SACRAMENTO – State Senator Melissa Hurtado and Congressman John Garamendi are sounding the alarm on the dangers of when billionaire investors gobble up ag land.
On Aug. 29, Senator Hurtado, 16th District and chair of the State Agriculture Committee, hosted an informational hearing at the State Capitol to discuss the unprecedented land purchases in Solano County by Flannery Associates LLC; and to explore possible remedies to prevent private entities and foreign governments from acquiring California agricultural land.
The hearing, titled Informational Hearing on Navigating Threats to California Agriculture, included comments from politicians, including Congressman Garamendi, D-8th District, farming advocates, an investigative journalist, an agriculture land real estate agent and Agriculture Committee members.
FLANNERY ASSOCIATES REVEALED
On July 7, the Wall Street Journal reported that Flannery Associates LLC, a Delaware-based company, had been purchasing land near Travis Air Force Base (AFB) in Solano County. According to the Journal, since 2018, Flannery has paid over $800 million to acquire 55,000 acres of land, making it the largest landowner in Solano County. The company often paid much higher prices than the going market rate for the land.
On Aug. 25, the New York Times identified Jan Sramek, former Goldman Sachs trader, as the face of Flannery. Sramek orchestrated the land deals. He received financial backing from some of Silicon Valley’s largest investors. These include Mike Mortiz, the former head of Sequoia Capital, LinkedIn co-founder Reid Hoffman, former Netscape co-founder Marc Andreesen, and Laurene Powell Jobs, the wife of Steve Jobs and founder of Emerson Collective, a philanthropic enterprise.
According to various news outlets, Flannery purchased the 400 plus parcels of land as the first phase in a project to build a massive development, which would include a new city with tens of thousands of new homes, a solar energy farm, orchards with over a million new trees and over ten thousand acres of new parks and open space.
TRANSPARENCY AND CONSERVANCY
In her opening remarks, Hurtado started off by saying not all investors are bad actors; however, she noted that there is no reason for someone to hide their identity or their money in the Cayman Islands.
“We have to ask ourselves, ‘Who is buying our ag land, and for what purpose?’” she said. “What happens when urban sprawl takes over prime ag land, and California can no longer be the breadbasket?”
Garamendi said farmers face a myriad of threats to their livelihood these days, including labor shortages, climate change and rising costs. But they should not have to fear billionaire investors.
“Flannery and Associates have purchased 400 parcels, 55,000 acres of land in unincorporated Solano County,” Garamendi said. “Flannery surrounds 75% of Travis Air Force Base. It’s the busiest base in the U.S. Last week, Flannery revealed plans to override local zoning ordinances to build a megacity east of Fairfield.”
According to Garamendi’s statements, Flannery is using secrecy, bullying and mobster tactics to force generational farm families to sell. He said the corporation does this by hiring “big city lawyers to file federal lawsuits claiming restraint of trade against seven families who refuse to sell.”
“One family, unable to pay legal costs to defend themselves, has sold out. That lawsuit is a heavy-handed intimidation tactic and those Silicon Valley billionaires should be shamed and held to account,” Garamendi said.
He followed up these statements by saying that conservancy is the best foil to prevent large-scale land grabs.
“Conservation easements, ensuring agricultural landowners are compensated for the value of their open space,” he said. “I hope agricultural landowners across the state will take a hard look at placing agricultural easements on their property.”
From Garamendi’s account, $40 million in federal funds are available this year to purchase easements from landowners. He said $173 million has been spent this year in California already to preserve land adjacent to military installations.
To get ahead of this situation, Garamendi, along with Congressman Mike Gallagher, introduced the Protect America Farmland and National Security Sites from Foreign Adversaries Act. He also amended the House of Representatives version of the National Defense Authorization Act to require the Department of Defense to develop processes to address any type of sale of land that might encroach on military installations.
“Keeping agricultural land in agricultural production is the best possible use to prevent encroachment,” Garamendi said. “Travis Air Force Base cannot operate surrounded by skyscrapers, tract homes and wind turbines.”
INFORMATION AND PROTECTION
Garamendi said information is the best defense against secret land transactions.
“The testimony (at the hearing) indicates a need for information. Perhaps you start with a process of reporting agricultural land transactions,” he said.
From there, Garamendi said legislators can add prohibitions. He referred to the two state bills Hurtado authored that would prevent foreign countries from purchasing California agricultural land.
“Then, protections – which was the essence of my testimony,” he said. “There are certain key assets you want to protect.”
Garamendi concluded by saying there is money available at the federal level from the Department of Agriculture to finance startup family farmers. He said states should coordinate with the federal government to ensure that startup farmers have access to the funding.
NEW GUARDRAILS
State Senator Dave Cortese, D-District 15, who is a member of the State Agriculture Committee, said the committee needs to dive into real written language and specifics to address mega land transactions such as those engaged in by Flannery.
He said deterrents, such as those included in the 1965 Williamson Act – which enabled local governments to enter into contracts with private landowners for the purpose of restricting specific parcels of land to agricultural or related open space use – were not set up to challenge wealthy investors such as Flannery.
“Billionaires will not be deterred by pretty paltry Williamson Act penalties,” Cortese said. “Those penalties were not set up to stop billionaires. The act was there for small and medium-sized farmers and ranchers to stay in business.”
Cortese said when the act first came to Sacramento, times were different. Politicians and their committee staff were in place for much longer than today.
“People were able to spend four or five years completely rewriting or significantly augmenting the rules around land-use transactions,” said Cortese. “We have been in more of a triage environment legislatively, in my opinion.”
Cortese said he believes the resources are available at the state level to look deeper into codes and statutes in order to prevent a future situation like Flannery’s from occurring once more.
“I believe the expertise is here in the Capitol to do this kind of work despite the fact we haven’t done it for 30 years,” he said. “It strikes me that there is nothing stopping the legislature from coming in and putting in some new guardrails of what can and cannot be done in terms of these mega transactions.”
He added, “If nothing else, we can put a moratorium on these types of transactions.”
DAVIDS VERSUS GOLIATHS
Jamie Fanous, policy director, Community Alliance with Family Farmers, said farming in California has become so precarious that only individuals with family ties to land or with access to significant wealth can acquire land.
“In California, 80% of farms operate on less than 180 acres; 75% of farmers exist on less than $100K of gross sales,” Fanuos said. She added that 50% of California cropland is owned by 5% of landowners and 40% of farmland is rented or leased by non-farmers.
“Most small-scale farmers lease their land. They can’t invest in the land they manage. And are regularly at risk of being kicked out,” she said. “Unless you inherited the land or have access to $1 million, access to land is 100% impossible. Only large corps, hedge funds, investment firms and tech billionaires can purchase land.”
She added, “The playbook for all of these entities is the same: if they do not get what they want, they will likely sue the small farming communities out of existence.”
ERADICATING INFRASTRUCTURE
Christopher Cabaldon is the former mayor of West Sacramento and is currently running for the California State Senate. Cabaldon said Flannery’s colossal land purchases forever altered the farming infrastructure in the area.
In his presentation to the committee, Cabaldon presented slides displaying the parcels of land Flannery purchased. Another slide showed land that was formerly protected by the Williamson Act. Nearly all of Flannery’s purchases involved land formerly protected under Williamson.
“The Williamson Act has not functioned in this case to in any way deter these acquisitions from happening,” Cabaldon said. “In some cases, it’s almost been a flag saying, ‘Buy here,’ because Williamson has kept prices low for buyers to swoop in.”
Regarding Williamson, Cabaldon added, “Farmers who terminate easement contracts with the state early will pay a penalty of 15% of the current market rate of the land. But if the buyer is prepared to pay up to 10 times the market value, then clearly that 15% penalty is of no consequence.”
Because Flannery represents investors and not farmers, Cabaldon said that when these properties were sold and the owners left, all of the farmers who remained in the area were negatively impacted.
“When a single, non agriculture-based owner establishes a monopoly in the entire agricultural infrastructure of the region, it becomes very difficult for any single farmer to continue (farming),” he said. “Or to get feed.” Or for foraging, he added.
“Many of the farmers in the area lease foraging land from each other,” said Cabaldon. “Flannery has canceled many of these foraging leases.”
LAFCO AND CEQA
Cabaldon brought up the question of what means local governments possess to prevent large-scale land deals.
Earlier this month, Flannery sent out surveys to Solano County residents. The company wanted community input regarding a possible ballot initiative that would ultimately pave the way for its mega development.
“Voters cannot create a new city by ballot initiative,” Cabaldon said. “That’s not allowed in California.”
Cabaldon said only the Local Agency Formation Commission (LAFCO) – which is a state agency and not subject to county initiatives – is the only agency that can forward such an initiative to a later vote.
“But remember, LAFCO is five people,” Cabaldon said. “It is not a complete governmental process; it is not elected.”
Cabaldon next discussed the California Environmental Quality Act (CEQA). He said in many housing projects, CEQA is overpowered.
“In this case, it’s probably completely underpowered,” he said. “There is no lead agency that is capable of examining all these issues when you’re talking about a conversion of this scale.”
Cabaldo said CEQA is designed to address smaller issues. “It’s not designed to address issues involving half a county,” he said.
REAL OR RUSE?
Given that state laws prevent Flannery from using a ballot initiative to receive the greenlight for its mega project, Hurtado said she questions the company’s real intentions for the land.
“I don’t think it’s about building a city,” Hurtado said. “I think it’s about water and energy.”
She mentioned the state’s futures water market. In 2020, California became the first state to create a futures market for water. With water in the futures market, this means investors are able to trade water the same way they have things like gold, or oil.
In a report, the Property and Environment Research Center (PERC) noted the market was created to help buffer water price risk and is “intended to provide a way for California water users to protect against fluctuations in the price of water.”
Hurtado said she believes Flannery is all about resources, not community development.
“I think they are thinking of ways to make money without investing money into the project,” she said.
