Taxpayer loses over $ 2.8 Million on San Gorgonio Inn

Taxpayer loses over $ 2.8 Million on San Gorgonio Inn


1/16/12 – Banning’s five geniuses on the City council have done it again : after losing millions on projects like All Star Dodge, the Haven Coffee House, the Banning Business Center, an art gallery and on useless land acquisitions, they just sold the San Gorgonio Inn site at a loss of $ 2.8 Million.

But what else would you expect from a  City council that felt it was a great idea to loan over $ 500,000 to murder suspect Demario Jackson, only to find out that he defaulted on the deal ?( full story)



The proposed development of the former San Gorgonio Inn site will consist of 70,000 sqft mixed use space

Developer JMA Village, LLC, represented by Arthur Pearlman and Mark Frost, intends to build almost 70,000 sqft. of mixed retail, office and hotel space on the 5.25 acre site. This despite the fact that many “for rent” signs around downtown Banning indicate a vast oversupply of commercial space at the present time.

What will change in the future that will absorb all those vacancies and create demand for another 70,000 sqft. ? Will the new courthouse create a need for all this space ?

Downtown Banning : vacancies are all over the place

To answer these questions, we should look at the Mid County Justice Center in Murrieta as well as the historic courthouse in downtown Riverside. Around either location one cannot find significant retail activity, neither in form of restaurants, nor – in case of  Murrieta – in form of office space or hotels. Optimistic predictions for increased commercial activity due to a new courthouse coming to Banning  (as concluded in this consultant’s report) should therefore be met with some skepticism.

The same report also indicates that not a single tenant has been secured for the project so far. Without signed tenants and in light of significant current vacancies downtown, the project may face an uncertain future.  Will this be yet another  “pie in the sky” project, similar to that of the Haven Coffee House ? (story)



The developer does not have to reach very deep into his pocket : he is able to buy the San Gorgonio Inn site “no money down” and does not have to come up with cash until 2 years from now. According to public discussions, the remaining development risk will be shifted mostly to foreign investors, who participate in an investment program (EB-5 financing). Under the federally recognized program, the foreign investors earn entitlement to US residency ( i.e. “Green Card”) in exchange for their investment in the project. Pearlman has stated that the investors are both from China and Vietnam.



The purchase price of $ 1.02 Million is based on appraised fair market value. This means that the council incurred a huge $ 2.8 Million + loss after they bought the San Gorgoinio Inn and by adding several adjacent parcels, all within the last 3 1/2 years. These purchases and their associated expenses ran up the bill to a total cost of $ 3,976,623 .  The entire council did so while knowing full well that we were in a declining real estate market, which had started in 2007.



When millions of dollars are mismanaged like they are in Banning, there is a price to pay. Huge capital losses have accrued because  practically every project the City council has touched has failed. You can’t keep “buying high” and “selling low” forever.


The City Council has laid the foundation for substantial future tax increases . Reason : every dollar spent on these ill fated projects originated from redevelopment bonds, which require interest payments. With more and more losing projects, shortfalls in tax revenue are a given. Such shortfalls can only be cured by increasing taxes for Banning citizens. Additionally, this may also be accomplished by raising electric rates. Year after year, electric rate payers are contributing substantially to the City’s general fund.

However, Banning’s electric rates are already among the highest in California. Raising electric rates any further may finally cause many Banning residents to move elsewhere.




In 2008, Hanna and Machisic gave over $ 500,000 to murder suspect Demario Jackson


Come November, terms for council members Barbara Hanna,  John Machisic and Don Robinson will be up . These council members count on most of Banning’s voters to be  “asleep on the wheel” – and will try to bamboozle the public into getting re-elected.

Should any of these “geniuses” be given yet another opportunity to lose even more money for the taxpayer ? How much longer can Banning afford to lose millions on questionable developments like the Haven (story), All Star Dodge (story) or the San Gorgonio Inn  ?

Isn’t it time that we elect a City council who will not give away over $ 500,000 to a self proclaimed “businessman” turned murder suspect ?(story) – Not even the City of Bell did anything like that  – only in City of Banning can one find such outrageous abuse !



It was Einstein who said that the definition of insanity is to repeat the same mistakes over and over again, while expecting different results. Based on this definition, re-electing any City council member would indeed be insane.

The San Gorgonio Inn sale is yet another example why Banning is in desperate need of some fresh blood on its City council.


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