OAKLAND -- Alameda County officials are rejecting the accusations of a civil grand jury that found "complete lack of transparency" and "systemic failures" in the negotiations to build and buy a pricey new social services office.
A private developer built a new headquarters for the Alameda County Social Services Agency on a street corner in Oakland's fast-changing Uptown District, then sold the building to the county for $50.8 million two years ago.
The no-bid transactions raised red flags and might not have been in the public's best interest, an Alameda County grand jury declared this summer. County supervisors disagreed with the stinging conclusions in a formal response Tuesday.
Also upset by the grand jury report is developer Alan Dones, who said Tuesday his San Pablo Avenue project was cost-effective and a great success.
"Were it not for all of these sad, unfortunate attacks, I think this building would be one of the outstanding stories of our community," said Dones, managing partner at Oakland-based Strategic Urban Development Alliance. "It's a building that has so much quality and value."
Dones, who is African-American, also speculated that the complaints that sparked the grand jury investigation had racial undertones. When the development broke ground in 2004, it was celebrated as the largest black-led construction project in Oakland's history.
But it began attracting public scrutiny when a high-ranking county real estate official, C. Candace Fitzgerald, filed a whistle-blower lawsuit in 2006 claiming the county was wasting taxpayer money on a bad deal. That lawsuit was dismissed, but Dones said the project's legacy has been saddled with "vicious, defamatory attacks. Discrimination by defamation. It's very effective."
Asked to investigate, a 19-member civil grand jury last year began poring through thousands of county documents and interviewing officials who had been involved in the negotiations. The jury's conclusion was that the county ignored best industry practices, allowed the negotiations to be "wrestled away from ... real estate experts and into more political hands," and bought the building "without appropriate public discussion."
After securing a deal, with no competitive bidding, to build the 100,000-square-foot social welfare office, developers in 2004 tore down the abandoned Hotel Royal and the old Oakland Post newspaper building at the corner of San Pablo Avenue and 20th Street. They also paved the way for an adjacent condominium complex that would share parking spaces with the new county office.
That later led to internal wrangling within the county over whether bond proceeds were being used to subsidize the residential development, which later went into foreclosure.
The county signed a 30-year lease to use the San Pablo Avenue building and agreed to pay all utilities, taxes and maintenance. The county years later realized it was exempt from property taxes because it was a social services building, but had trouble working with the owner to get reimbursed, according to the grand jury. That and other concerns led the county to begin negotiating to buy the property, which it did in 2011 for $50.7 million -- a pre-market-crash price for a building appraised at $24.1 million. The county also raised the grand jury's eyebrows by leaving the original owner with control over the storefront retail space, rooftop solar panels and many of the garage spaces.
The grand jury reported it was "concerned that the county may have purchased 2000 San Pablo Avenue, in part, to ensure that the developer would not fail financially."
Since county real estate transactions are usually handled by the Alameda County General Services Agency, the grand jury questioned why the San Pablo Avenue purchase was instead overseen by Assistant County Administrator Donna Linton. County officials responded Tuesday that it is normal for the county administrator's office to intervene in complex negotiations that involve county finances. The Board of Supervisors also asserted in the letter it approved Tuesday that the negotiations followed best practices and that the public was properly notified, though it conceded that supervisors could be given more information about the pros and cons of a purchase before they vote on it.
Dones said many of the grand jury's concerns might have been cleared up had they bothered to give him a call. "I didn't even know an investigation was going on until this report came out," Dones said. "I was shocked by it. How can you conduct a legitimate, sound investigation when one of the key subjects of the investigation is not even contacted to give their side of the story?"
Matt O'Brien covers Alameda County. Contact him at 510-208-6429.