Posted on Wed, May. 21, 2003

San Jose pays $13.5 million for Cargill salt pond


By Paul Rogers

Mercury News

The San Jose City Council on Tuesday voted to pay Cargill Salt $13.5 million for an industrial salt pond near Alviso, capping one of the city's more expensive recent land purchases and leaving San Jose paying more per acre than the state did for similar real estate.

The 856-acre pond, ringed by levees and bordering Coyote Creek, is the same size as New York's Central Park. Its purchase comes two months after a $100 million state and federal deal to buy and restore 16,500 acres of Cargill's other bayfront salt ponds.

The purchase also comes amid increasing questions from environmentalists and others about whether public agencies around the bay are overpaying for Cargill ponds. On Tuesday, a Mercury News analysis revealed that the state relied on outdated economic assumptions in setting the purchase price of its deal and may have overpaid by millions of dollars.

San Jose's environmental services department has no immediate plans for the pond, known as A-18 and used to evaporate salt for roads and food, said department director Carl Mosher. The city may restore it to wetlands for birds and fish in ``five or 10 years,'' he said, to help win new state and federal permits for its wastewater plant.

Unanimous vote

On Tuesday, the city council voted 11-0 to approve the sale. Council member David Cortese asked why San Jose was paying $15,775 an acre, when state and federal officials in March paid $6,000 an acre to buy nearby Cargill ponds.

Mosher said the price is supported by an appraisal that cites other comparable wetlands sales. Most notable, he said, is a $6 million purchase by the Santa Clara Valley Water District in 2000 of a 321-acre Cargill pond near Sunnyvale, at $18,884 an acre.

Mosher also noted that the state and federal governments paid less per acre because they bought more land -- 16,500 acres.

But Mayor Ron Gonzales offered another reason: San Jose lacks political clout.

``That one was negotiated by a U.S. senator calling the president of the company, which tends to have an impact on the value of the land,'' Gonzales said, referring to Sen. Dianne Feinstein, D-Calif.

Criticism of article

Several council members, including Gonzales and Pat Dando, criticized the Mercury News report about the state and federal deal that suggested even the $6,000 per acre price may have been too high. The article noted the appraisal used in that purchase was 28 months old -- despite federal rules that require new appraisals after one year.

That appraisal based much of the value of Cargill's lands on assumptions that San Francisco and Oakland international airports would build runways into the bay. If the runway projects, both of which have since been shelved, were approved, the salt ponds would be worth $20,000 an acre as ``mitigation'' for the airports to restore to wetlands as they tried to win permits to fill sections of the bay, the appraisal said. Otherwise, the ponds' value for making salt is only $3,000 an acre, it noted.

Dando and Gonzales said the article was misleading and needlessly cast doubt on the San Jose purchase.

Environmentalists had mixed feelings Tuesday about the San Jose deal.

``This is a beautiful pond. It should be in public ownership. But the city should use the public's money fairly and honestly,'' said Florence LaRiviere, co-founder of the Citizens Committee to Complete the Refuge, in Palo Alto. ``I'm worried we paid too much.''

LaRiviere said the Santa Clara Valley Water District overpaid in 2000 for its pond because it used other government purchases as comparable sales.

Federal appraisal guidelines caution against that, noting they are not free-market transactions.

Documents sealed

A key document that helped determine the price of the state and federal deal in March was a report written by Wildlands, a Sacramento consulting firm. Wildlands buys and sells wetlands ``credits'' to developers and public agencies who need to restore wetlands to obtain permits for construction projects. At Cargill's request, the Davis administration has refused to make the Wildlands report public.

Mosher said San Jose will not make public a similar Wildlands report included in the appraisal for the city's purchase Tuesday. He called it a ``trade secret'' of Cargill's.

Contact Paul Rogers at [email protected] or (408) 920-5045.

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