Environmental Education Group, a Santa Barbara-based nonprofit that has been granted exclusive rights to negotiate a deal that could result in its control of 114 acres of city-owned land in Lompoc, has negative net worth and no history of successful commercial real estate development.
Its leader, Alan Tratner, faces a $21,000 default judgment in federal court in Los Angeles, according to court records. He presented himself to Lompoc city officials as the president of a nonprofit that turns out to have been dissolved and is president of an affiliated foundation whose tax exempt status has been revoked by the IRS.
For nearly a year, Environmental Education Group, also known as EEG, has been aggressively seeking to guide a $220 million development that would include a space museum and business park near the Lompoc campus of Allan Hancock College. The group has asked the city of Lompoc to donate the 114 acres to EEG so that it could use it as collateral in talks with financiers and developers.
The City Council granted EEG an exclusive negotiating agreement to use in talks with developers but balked at handing over any property until $59 million in equity and grant funding commitments are in place for the first phases of the project.
The EEG effort follows the collapse of the California Space Authority and its plan to create a space museum and related development. Lompoc has been searching for ways to jump start its economy. Unemployment in the city was 14.7 percent in January, compared to 8.4 percent for Santa Barbara County.
However, a Business Times analysis of public filings found that a land transfer to EEG could be fraught with risk. EEG listed negative net assets on its most recently available federal tax return, and city-owned land could wind up under the sole control of the three people who are officers and directors of the nonprofit. If the project doesn’t succeed, the city could wind up taking the property back — and taking on a fresh load of debt if any is raised for the project and attached to the property.
In an email interview with the Business Times, EEG Secretary and Treasurer Lielle Arad said that the group does not expect to receive any land until financing is secured and that it seek to ensure the city is protected in any contracts it might sign.
“We have taken on this project because we totally believe it will be good for our community and our country,” Arad wrote. “We also believe we can accomplish our goals, complete this project and bring all that it promises to our community.”
While the EEG has started a “project” within EEG called the California Space Enterprise Center, complete with “boards” of advisors and directors, Arad confirmed to the Business Times that the only legal entity involved is EEG, which listed net assets of negative $1,266 on its fiscal 2010-11 tax return, the most recent that is publicly available.
The group conceded that any land transferred to it by the city, and any funds it raises from lenders or equity backers, would be under the sole legal control of Tratner, Arad and board member Kyle Schulte.
In its original proposal to the City Council, EEG asked that it be given the land with few restrictions. “The entire premise of the [California Space Enterprise Center] project is based on the offered and anticipated outright land grant of the 114 acres from the city of Lompoc to EEG,” the proposal reads. “The land grant will have stipulations related only to the extent that if nothing can be accomplished in any phases of [the space center] by the 5th year, EEG will return the property to the city.”
Arad said that EEG expects to be solely responsible for funding the project, whether the funding comes in the form of debt, equity, sponsorships, grants or donations. She said the city would have no requirement to fund any part of the space center. The land would be transferred back to the city if pre-defined milestones weren’t met. Arad said it is “more common” for cities to hand over land before financing, though several public sector real estate experts contacted by the Business Times disagreed.
“EEG is not asking for the land transfer before securing financing. However, it is more common to actually have land secured before securing financing. EEG has its hands tied in some ways, because it is not certain that we have the land to present the actual real proposition to our funding partners,” Arad said.
But when asked by the Business Times whether it would be possible for EEG to use the land as collateral for debt that would remain attached to the land even if it were returned to the city, Arad refused to provide a clear answer.
She confirmed that EEG’s officers and directors would have control over any money raised, but she insisted that debt for the space center would be attached to EEG’s assets and not the 114 acres of land. She did not provide an answer when asked how EEG planned to persuade lenders to secure potentially tens of millions of dollars in debt against a nonprofit with negative assets and very small cash flows.
Lompoc’s City Council voted to require EEG to find a qualified developer for the project by April 8 and secure financing commitments by the end of June. Arad said the nonprofit has a letter of intent from a developer but no agreement yet. As to funding, Arad said the group has “identified funds, and has compiled letters of intent and commitment from a variety of financing sources” but would not confirm any binding commitments.
EEG chief’s legal issues
In EEG’s presentation to the city of Lompoc, Tratner, the head of EEG, presents one of his qualifications as “President/ Executive Director of Inventors Workshop International and Entrepreneurship Workshop.”
Arad said that Inventors Workshop International is a “nonprofit public benefit membership organization.” A company called Inventors’ Workshop International, founded in 1971 with a contact address in Ventura, is listed as dissolved by the California Secretary of State’s office.
On its website, Tratner also publicly identified himself as the president of the Inventors Workshop International Education Foundation, a separate nonprofit whose tax-exempt status was revoked in 2010 by the IRS.
Arad said Tratner is working to resolve the status of both companies.
Tratner and Inventors Workshop International were the defendants in a 2010 lawsuit filed by Mark Sanders in U.S. District Court in Los Angeles. In it, Sanders alleges that Tratner “preyed on unsuspecting inventors” by collecting money from them and “stealing” their ideas. “Tratner has used the funds received by him to establish a high maintenance lifestyle whereby he has numerous homes and real estate holding [sic] and has flown around the world,” the complaint reads.
Arad said that Tratner filed a letter with the clerk of the court asking the case to be dismissed. However, public records show no evidence of such a letter. With no formal response from Tratner after he was served with the lawsuit, Sanders won a default judgment for $21,000 against Tratner.
The judgment was entered on March 12, 2012, several months before Lompoc engaged EEG. Linn, mayor of Lompoc, said he could not comment on the case because he had only heard about it on March 22, 2013 and had not spoken to Tratner about it.
Space Authority took $16M in public funds
The now-defunct California Space Authority spent years and more than $1 million trying to launch the space center. The project hit a roadblock when officials there learned that it would need to go through Santa Barbara County’s development process rather than the federal process. In 2011, the Space Authority was dissolved by its board — mostly major aerospace contractors — after taking in nearly $16 million in public funds with little to show for its efforts.
While Tratner and EEG lack prior experience executing a project such as the space center, Lompoc Mayor Linn said that is because the effort is unprecedented.
“The only one out there that’s executed a project like this is named Disney,” he said.