Mayor Pro Tem Michael Maciel cast the dissenting vote, citing his mistrust in James Rogers, the chief executive officer of Spirit of California, and leader of the project.
Rogers has been criticized for not being forthcoming enough about his finances and how he is raising money for the project.
Council members were advised by city staff at the meeting to cease all negotiations with Rogers and Spirit of California.
The city sent Rogers a letter Feb. 7
asking for details of his finances. Rogers responded by letter Feb. 20 and appeared at the March 19 council meeting, where members voted to give him 30 more days to answer the city’s questions. He was again in front of the council on Tuesday because the council felt his financial proof was inadequate.
The Los Gatos-based developer is operating under an exclusive negotiating rights agreement (ENRA) — between the city and Tracy Blast LLC, but he said he needs to establish one between the city and Spirit of California for 628 acres of city-owned land to move the project forward.
Maciel told Rogers that council members “drew a line in the sand” in March and that Rogers provided only “a marginal level of cooperation.”
“I hope I’m proven wrong down the road, but I’m not optimistic that the information will come forward,” he said. “We stiffened our spines a month ago and said, ‘This is what we need to do, this is what you need to do or we aren’t going to play anymore,’ and I don’t think it was done, and we’re waffling if we approve this.”
During a nearly three-hour debate preceding the vote, Rogers told the council that he had investors ready to commit when they feel comfortable the city of Tracy is backing the project.
Rogers said he had about $2 million on hand from investors, including 10 Tracy residents who had invested at least $5,000 each. But to get the “big-money investors,” Rogers said he needs an ENRA with the city — which will serve as his “welcome letter.”
“It lets the investors know that you obviously aren’t going to grant an ENRA if you don’t want this project in your town,” Rogers said. “It’s giving me the opportunity for me to spend my money to bring something to you.”
Rogers said the Spirit of California is investing up to $2 million in financial models and studies that will prove that the project — which could top $1 billion — is a viable economic undertaking.
He said those models could take six months to finish and present to potential investors.
“That’s kind of a lot of proof,” he said. “I don’t want to get caught up in this and that and all of this. If I’m processing and moving forward and spending a couple million dollars on this property, is anybody really upset about that?”
Scott Roddy, a member of the National Development Council in New York City, is a consultant for the city. He recently analyzed the finances of the Spirit of California and told council members Tuesday that he felt there was a 10 percent chance the project would succeed.
Rogers told the council Tuesday that the Spirit of California had purchased stock in Autonomy, an automotive company that plans to make its initial public offering next month, and he expects to have at least $10 million available in two months. The stock purchase was meant to build a balance sheet for the Spirit of California.
The developer also told the council he could secure $300 million from an EB-5 visa program through the federal government. The program allows foreign nationals to obtain a green card if they invest $500,000 in an area that will create 10 jobs.
However, Roddy — who was paid $5,000 by Rogers for his work — said that a balance sheet for a new company like Spirit of California is “an empty suit” and that “what you’re looking for is economic substance.”
Companies capable of financing similar projects are more transparent in their dealings, he said.
“When you walk in and ask financial capacity questions, it’s obvious, you can see it from known investors, and those known investors who are able to meet their commitments is able to be verified,” he said. “It just isn’t present in this case.”
Roddy also noted that the Spirit of California would be unable to repay investors’ money if they were all to request a reimbursement.
Before the vote, Councilman Charles Manne expressed his individual concern that Rogers had not cooperated with the city’s requests and there was “too much uncertainty” with the project.
Manne said he couldn’t recommend approving an ENRA, “because my job here at the council is very simple: It’s to protect the citizens and be a good steward of the dollars they entrust us with.”
“There are a lot of questions in my head and right now I don’t have the comfort level to continue this dance,” he said. “Mr. Rogers did take initiative and provide letters of reference, or letters of referral, on certain items, but nothing that I take as substantial.”
However, Manne would later bring the issue to a vote by seconding a motion by Councilman Robert Rickman to approve an ENRA with Spirit of California.
Rickman said he wanted benchmarks in the ENRA requiring Rogers to complete certain tasks at designated times. He countered Maciel, saying that the council hadn’t drawn a line in the sand and that members shouldn’t be too quick to dismiss his ideas.
Councilwoman Nancy Young said she was excited about the potential for jobs and local attractions in Tracy. She wanted to give the project a chance, because “we are possibly on the brink of history here.”
However, Young also recalled a statement her pastor made about giving people enough rope to hang themselves.
“If it’s something that’s good, it’s not going to hurt them, but if it’s something that’s bad, they’re going to hang their own selves for everybody to see and it’s clear,” she said. “I think that it will be good for us to give the opportunity for this to happen.”
Mayor Brent Ives said the only loss to the city right now is the time city staff members spend working on the project. Spirit of California is reimbursing the city for labor costs — which is typical for a developer during the process. Ives did not account for the time lost to other projects.
The city was unable to provide an exact number of staff hours dedicated to the project, because multiple departments are working with Spriti of California and a total wasn’t available Thursday, May 23, according to Monica Gutierrez, management analyst for the city of Tracy.
She did state that the city of Tracy had been working with Tracy Blast LLC since April 2011, and that the company put down $25,000 to cover staff time associated with the city processing its ENRA. In August 2011, the city entered into a cost recovery agreement with Blast, Gutierrez stated.
During the meeting Tuesday, city staff confirmed that no other developers have shown interest in the land that Spirit of California is negotiating to use and that the company’s financial balance with the city is fully paid at this time.
“I think Councilwoman Young said it very well — give him the rope he needs to either go out and swing away on it or to hang himself,” Ives said. “The project is worth that to me, because in general terms, most people would like to see a project like this in Tracy.”
All the council members individually stressed to Rogers that the ENRA was a gesture of support and not an endorsement of the project.
However, the investor section of the Spirit of California website on Thursday stated that the passage of the ENRA showed the city was backing the project.
“The City Council has expressed unanimous interest in having this entertainment park in their City,” the website states. “The City of Tracy has granted us a 3-year ENRA (Exclusive Negotiating Rights Agreement) due to the City Council’s full support of the project.”
The city staff will begin identifying benchmarks and requirements for the ENRA and present a draft for approval by the council in the coming months.
Rogers said he could work closely with the staff to “get one done in two weeks,” but City Attorney Daniel Sodergren told the council it would take 60 to 90 days for the city staff to thoroughly complete the process.
• Contact Joel Danoy at 830-4229 or email@example.com.