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Wannabe Cali governor gives up against beach-blocking billionaire VC

Gavin Newsom pleads with Vinod Khosla to end dispute over much-loved shoreline

By Kieren McCarthy, 6 Dec 2016

With one eye on the governorship of California in 2018, Lieutenant Governor Gavin Newsom backed down from a fight with billionaire VC Vinod Khosla on Tuesday over controversial access to a beach.

At an extraordinary meeting of the normally staid State Lands Commission on Tuesday, a series of lawyers, local residents and surfers lined up to encourage the commissioners to follow their staff's recommendation and use the extraordinary power of eminent domain to force Vinod Khosla to sell a parcel of land that covers the only entrance to Martins beach in San Mateo county.

The Sun Microsystems cofounder, who is worth $1.5bn, bought a 90-acre plot of land alongside the popular surfing spot in 2008 for $32.5m before closing public access in 2010. It has been tied up in legal disputes ever since.

Despite the state of California passing a specific law designed to force Khosla to open up access or sell the relevant piece of land (and bypass his novel legal strategy), he has refused to back down during two years of negotiations and talks have gone nowhere. That finally led the commission's staff to make the extraordinary recommendation to the commission that it use its power to force a compulsory purchase. If voted on, it would be the first time in 78 years of existence that the commission would have done so.

But after 90 minutes of testimony and nearly an hour in closed session, the commissioners backed down and instead asked staff to "report back on the specific steps and process elements associated with the condemnation."

In comments after the decision, Newsom repeatedly pleaded with Khosla to resolve the issue. "Let's negotiate this thing and get this thing done," he said, reiterating several times that "none of this preclude ongoing negotiations."

There may be trouble ahead

Newsom's fear of having to force a tech billionaire to hand over his property in a state where tech billionaires are critical to political ambitions was repeatedly revealed as he imagined other ways in which the issue could be resolved or where further delays in the process may lie.

"There are three pending lawsuits that could resolve this more quickly than we could," he mused. "This commission is moving forward. But there may have to be an environmental analysis before we can [do that] ... We have to calendar action and that means directing staff to create a workplan and put together a framework, and we are moving in that direction with earnest."

He noted that within the commission, the issue is unlikely to be resolved "in the next three to four years" – which coincidentally will be long after he has made his run for governorship. And just in case you have any doubts, the website title for GavinNewsom.com is "Gavin Newsom for Governor 2018."

What did come out of the hearing was the sum that the commission has calculated the land was worth: $380,000.

That is more than 25 times less than the $10m Khosla's lawyer claimed the state would have to pay for the land, and may help to explain the clear frustration the commission has with the VC and his legal team.

No right way

Under California law, the coastline and beaches are public property. Khosla's land purchase included a small road leading to the beach that under all previous owners had been left as a public right of way.

In 2010, Khosla shut the gate to the road citing the cost of maintenance and liability, added armed guards and painted over a welcome sign. When locals wrote to the VC asking him to reopen the road, he sent them a short response, according to one of the speakers at the commission: see you in court.

Six years later, there are three lawsuits on the issue, marking just part of a legal campaign waged by Khosla to tie the matter up in red tape while he enjoys exclusive access to the beach, renowned for its beauty and enclosed by cliffs on both sides and a distinctive sea stack just offshore.

One speaker, an engineer at Tesla, told the commission the billionaire had charged him with criminal trespass. He complained that the VC was "using his immense wealth to circumvent laws and to intimidate people."

Newsom also noted that both the commission and the commissioners personally had been sued by one of Khosla's two holding companies, Martins Beach 1 and 2 LLC, and that "didn't sit well" with them.

A raft of others gave short statements encouraging the commission to exercise its "power of condemnation" and force Khosla to sell. Notable among them was a retired surfer known as Birdlegs who told the meeting he first started surfing at the beach when Eisenhower was president. His advice to the commission? "When dealing with a bully, the best thing you can do is punch him in the nose."

Crickets

After a lengthy line of people speaking in favor of forcing compulsory purchase, the room fell dead silent when Khosla's lawyer stood up to make his client's case.

To laughter from the room, the attorney argued that Khosla was a good man, a philanthropist and an environmentalist and a man of principle. He noted, to some consternation, that the VC has promised to give away half of his wealth, which represented "more money than any of us will ever earn."

He also argued that the entire issue over access to the beach was nothing but "political drama manufactured by the media and state" and slammed the man who brought and passed specific legislation aimed at getting around Khosla's lawyers' legal strategy. The issue only exists because of "opportunist politicians like Mr Hill," he noted, before turning to Senator Jerry Hill who was in the room and adding "no offense."

At the start of the meeting, the official staff report on the commission's two-year-long negotiation with Khosla's lawyers was diplomatic but made it clear that the VC's legal team had been extremely difficult to deal with.

"We have been unable to reach an agreement," noted a commission staffer, adding that Khosla's side had made it plain "in unequivocal terms that they are unwilling to sell an access easement to the state."

They had instead made two offers: to open the road for a limited number of days a year based on a log of use that Khosla apparently kept in 2008; or to sell both parcels of land that Khosla bought – one covering the road and some surrounding areas and the other with some buildings on it.

The staff report made it plain that it didn't think either option was realistic: the first was too restrictive and far from the "comprehensive public access" remit that the SB 968 law has given the commission; and the second simply extended fruitless negotiations.

"We are not confident we will be able to reach agreement on a price for the entire two parcels given what we've learned over the last two years," the staffer noted.

Khosla's lawyers do have a strong point however, which is why eminent domain has never been used in the commission's 78 years: the road is on private land.

Dangerous precedent

A fellow landowner who allows public access through his land to a similar California beach warned that approving an eminent domain purchase would "destabilize long-established property expectations across the state and decrease the likelihood of property owners to allow any access."

The previous owners of the Martins Beach road had decided on what days to open and close the road based on demand. Khosla's lawyer argued that use of the beach had diminished over time and that offering access based on the 2008 log was a reasonable compromise.

"There is no constitutional right to cross Mr Kholsa's property – our courts have already ruled on that," Khosla's lawyer correctly noted. "The issue of access should be left to be interpreted by the court system."

Despite Newsom's apparent hope that the lawsuits will be resolved in the next year, another speaker – a lawyer – warned that Khosla's plan appears to be to appeal the case all the way up to the Supreme Court – a process that could take a decade.

Even if Khosla ultimately lost that battle, the 61-year-old would still be able to enjoy 10 more years of exclusive access to Martins Beach before having to allow public access again.

Khosla has made it absolutely clear that he has no intention of negotiating public access, and every intention of using his enormous wealth to stretch out the dispute as long as possible.

With Newsom clearly punting the issue into the long grass to further his political ambitions, Khosla has no need to compromise on the issue until at least November 2018. Two more years in which San Mateo locals will have little but their memories of Martins Beach. ®

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