Stakes high as developers pressure growth boundaries

By Mary Lynne Vellinga and Stuart Leavenworth
Bee Staff Writers (Published April 9, 2000)
Sixth in an occasional series

Seven years ago, Sacramento County supervisors declared a large expanse of the county off-limits to new suburbs. But that hasn't squashed the hopes of land speculators and developers such as Angelo Tsakopoulos, John Reynolds or Enlow Ose.

Since 1997, Tsakopoulos has placed options on 2,800 acres south of Folsom and outside the official growth boundary adopted by the county in 1993.

Reynolds is betting on a tract he bought next to the proposed Lent Ranch shopping mall in Elk Grove, and Ose hopes to cash in on 1,060 acres he owns in North Natomas.

Across the region -- from Sacramento to Placer, Sutter and El Dorado counties -- speculators are placing multimillion-dollar wagers on the region's next phase of growth. They aim to buy low and sell high, and they aren't just leaving the outcome to chance.

In many cases, these developers and speculators are lobbying elected officials to back off their land-use restrictions, extend sewer lines or take other steps that will boost the value of their properties.

"That's the nature of the business," said developer Ose, 75, who has been sitting for 15 years on his North Natomas farmland.

"You have influential developers who promote their interests wherever they own land," said Ose, who has lobbied the regional sanitation district to build the new North Natomas sewage tunnel big enough to accommodate development on his land, which sits outside the growth boundary. "The same thing is going on west of Roseville now, at Deer Creek (in eastern Sacramento County), at Lent Ranch. ... I think it boils down to what politicians are willing to go along with."

Critics say elected officials are going along with far too much. Rampant speculation, they charge, is confounding efforts to plan for growth, adding to problems of traffic congestion, smog, lost open space and overcrowded schools.

In Sacramento County, planners estimate there is enough land within the 1993 growth boundary to accommodate 50 years of growth. But since land is so cheap and available on the region's outskirts, speculators see little incentive to invest in established communities.

Sacramento County Supervisor Illa Collin is one local leader who worries about the clout of various speculators.

"They have the money to give to campaigns, and they also have the ability to shut money off to campaigns," said Collin. "They just have a very powerful influence, and anyone who says they don't isn't really being honest with themselves."

To be sure, land speculation has long been part of the Sacramento landscape. But in recent years -- with the population surging and many farmers getting out of agriculture -- the potential jackpots are growing bigger than ever.

Around Sacramento, agricultural land generally sells for $2,500 to $4,500 an acre, depending on its quality. Land approved for development fetches $75,000 to $80,000 an acre, said local land appraiser Doug Elmore.

Eastern Sacramento County offers a classic example of the modern land grab. Starting in the mid-1980s, investors began snapping up pasture land that rolled south of Folsom and Highway 50, and east of Prairie City Road. Back then, buyers such as Tsakopoulos and C.C. Myers routinely bought land from ranchers for $6,000 to $10,000 an acre.

Then came the recession and the county's growth boundary, which restricted development east of Prairie City Road. Land values dropped to less than $2,000 an acre.

But not for long. Within a few years, Tsakopoulos, his associates, and brother George Tsakopoulos had bought or optioned more than 12 square miles of land. Since then, Folsom has signaled that it plans to eventually annex some of that property, and land prices have returned to about $8,500 an acre.

Environmentalists cite a simple reason for the rising property values in the east county: Developers don't believe supervisors will "hold the line" and stick with the growth boundary.

"Sacramento County historically has been among the worst jurisdictions in terms of upholding plans they've adopted. ... The norm has been that the plans are changed," said Mike Eaton, director of the Nature Conservancy's Cosumnes River Preserve, which has saved thousands of acres of open space in the Cosumnes River watershed.

As a recent example, Eaton cited the way in which county supervisors have backed off from plans to concentrate dense pockets of housing, stores and offices along future transit lines. That provision was once seen as key to improving the region's poor air quality and reducing pressure to gobble up more farmland.

Yet even when the county holds the line, it finds itself outflanked by other local governments that are more responsive to real estate developers, Collin said.

For instance, when the Sacramento County Planning Commission rejected the Lent Ranch Mall, developers Martin Feletto and M&H Realty threw their financial muscle behind the successful incorporation effort in Elk Grove, contributing nearly $32,000 to candidates for the new City Council.

The new council is expected to approve the mall, and that can't come soon enough for speculators such as Reynolds, who spent $2 million on 319 acres south of the mall site two years ago.

"Land next to a shopping center is an awfully good bet," said Reynolds, an East Bay investor whose land is outside of the growth boundary.

In the eastern part of the county, developers are also trying the sidestep the decisions of county supervisors.

Last year, the board rejected Myers' proposal to build Deer Creek Hills, a gated senior community outside the growth boundary north of Rancho Murieta. Now Myers is working to qualify a measure asking voters to move the boundary.

Meanwhile, developers are lobbying members of a regional board -- the Local Agency Formation Commission -- to let Folsom extend its planning authority over 3,584 acres south of Highway 50 that is off-limits to growth.

Lauren Hammond, a Sacramento City Council member who is a LAFCO member, said Angelo Tsakopoulos and his daughter, Eleni, have both contacted her about Folsom's expansion plans.

"I think it is odd," Hammond said. "Why am I getting all the pressure?"

County supervisors, in turn, are now meeting with Folsom leaders to work out a deal that would allow Folsom to expand and still preserve some of the neighboring grassy plains and oak woodlands as open space.

Tsakopoulos, undisputed king of local land investors, is one person who stands to gain the most from these talks. Since fleeing poverty in his native Greece as a teenager, Tsakopoulos, 63, has built a fortune buying properties in the Pocket, Laguna, Folsom, Roseville and North Natomas, winning government approvals, building streets and sewers, and selling lots to home builders.

Tsakopoulos doesn't like the label "speculator," but others say he is a master at knowing when to buy and sell, and at what price.

"He's the biggest. He's the best. He's the guy," said Reynolds, the East Bay developer.

Some environmentalists and rival developers see Tsakopoulos, a leading political donor locally and nationally, in a more negative light. They grumble that he has used his clout and campaign contributions to bypass the planning process, adding to the trend toward leapfrog development.

During the debate on Sacramento County's 1993 general plan, for instance, Tsakopoulos stepped up to the dais and showed the supervisors how they could move the urban services boundary to take in all of an 1,800-acre parcel he owned in the east county rather than a third of it. The line was moved.

Other property in the east county in which Tsakopoulos had an interest was also included. Landowners to the north and south complain that more of their land was excluded from development as a result.

"It was a political move; it wasn't even studied from a rational standpoint," said Cameron Doyel, who represents a group of North Natomas landowners in the unincorporated county whose land was left out of the plan.

In the mid-1980s, Tsakopoulos was at the center of a fund-raising scandal that involved his Laguna development and then-Supervisor William Bryan.

Bryan was fined $290,000 by the California Fair Political Practices Commission for secretly accepting $256,700 -- through a number of intermediaries -- from Tsakopoulos for repayment of a loan. At around the same time, Bryan voted in favor of two of Tsakopoulos' major Laguna projects. Tsakopoulos has consistently denied any wrongdoing in the case, and no charges were ever brought against him.

Tsakopoulos says stories of his political influence have always been overblown. Cogent arguments, rather than political persuasion, won the day in the debate over drawing the 1993 growth boundary line, he said.

"That kind of gossip is unfounded, because what they're suggesting is our political system is corrupt, and that is nonsense," Tsakopoulos said.

Local leaders, he said, realize that new territory must be opened to development to keep housing costs low as the population grows. And he brushes aside claims that the rolling, oak-studded east county, home to hawks and other raptors, is important open space that deserves protection.

"I'm astounded at the myopia of the environmental community," he said. "They should be promoting development in the foothills because it is the area that is the least sensitive. Over there, jack rabbits carry their own lunch. ... There's nothing that's productive."

Even so, Tsakopoulos and other developers haven't shied away from building in Natomas, a floodplain of farms, pastures and wetlands. In North Natomas, environmentalists point to Fisherman Lake as one place where speculators are complicating their goals. Fisherman Lake isn't the prettiest place. A century ago, it connected two natural lakes, but now it's just a wide place in the West Drainage Canal. Yet biologists say it provides some of the most important habitat in North Natomas for the endangered giant garter snake and the Swainson's Hawk, along with many other birds.

A person strolling along the lake can see any number of creatures, including great horned owls, great blue herons, swallows, egrets, moorhens, mallards, a cinnamon teal, coots and red-tailed hawks.

The Natomas Basin Conservancy -- set up by the city to preserve habitat in the area -- has been shopping for land along the lake. Thus far it hasn't been able to pay the steep prices asked by speculators who have control of the land, said John R. Roberts, the group's executive director.

The eastern shore, which is within the city limits and thus eligible for development, is owned by George Tsakopoulos, Angelo's brother. He told the conservancy he would sell -- for $150,000 an acre, Roberts said. On the other side of the lake, outside the urban services boundary, landowners are asking $10,000 an acre, still more than double what the conservancy customarily pays.

Meanwhile, Angelo Tsakopoulos has asked the city of Sacramento to annex 133 acres he owns on the northeast side of the lake, land that now sits outside the county's urban services boundary. He wants to build a gated community with 464 houses surrounding a new artificial lake.

"I assume (the city) will go along with it; it's reasonable," he said of his plan.

For the Sacramento region, battles over land speculation will likely rage for decades, or at least until the next recession. If built, road projects such as the Marysville Bypass and the Placer Parkway will open new lands to development. Decisions on sewer extensions and other infrastructure could determine the expansion of cities from Elk Grove to El Dorado Hills.

Some think the region should accept the inevitable, allow development on the fringe of cities and not cling to growth restrictions that were approved before employment centers sprang up outside of downtown Sacramento.

"The urban services boundary had its usefulness a few decades ago," said Bob Fountain, a retired urban planning professor at California State University, Sacramento. "But it doesn't fit with our current economy, with the way we are growing now."

But environmentalists say the rapid consumption of open space has to be slowed down, and that local officials must be firmer in their resolve.

"Our view is that just because speculators are willing to pay prices that are high for the land considering its zoning and current use, that shouldn't drive policy," said Alta Tura, a member of the Environmental Council of Sacramento. "They're choosing to take the risk, and we don't think that just because they're willing to take the risk it should guarantee land use changes."