SAN FRANCISCO BAY RESTORATION PLAN
Appraiser disciplined; taxpayers paid millions
MANY ERRORS ALLEGED IN PURCHASE OF CARGILL PONDS FOR $100 MILLION IN 2003

By Paul Rogers
Mercury News
Wednesday, October 11, 2006

The appraiser whose report helped set the $100 million price taxpayers paid in the 2003 Cargill salt ponds deal has been disciplined on allegations that he made numerous errors and violated federal standards when he set a value for the property.

The state attorney general's office brought a misconduct complaint against Charles Bailey of Mill Valley this summer, alleging 24 significant errors in his appraisal of Cargill lands for the federal government in December 2000.

Bailey, who denied any wrongdoing, agreed Sept. 27 to a censure of his license, known as a ``public reproval.'' He also will pay $4,000 to cover the costs of the state investigation. Although he will keep his license and can continue working, any disciplinary action on an appraiser's record is very harmful to his career, said Deputy Attorney General Char Sachson.

News of the settlement heightened concerns that taxpayers may have overpaid by millions of dollars when government agencies bought 16,500 acres of Cargill salt evaporation ponds from Hayward to Alviso to Redwood City in March 2003. It also brought calls Tuesday from political leaders for less secrecy in public land deals.

``This is taxpayer money. These are huge sums of money,'' said U.S. Rep. Anna Eshoo, D-Palo Alto, who called the news ``a tragedy.''

Eshoo said she is considering drafting legislation in Congress to require appraisals be made public before escrow closes when the government buys land.

Under the deal, the state Department of Fish and Game and the U.S. Fish and Wildlife Service bought the ponds -- used for years to evaporate salt for roads, food and medicine -- with the goal of converting them to wetlands for fish and birds.

After Cargill offered the ponds for sale in the late-1990s, environmentalists, taxpayer groups and some elected officials, including Eshoo, asked the U.S. Fish and Wildlife Service to release the appraisal Bailey had done for it, so the public could see how they arrived at the sale price before any money changed hands.

Each time, the agency refused, citing Cargill's right to confidentiality.

``In balance with the public's right to know, we must also comply with the landowner's right to confidentiality and privacy,'' Michael Spear, supervisor of the Fish and Wildlife Service's California-Nevada office, wrote in an April 2001 letter to Eshoo.

When the government buys land, Spear wrote, the Freedom of Information Act allows appraisals to be kept secret ``so long as the privacy interest outweighs the public interest.''

Alex Pitts, a spokeswoman for Fish and Wildlife in Sacramento, said Tuesday that no one from the agency was available to discuss the case.

Eshoo said more transparency on the part of the agency could have improved the deal for the public.

``They did what they wanted to do and taxpayers are left holding the bag,'' she said. ``I so resent that it tarnishes an extraordinarily important project. And it undermines future projects.''

Bailey's appraisal valued 16,500 acres of Cargill's salt ponds at $243 million. Cargill received $100 million in cash -- $72 million in parks and water bond funding from the state, $8 million from the federal government and $20 million from the Hewlett, Packard, Moore and Goldman foundations. It also is seeking a $143 million federal tax write-off.

Cargill spokeswoman Lori Johnson said the company believes the price was fair: ``We thought it was a little low.''

She noted that the Bailey appraisal was approved not only by Fish and Wildlife, but by the state Department of General Services.

And she said the attorney general's office, working on behalf of the state Office of Real Estate Appraisers, appeared to let Bailey off relatively lightly.

``If they really believed that the appraisal was that flawed and Bailey is wrong, then everybody else in the system is wrong, too,'' Johnson said.

The state Fish and Game department released the appraisal in 2003 after the deal had closed. A Mercury News analysis found that it was 28 months old. The U.S. Fish and Wildlife Service waived federal rules requiring appraisals to be updated every 12 months.

The appraisal noted that under the Clean Water Act, the ponds probably could not be filled or developed, dramatically reducing their value. It noted salt-making rights on the Cargill ponds were worth $3,000 an acre. But the appraisal said the ponds had a ``mitigation value'' of up to $20,000 an acre, meaning they could be bought and restored as wetlands by developers to offset environmental damage from construction projects elsewhere.

At the current rate of private development, it would take 165 years before all the ponds would be needed for mitigation, the appraisal said. But there would be a market for mitigation if San Francisco International Airport built new runways into the bay, the appraisal concluded, because SFO would have to restore thousands of acres to offset the filling of the bay. The airport later withdrew the runway project.

Although the appraisal was built on a dead airport runway project, Sen. Dianne Feinstein and the state and federal agencies pushed the deal through.

Asked about the case, Feinstein's office Tuesday replied in an e-mail.

``I believe this was as fair a purchase as possible at that time,'' Feinstein wrote. Asked whether Cargill should receive a $143 million tax write-off, she wrote, ``The appropriate tax write-off amount will be determined by the IRS.''

The attorney general's complaint said Bailey's appraisal failed to adequately evaluate comparable land sales, support revenue projections for the property or explain the costs and risks of restoring wetlands in mitigation deals.

In an e-mail, Bailey noted that he denies wrongdoing, his work was approved by the U.S. Fish and Wildlife Service and his license continues to be listed as ``active and in good standing.''

One issue left undecided: whether Attorney General Bill Lockyer will attempt to get some of the public money back.

``We're going to look into the matter,'' spokeswoman Teresa Schilling said Tuesday.