The Gwinnett County school district apparently paid an inflated price for land in 2008 from a developer who is at the center of a criminal investigation into earlier land deals with county government, an Atlanta Journal-Constitution investigation has shown.
The district paid $6.94 million for the 103-acre parcel near Dacula — more than three times what developer David Jenkins paid for it 4 1/2 years before — with plans to put a middle school there.
Two Atlanta-area real estate analysts who reviewed the transaction for the AJC estimated that the value of the property at the time was no more than $5.18 million.
Had the district paid that price, taxpayers would have saved $1.76 million.
The purchase came to the rescue of Jenkins, who had abandoned plans to build a nearly 400-home subdivision on that property and a smaller tract across the road. Most of his remaining land fell into foreclosure.
The school district official in charge of buying land, Chief Operating Officer Jim Steele, said in an e-mail Friday that the purchase was “absolutely not” a bailout of the developer and that he found the question insulting.
“No one on our land acquisition team is anything other than a professional,” he wrote.
Steele maintains that the school district got a good deal on the property. “This school will be located exactly where it is needed,” he wrote. “It is, in fact, one of the better school sites that we have been able to acquire.”
Jenkins did not return calls seeking comment.
The AJC has been investigating school district land purchases for three months. As a result of the newspaper’s reporting, the district has launched its own investigation into its land deals and is proposing changes to its procedures for buying land. And District Attorney Danny Porter said recently he is considering asking a grand jury to look into the transactions.
It was Porter who, after an earlier AJC investigation into county land deals, convened a special grand jury that last fall indicted Commissioner Kevin Kenerly and led to the resignation of Chairman Charles Bannister.
And Jenkins, who has not been charged, is wedged in the middle of it all. Kenerly’s three criminal charges all involve alleged financial arrangements with Jenkins. The most serious charge, a felony count of bribery, stems from a $16.2 million purchase of land by the county commission from Jenkins.
But, it turns out, Jenkins has been making money off Gwinnett schools, too. The 2008 deal is the second investigated by the AJC involving Jenkins. In November 2005, he bought a 26-acre tract near Dacula and sold it to the school district on the same day — for $1.12 million more than he paid for it.
In the most recent deal, Jenkins had bought the land from chicken and cattle farmer John Lovin. That transaction took place in December 2003.
In a phone interview, Lovin said he is content with what Jenkins paid him for his land, but he described the school district’s price as “astronomical.”
“It sold to the school board for a tremendous amount of money,” Lovin said. “There was no way that it should have cost that much.”
While investigating this land purchase, the AJC also found:
● Kenerly, a real estate broker, negotiated Jenkins’ purchase of the land from Lovin, then voted as a county commissioner to rezone the property without disclosing his involvement.
● The middle school will not be built for another two or three years, records show.
Unlike other school boards in metro Atlanta, Gwinnett’s board does not make the final call on land the district buys. Instead, it puts that power in the hands of Steele, after authorizing him to choose from a number of parcels.
Steele refuses to grant interviews to the AJC about land purchases. Instead, he will only answer questions by e-mail.
‘Paid too high for it’
Two experts from real estate research firms who scrutinized the purchase said the district overpaid for the land.
“They paid too high for it,” said Steve Palm of Marietta-based firm SmartNumbers. “That’s pretty extreme inflation for just a few years.”
Eugene James, Atlanta region director of Metrostudy, recalled being bewildered when the district bought the tract.
“I remember when it sold for a mint,” said James, who tracks local real estate trends and transactions. “Those of us that were looking at the transaction from afar just scratched our heads and said, ‘What the...?’
“It was very clear to see that we were in a rapidly declining market at the time of sale.”
Palm and James, in separate interviews, estimated that they would have paid no more than $50,000 per acre for the land at the time, compared to the district’s $67,000 per acre price.
Palm analyzed land transactions in the same area. Dating back 13 years, he found 65 transactions involving vacant land of similar size. Of those, four cost more per acre than the district’s purchase. And unlike the district’s deal, all of those occurred at or before the peak in the real estate market. They also were smaller parcels, which cost more per acre than larger tracts, Palm said.
Steele attributed the nearly $5 million increase in cost for the property primarily to the fact that Jenkins and a group of developers pooled their resources to extend the county’s sewer system to that area. He also noted that Jenkins got the land rezoned.
“When Mr. Lovin owned the property, it was unimproved, rural, agricultural property that would have been valued 4 1/2 years earlier at a much lower price than the improved property we purchased,” Steele said.
Those changes increased the property’s value significantly, but not as much as the district paid for it, said Palm and James, both of whom took the rezoning and sewer access into consideration.
Steele said that the higher of two appraisals his office commissioned pegged the property’s value at $8.8 million, nearly $2 million more than the district paid for it.
But that appraisal is the same price that real estate experts say Jenkins could have asked for the property had he fully developed the land; that is, prepared it for home building by grading the tract, building roads and installing utilities and drainage systems.
Jenkins made none of those improvements, nor did he even finish the process of obtaining permits to do so, county records show.
In addition, the Jenkins transaction came months after the real estate market had begun its historic collapse and after the country had fallen into the Great Recession.
The district’s purchase price also amounted to nearly double the county’s tax appraisal at the time, $3.79 million.
Jim Grissett, an adjunct real estate professor at Emory University, also noted the land still sits vacant.
“Here we are X years later, and they aren’t even under way on the thing, are they?” he said.
Steele described the purchase as “good planning and organization.”
“We always try to and prefer to acquire future school sites before they are needed,” he said.
Development plans
Jenkins had planned to build 391 homes on the tracts that he bought from Lovin.
The parcels — one is 103 acres and one is 69 — sit across from each other on Indian Shoals Road in a corner of Gwinnett that still has green, rolling hills and country homes.
After getting the land rezoned, Jenkins went to work on the 69-acre tract, which he described as the first phase of a development named Providence. He planned 159 homes on that tract and got his first building permit in June 2006, records show. But he only built 14 houses before walking away from the project, according to county records.
A roadside advertisement posted on the property describes the subdivision as a swim and tennis community.
Residents say it is neither.
The swimming pool and tennis courts are locked and off limits to the homeowners. Most of the property consists of empty, overgrown lots. Trespassers vandalize the property and sneak into the fields to drive four-wheelers, residents say.
“My attitude is it sucks,” said Sonya Burns, 36, one of the first to move into the subdivision. “I didn’t think it would be quite this bad. I didn’t think the developer would [go into foreclosure].”
Jenkins had also submitted development plans for the larger tract across the street. But he gave up on that around May 2007, records show.
Three months later, Steele took the land to the school board for possible purchase, records show.
The district’s purchase not only delivered Jenkins substantially more than he paid, but it also took a large tax bill off Jenkins’ hands. By 2007, the tax bill had grown to nearly $50,000 a year.
Kenerly connection
Lovin, who now lives in Oglethorpe County near Athens, appeared uncomfortable when asked how Jenkins approached him about the land.
“Now I’m not here to get anybody in trouble,” Lovin said before a long pause. “I was approached by Kevin Kenerly.”
Kenerly has acknowledged to the AJC that he and Jenkins are longtime friends who have taken Las Vegas vacations together and were partners in several business deals.
Lovin said he and Kenerly negotiated the deal in a series of meetings at Lovin’s home.
Lovin and a relative eventually sold 172 acres to Jenkins for $3.85 million in December 2003, property records show. The portion that later went to the district — the 103-acre parcel — fetched $2.08 million.
Ten months later, Kenerly voted four times in connection with rezonings and permits related to both properties.
The county’s ethics code states that commissioners must disclose any “financial or personal” interest in a legislative action. And they have to abstain from voting if they believe their interest might affect their vote.
Kenerly disclosed nothing.
Jenkins’ land was not in Kenerly’s district but rather former commissioner John Dunn’s.
Yet when then-Commissioner Marcia Neaton vigorously opposed the project during a public meeting, it was Kenerly — not Dunn — who came to Jenkins’ defense.
After Neaton implored the commissioners to preserve the rural character of the community, Kenerly engaged her.
“I appreciate your comments commissioner, but I think staff recommended approval of this,” he said, sparking the terse confrontation.
The commission voted 4-1 in favor of the rezonings.
Kenerly did not return calls seeking comment. He stepped down from his political post a month after his indictment and is appealing his charges.
When informed of Kenerly’s involvement in the land deal and rezoning, Porter, the district attorney, said he would investigate it.
He said Kenerly’s list of criminal charges could grow if Kenerly had a financial stake in the land or the planned subdivision that he voted to rezone. Or if Kenerly got money “for voting for the rezoning,” Porter said.
Seven years after the rezoning, in a phone interview, Neaton didn’t recall details of the project. But she did remember a conversation she had with a developer years ago about the school district.
Neaton told the developer about a piece up property that she thought would be a good fit for his development style.
“Oh no, the school [district] wants that piece,” he said, according to Neaton.
“So?” Neaton said.
“Nobody bids against the school because they always pay too much for the property,” he told Neaton.
“And I just looked at him and said, ‘Well, isn’t that nice to know that my tax dollars go for good work,’” she said.
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