Rancho San Carlos: Developing a Vision
Planned development on the 20,000-acre Rancho San Carlos could make it worth $1 billion. Incredibly, owners say they can make their money and save the environment at the same time.
Thursday, December 10, 1992
Japanese investors. A gated community. Golf memberships. Sound familiar? Well, the next Pebble Beach may go by the name of Rancho San Carlos. And plans to develop the largest privately-held piece of property in Monterey County into a luxury gated community with golf, an equestrian center and hotel could bring hundreds of millions of dollars to its investors or be stopped dead in its tracks by a lack of natural resources. Either way, the unique approach its developers want to take in conserving large portions of the property while carefully developing just 10 percent of the land could well stand as a model for how development is done into the 21st century.
Rancho San Carlos, a 20,000 acre piece of property just south of Carmel Valley has primarily been a cattle ranch for centuries. Sold by one family after another for financial reasons, the property was most recently purchased in 1990 for $70 million by the Rancho San Carlos Partnership (RSCP) from the Oppenheimer family. The Partnership’s two general partners are A Plus Co., Ltd., formerly Daishinpan Co., Ltd., a Japanese finance company associated with Sanwa bank; and Las Garzas Associates Limited Partnership, which includes San Francisco-based real estate development and management corporation Pacific Union as a partner.
Those groups and the convoluted list of other limited partners now own a singularly spectacular piece of property. If not pristine (the ragged, grazed filed lined with over 100 miles of fence are anything but wild), the Rancho is certainly spectacular in its size – 1 ½ times as large as Manhattan, 2/3 the size of Fort Ord and approximately the same size as Carmel Valley.
From rolling hills overlooking the Pacific to rich redwood canyons and oak-dotted savannahs, the Rancho supports an unusually diverse collection of wildlife within close proximity to the Peninsula. Everything from woodpeckers and owls to hawks and eagles live off the land along with 10 species of bats. Hundreds of black-tailed deer roam the property along with fox, bobcats, and mountain lions. Those native animals have been joined in the last century by imported game – wild turkeys and Russian boar – the latter of which have done untold damage on the ranch, turning over acres of topsoil in search of food. Only fences will keep them back.
Rancho San Carlos: Who Are the Players?
THOMAS GRAY | RSCP Affilation: Managing Partner of Las Garzas Association, the development and achievement partner of RSCP; President, Pacific Union Properties
Work History: Over 25 years in real estate. Former Executive VP and CEO of Wells Fargo Mortgage Company, former President of Wells Fargo Realty Services.
Education: BA, Stanford; MBA, UCLA
JEFFREY FROKE | RSCP Affiliation: Natural Resources Manager, President of the Rancho San Carlos Foundation, a non-profit formed to encourage public appreciation and understanding of nature in Monterey County. Joined Pacific Union in 1991.
Work History: Over 18 years in land conservation. Former Associate Director of Sanctuaries for the National Audubon Society; former wildlife inspector for US Fish and Wildlife, former California Park Ranger.
Education: BS, Humboldt State; doctoral candidate, UCLA; Loeb fellow, Harvard University
DON WILCOXON | RSCP Affiliation: Rancho Operations Manager, Project Manager. Joined Pacific Union in 1985.
Work History: Former investment banker with Goldman, Sachs, Company in New York.
Education: Brown University; MBA from Stanford.
JAY GENTRY | RSCP Affilation: Marketing Director since 1991.
Work History: Former sales, marketing and employee training specialist with Xerox Corporation and Tratec, Inc.
Education: BS in Business from UCLA, distinguished graduate from the Air Force OTS and Flight School.
Now those boar are being joined by what some say is a similar-minded two-legged cousin, with plans to turn over topsoil for profit. Already local environmentalists are calling the regulatory fences to go up against the Rancho San Carlos Partnership.
That’s because they plan to integrate into those wide open spaces and spectacular mountain peaks 300 multi-million dollar estates. But getting to the point where homes are build (RSCP estimates sometime in 1995) will involve the completion of scores of environmental studies. Both the Planning Commission, which is considering a land use designation right now, and the Board of Supervisors, who will ultimately decide the maximum density, could derail the project plans. And in the end, it might mean that RSCP will be forced to play the trump card that could ensure the success of their development plans – the threat to sell off the Rancho into over 100 lots of record.
If the above sounds like an oxymoron, the guys at Rancho San Carlos will assure you it’s not. As diverse as the Rancho’s flora and fauna is the team of 40 consultant companies and over 100 professionals that RSCP has assembled to study the property and provide the background information needed for a project. In the last two years, hydrogeologists and archaeologists alike have covered every acre of the property, compiling data on and analyzing the environmental and historical attributes of the Rancho. Additionally, RSCP’s Natural Resource Manager Jeff Froke is a wildland ecologist who was Associate Director of Sanctuaries for the National Audubon Society for over a decade.
“They’re quite unusual,” says Andy Johnson, president of Conservation Advisors, a group hired by the Big Sur Land Trust to look into RSCP’s intentions. “Most developers are out to max out the property. I think they [RSCP] have in their approach the understanding of the importance of maintaining the quality of the environment they’ve acquired. They are really doing more than their share to come up with a unique solution.”
RSCP could just be doing the environmental research to push their plans through the process a little faster since they have to do a project environmental impact report anyway. But RSCP Managing Partner Tom gray says it’s more than that. “If there were no planning process, no regulation in Monterey County, we would be doing the same thing for this piece of land,” says Gray. “From an economic standpoint, the true value of this piece of land is in its natural resources and protecting them will maximize that value.”
$70 Million and Counting
It takes money to make money – in this case, lots of it. Gray estimates the final investment will be “on the order of $200 million,” though he refuses to tell Coast Weekly how much investors stand to gain.
But a conservative estimate on the gross sales of homesites alone would be $300 million. Add to this the value of an exclusive golf club and resort hotel and it potentially becomes a project equivalent to Pebble Beach, a property valued in excess of $500 million.
With millions at their disposal, RSCP has been able to buy the best of everything – consultants, a high-tech computerized Geographic Information System to analyze data gathered on the ranch, even the inside know-how of the man who some say was the county Planning Department’s sharpest staff member. Joel Panzer, who’s now working as a consultant for RSCP, says he intended to leave the department anyway in 1990. Now his knowledge is a distinct advantage for RSCP as they go through the planning process.
Using the huge amounts of data gathered thus far, last month RSCP announced broad details of their 20-year plan for the development and preservation of the property, with an emphasis on preservation. If development is dirty, then RSCP is maybe just a little dusty. “Carefully placing 2.5 acre homesites in this patchy landscape does not change the overall texture of the landscape,” says Froke, “and in fact, in cases where we’re looking at overgrazed and stressed pastures, they can be viewed as local enhancements to the area.”
Claiming that development is an enhancement to open space is only one of the statements that’s raising the hackles of local environmentalists. “You can spell out environment in all kinds of capital letters, but it’s still a project,” says Don Gruber, chair of the Sierra Club’s RSC Committee. “I want people to look through all that sales rhetoric and see that the basis of this thing is it’s a development and the bottom line is money.”
“It bothers me that a small but outspoken number of people see us as just another bunch of developers here to rape the land, make a profit and split,” counters Froke, who points to the fact that each of RSCP’s main employees plan to spend the rest of their careers working on the project. “We care as much if not more about the land than our critics. This is not just for our own selfish purposes.”
The Sierra Club argument is not lost on Pete DeSimone, manager of the Audubon sanctuary in Orange County that Froke used to manage. DeSimone’s still fighting golf course runoff from a nearby developer with whom Froke tried to negotiate environmental protections. “Things aren’t always what they seem,” DeSimone Says. “The impacts were greater than we thought.”
Froke explains that the project ran into problems because environmental mitigations would have been paid for through profits from the third and fourth phases of the development, which were never built.
Froke says what he learned from mistakes in that project is now reflected in RSCP’s plan. “It’s important that the landowner be committed at a philosophical, practical and financial level, but also personally have a real commitment to environmentally sensitive planning and construction,” he says. “Rancho San Carlos today has the greatest potential of any property I know in the country, preserve or development, to create a truly sustainable conservation management program.”
Still, the Audubon’s DeSimone says if hard questions are going to be asked, now is the time, “I’ve seen developments get ‘sold’ to the planning commission or boards with good rhetoric and a minimum amount of information that lacks some kind of continuity with reality,” he says.
At one time, the Oppenheimer family had talked about an 11,000-unit development. Carmel Valley currently supports over 6,000 units. What RSCP is looking at sounds minuscule in comparison, but still represents a “substantial subdivision,” according to the Monterey County Water Resources Agency: 300 homes, 50 employee housing units, a 150-room lodge, a golf course, an equestrian center and a village center with a general store, a gas station, a post office and possibly even dry cleaning.
40 Acres and Some Rules
The home sites, from 10 to 50 acres each, would start at a sale price of around $1 million and go oup to several million dollars. RSCP would provide basic infrastructure, like roads, water lines and utilities. Individual property owners would be responsible for the construction f their homes, but would have to follow lot-specific guidelines and restrictions with regard to size, location and other factors. “Never will a home become the horizon. Every homesite will have its own set of restrictions,” says Gentry. “We anticipate a few selected homesites where you might be able to keep your horse with you or raise a half acre of grapes.”
For instance, one home site currently on the drawing board would be developed without changes to trees or riparian zones on site and with additional tree planting to mask the home – a low-profile, single-story structure with a maximum of 7,000 square feet and contours to match the slope. Additionally, homeowners would be restricted to altering only those landscapes within an approximately 2.5 acre “housing envelope” on their parcel.
Why will buyers spend millions of dollars to have someone else tell them how to build their house? “What people are buying is the opportunity to live in a natural setting and the certainty that the setting, their view and that place will never change,” says Gentry. “Nobody’s going to build a house or a 7-11 in front of them. Where you build, you look out there and see what your children are going to see.”
What homeowners at RSC will look out on is a Community Preserve – made up in part by a required easement from their acreage, and supported in party by an endowment from the purchase price of their parcel. RSC property owners will own 8,000 acres of “openlands” and will give up conservation easements totaling 6,000 acres. The rest will make up homesites, recreation and commercial areas. The remaining 12,000 acres of “wildlands” (all inappropriate for development anyway) will be deeded by RSCP itself. The Preserve will be deeded to remain in its natural state in perpetuity and the ongoing cost of managing (an estimated $2 million a year) will be virtually assured. A portion of the lot sales plus a donation from RSCP will combine to create the approximately $30 million endowment needed to fund Preserve management forever.
What about county affordable housing requirements? RSCP says that they have the answer, in the form of 50 employee housing units they plan to build on the Rancho.
RSCP says that they would serve as a significant traffic mitigation for the project by cutting down the commutes by restaurant and hotel workers. But just like every other unit on the Rancho, employees would probably have spouses working somewhere else, meaning there would be at least one member of each family commuting the eight miles from San Francisquito Flat to Carmel Valley Road daily, then down the road in either direction. Add an extra trip to get kids to and from school and you have one more round trip than a single employee working on the ranch would make just commuting to the Rancho.
Already, twelve of the employee housing units have been approved to replace dilapidated homes currently on the ranch.
The remaining pieces in RSCP’s development puzzle are the more controversial because they go above and beyond simple housing. The concept of an Equestrian Center, with a series of barns, stables and paddocks in the San Francisquito area, surfaced more recently and has received little criticism, possibly in part due to the fact that horses have always been a part of the working ranch.
Similary, the “rural village” concept hasn’t been actively challenged, though there are some unanswered questions. While RSCP says they will build just a grocery store, gas station and post office with a total of 5,000 square feet, they are asking the county to approve a land use designation that would make the entire San Francisquito Flat area (a total of 440 acres) a “light commercial and visitor services” area with one unit per 10 acres density. There would be no built-in cap on construction of commercial space in that area. But RSCP says studies to date look at impacts of 5,000 square feet of commercial space – making that a “de facto” cap.
As well, RSCP’s intention for a 150-room lodge is sure to be an ongoing issue. Atypical to most hotels, the vision for the Rancho lodge would be for separate units, in a Post Ranch-style arrangement (Big Sur’s Post Ranch is coincidentally managed by Pacific Union Hotels). The lodge would have a restaurant and be located in a valley near San Francisquito Flat. While RSCP says they would need 150 rooms to “make it economically feasible,” the county planning staff is recommending a land site designation that would allow just 100 rooms.
Golf: A Good Project Spoiled?
The concept raising the most ire from environmentalists and neighbors is the idea of a golf course on the property. “We anticipate a private rather than a public golf course, primarily because of the traffic,” says Gentry. “We anticipate that there would be memberships sold. The idea is that it would be a relatively low usage course.”
But Gentry stresses, “This is not a golf project. If people begin thinking of this as a golf project, they’re really looking at a tiny, tiny part that we’re not even sure we’ll be able to do.”
Yet one site just off Robinson Canyon Road and two in other portions of the Rancho are being explored as possible locations for a course, though Gentry stresses RSCP would only build one course. All of the sites are in areas that drain into major water sources – two lead to the Carmel River, the other is positioned so that rainfall and runoff ends up in the San Clemente dam, which in turn is a major source for the Peninsula’s water supply. But concerns about the amount of water a course would require don’t worry some as much as the threat of nitrate contamination from pesticide use on greens.
“We say no way. We don’t want a golf course in here. The major concern would be the drainage into the Peninsula’s water supply,” says Mike Dormody, the 33-year owner of San Celemente Rancho, a 2,000 acre property adjacent and just downstream of RSC. “The only way you make a golf course green is through nitrates.”
“There’s no reason why contaminated waters need to run off a course into any neighborhood watershed. It is possible to design and build courses which would have both a restricted water need because of small irrigation areas and second, incorporate runoff capture and reuse,” says RSCP’s Froke. “Most course problems should be dealt with without chemicals. This is not a chemical-free course, however.”
Golf or not, RSCP will be catering to a wealthy crowd that relishes open space without a lot of people. Like Pebble Beach, RSC would be gated. Unlike Pebble Beach, the public would only be allowed in for arranged, educational guided tours of the property or for dinner at the lodge’s restaurant. By and large, the 18,000 acres of Community Preserve would be for the community – of the Rancho.
Boon the County
While RSCP would get some kind of tax break on the property they deed to open space, home site owners would pay the full assessed property tax value of their property. Currently, RSCP pays approximately $780,000 a year to the county in property taxes. With 300 homesite owners, the county could more than triple its assessed taxes on the property. With a value of at least $1 million on each undeveloped site, the county would be assured a minimum of $3 million a year in property taxes.
Incredibly, add to that the $30-50 million RSCP estimates will be generated each year during the 15-year construction process and the RSCP project could make up for almost half of what the Fort Ord Task Force has estimated as the annual impact of the departure of Fort Ord over the first five years.
There’s just one catch: RSCP says it will be unable to commit to the Community Preserve plan unless the county creates a land use designation in line with RSCP’s plan – a designation that would fly in the face of advice from a carefully researched environmental impact report.
“Lots” of Controversy
RSCP’s property falls into three county planning areas: the Greater Monterey Area Peninsula Plan (GMPAP), the Carmel Valley Master Plan (CVMP) and the Local Coastal Plan zone (LCP). Already, the approximately 2,400 acres in the CVMP have land use densities that would allow up to 240 homes, and the nearly 600 acres in the LCP allow for up to 14 homes – a grand total of 254 potential homes. The designation for the largest piece of the property, 16,967 acres in the GMPAP, is still up in the air because of a 1984 lawsuit.
Now, the final draft of an EIR on that acreage has become available and the 10-member Planning Commission is set to make a recommendation to the Board of Supervisors on the appropriate density.
How much growth can the land and surrounding areas sustain? The EIR suggest that one unit per 160 acres is the “environmentally superior alternative.” That would allow for a maximum of 106 units, plus the 254 in the other zones of 360 over the entire RSCP property. Caltrans, the county Environmental Health Department, the California Native Plant Society and the Department of Fish and Game all agreed with that designation in written responses to the EIR.
Yet, RSCP is pushing for a designation of one unit per 40 acres or a possible 424 units in the GMPAP, making a grand total of 678 units possible over the whole property. Still RSCP vows to build just 500 home and hotel units over the entire property.
The Planning Department staff recommendation generally matches RSCP’s plan, agreeing that the Commission should designate one unit per 40 acres, but with a maximum of 100 hotel rooms.
“Why with everybody recommending 1/160 would the staff totally reverse their position and recommend 1/40 acres?” asks neighbor Dormody.
“Basically, we looked at the EIR and the level of significance of the impacts as identified in the EIR for the different alternatives. Then we also took a look at a lot of different issues, like lost of record and surrounding land uses,” says Linda Weiland, project planner for the county, adding that RSCP’s rough proposal for development also figured into the staff recommendation.
But more importantly, “We don’t’ want to put them in a position of having to sell off the lots of record as opposed to a more comprehensive us,” admits Weiland.
“We do not consider that a valid reason,” counters Dormody. “County staff is not supposed to make decisions based on whether the developer can make money or not.”
In fact, the lots of record are a strong leverage point with the county. With nearly 100 lots of record already established over the 20,000 acres, RSCP is in the process of establishing close to 30 more. According to the Planning Department, those lots collectively could represent a much greater environmental threat than RSCP’s current concept does. If the lots were sold off to 130 individuals, each could apply for a higher density and potentially get a subdivision permit. “They would each want their own individually designed road,” says Chief of Planning Services Nick Chiulos. “It rally would carve up the ranch in a way we think would be damaging to the environment.”
It is also unlikely multiple owners would be willing or able to provide the kind of regional vision and cooperation or environmental sensitivity RSCP is promising. Certainly, preserving 18,000 acres of the ranch would be an impossibility.
Yet, if the county sticks by the EIR-recommended one unit per 160 acres density, significantly fewer units could be built by those individual owners – just a total of 379 units.
“The only reason I talk about lots of record is so that people understand the history behind this ranch and what it means for the future of the ranch if our alternative for the ranch is not supported,” says Gray. “I don’t really see how at any densities that are lower than [one unit per 40 acres], that anyone would find it economically feasible.”
“There’s still plenty of money there for everybody to make – to develop the less sensitive areas at a density of one unit per 160 acres,” says Dormody, “and they can still be a leader in environmental development.”
But RSCP isn’t asking for carte blanch on the one unit per 40 acres designation. At the November Planning Commission hearing on the land use designation, RSCP presented a computer-modeled map of the GMPAP part of the property as they believe it should be designated (see map, page 14). RSCP asked the Commission to adopt the map as part of the land use designation – to tie RSCP or any future owners to building only in the areas which can sustain development.
Suggesting the map is intended, says RSCP, to put the development in “appropriate” patterns, but is also a matter of pragmatism. “Unfortunately, the history of anything like this is that the legal process begins where the planning process ends,” says Gentry. “Every ambiguity costs us and the county time and money.”
Air, Water and Traffic
Approximately 50,000 acre feet of water fall on the ranch in year and RSCP wants to use around 1,000 of it. “It’s real obvious that water is a scarce resource on the Monterey Peninsula,” comments Gray. “We can only take groundwater from Rancho San Carlos in a responsible manner that doesn’t have any impact offsite – doesn’t’ take water away from our neighbors and doesn’t damage any of the on-site resources.”
That may be tough in an area where water resources are already stretched thin. RSCP’s desire for the one unit per 40 acres density is already drawing heavy criticism from Monterey County Environmental Health Director Walter Wong. Wong says the water sources on the Rancho are still so unknown that he is supporting the one unit per 160 acres density until definitive studies on water are completed. “This is a critical issue when you’re zoning things when you don’t know if there’s enough water. If you don’t have any water, why proceed?” asks Wong.
Claims of finding independent water sources is still a sore point in the area after Carmel Valley Ranch’s phantom “Tularcitos aquifer” failed to yield what studies said it would at the completion of the development. “This is one where we’re saying you’d better tell us where your aquifers are,” says Wong.
Additionally, Wong points to preliminary RSCP findings for 33 wells drilled around the property that he says conflict with well driller’s reports submitted to the county. The most glaring discrepancy is on one well where RSCP claims a flow of 200 gallons/minute while the well driller recorded just 40 gallons/minute.
Clifford Wallman, RSC Project Hydrogeologist with Todd Engineers, says the numbers differ because the well drillers only pumped the wells for a short time initially. Wallman says since then, each well has been run for a full day, providing more accurate information. “I’m very confident that we’re going to come to an agreement on the number we submitted,” Wallman says.
Traffic and access to the ranch will be another stumbling block in the process, especially because part of the staff recommendation about the GMPAP designation is that Rancho San Carlos Road be improved and serve as the primary access to the ranch. The county would require that Robinson Canyon Road, a county-maintained road that runs in a series of hairpin turns through the property, only be used for emergencies. But RSCP is wary of that requirement – monitoring road use would be tough at best, so they’re requesting that part of the recommendation be reworded.
Regardless, RSC traffic will have a significant impact – an estimated 5,400 trips a day – on traffic along Carmel Valley Road, and thus, the already heinous intersection of Highway 1.
New RSC property owners may actually end up being a major subsidizer of road improvements in the area. Recently approved developers fees for Carmel Valley road improvements – set to be $13800 for a home on a new lot and $15,000 for each hotel unit – will apply to the Rancho, according to Gray. “We will certainly pay our fair share of those road improvements,” he says.
But paying Carmel Valley fees won’t soften the blow of adding thousands of trips to Highway 1, Highway 68 and other already overburdened thoroughfares in the area. If RSCP’s project goes through, residents can count on the call to build the proposed Hatton Canyon freeway to grow louder in coming years.
Air quality will also be affected by development on the Rancho. According to the EIR, Rancho San Carolos Partnership’s proposal would generate nearly a ton of pollution day – well above the 150 pounds/day the Monterey Bay Unified Air Pollution Control District considers a significant level of pollution. The district will offer opinions about the project once there’s a specific plan on the table, but Air Pollution Control Officer Abra Bennett says, “The district role is limited to providing an analysis. It’s up the county to figure out whether to implement measures.”
Other miscellaneous issues such as fire safety, noise and schools will come up when RSCP submits their project plans. But the Sierra Club, among other groups, feel the area plan EIR should reflect more. “We don’t feel that supplemental EIR provided sufficient information on air quality, on traffic and on water to support the development,” says Club Coastal Chair Janie Figen.
Developing a Vision
As public agencies find themselves with less money to pull off land acquisition and maintenance, private groups like land trusts and developers are being relied upon increasingly to preserve open space. “Thirty years ago it might have made sense to transfer that land to public agencies,” comments the Big Sur Land Trust’s Brian Steen, “but given restrictions on money and management personnel, it can be better handled in the private sector.”
Developers in particular may find that as resources become scarcer, they will be relied upon to provide open-space easements as an integral part of developments, rather than a last-ditch bargaining tool to push a project through.
Gloria Root, the consultant who produced the EIR for the county, observes that RSCP is the first property owner to know more about the land than she. “What we’re experiencing in our company is an interesting shifty to the private sector funding its own serious environmental planning. I think the developers are changing,” Root says. “I think they realize environmental values are widely shared and they need to work them into their plans.”
While RSCP talks and acts the part of the environmentalist, there are those who are still wary. “Deep in my heart I truly believe that property ought to remain as rural grazing,” says the Sierra Club’s Figen. “I don’t see that that’s possible and maybe this the best that can be done. I am truly worried.”
“I know why people would be skeptical and cautious,” answers Froke.”I’ve seen and suffered bad development done by people who have no business owning or developing some very precious landscapes.”
Ultimately, Rancho San Carlos has the potential to fall into unconcerned hands. Once a land use designation is handed down by the county, there is nothing to keep RSCP from selling off Rancho San Carlos in part or in whole to someone who might attempt to develop every last of the allowed units on the property. Public commitments can been broken. Environmental analysis can been wrong. And what is predicted on paper doesn’t always match what happens.
Members of the Rancho San Carlos Partnership say they’re different, but they too have a bottom line – a set of investors who have already dished out more than $70 million with the promise of a return.
“The way I see it, in the 21st century there is going to be a continuing and growing concern about the environment and people’s relationship to the environment,” says Gray. “We’re trying some concepts here at Rancho San Carlos: How do we set up a balance between people living on the land with the wildlife and natural resources? I call in balancing the economic and environmental equations. If those equations can be brought into balance, then you have a sustainable future for the land.”