OAKLAND -- A leadership vacuum at City Hall led Oakland to spend four times as much as originally planned to revive the Fox Theater, according to an audit released Tuesday.

The City Council agreed in 2004 to contribute $13 million in city money to the project that turned the broken-down ruins of the Fox into the landmark theater that exists as the touchstone of Uptown Oakland. At the time the project was estimated to run $33 million total. When it reopened in 2009, the Fox had cost the city $52 million and the total project had ballooned to $91 million.

During that time, "the city wasn't in control of its own interests," said Oakland City Auditor Courtney Ruby. In an 86-page report she released Tuesday, Ruby said she found no one person or agency to blame but said a lack of oversight let the city's expenses skyrocket without anyone ever laying out a real game plan for how the project was changing.

Regardless of whether the Fox turns out to be a sound investment for the city, Ruby said, the careless use of city money is a problem in and of itself. Among the most troubling findings in the audit:


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  • In several adjusted work orders, the city ended up paying for labor at rates up to 60 percent higher than the state average.
  • The city paid California Capital Group $1.2 million more than the "not-to-exceed" limits set in a contract.
  • The city paid about $179,000 to CCG for costs for which CCG had provided no receipts. They also overpaid invoices by about the same amount.
  • Not only did the cost of the project go up, but Oakland's share went up, from about 40 percent to 57 percent, the audit found.

    The Oakland Redevelopment Agency, charged with revitalizing economically depressed neighborhoods, bought the ruined Fox in 1996. Then in late 2004, the agency won council approval to renovate it as a cabaret with seating for 500 to 600 people.

    The project manager, however, was not a city employee: it was California Capital Group, headed by developer Phil Tagami.

    The way the project was structured, CCG stood to benefit financially from increasing the scope of the project, Ruby said. CCG proposed several change orders that bumped up the overall cost of the project, all of which were approved by the City Council.

    But city staff never explained other options to the council, Ruby said.

    Ruby said the problems exposed by the audit are especially alarming in light of a much more massive project on the horizon -- the renovation of the Oakland Army Base.

    With estimates for the project beginning at about a half-billion dollars, Ruby said, the need for a more organized approach is especially crucial.

    Sue Piper, spokeswoman for Oakland Mayor Jean Quan, said Monday the city administrator's office has not yet finalized a response to the audit.

    A written response included in the audit defends some of the city's actions.

    "Contrary to the audit report findings, the Fox Theater project since 2001 was envisioned as a full renovation project," wrote redevelopment manager Patrick Lane. "All significant aspects of the project were presented to (the council) and at numerous public meetings."

    Council President Larry Reid said Monday he hadn't seen the report yet, but he balked at the increase in the city's spending and said he agrees it's a vitally important issue.

    "That's a big difference. A huge difference," Reid said of the city's spending. He said he looks forward to digging into the report. "It'll make for some nice reading."

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