The Vallejo City Council has unanimously approved a profit-sharing agreement concerning the sale and redevelopment of the Blue Rock Springs Golf Courses. This decision, finalized on Tuesday, marks a significant step forward for a project that has stirred considerable public debate.
At the heart of the controversy was an initial $400,000 payment for approximately 75 acres of land, currently home to two 18-hole golf courses on either side of Columbus Parkway. This parcel had been initially valued at $285,000, raising eyebrows when Blue Rock Springs LLC, the developer, advertised the property for $18 million just eight months after the purchase. Public concern grew over the perceived discrepancy in value and the future of the beloved Blue Rock Springs golf course.
The newly approved agreement with Blue Rock Springs LLC sets a minimum compensation of $10.5 million for the city’s land. Crucially, the deal also stipulates that if the property’s appraised value exceeds expectations upon completion of the project’s permitting phase, Vallejo will receive additional funds. Furthermore, the city is set to benefit from a share of the profits generated from the sale of finished homes, negotiated between Blue Rock Springs LLC and homebuilders. This profit-sharing mechanism aims to ensure the city benefits from the project’s financial success.
Jeb Elmore, Vice President of Acquisitions at Lewis Group – the company partnering with Greg Norman Company to form Blue Rock Springs LLC – championed the agreement, praising the city’s negotiation efforts. He acknowledged that the project’s projected returns for his company were “substandard” compared to their typical requirements. However, he emphasized the collaborative nature of the agreement, stating, “The city, through negotiations, became a seller and a partner. In most cases, we’re either a seller or we’re a buyer of property or we’re a partner.”
Elmore highlighted the financial security the agreement provides to Vallejo: “In the seller side, you’ve guaranteed yourself a minimum consideration vetted by your financial consultant,” he explained. “In addition, you became a partner, where we’re mutually aligned, that the better our company does, the better the city ultimately does.”
Despite Elmore’s positive portrayal, council members remained diligent in scrutinizing the financial details. Councilmember Charles Palmares questioned the rationale behind the $10.5 million minimum compensation. Elmore clarified that Blue Rock Springs LLC had funded the city’s engagement of a consultant. This consultant thoroughly examined Blue Rock Springs LLC’s financial records and modeling to arrive at the negotiated minimum sale price, ensuring an independent assessment.
It was clarified that the $10.5 million figure encompasses the initial $400,000 payment. Additionally, the city is responsible for a $1.5 million architecture and engineering plan for a revamped 18-hole golf course and an accompanying clubhouse. Assistant City Manager Gillian Haen informed the council that they would have a choice of three price point options for this project, allowing for flexibility in the scope of the golf course improvements.
Haen emphasized the city’s autonomy regarding the project proceeds: “While it makes sense for the city to move forward with new clubhouse and revitalized golf facilities, the proceeds from the project are to be used by the City Council at their sole discretion,” she stated. “It could be on the golf course renovations, or it could be on something else,” leaving the door open for funds to be allocated to other city needs if deemed necessary.
The Blue Rock Springs redevelopment project is still subject to further approvals. It must pass through the city’s Planning Commission for design and environmental reviews to secure the necessary construction permits. Upon permit approval, a formal appraisal of the property will be conducted, and the city is entitled to an additional 25% of any appraised value exceeding the $10.5 million minimum, further securing Vallejo’s financial stake in the development.
Initial project designs considered residential developments on both sides of Columbus Parkway. However, Syar Industries, former operators of a nearby quarry (now Vulcan Materials), voiced concerns about potential noise and dust impacts on residential areas from their operations. To address these concerns, a settlement between the city and Syar Industries resulted in confining all residential development to the west side of Columbus Parkway. The revised plan includes a commercial strip adjacent to the residential area on the east side of Columbus Parkway, creating a mixed-use development.
Map of Planned Development Areas at Blue Rock Springs Golf Course in Vallejo, California
Once permitting and infrastructure requirements are met, Blue Rock Springs LLC intends to sell the residential lots to a housing developer. Upon these lot sales, the city will receive 8.15% of the gross lot sales exceeding the $10.5 million minimum compensation.
Furthermore, Blue Rock Springs LLC may negotiate a share of the profits from the housing developer’s sale of completed homes. The profit-sharing agreement mandates that any such negotiated profit share with the housing developer will be split with the city, ensuring Vallejo benefits from downstream housing sales as well. Elmore indicated that the company anticipates negotiating a 50% profit share from home sales, with the city receiving half of that share, further enhancing the city’s potential revenue from the project.
Councilmember-elect Alex Matias, during the public comment period, questioned the developer’s 25% share, suggesting it might be on the “higher end.” He requested clarity from city staff on typical profit-sharing percentages for similar deals to ensure Vallejo was receiving a fair return.
Haen responded that the 25% share was considered normal and had been vetted by the city’s financial consultant. “Actually, it’s more than I’ve negotiated on any prior agreement, for a developer to share at point of land sale and home sale is not common,” Haen clarified, reinforcing the favorable nature of the agreement for the city.
The impetus for redeveloping the two 18-hole golf courses stemmed from a $4.6 million operating budget deficit accrued by the courses between 2011 and 2017 due to declining revenues. In 2017, the city selected a proposal from the Greg Norman Company, which subsequently partnered with Lewis Group to establish Blue Rock Springs LLC, initiating the current redevelopment endeavor for the Blue Rock Springs golf course and surrounding land.
