash, which resulted in an additional criminal charge.

Tex Moore, the Association vice president, refused to testify at trial, invoking his Fifth Amendment rights.

In the course of the Un trial a mysterious Majestic document was submitted by the defense which purportedly recorded payments to various individuals in an attempt to damage Cunningham. It was disallowed by the court and remained under seal.

 During the trial, the local press carried headlines and stories to the effect that Cunningham was implicated in Un’s “crime,” but he was never formally interviewed, called as a witness or charged.

Un was sentenced to eight years in state prison and threatened with expulsion from the country for committing a crime while her bargained  “no contest” plea, which she had attempted to withdraw, was in effect.

Her brother and a family lawyer were also sentenced. A retired Redlands police officer, Charles Varvel, who was employed by Un in the trash operation, received immunity in exchange for becoming a prosecution witness.

About this time the Press-Enterprise reporter, who was covering both the Un affair and the city hall was hired by Majestic’s Riverside public relations firm which kept a steady stream of negative material flowing into the local papers.

In November  Haws and Peppler, who ran as a slate on a platform of “getting along,” a quick resolution of the Majestic issue, no more money “wasted” on litigation and a reversal of the “Lowe’s deal,” defeated incumbents Banda and Cunningham by a large margin. Haws, Peppler and their protagonists spent more than $130,000, many times the highest amount ever in Redlands election history, in the most negative campaign ever.

Vital to their campaign’s success were personal attacks on Cunningham related to his association with Moore and his alleged complicity in the Un affair.

The new council set as its primary goal the resolution of the “Hole” issue, a task they approached confidently.

The new mayor, Gilbreath, and council member George, believing that all could be quickly and easily settled, met with UDHOPA. They were confronted with demands they could not meet, namely: apartments with a density of up 24,560 people per square mile; an election to overturn Measure U by March; and the city to pay all costs of development.

Soon, relations with Majestic went from bad to worse, with Chaikovsky characterizing the council’s behavior thus, “These actions are as bad, and more likely worse, than those of any prior city administrations.”

That spring also saw the special legislation, AB 1533, resurrected, as threatened by Granlund, as AB 1544. Roski demanded that the city drop all opposition to its adoption and all claims for the city’s $5.5 million loss in stranded utilities in the “Hole.”

Gray Davis signed 1544 into law and Majestic (Roski) later contributed approximately $100,000 to Davis’ re-election campaign.

Open negotiations failed, and a public war of words erupted between Mayor Gilbreath and Granlund, with Granlund referring to Gilbreath’s medication, or lack, thereof, and Gilbreath calling Granlund, “crazy.”

Meanwhile, Haws, without the knowledge of the rest of the council, was meeting in secret negotiation with Majestic.

Granlund, working with Haws and Peppler, “found” $5.25 million in state grant money for their campaign promised sports facility. Interestingly, it is approximately equal to the investment the city lost to AB1544.

Bitter infighting subsequently broke out among council members, finally resulting in Mayor Gilbreath joining councilmembers George and John Freedman in a legal challenge to 1544. She was publicly chastised by Majestic supporters for her stand, Haws and Peppler among the most outspoken and critical, as Granlund threatened withdrawal of the sports park grant money if the city continued its challenge to 1544..

Using a small nine lot subdivision in Mentone, Majestic’s Mirau and Meyer then unsuccessfully charged that the fee provisions of Measure U were in violation of Proposition 218.

In February 2001 the council majority of Gilbreath, Haws and Peppler, under the guise of settling all litigation with Majestic, acquiesced to an agreement dictated by Majestic and Foster, representing Supervisor Hansberger.

The council did not see the agreement until the last minute while in secret session and were cautioned by the city attorney that they would, in his opinion, violate state law, if they agreed to its terms.

Once they had the opportunity to expose the agreement’s contents at a council meeting, when it became public several days later, Freedman and George roundly condemned the majority’s action in giving away 1) all say in any activity in the “Hole,” whether in violation of law or not, 2) a promise to sue any citizen who protested any activity in the “Hole,” 3) the right for any purveyor to use city land to provide utility service, 4) all challenges to 1544 and all claims for reimbursement for infrastructure lost.

Also among its provisions was the requirement that the city apply to the courts to reverse all the hard-won decisions where they had prevailed against Majestic. The appellate court refused the request for reversal on the county amendment case and chastised the council for their act of attempting to make a gift of public funds,

In response to the council’s action, The Redlands Association filed a lawsuit challenging the agreement as 1) a violation of the California Environmental Quality Act, 2) a violation of state law by the city giving away its police powers designed to protect the public health and safety, and 3) making an illegal gift of public funds

Through the last months of 2001 Haws and George met a number of times with Foster and Mirau to make an agreement with the developer for the city to receive taxes in exchange for the provision of services.

That  November the Majestic - employee union slate of George, Gilbreath and planning commissioner Jon Harrison defeated incumbent Freedman and Cunningham in his second re-election attempt.

The following council reorganization saw Haws, with Peppler’s and Harrison’s support oust Gilbreath as mayor.

2002 brought a Foster ultimatum to settle with the county and Majestic by January 8 on dictated terms which the council saw just minutes before the vote and which were kept from public view until the last minute. His conditions were: 1) the city to provide water and sewer service at cost, 2) development to county standards, 3) sales taxes to be split 25 percent city, 75 percent county the first year graduating to the city receiving all the taxes in eleven years, 4) the city to be paid $25,000 for one year only to provide police services, then to provide them in perpetuity without compensation, 5) annexation would not be required by the city.

The council bowed to Foster’s demands.

In response the Association mounted a referendum campaign and in just twenty two days collected nearly 6,000 signatures, well above the 3,231 required.

Majestic spent a publicly admitted $133,000 to stop the effort - $17,000 to the Chamber of Commerce, $50,000 to the police and fire unions and $65,000 to Bob Roberts. Most of Roberts money went to professional campaign “blockers,” who harassed and intimidated the referendum’s volunteers, triggering more than a half dozen police calls.

During the campaign Haws signed a mailer bearing the city seal and made automated phone calls, the content of which, while primarily an attack on Cunningham, cast an unfavorable light on San Bernardino. That city’s mayor, Judith Valles, became so incensed with Haws’ denigration of development standards in her city that she took a  most unusual step and confronted him at a Redlands city council meeting with a demand for an apology. Haws had earlier tried to head her off with a personal letter but, in the end, was forced to apologize publicly.

City Clerk Poyzer subsequently certified the petition as valid.

Still determined to deny the people a voice on the issue, the council sued Clerk Poyzer and the Association, as the real party at interest, to keep the referendum off the ballot. The court agreed with the council, finding several technical errors in the petition - the pages were mis-numbered and the title, while not required, was not complete. The Association appealed.

Abruptly, and without warning to the city, the county cancelled the agreement.

The council was left with having wasted more than $80,000 attacking the referendum in vain.

In spite of an earlier warning of potential liability by Lockheed-Martin if they proceeded, Majestic had been drilling two wells north of their site and hopefully out of the contaminating perchlorate plume.

Majestic, with the city’s acquiescence, rerouted the city’s sewer main which had bisected the developer’s property to the frontage road. The Association challenged the action as a violation of state law for public works projects. The court, in denying the Association’s request for a writ based its decision on Majestic’s claim that the developer stood to lose $2.5 million if they did not break ground on the their project within sixty days.

Kohl’s had come to California, was building its distribution center at Norton and had contracted to build one of its stores on Majestic’s site. Too late to get their wells in operation and build its “package plant,” Majestic needed utility services immediately.

Having exhausted all other practical alternatives, Majestic turned to San Bernardino for sewer service. That city had refused an earlier request but with relations now poisoned with Redlands, Valles agreed to provide service.

To protect the interests of the people of Redlands, the Association challenged the San Bernardino contract on environmental grounds, effectively delaying it for many months.

Majestic was left with no source of water and sewer service for their client, Kohl’s, which was under a rigid schedule to open in early March.

On October 31, the Association was informed by an anonymous source that the city had given water and sewer service to Majestic. Utility staff members suddenly became unavailable. When confronted the following morning City Manager Davidson admitted that the city had provided service on October 8, three weeks before. It was later discovered that a Sun reporter had stumbled onto the situation but had been met with a stonewall of silence.

The city, the county and Majestic had deliberately attempted to “run out the clock” on the statute of limitations by dealing in secret before anyone would know or could respond.

The city had given up millions of dollars in development impact fees intended to provide infrastructure and retire debt, all control over what and how anything was developed on the site, and any requirement for annexation or tax revenue.

Within days of learning what had been done, the Association filed a request for an alternative writ with the court to stop all activity until the merits of their challenge could be heard, charging that the city had violated Measure U, the city code and state law.

Two meetings to resolve the lawsuit among the parties ended in stalemate with the city representatives stating that they intended to try to annex Kohl’s, but threatening to defend the agreement against the Association’s suit even if  their proposed annexation, initiated in “good faith,” with no commitments from Majestic, were to fail.

The court is now scheduled to hear the Association’s writ request later this month.

The Association’s challenge to the February 2001 agreement after two years of delays by Majestic’s attorneys, including appeal to the state supreme court to remove the judge from the case, was finally ruled in the developer’s favor in November. That ruling has been appealed and may be a year away before final determination.

As events now stand, the two lawsuits will probably not be finalized for many months.

In the meantime, in obvious response to the association’s challenge, the council has authorized city staff to begin the process of annexation of Kohl’s, which opened on March 7, and has announced intention to apply for annexation of each piece of the Majestic property after it is developed.

Forfeited will be all but the $915,000 Majestic paid for water and sewer service out of the scheduled $10,073,349 in development impact fees that would be owed.

Contrary to press reports, the city has not made application to LAFCO. No one is assured how that body or Majestic will respond.

The amount of taxes, without which annexation would be a burden of mammoth proportions, will be determined by the county at a time when it is losing revenue.

In early 2003 the city contracted to provide fire service to the “Hole,” the fire chief stating at the time that the men were on duty anyway. The city was to be paid $67,000 each six months. The payment to made at the end of each six month period.

Foregone are two opportunities when the city could have required   annexation with full fees, all taxes and city standards.

Kohl’s had an iron clad commitment to open 28 stores in California on the same day in March. They could not have done so without Redlands water and sewer, the only possible source. The second opportunity presented itself when Kohl’s insurer would not agree to allowing the stocking of inventory without Redlands fire protection.

Majestic had no other option but to come to the city, on the city’s terms. Each time, the council extracted none.

A Postscript

One would hope that the intrigue, machinations and cut-throat competition surrounding events over the past decade are behind us. That soon Redlands will assume its rightful role with annexation of the “Hole,” bringing with it the benefit of full taxes, the payment of fees and control over development standards.

We will soon know whether or not Majestic will annex. The city has yet to begin the process. An even larger question lies with the county. Now that it has a major sales tax generator, will it give up those revenues, especially in a time of fiscal stress?

In many ways the most important question lies with the future of downtown. Can it survive “cannibalization”and continue to prosper, or will it go the way of the downtowns in San Bernardino, Ontario and so many other cities? What lies in the future for K Mart, Mervyn’s, and Tri-City Center, itself? Can Harris’ Gottschalk’s survive downtown if Majestic’s mall becomes a reality?

The “Hole,” given time, will likely generate thousands of jobs, and if the analysts are correct, they will be low-wage, just as those of this first project are. Either the demographics of our town must change or we can anticipate commuter traffic on our streets approaching gridlock.

The Sun newspaper in an editorial this week, advocated that Redlands relax its sign standards and allow billboards as a money maker for the city.

Since the “Hole” is developing in the county, and with the knowledge that Granlund and Foster (Hansberger’s “special projects coordinator) are in the billboard business, Redlands may well see a many of them along Route 210, whether our code is changed or not. Rumor had it in earlier days that as a part of his reward for his work in Majestic’s behalf in Sacramento, Granlund was to get the Majestic signage contract.

Mine is the cloudiest of crystal balls. As it stands, most anything might be built in the “Hole.” But I do know one thing.

Should the Association’s legal challenges be viewed favorably by the courts, only then will the people of Redlands have been guaranteed a voice in the future of the “Hole.”

Parenthetically, and of some interest, Home Depot, one of Majestic’s tenants in Chino, and several other retailers have built on the old Redlands Crossing site.

And Ms. Un, after spending more than two years in state prison, had her sentenced overturned on appeal.

While her real estate fraud trial now proceeds, the court dropped all charges on the “trash  crime.” The question arises as to what effect that decision will have on those sentenced for a crime which no longer exists.

Further, I have no idea whether Un has retained a financial interest in the Pavilion property, it would be ironic if another of Majestic’s vanquished competitors, like the phoenix, were to rise again.

Will the coming decades be as interesting as the one just past.

And will we still be able to recognize our town of today when all is said and done?

The recording of those chapters must await the pen and perspective of another.

Note: The facts, circumstances and events as set forth are true and correct to the best of my knowledge and belief.