The City of Hanford now owes Helena Agri-Enterprises $12 million after the Hanford City Council voted to settle a lawsuit by the company against the city. After an initial payment of $7.5 million in 30 days, the city must cough up the remaining balance in annual installments beginning on March 1, 2024.
A ten-year legal battle between the two entities was settled with the council’s vote on January 31.
But while one chapter comes to an end, another now begins – and the citizens of Hanford are asking: how did this happen?
During the meeting the council voted 5-0 to settle the suit and agreed to the payment schedule.
According to the agenda packet, Hanford’s general fund of unrestricted money only has $5.5 million in cash that can be paid without internal borrowing. City Manager Mario Cifuentez told the Hanford Sentinel that the city had several funds to borrow from but hasn’t identified which one makes sense.
A press release was disseminated minutes after the council’s meeting ended, indicating that city staff likely had a good idea what the vote would be.
“It’s important for the public to know that this settlement will not impact the City’s ability to continue to provide essential services to our residents, such as police and fire services,” Mayor Travis Paden said in the statement.
“Helena was seeking damages of $38 million plus interest and attorneys’ fees, for an amount exceeding $50 million,” the press release added.
If the council had not voted in favor of the settlement, the trial was set to start on Monday, February 6.
Several people in the audience, joined by Hanford Councilmember Lou Martinez, asked that the council delay the vote for the sake of transparency. Because of the city’s new website the public was not sent notice of the special meeting that was set at an odd hour, 3:30pm.
Megan Dodd, from the Griswold LaSalle Law Firm – which has represented the city since 2007 – said the court gave a “hard no” to requests for a delay.
As for the council, the settlement amount was far preferable to potentially losing $50 million at trial.
“I am not OK with gambling $50 million of taxpayer money. It’s playing roulette and that would bankrupt us,” councilmember Kalish Morrow said. “I don’t see this going our way if it goes to trial.”
Newly elected councilmember Mark Kairis said he trusted the experts’ analysis of the situation.
“Yesterday evening I didn’t sleep well – at all. But, I am going to rely on staff, city attorney’s office and the information I have been provided to make my decision,” Kairis said.
But many members of the public believe that trusting the experts is what got Hanford in this predicament.
“I met with Darrel Pyle, the former city manager, [Griswold LaSalle attorneys] Bob Dowd, Ty [Mizote], and Mario Zamora, and they sat me down at a large table and said this is what we have – and they don’t have a case,” former Hanford City Councilmember Art Brieno said during public comment.
Former council member Francisco Ramirez echoed Brieno’s statement and said he was upset at the lack of transparency and minimal notice of the special meeting.
“For the last eight years that I was on the council, there was no indication we were in the wrong. Our city attorney said, ‘we have no liability,’ ‘we have no liability,’ and once again, ‘we have no liability.’ And now two months after I have been out of office we have a $12 million liability!,’” he said.
Bob Ramos, a Hanford resident who regularly attends the city council’s meetings, concurred, saying that city leaders regularly said “they don’t have anything on us,” and “they won’t win.”
“I feel we have been betrayed, us the citizens, we have been betrayed,” Ramos said. “I think there has been a failure with Robert Dowd’s office [at Griswold LaSalle], including Ty [Mizote].”
Ramirez and Brieno both stated Hanford should be looking for a new law firm to represent the city.
Ty Mizote, an attorney with Griswold LaSalle who serves as the Hanford City Attorney, characterized the root of the legal fight as a disagreement between two developers.
“In an effort to be business friendly, in 2013 the city was willing to work with Helena on zoning issues and it put the city in a difficult position between two long term tenants,” he said.
Martinez summed up his feelings on the matter in one statement.
“Hanford dropped the ball,” he said.
In the beginning, there was farmland
In 1955, before the advent of big box stores, back when Highway 198 wound its way to Visalia as a two-lane oak tree-lined road, a fertilizer company set up shop at the intersection of Lacey Avenue and Highway 43.
Wanting to expand, Helena bought the property in 2011 and moved their fertilizer manufacturing plant from its 11th street location in Hanford to their new, larger parcel.
What the company didn’t realize is that when the City of Hanford annexed the area around Highways 43 and 198 in the 1980s, it was rezoned from industrial to “service commercial.”
That made the fertilizer plant a non-conforming use of the property.
Because a fertilizer plant had continually operated on the parcel since 1955, Helena was grandfathered in and could continue operating, but they could not expand or make improvements without action from the city council.
Helena asked the city council to amend their zoning ordinance and they did.
“On November 18, 2014, the Hanford City Council approved a municipal code amendment allowing expansion of Helena’s Facility on East Lacey Boulevard. The Council voted 3-2 to approve a municipal code amendment to allow “enclosed storage, blending and sale of bulk and prepackaged dry and liquid fertilizer for retail use” in the city’s light industrial zones. The council also approved a permit that would allow Helena’s existing operations at its current location to continue without restriction, and to construct its planned 24,650-square-foot warehouse for its expanding operations,” the company’s 2017 lawsuit reads.
But real estate developer John Kashian bought a large parcel across the street from Helena because it had been rezoned service commercial. He had already spent years developing a site plan and jumping through the permit processing hoops, ultimately luring Costco to anchor his project.
Kashian had broken ground on his project never suspecting the city would change its zoning.
Following the city council’s vote, Kashian ordered his engineering firm to stop work on the project and said he would not resume until the council rescinded its vote on the zoning.
“Allowing the agricultural fertilizer retailer to expand would not be compatible with plans to build the 500,000-square foot Hanford Marketplace shopping center with stores and restaurants,” he stated.
From Helena’s viewpoint, Kashian knowingly set a shopping center across the street from a chemical company that produced fertilizer.
From Kashian’s perspective, his development conformed to the current zoning, and the fertilizer company would not have had an impact on the development – as long as it didn’t expand.
The city stepped in to resolve the conflict, by not following through on implimenting the zoning change and offering to shuffle Helena off its existing property.
It offered “to acquire from Helena the Lacey Property in exchange for the Kings Industrial Park Property. The City also agreed to pay for the relocation of Helena’s existing improvements to the new site and, if not feasible to move, then to construct equivalent new improvements on the new site at the City’s sole cost and expense.”
According to the 2017 suit, the Hanford council met on November 25, 2014 to negotiate a relocation agreement, ending in a binding contract and a memorandum of understanding (MOU).
The MOU, signed by all the city council members and city manager, stated that the agreement was “binding.” But the MOU also said the agreement was “contingent upon the execution of a definitive agreement that is agreed upon in writing by the parties, and contingent upon receipt of all corporate approvals.”
While that “definitive agreement” never happened, Helena declared the agreement as “binding.”
Who is to blame?
Over the last ten years Hanford City Council Members and city staff have come and gone. but there has been one constant: Hanford city’s attorneys, Griswold, LaSalle, Cobb, Dowd & Gin LLP.
Did Hanford get stuck paying a $12 million settlement because of bad legal advice?
Mizote said the city council’s decisions over the last ten years came down to finances.
“We give legal advice, not financial advice,” he said.
Even though Mizote agrees $12 million is a lot of money, he said had the city signed the past negotiated agreements it would have cost the city much more.
There were two pivotal events in the negotiations between Helena and the city, he said: the 2014 MOU and the 2015 “definitive agreement.”
When the MOU was signed by the city council, Mizote said it did not have a cost estimate.
Helena estimated it could $9 million to relocate their company to the industrial park, Mizote said, which the city would be obligated to pay; then, he says the number went up to $11 million – and may have even gone higher.
At that point, Mizote said the city decided the MOU did not have a sufficient benefit for the cost, and the next few years was spent hashing out an agreement.
In 2015, the City of Hanford and Helena negotiated for months producing eight or ten drafts.
Both sides were doing their due diligence and trying to find an equitable solution, Mizote said. When the city was told it would need to pay $14 million to move Helena to the Kings County Industrial Park, the city again voted against the agreement.
Mizote said the council at the time didn’t think they had the funds, nor did they think there was a sufficient cost-benefit to the city.
With a good-faith agreement on the table, it was inevitable that someone would sue if it was not signed and acted upon.
When the city declined to sign the agreement, Helena amended a lawsuit they had filed in 2017 and re-filed it against Hanford for breach of contract in 2018.
Mizote pointed out that if the council had signed the agreement it would have cost the city $18 million in 2023 dollars.
Conclusion
Mizote’s opinion was that the city ended up paying less than if it had gone forward with the MOU or the definitive agreement — “and Hanford got a Costco out of it, which the residents really wanted.”
Brieno exclaimed, “You backed out of an agreement you had. But Hanford’s legal counsel told me we had no agreement. They said we had an agreement to go into an agreement.”
“And that was the city’s defense,” Brieno motioned with his hands up in the air in disbelief.
Whether it was the fault of John Kashian, Helena, Hanford’s city council, or the city’s attorney — it doesn’t seem to matter now.
As Ramirez said during public comment, “Now we know where the cannabis money will be going.”
When the city received the 13.5 million from feds. for covid19, city manager moved 8 million to general fund, he must have know back then the 7.5 million would soon come to council for vote, there is funny smell in regards to this issue.