Hey, A.C. Gonzalez: Forget "Transparency." Here's a Tougher Challenge.

Based on the City Council meeting yesterday where they appointed A.C. Gonzalez city manager, I now have a new least favorite word in the whole English language. Transparency. They kept saying it over and over like a weird chant. I've got something else for them to work on, way before transparency. Tell you in a minute.

After watching the council voted to make Gonzalez the next city manager (see my column about it in tomorrow's print product), I attended a meeting of the council's housing committee where they discussed a matter I have shared with you here before -- the big fancy real estate development you and I are paying for, not a brick of which has been laid, across Lancaster Road from the Veterans Affairs hospital on a very tough stretch of Lancaster Road.

See also: Maybe Yigal Lelah Did Spend $4.5 Million of Our Money on Dirt. Feel Better Now?

Over the last five years you and I have given Yigal Lelah, the developer, $4.3 million in city funds to buy an entire block of beat-up commercial properties and tumble-down shacks so he could put up a space-age combination retail, office and residential development with a veterans hospital theme. I guess the street names could be, "Wait Until You Die Avenue" and "Oops We Took Out Your Wrong Kidney" Lane.

Anyway, nothing is there. The money is spent. The City Council wanted to know how Lelah could have paid prices of more than $15 a square foot for land in an area where the tax appraisal district says most land is worth a dollar a foot. And, yes, the tax appraisal district often low-balls its appraisals, but not by 1,500 percent. C'mon.

Lelah says he did not overpay for the land, and he is not without his defenses. After the meeting he flipped some pages open for me in a file that he said contained an appraisal commissioned by the federal government. He said their appraisal found his purchases to be worth almost a million dollars more than what he paid for them as of November 7, 2012. That's interesting.

Of course, if the appraiser for the feds used the prices Lelah has paid over the last five years as a measuring stick, then, yeah, that land may be worth a ton more than it was before Lelah bought it. You know how they always say the rule of value in real estate is three words -- location, location and location. We here in Dallas know that's not always true. Sometimes it's three other words -- flipping, flipping and flipping.

I looked through the briefing materials provided to the council before the meeting, and I came across something I've just never seen before in my 200 years as a reporter covering incredibly boring real estate crap: The appraisals Lelah provided the city to justify the prices he paid for land are based on a principle that is new to me. Look, maybe I'm stupid. I just haven't ever seen it before. All the appraisals I'm used to are based more or less on what somebody could get for it.

You know, if it's some guy's house, what could the guy get for it if he put it on the market for six months? Say it's a rusted-out car wash where half the hoses are broken and anyway there's a crack house next door, but you want to buy it. What kind of a check would you have to write to get that guy to give up that car wash? Maybe you wouldn't even have to write a check at all, just give him a ride to Mineola.

You know. What's it worth sitting right there as is?

That's not what Lelah's appraisals are based on. Instead, he's using a technique that's brand-new to me, and shame on me if I should have known about it. His appraisals are based on "estimated hypothetical market value."


In the documentation provided to the city, estimated hypothetical market value is defined as "market value of the property with all proposed development, construction, conversion, and/or rehabilitation hypothetically completed, or under specifically proposed conditions, as of the date of the appraisal."


No, wait. You have the value when it's shacks and rusted-out car washes. That's what you pay for the shacks and rusted-out car washes. Then you spend a huge sum of our tax money, estimated at a total of almost $30 million if this thing ever does get built. And when you're done developing it, you have a much higher value because you spent $30 million improving it.

So here is where I am stumped. Before you develop, you don't buy the land at what its value will be after it's developed, because it hasn't been developed yet, so it doesn't have that value yet. That increased value is what you make, not what you pay.

OK, I have to stop with this, because when I go to City Hall, and they're all chanting "transparency, transparency" over and over again like Tibetan monks, and then they start doing one of these through-the-looking-glass routines on me about estimated hypothetical reality, I get the willies. I do. Then I lose sleep.

Here is my thought. The new city manager, Mr. Gonzalez, has promised us transparency like we've never seen before. So why not start with this thing? Hmm? At the end of the meeting, Councilman Rick Callahan, who is a commercial real estate broker by trade, said, "There's a smell test here, and I can't get my nose past it." He called for a full-scale investigation of the whole deal. How about that, Mr. City Manager?

I told you I can't stand that word any more. Transparency. You know what I'd like to see them go for down there before they even try for transparency? Sanity. That's my new favorite word. How about it, Mr. Manager? Could we just have sanity?

The council briefing documents are below.

Yigal Lelah Sapphire Road Development Veterans Place City of Dallas City Council Housing Committee Briefing... by Schutze

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Jim Schutze has been the city columnist for the Dallas Observer since 1998. He has been a recipient of the Association of Alternative Newsweeklies’ national award for best commentary and Lincoln University’s national Unity Award for writing on civil rights and racial issues. In 2011 he was admitted to the Texas Institute of Letters.
Contact: Jim Schutze