City of Watsonville ∫ 19 There was disagreement amongst the interviewees from different departments, commissions and

Recommendations 9

• R1
  The City Manager should make regular reports to the City Council, in open session, regarding the performance of significant contracts, i.e., $50,000 or greater.
• R2
  The City should adopt a “best practices” government procurement policy. The California Society of Municipal Finance Officers is a particularly useful resource for the development of such a policy.[25]
• R3
  City Staff with purchasing authority and responsibility should receive adequate training to successfully execute contracts and process transactions. City of Watsonville ∫ 17 Environmental Health Investigation The Grand Jury discovered that the City of Watsonville has no policies or procedures in place to check for environmental hazards for any given development site prior to the issuance of land use or building permits. Most of the pertinent documents related to this investigation may be reviewed in various locations throughout the EnviroStor web page for “PG&E, WATSONVILLE #1 MGP (44490007).”[36] The site investigated is located at 618 Main Street in Watsonville. Extensive past environmental investigations have identified hazardous residues in the soil resulting from historical operations at the site. The contaminants identified in the reports are known to cause cancer or birth defects and include polynuclear aromatic hydrocarbons, petroleum hydrocarbons, arsenic, and hexavalent chromium. It was also determined that, as a result of the contamination, the “groundwater presents an unacceptable threat to human health and safety.”[27][36] The site is located within the historic footprint of the Watsonville-1 Manufactured Gas Plant, which operated from 1871 until 1906. The plant used coal and oil to produce gas for lighting, heating and cooking. Some of the hazardous byproducts from the manufacturing process remain at the site. Pacific Gas and Electric Company (PG&E) eventually took over ownership of the site and used it as a customer service facility until 1989, when it was leased to its present owner and converted into a restaurant (Jalisco).[36] The site was purchased by its present owner from PG&E on February 27, 2001, subject to a recorded “Covenant to Restrict Use Of Property, Environmental Restriction,” which was found to be “reasonably necessary to protect present or future human health or safety or protect the environment as a result of the presence on the land of hazardous materials as defined in Health & Safety Code section 25260.” The ongoing environmental investigation at the site is under the supervision and authority of the California Department of Toxic Substances Control (DTSC) (Department).[27][28][36] The restrictions described in the Covenant include prohibited uses (residence, hospital, school or day care), prohibited activities (raising of food or extraction of groundwater for consumption) and requirements for soil management: 4.02 (a) “No activities that will disturb the soil (e.g., excavation, grading, removal, trenching, filling, earth movement or mining) shall be allowed on the property without a Soil Management Plan and a Health and Safety Plan approved by the Department.” 4.02 (b) “Any contaminated soils brought to the surface by grading, excavation, trenching or back-filling shall be managed in accordance with all applicable provisions of state and federal law.” The Covenant further mandates an interim remedial measure to prevent the release of hazardous substances from the contaminated soil. This includes maintaining the current asphalt parking lot, commercial building and other structures on the property, which are referred to as the “Cap.” 18 ∫ Santa Cruz County Grand Jury Final Report 2010-2011 4.04 (a) “Activities that may disturb the Cap (e.g. excavation, grading, removal, trenching, filling, earth movement, or mining) shall not be permitted on the Capped Property without prior review and approval by the Department.” Furthermore, sections 3.01 and 3.02 of the Covenant stipulate that the restrictions “run with the land,” and are “binding upon owners/occupants.” All owners and future owners of the property are required to adhere to the provisions of the Covenant.[27][36] The Grand Jury found that on two specific occasions, the Watsonville City Government failed to discover or provide information highlighting the fact that there are hazardous materials present on the site. On June 18, 2007, the City of Watsonville issued a “Correction Notice,” due to the start of construction, without a permit, of a courtyard seating area at the site.[29][36] After the city issued the correction notice, all required applications and plans were submitted, permits were obtained, and building inspections were performed.[30] However, NO assessment of the land use restriction or presence of hazardous materials was considered. On March 4, 2008, the Watsonville Planning Commission approved a Special Use Permit allowing liquor sales and special events on an outdoor patio at the site. The staff report included the finding that “Jalisco’s Restaurant has operated in its present location for 19 years. An 800 square foot patio was added to the restaurant for food service in the summer of 2007.” The staff report failed to provide any information concerning the environmental hazards and risks on the site.[31] In 1996 the California Environmental Protection Agency designated Santa Cruz County Environmental Health Services (EHS) as the "Certified Unified Program Agency" (CUPA) within the geographic boundaries of the County (including all four Cities). As the CUPA, EHS is responsible for enforcing State and Federal statutes and regulations as well as any applicable local ordinance.[32] However, since the City of Watsonville failed to discover the hazard or the land use restriction, EHS was not notified, and was unable to act in its capacity as the CUPA. EHS staff who were interviewed also stated that Watsonville City staff rarely contact them for advice or assistance. There are various databases available to the public online, that identify sites with known or suspected hazardous materials contamination. The Grand Jury easily found the site located at 618 Main Street listed on “EnviroStor,”[36] and “GeoTracker.”[38] EHS maintains a website with a link to known contaminated county sites, titled “Santa Cruz County ‘Site’ List.”[37] Nearly 700 county sites are identified on the list, including approximately 100 in the City of Watsonville alone. The site at 618 Main Street appears on the list and was also found in the “Fortis” document file maintained at EHS. The Watsonville Community Development Department staff first became aware the site was contaminated when they were interviewed by the Grand Jury. They were unaware of the land use restriction and the presence of hazardous materials on the site. They do not routinely make inquiries regarding these issues when processing permits. City of Watsonville ∫ 19 There was disagreement amongst the interviewees from different departments, commissions and the City Council as to whether the permit process needed to be revised to include a routine check of soil and groundwater contamination databases prior to issuance of a permit. It appears that the site construction activities permitted by the City of Watsonville caused an unauthorized release of hazardous materials. The Grand Jury notified EHS of a potential release; EHS subsequently referred the notification to the DTSC, the lead cleanup oversight agency.[33][34][36] The DTSC replied, “the disturbance of the soil...did not likely have any impacts on the public, workers who performed the construction, or the environment,” and that it would take no enforcement action at this time. However, it did direct that any future activities on the site that cause soil disturbance must be performed in accordance with the requirements of the Covenant.[35][36] Nevertheless, the Grand Jury maintains that the City of Watsonville permit procedures fail to recognize existing documented soil and groundwater contamination hazards that pose potential risks to public health and safety.
• R4
  In collaboration with EHS, the City of Watsonville Community Development Department should develop a procedure to alert staff to the presence of hazardous materials on a site prior to the issuance of land use or building permits. Airport Investigation The Watsonville Municipal Airport is a lightning rod issue and is very divisive in the Watsonville community. Many Watsonville residents, including several members of the City Council, see no value in the Airport and would like it converted to affordable housing. On the other side are business leaders, the Watsonville Pilots Association, the Farm Bureau, and others, who support retaining the full capabilities of the Airport. The divisiveness of this issue is even underscored internally within the City. In direct contrast to the City Council majority opinion, the Airport’s benefits to the community, including economic, are touted and well documented on the City’s Economic Development Website “Watsonville Municipal Airport.”[39] Over the past five years, costly litigation over land use issues in areas surrounding the Airport has exceeded $1.2 million of limited City funds. The City is now embarking on a project to re- adopt its 2030 General Plan[40] to address deficiencies found by the California Superior Court.[41] 20 ∫ Santa Cruz County Grand Jury Final Report 2010-2011 With the City facing a pending budget deficit of $1.9 million, the Grand Jury believes the City Council should have a full public discussion of the airport issues and potential costs, solutions, and compromises, before proceeding down the path of another round of costly litigation. The Grand Jury has found that on matters concerning the Airport, the City Government has failed to act in a manner that is transparent, and failed to make decisions based on complete and accurate information. A chronology of events relating to the Airport over the past six years is as follows: 1. A 2005-2006 Santa Cruz County Grand Jury Investigation was prompted by the City Council’s adoption of Resolution 74-05[42] on April 12, 2005, which amended the City’s Airport Master Plan 2001-2020, in anticipation of the adoption of the WatsonvilleVISTA 2030 General Plan.[40] The Grand Jury report titled, “Watsonville Municipal Airport: Headed for a Crash,”[43] is informative and mostly still pertinent today. The following paragraphs are from this report (bolds and underlines added for emphasis): Watsonville Municipal Airport is a valuable asset to the City of Watsonville and to the entire County of Santa Cruz. While land-use planning around most airports is monitored by regional commissions specializing in airport issues, a unique loophole in California State law permits the Watsonville City Council to serve in this capacity for the airport. The airport's existence is now threatened because the city is meeting its mandated housing goals by planning housing developments in airport safety zones, which could lead to increased noise complaints and untold liability in the event of an accident. The airport is economically valuable to the city, providing steady employment, business opportunities, a substantial tax base, and drawing business and recreational visitors. Strategically, the Airport is a key asset in low frequency but high impact disaster relief efforts, as was demonstrated following the Loma Prieta earthquake. Before any irrevocable decisions are made, the benefits of the airport to the entire region must be carefully evaluated through the formation of an independent Airport Land Use Commission. Such a commission will provide an opportunity for community input and to make impartial land use decisions more frequently to protect this critical regional resource. The Watsonville Municipal Airport was constructed by the Navy during World War II on land purchased by, and incorporated into, the City of Watsonville. In 1947 the airport was transferred back to the city for $1 provided the land would be used as an airport in perpetuity. Initial construction consisted of two runways, both built to military specifications that make them suitable for use by heavy aircraft such as C-130s and business jets. Two runways are needed to accommodate weather variations. The primary runway, Runway 2-20, is the longest and can be City of Watsonville ∫ 21 used ninety-four percent of the time. The shorter runway, Runway 8-26, can be used ninety-eight percent of the time and is necessary not only for wind variations, but particularly in summer fog conditions. 2. During the Santa Cruz County Grand Jury’s 2005-2006 term, several additional airport actions occurred, which were not included in the report. (cid:190) An April 21, 2006, letter to the City of Watsonville from the California Department of Transportation (DOT),[44] included the following statements: “It is our position that Resolution 74-05 should be invalidated,” (bold and underlined for emphasis) and “If the City of Watsonville does not intend to implement the State’s request in complying with the State Aeronautics Act, please consider the subject letter as a request for an administrative appeal.” The City took no action on this letter. (cid:190) On May 23, 2006, the City Council adopted Resolution 114-06 (CM),[45] certifying the final Environmental Impact Report (EIR) for the WatsonvilleVISTA 2030 General Plan, and Resolution 115-06 (CM),[46] adopting the WatsonvilleVISTA 2030 General Plan and Findings. These resolutions incorporated the disputed Resolution 74-05[42] into the General Plan, despite the DOT’s position. 3. Since the Grand Jury Report was issued in June of 2006, additional activities concerning the airport have taken place. (cid:190) Two cases were filed and litigated: “Santa Cruz County Superior Court CV 154571, Watsonville Pilots Association et al., v. City of Watsonville, et al.,”[47] and “Santa Cruz County Superior Court CV 154572, Friends of Buena Vista, et al., v. the City of Watsonville et al.,”[48] (cid:190) On March 21, 2008, the Court “issued a statement of decision,” signed by Superior Court Judge Paul P. Burdick, in favor of the plaintiffs in both cases. (cid:190) On May 2, 2008, the Santa Cruz County Superior Court “entered judgment” for the plaintiffs, and issued a Peremptory Writ of Mandate,[49] “YOU ARE HEREBY COMMANDED...to set aside the certification of the Environmental Impact Report...and all your decisions, approvals and findings for the Watsonville Vista 2030 General Plan.” A key provision of the Writ is, 3. You are prohibited from implementing the Watsonville Vista 2030 General Plan or Resolution 74-05 (bold and underlined for emphasis) or basing any action on or engaging in any activity pursuant to the Watsonville Vista 2030 General Plan or Resolution 74-05, unless and until the environmental review and the Watsonville Vista 2030 General Plan and Resolution 74-05 are revised to comply with the Court’s Statement of Decision, and California law, including but not limited to its statutes and regulations known as the California Aeronautics Act, the California Environmental Quality Act ("CEQA") and the CEQA Guidelines and the Court is satisfied that you have complied with this peremptory writ of mandamus by way of a return to the writ.[49] (cid:190) The City of Watsonville appealed the ruling to the Court of Appeal of the State of California Sixth Appellate District on June 26, 2008. 22 ∫ Santa Cruz County Grand Jury Final Report 2010-2011 (cid:190) On March 15, 2010, the Court of Appeal of the State of California Sixth Appellate District denied the City's appeal,[50] required it to follow the trial court’s Peremptory Writ of Mandate, and further required the City to develop a Compliant Airport Land Use Compatibility Plan (ALUCP) consistent with the California Airport Land Use Planning Handbook. (cid:190) From interviews and documents provided by the City,[51] the Grand Jury discovered the City was required by the Court to pay $691,837.84 to the plaintiffs for their legal fees. The City also paid $442,346.10 to its own attorneys for the defense of the suit, for a total expenditure of $1,134,183.94. 4. While these legal actions were underway, the Planning Commission received an application for a permit for a commercial building to be located next to the airport. On August 4, 2008, the Planning Commission approved a special use permit for a 43,389 square foot light industrial building on Jennings Drive. The project became known as “Lawton.” The approval followed discussion and review of the information in the form of a Memorandum provided by City Staff. However, the City Staff failed to provide the following information to the Planning Commission: (cid:190) The Memorandum to the Planning Commission[52] makes no mention of the Writ of Mandate[49] affecting the property, which states, “You are prohibited from implementing the Watsonville Vista 2030 General Plan or Resolution 74-05.” (bold and underlined for emphasis) (cid:190) The Memorandum mentions “A Mitigated Negative Declaration,” but does not include the original negative declaration letter from the DOT,[53] which cites the Superior Court decision, and includes the statement, “Portions of the project site appear to be within the Safety Zones 1, 2, 3, and 6 for the Watsonville Municipal Airport.” (cid:190) A City letter attempted to mitigate the negative declaration,[54] but their letter had not been accepted by the DOT by the date of the meeting. This fact was not communicated to the Planning Commission by the City staff. Subsequent to this meeting, the DOT issued a letter[55] which includes the statement, “We further request that the Negative Declaration not be approved.” (cid:190) The Minutes of the Planning Commission meeting[56] include the statements, “Commissioner Martinez...” (Planning Commissioner at that time) “...noted the close proximity of the Airport to the project,” and “Principal Planner Boyle stated the proposed use is allowable in Zone 6 and is consistent in both General Plans.” Planner Boyle’s statements fail to inform the Commission of the DOT claims that the project is in Zones 1, 2, 3 and 6, or of the Writ of Mandate which prohibits the implementation of the WatsonvilleVISTA 2030 General Plan. It is not possible to know how the Planning Commission would have acted if they had received full information. They may have elected to approve the permit, they may have denied it, or they may have continued the matter and requested further information. The Watsonville Pilots Association and others subsequently filed suit[57] to stop the project, since it was in direct violation of the Peremptory Writ of Mandate issued on May 2, 2008. The Lawton City of Watsonville ∫ 23 Project was eventually dropped by the applicant due to the suit, and the City of Watsonville and the Watsonville Pilots Association negotiated a settlement to the suit. From interviews and documents provided by the City,[51] the Grand Jury discovered the City paid $48,000 to the plaintiffs for their legal fees. The City also paid $12,048.78 to its own attorneys for the defense of the suit for a total expenditure of $60,048.78. To summarize, ● In the first lawsuit, the city ended up paying $1.134 million in legal fees ● In the second lawsuit, the City settled and ended up paying another $60 thousand in legal fees.
• R5
  The City Council should have a public discussion regarding future development surrounding the airport, including full disclosure by City Staff of all issues and potential costs, solutions, and compromises, to avoid another round of costly litigation. This public discussion should be held prior to development of the revised City General Plan 2030. Redevelopment Agency Investigation The City Manager, the recently retired Director of Redevelopment and Housing, and other senior city executives, both elected and staff, have made many public statements[58][59][60] concerning the importance of redevelopment funds to the City of Watsonville. Their statements emphasize how damaging the elimination of the Watsonville Redevelopment Agency (WRDA) would be to the city. There has been much discussion of Redevelopment Agencies (RDAs) since California Governor Brown’s recent proposal to eliminate them. The Grand Jury attempted to investigate the history of the WRDA to find quantifiable measures to evaluate its effectiveness, such as a list of projects undertaken; project costs and status; WRDA annual revenues and expenses; and bond obligations. The Grand Jury was never able to find this information. As of the start of our investigation, there was no publicly available information on the effectiveness of the WRDA. The Grand Jury reviewed the Watsonville “Redevelopment Housing Economic Development” website[61] and found none of the information we were attempting to obtain. Additional City websites were investigated for information concerning the WRDA. 24 ∫ Santa Cruz County Grand Jury Final Report 2010-2011 Several reports were found that contain partial information.[61][62][63][64][65] City Staff interviewees informed the Grand Jury there was no simple way to obtain this information. Interviewees were able to name only five or six WRDA completed projects over the nearly thirty-year life of the agency. We were also told that it would take an effort by staff to look through “paper files” to provide us with a list of WRDA projects over the past five years. In addition, some City Staff members were dismissive and contemptuous of the Grand Jury’s attempt to obtain such information. We investigated neighboring county and city governments’ RDA websites to see if the type of information we had requested of the City was available online. We found that the websites of the County of Santa Cruz,[66] the City of Santa Cruz[67] and the City of Morgan Hill[68] all contain excellent and easy-to-understand information that helps the public to understand the effectiveness of their RDAs.
• R6
  The City of Watsonville should publish on its website, a current record of activities of the WRDA, including projects proposed, approved, in progress, and completed, along with related revenue, bond obligations and expense information. Manabe-Ow Investigation On October 26, 2010, the City Council passed resolution 174-10[69] approving the Manabe-Ow Specific Plan (MOSP)[70] amid a sea of sign-waving young citizens chanting, “We Need Jobs.”[71] The City considers the Manabe-Ow Project key to its strategy for employment, because it projects over 2,000 new jobs over the next twenty years. The project consists of the development of a 95-acre industrial area in the southern part of the City. “The MOSP represents the culmination of the City's extensive efforts to create a new job base for the community. The City of Watsonville has been actively pursuing a new industrial area to provide new jobs for the residents of the City for the past 15 years.”[72] The Grand Jury supports the City and citizens of Watsonville in their political processes, and does not have an opinion concerning the appropriateness of the Manabe-Ow Business Park project. The Grand Jury is concerned with the completeness and accuracy of background information regarding project financing that was provided by City Staff to the public, the Planning Commission and the City Council, prior to the passage of Resolution 174-10. At the October 26, 2010, City Council Meeting,[71] the Interim Community Development Director presented the Manabe-Ow Staff report.[72] Financing was not discussed at the City of Watsonville ∫ 25 meeting;[69] however, the report included several
• R7
  The City Manager should implement a process to ensure transparency, completeness and accuracy in the information provided to the City Council, City Commissions and the Public. City of Watsonville ∫ 27
• R8
  The City Council should exercise due diligence and demand that it receives adequate information to make informed decisions. “Financial Management for Elected Officials: Questions to Ask,” published by the Institute for Local Governments is a useful resource.[26]
• R9
  The City Council should have a public discussion of the Manabe-Ow project with full disclosure of all funding options.