A bad land deal that has plagued three Natomas Unified school boards and five superintendents has finally been resolved.
But the district still took a big hit.
After six years of negotiations, Natomas Unified recovered $5.6 million of the $13.3 million a record $325,000 an acre that it spent on a 41-acre school site in 2007. It also will pay a total of $1.4 million in attorneys fees.
The $4.2 million the district will end up with after lawyers' fees is far less than the $10 million Natomas Unified had asserted it overpaid for the unincorporated farmland.
The school board on Wednesday night officially ended its years-long legal battle with the seller, West Lakeside LLC, a partnership managed by developer Angelo K. Tsakopoulos. Their final action: a vote to approve paying West Lakeside $550,000 for its legal fees.
District Superintendent Chris Evans said he's relieved to have closure.
"That's a little over $4 million net," he said. "Legal fees could have continued to mount and mount."
The district and West Lakeside were only months away from finding themselves in a courtroom, said the superintendent. "We could continue to litigate this for God knows how long," he said.
Separately, the district last fall returned a 7.3-acre piece of "unusable" buffer land to West Lakeside.
In the end, the district will have paid $248,223 an acre, officials said.
That brings the property within range, albeit the "high range," of realistic property values in the surrounding area, Evans said.
Sacramento-area land appraiser Dave Jarrette called the amount "more reasonable," based on the land market in 2007 when the sale occurred. But he noted that property in the area is now selling for just a fraction of that price.
He said four nearby Natomas basin properties zoned agricultural sold for between $15,500 and $52,200 an acre in recent years. All are slated for future urban development, Jarrette said.
One 59.5-acre property, almost next door to the West Lakeside property, was sold by the Internal Revenue Service for $2.1 million, or $35,300 per acre, in 2009.
Wednesday night, school members expressed sorrow at having to pay West Lakeside $550,000 to settle the suit, but said they weren't willing to gamble more district money on winning in court.
If they lost, Evans said, they would be responsible for more district lawyers' fees and all the West Lakeside attorneys' fees said to total $2 million.
A smattering of audience members urged the school board not to pay the money.
"Don't settle," said Keith Lyon. "Don't be afraid of a jury trial. How can you let them pick our pockets again?"
The board voted unanimously to pay the money, saying it is time for the district to move on.
The West Lakeside land purchase was controversial from the start.
School board members said the deal was a bargain when it was purchased in 2007 at half of its $24.7 million appraised value. But a Bee investigation revealed that the appraisal was based on the property being in a ready-to-build neighborhood in the city, instead of its actual state: empty farmland lacking basic services such as water, sewers and roads.
Natomas Unified sued West Lakeside in 2009.
The Sacramento County grand jury issued a report that same year saying the district paid six times the land's value and asking for an investigation.
A senior property appraiser from the California Office of Real Estate Appraisers who testified before the grand jury said the property was actually worth $50,000 to $60,000 an acre in 2007, for a total value of about $2 million.
The school district still has to overcome a number of hurdles before a school can be built on the site. The land, in unincorporated Sacramento County, is considered a hazardous floodplain and, like the rest of North Natomas, is under a federal building moratorium.
When that is eventually lifted, the district will have to gain county approvals, or seek annexation to the city of Sacramento, said Scot Mende, the city's new growth manager. The annexation process would probably take about a year and would allow the school to obtain municipal services, water and fire protection from the city of Sacramento, Mende said.
The city also would have to amend its sphere of influence a city's probable area of growth to include the site, he said.
The district also would need a habitat conservation plan from the U.S. Fish and Wildlife Department, Mende said.
Superintendent Evans said he expects the North Natomas area will grow quickly after the building moratorium is lifted and the district will need to build more schools. He said the district has acquired four properties for future growth, including the West Lakeside land.
The district took advantage of a clause in the sales contract to return the 7.3-acre piece of buffer land in return for $2.6 million, Evans said. The total $5.6 million returned to the district included settlements from two parties named in the Natomas suit.
Sacramento attorney Martin Steiner and his firm settled with the district for $2.6 million in 2012.
Steiner, who was hired by the district to oversee legal aspects of the $13.3 million purchase, revealed three months after escrow closed that he had a conflict of interest, according to a Sacramento grand jury report released in 2009.
The Bee reported in 2008 that Steiner had represented Tsakopoulos in other transactions but hadn't obtained a written waiver from the school board or superintendent acknowledging they had been briefed about the potential conflict.
Appraiser Christopher Ferguson and the firm Ferguson & Associates settled with the district for $350,000 in 2011.
Ferguson was hired by attorney Steiner. The lawsuit describes him as "negligently and carelessly" providing appraisal services "erroneously based on non-credible and non-valid hypothetical assumptions" that grossly inflated the property's purported value.
The district also named real estate broker Mark Skreden in the suit, but the district's claims against Skreden were dismissed by a court ruling last week.
West Lakeside filed a cross-complaint against the district in October 2011.