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Photograph by Christopher Gardner
Fifty luxury homes and a golf course might have become a part of this view had MROSD not voted to purchase the property.
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Mountain Treasure
The Midpeninsula Open Space District walks away with the prize-- thanks to a little help from the Peninsula Open Space Trust
By Jeff Kearns
Looking up at the rolling green hillsides and ridge lines rippling up into the mountains south of Los Gatos, it's easy to forget the story behind the property, which is as notable for the storm of legal battles and closed-door meetings that have surrounded it in recent years as it is for its awesome natural beauty.
In the meadows and canyons, mountain lions, deer and other wildlife roam among towering redwoods, mountain streams and overgrown vineyards left at the former Jesuit seminary on the site. The property seems a world away from the sprawling, smoggy cites in the valley below.
But, behind the scenes, parties competing for the land have waged an often nasty battle against one another. Preservationists have done everything but chain themselves to trees in their attempts to thwart developers trying to build a golf course and big homes on the land. And the property is already being logged, which environmentalists and mountain residents oppose, but can't legally block.
Much to their delight, however, the preservationists won their more than 20-year fight last week, after a last-minute deal was announced that will dedicate the huge section of the Santa Cruz Mountains as open space instead of a golf course and homes.
The Midpeninsula Regional Open Space District board of directors approved a $10.5 million purchase of 260 acres on June 24, after the private Peninsula Open Space Trust agreed to take out a loan for the money just days before the June 30 purchase option deadline.
"We've always wanted this property acquired," said POST president Audrey Rust. "And it became something that we just had to do."
Rust added that the property was on POST's wish list when the organization was formed in 1977, and that she had been personally involved in trying to preserve the property since 1989.
The MROSD board voted 5-0 (with two absences) to acquire the entire property--an area larger than the city of Monte Sereno.
"I've seen the ins and outs of this property over the years--and there have been a lot of ups and downs--so it's exciting that we have finally found a solution," said MROSD board member and Los Gatan Pete Siemens, whose ward includes the new land.
Remembering the first time he saw the land while driving to Santa Cruz in 1956, board president Jed Cyr added, "Now we can look at this property every time we drive over the hill, and say 'thank goodness this is in the public domain.' "
MROSD also agreed in March to pay $14.5 million in March for the other 805 acres on the property, but couldn't come up with the $5 million needed to buy the logging rights for the property. A Santa Cruz County lumber company started cutting trees on the property in late May.
When the district board approved the first phase of the acquisition in March, the deal was set up around a complex agreement that stipulated that if the MROSD didn't make the second purchase, Arlie Land and Cattle Company could back out of the deal--if it didn't get the rights to develop the property.
The district didn't actually buy the property in March, but rather bought a purchase option and five-year lease on the upper 805 acres.
The deal was not without some risk. If the district hadn't come up with the rest of the money to buy the lower 260 acres and the timber rights, the MROSD could have ended up with a park that was partially logged right next to a golf course and luxury homes--not an environmentalist's dream.
According to MROSD district manager Craig Britton, now that the second phase has been approved, "About 90 percent of that [original] agreement is no longer necessary, but at the time it was absolutely necessary."
The district paid Arlie $250,000 to extend the option to buy until the end of June, but that money will be credited toward the purchase price. Britton says the district expects to close escrow on the land by July 15.
After the POST's $10 million loan, the district's share of the second phase of the acquisition will eat up $4.5 million of its $20 million land acquisition budget for 1999-2000. The $14.5 million it already paid for the first phase came out of the previous year's budget.
Britton says that the MROSD and POST will split the fundraising duties to cover the $10 million loan, which is due in three years. The district hopes to recover its half from grants, while POST will try to get matching donations from private sources.
Although the two organizations have partnered on preservation deals several times, POST initially said it wasn't going to be able to help the MROSD buy the land from Arlie--but that was when the district wanted $20 million, instead of the $5 million POST agreed to raise. The district also saw its revenue (which comes from property taxes) jump as it entered the 1999-2000 fiscal year, making it possible for Britton to commit more money to the purchase.
Under the deal, POST plans to buy the upper 805 acres for $10 million, then enter a five-year agreement with the MROSD, which will operate the preserve.
Although the buy is the most expensive in the district's 27-year history, the final purchase is slightly cheaper than an independent appraiser's estimate earlier this year.
The property in the Lexington Basin area abounds with springs such as this one.
Photograph by Christopher Gardner
Denevi's dream dashed
The deal permanently ends Pete Denevi's dream of turning part of the property into an 18-hole golf course, which he's been pursuing since 1981.
And Arlie--the landowner who sparked a controversy last year by subdividing the giant property into more than 50 potential home sites last year--walks away with $25 million from open space groups.
"I'm glad the damn environmentalists got it," said John Musumeci, the land acquisition manager for his wife's Eugene, Ore.-based Arlie, which bought the property in late 1997 for about $17 million. "They worked so hard for it. We didn't get what it was worth, but we're happy the community is going to get a park out of it."
According to Britton, the property may not be open to the public for as long as five years. The first thing the district plans to do is put up gates and fences around the land and make a series of improvements to the property. But part of the long drama that has unfolded over the land during the last few years isn't over yet.
Although the MROSD will definitely get title to the land, Denevi has threatened to sue the agency for interfering with his plan to buy and develop the property, and has filed suit against Arlie last year for breaking a deal to sell him the land.
"I warned Midpen that they'd get sued if they went ahead and did what they did," said Denevi, who puts his losses on the deal at $1.7 million over the last four years.
Denevi partnered with developer Barry Swenson, whom he brought in as a partner to help him come up with the money and develop the property.
Swenson and Denevi, along with three other real estate investors, created the Los Gatos Country Club LLC, an entity set up to buy and develop the golf course land. But now that the golf course is out of the question, that entity will probably dissolve.
Swenson and the golf course LLC are also plaintiffs in Denevi's continuing suit against Arlie. That suit was filed last year after Arlie ended Denevi's option. Although that suit is still pending, a superior court judge ruled in January that ownership of the property could be transferred while the suit was still pending.
Denevi and Swenson have until October to decide if they will take legal action against Britton and the board members.
Denevi blasted the district during the June 28 MROSD public hearing for paying the price they did for the land, and said it was ironic that there would never have been any logging on the property if his golf course plan had been approved.
Denevi, 73, a retired Los Gatos High School football coach, introduced himself as "the bad guy," making reference to the environmental groups that have opposed his golf course plan at every turn.
"I'm an environmentalist, just like you," he said. "I've been in love with this property since I was a teenager. We used to ride our bikes up there and go swimming on hot days. My dream was to build a golf course in Los Gatos, and I'm thinking today that that dream will not be realized."
After Denevi made his first attempts to buy the property in the early '80s, he spent the next dozen years trying to come up with the money to buy the 210 acres along Highway 17 and Bear Creek Road where he wanted to build the Los Gatos Country Club.
The entire 1,071-acre property, site of the former Alma College Jesuit seminary, was sold by the Jesuits in 1989 to billionaire Hong Kong casino tycoon Stanley Ho for $12 million.
The Jesuits built the novitiate in 1934 on what had been a private estate in the 19th century. The seminary moved from the site in 1969, but the remaining buildings served as the West Heights Christian School until 1994.
Denevi had an option on 211 acres and started negotiating to buy the land with the new owner, but Ho's company, Hong Kong Metro Realty, based in Madison, Wis., sold the entire property to Arlie in December 1997.
Earlier that year, Denevi submitted his application for the golf course to the county Planning Commission, but was turned down after environmentalists mounted a bitter challenge to the golf course. Preservationists claimed that putting a golf course on the hillside would ruin the viewshed in the area and that golf course chemicals could leak into the reservoir.
Denevi came back with a plan for a totally organic golf course, but the county ruled that he needed a $400,000 geotechnical study on the stability of hillsides in the area, and the project has been on hold since then.
The Arlie Battles
Arlie caused a stir with environmental groups in early 1998 when it started re-drawing property lines on the land based on a series of land grants issued by the federal government in the late 19th century.
Working with San Jose real estate consultant Velimir Sulic, Arlie filed for several certificates of compliance with the county, which would legally restore the original property lines on the property, while keeping the existing property lines.
The county granted more than a dozen certificates, which, because the old and new property lines criss-crossed each other, brought to about 54 the number of legally recognized lots on the entire property.
Arlie's next move would have been to apply for a lot-line adjustment that would turn the irregularly-shaped parcels and property lines haphazardly crossing the site into two-acre home sites along Bear Creek Road. County regulations limit hillside development to one unit per 160 acres, unless the development is clustered to save open space.
Arlie never applied for the lot-line adjustment, but it still had about 54 lots on the property, and the company started trying to sell the lots through a Marin County real estate broker.
Alarmed by that move, preservation groups leapt into action. The Sierra Club, Committee for Green Foothills, Friends of Bear Creek Redwoods and other groups spoke out against putting home sites on the property.
One Bay Area group, San Francisco- based Greenbelt Alliance, sent out a press release in March 1998, warning that "South Bay's Bear Creek Redwoods [are] threatened by luxury housing and golf course development schemes."
Arlie sued Greenbelt over the release in June, alleging that it led to negative publicity for the company, but a judge threw out the case in September.
Celia Thompson-Taupin, whose 50 acres on Chase Road border the property, is one of the coordinators of Friends of Bear Creek Redwoods. The group's 547 members spent the last few years eagerly writing and emailing officials and turning up the heat on them at public hearings on the golf course and timber harvest permit.
"It's been a long and difficult and often tedious story," she says. "It's been quite an education on how things work, and also a very encouraging one.
"This beautiful property will be available for the public to use," she adds. "I'm not happy to think of only the very wealthy having access."
Arlie sold the timber rights last year to Davenport-based Big Creek Lumber, a company with a reputation for environmentally sensitive logging, for $5.2 million.
Big Creek's timber harvest permit, which was issued in April, is for only 125 acres in one of the most remote corners of the property, along Dyer Creek. The company doesn't have logging rights to the lower property. Under state law, the company can only remove about half of the trees on the property, but Big Creek forester Eric Huff says they only plan to take about 40 to 50 percent of the available trees that are more than 24 inches in diameter.
Logging started in late May, but was soon halted after neighbors complained that noise from the operation was disturbing a nearby music conservatory for drummers at a mountain resident's home. Huff says that most of the trees that will be cut have already been felled, and that they will be removed from the forest once operations start up again, probably in late July.
After that, Huff expects that the rest of the logging will take another month or two, and that the whole operation should wrap up by the end of September.
Huff says he'll be working with an MROSD forester who will review the rest of the trees that have been picked for harvest. Big Creek is primarily cutting redwoods and Douglas firs, and is concentrating on removing diseased and misshapen trees.
Work to be done
The MROSD still has plenty of work left to do with the site before it opens the land up to nature lovers. Since the district started leasing the property in March, its crews have been putting up gates and fences around the perimeter to curb the widespread unlawful uses it says are common on the property, such as motorcycling, off-road driving and illegal timber cutting.
Other issues must still be resolved, such as the allowable uses and the nature of the improvements, but the district probably won't have the funding to get started on those issues until 2000 or 2001.
Some uses, Britton says, like four-wheeling or motorcycling, definitely won't be allowed because they're not permitted on any district land.
In the meantime, while the property is closed to the public, the district will deputize some neighbors and hikers who are familiar with the land to help manage the property by keeping a lookout for illegal users and just generally walking the land.
The usage study will probably cost the district between $100,000 and $300,000, but after that the MROSD may have to pay millions to demolish buildings, clean up toxic waste (if it turns up), pave a parking area, build trails and make other improvements.
The MROSD, a Los Altos-based public land management agency, is funded by property tax, and protects more than 44,000 acres of open space (including this purchase) in Santa Clara and San Mateo counties, stretching from south of Los Gatos to San Carlos, and from Skyline Ridge to San Francisco Bay.
POST is a privately funded, non-profit organization based in Menlo Park that buys land in San Mateo and Santa Clara counties.
Not to be left out, Arlie is keeping the best piece of land for itself--Musumeci and his wife, company president Suzanne Arlie, are hanging on to a six-acre parcel at one of the highest points on the property and about 50 acres between Highway 17 and Lexington Reservoir for themselves.
Musumeci says they might look into donating the property along the reservoir to one of the open space groups, but they're keeping the other parcel as a possible site for a new home.
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Los Gatos, California Since 1881
