Santa Ana School Site Too Pricey, Critics Say : Development: Projected $21.8-million cost for 11-acre plot exceeds typical rate for retail land, opponents say.

The local school board, eager to tap into a little-known pool of state money for building new schools, is planning to spend nearly $22 million to buy a strip of commercial land that real estate experts say appears to be worth less than half that amount.

Critics charge that the inflated price for the controversial project, which was approved by the school board last month, demonstrates a disturbing disregard for how taxpayer money is spent.

And several also question the propriety of the close relationship among appraisers on the project, lawyers for the school district, and a state assemblyman who has lobbied Sacramento officials for the approval of the school proposal.

“It’s the state of California that loses,” says Jim Righeimer, a commercial real-estate broker and critic of the project who says that retail land typically sells for a third of what the Santa Ana district is planning to pay. “The school district’s attitude is: ‘It’s free money. The state’s paying, so who cares?’ Well, it’s taxpayer money, and I care.”

But Santa Ana Unified School District officials insist that their responsibility is minimal in ensuring that they get a good deal for an 11-acre site at a local shopping plaza that they plan to convert into a “fundamental school.”

If the district is in fact spending too much to buy the land, they say, then any overpayment should be caught by the state before the deal is completed in the months ahead. “I’m sure that the state will make sure that the integrity of the process is upheld,” Santa Ana District Superintendent Rudy M. Castruita said in an interview.

State officials, for their part, say they are well aware of concerns that have emerged about the land costs. “Our land expert has already said that if it comes in at $20 million, he’s going to pull it apart with a fine-tooth comb. . . . He’s very concerned about $20 million for that piece of property,” said Lyle A. Smoot of the State Allocation Board.

In the meantime, however, the state has already set aside $22.7 million for the project. And the district is moving ahead with plans to build a two-story junior high school above a parking lot at the back third of the Bristol Marketplace at 17th and Bristol streets. The mall owner thinks bringing a school into the complex could solve some of its financial troubles.

The plan is part of an experimental and still untested state “space saver” program that reflects the growing space crunch squeezing today’s urban schools. The idea is to take an already developed area--an apartment complex, for instance, a shopping plaza or even museum grounds--and plop a multistory school down in the middle of it, building up instead of out.

The state first approved money for the idea in 1989, but no school district has yet come up with a workable plan to capitalize on it. Santa Ana school officials, facing a shortage of space for 18,000 students by the end of this decade, want badly to be the first.

Not surprisingly, the plan has generated a firestorm of protest from plaza neighbors. The prospects of loitering children, rising crime and vandalism, as well as potential traffic problems, have all attracted attention. Nearly 500 people packed a hearing last month on the issue.

The question of the project’s costs, however, often appears to have gotten short shrift in the public debate. Even among the myriad issues raised in a Feb. 9 letter to the district, the state Board of Education sharply questioned the safety and convenience of the 1,300 students at the proposed school--but there was no mention of the project’s expected costs. This, despite another grim budget season ahead, with projections of a $5-billion state shortfall.

But now, less than three weeks after the Santa Ana school board approved the project on a 3-2 vote, critics are stepping up their attacks on the economics of the plan, questioning why district staff members have apparently been so reluctant to release basic information on its costs--even to the school board’s own trustees.

“To me, there’s just an air about this thing that I don’t like. And I think the whole thing has been orchestrated to get more money out of the district,” and ultimately, out of the state, suggests trustee Tom Chaffee, an engineer who joined the school board in December and was one of two members to vote against the project on Feb. 16. “I question what goes on behind closed doors.”

Even the author of the legislation that created the space-saver school concept appeared taken aback by the amount that Santa Ana is planning to spend on the plaza land.

“I can’t ever see how we’d be spending $20 million on land acquisition for a space saver,” state Sen. Leroy Greene (D-Carmichael) said in an interview. “There’s something wrong.”

Indeed, independent experts and realty documents appear to bear out some of the concerns.

The final sale price has not been set for the project. In fact, persistent questions about the cost have prompted the district to seek three new appraisals of the plaza property--at a cost of $25,000 each. Those may be completed in coming weeks.

But district officials say that at least for now, the total projected price for the 11-acre site in Santa Ana works out to $21.8 million--or nearly $2 million an acre.

That figure includes $13.5 million for the land acquisition itself (or $1.23 million per acre) and $8.3 million in what are termed “damages” that the school development would mean to the property owner, Interstate Consolidated Industries, based in Westminster, according to a November, 1993, preliminary estimate prepared by a private appraiser for the district.

But five specialists in realty brokerage or appraising--contacted by The Times and provided details of the Santa Ana plan--each agreed that the district appears ready to pay at least twice--perhaps even three to four times--what the property would typically sell for.

At a time of sluggish movement for land sales, many commercial/retail parcels aren’t selling at all, these specialists said. Those that are moving typically sell for anywhere from $400,000 to $800,000 an acre in Orange County, they said.

Even the 14 acres of land beneath one of the county’s ritziest hotels--the Marriott in Newport Beach--sold for $790,000 an acre last year. That makes the Santa Ana deal all the more puzzling.

“Sounds like a great deal for the seller,” said Stephen Rethmeier, vice president at S.S. Herron & Associates, an Anaheim appraisal firm. “The land market is dead. There’s no development that’s occurring. And if (the Santa Ana sale) ever ended up closing, that’d be one of the highest sales in a long time,” Rethmeier said.

“I’d say that’s $12 (a square foot) to $15 dirt at the most,” said Paul Carlson, chief executive officer of the Carlson Co., one of the largest property management firms in Orange County. Broken down by the square foot, Santa Ana is planning to pay double that price--more than $28 for the land itself. That jumps to $45.50 a square foot when the estimated “damages” are added in. “That’s a helluva price,” Carlson said with a laugh.

And an executive for one major county developer who asked not to be identified agreed that the sale price appeared “extraordinarily high.”

An informal survey of realty records from recent transactions involving major commercial properties appears to bolster their observations.

One already-developed retail shopping center in Newport Beach, for instance, sold for $576,000 an acre last April, while an eight-acre retail site in Lake Forest went for $728,000 per acre a year ago. The Mission Viejo Co. collected $654,000 an acre from the Kmart Corp. in December, 1992, for an 11-acre commercial site in Mission Viejo, and Target Stores paid $368,000 an acre for Foothill Ranch land last May.

So why the $2-million-an-acre price tag for a strip mall that, because of its odd configuration, is described by its own owner as “dysfunctional”?

No one working on the project seems willing, or able, to say.

Michael G. Vail, the school district’s top facilities planner, said simply: “It’s the price the appraiser gave us. . . . I’m not an appraiser. I have nothing to do with what the property owner gets. That’s left to the appraiser.”

The appraiser, Michael Waldron, president of Newport Beach-based Waldron & Associates, said he would not discuss details of the project, because the analysis he gave the district to arrive at the $21.8-million price tag is “confidential.”

Yet even that analysis, a preliminary cost assessment that Waldron prepared for the district four months ago as part of a $25,000 contract, appears to leave many questions unanswered. A copy was obtained by The Times.

At the outset, Waldron’s Nov. 1 letter to the district offered a string of disclaimers, stating that the preliminary assessment “does not represent an appraisal ‘per se,’ ” “represents a departure” from standard appraisal practices, and “is not to be used for acquisition, negotiations or otherwise disseminated to the public in any way.”

Nonetheless, it was on the basis of that assessment that the state has reserved more than $22 million for acquisition of the land for the school. And Vail, the school district’s facilities director, said that assessment has helped shape the district’s financial discussions and planning on the project for the past four months.

The appraiser’s report to the district estimates that by the time ongoing renovations at Bristol Marketplace are completed, the entire 37-acre plaza will be worth some $48 million, but it offers no explanation as to how this value was computed. (ICI paid about $12 million for the site a decade ago, and general partner R. Scott Bell said in an interview that the company has pumped undisclosed millions into its renovation since then.)

In one key finding, Waldron’s report also estimates that the school plan would cost Bell’s company $8.3 million in damages, in large part because two buildings--the HomeBase store and the Montgomery Ward automotive center--would have to be torn down and relocated elsewhere in the plaza to make way for school grounds and facilities.

But the report does not mention any of the economic uncertainties that already face the plaza--including the prospect that HomeBase, an anchor tenant in the mall, might have been moving its store anyway.

The shopping plaza, once a run-down eyesore that featured an X-rated movie theater, has undergone wholesale renovations in the past few years, and now includes a slew of brightly painted fast-food stops, grocery stores, a video shop, a nail salon and all the other accouterments of the modern-day neighborhood shopping center.

But that doesn’t mean the plaza owners at ICI are counting on a booming future--at least not yet.

If the school deal does not go through, ICI said in a report to the school district that the company will have to sell off land or assets to someone else because a tight lending market and “the current economic environment” have made it tough to raise capital for future renovations.

More troubling, the plaza’s size and shape mean poor visibility and reduced sales for shops tucked in the back--away from the major streets. “As presently configured, the shopping center is dysfunctional,” ICI said in its report.

HomeBase has been one of the stores most affected by its poor visibility.

Although a company official refused to discuss the issue, Vail at the school district said he understood that the chain had put the store on a “sublease list” to explore the prospect of finding a new tenant to fill its spot. And ICI acknowledged in writing to the district that HomeBase “has expressed discontent” over its current locale.

“I think the whole thing’s suspicious,” said Rosemarie Avila, a school board member who voted against the project and insists that district staff members have repeatedly misled the board about its key elements--whether this was the only site acceptable to the state, whether there was a hard and fast deadline for approving the project, and other issues. “The concern I have is: Why so much disinformation? Why was there such a campaign to pass this so fast by our district?” she asked.

“It just bothers me when the attitude is, ‘Take the money and get the school, and it doesn’t matter what we pay.’ Nobody would treat their own money that way,” Avila said.

But fellow board member Audrey Yamagata-Noji, who supports the project, said she believes Avila’s stance is merely designed to garner attention for her current state Assembly campaign. Avila “turns everything we talk about into a taxpayer issue. I’m a little suspicious about her motives,” Yamagata-Noji said in an interview.

Yamagata-Noji said she believes the $21.8-million price tag for the land falls in line with today’s market, but ultimately, she said, the district has to trust its appraisers.

“There’s a certain point where you have to look at the facts you’re given and have some confidence in them,” she said. “Am I wrong that I didn’t on my own go out and talk to other realtors and appraisers? Maybe I could be accused of that.”

State Sen. Marian Bergeson (R-Newport Beach), who sits on the seven-member State Allocation Board, said she remains confident that the state agency’s staff will act as a backstop if questions persist once a final property appraisal is completed in weeks ahead.

“There are many safeguards,” Bergeson said. “Believe me, the State Allocation Board is tough on figures. If there is anything out of the ordinary, the whistle will blow. . . . No one is trying to make a profit for the developer.”