City leadership and one of the Oakland's biggest developers fired back this week against a report criticizing the $91 million renovation of the Fox Theater as poorly managed and excessively expensive.
The report was released Tuesday by City Auditor Courtney Ruby, whose nearly yearlong audit found that the city's contribution to the project quadrupled, from $13 million in 2004 to $52 million in 2009. Ruby said the scope of the project had increased in "a leadership vacuum," with little to no information about less expensive options reaching members of the City Council, who approved several increases to the scope of the project over its five-year span.
To put that $52 million number in context: A recent $10.7 million grant is expected to buy the city 25 police officers for the next three years, and the recent budget gap of $56 million had threatened to close most city libraries and more than one fire station.
City Administrator Deanna Santana just took office this summer and was not working in Oakland while the project was under way, but she now directs the city staff responsible for it. Quoted in the audit, Santana calls the Fox "the crown jewel of Oakland's redevelopment efforts," a "nationally recognized success story (that has) transformed the surrounding area (and) achieved success beyond its projections."
In a written response released Wednesday, Santana said the project was monitored with four independent layers of oversight, including the Oakland Redevelopment Agency, which handled most of the city's end of the work.
The city even requested its own outside audit of the project in 2009, Santana said.
The project manager -- developer Phil Tagami's firm, California Capital Group, or CCG -- also lashed out, saying he followed all the city's directions and that he is "disappointed that CCG was not provided with the opportunity to provide additional facts before the release of the final document."
The audit was overly concerned with the structure of the project and its built-in incentive for CCG to make more money by increasing the scope, Tagami wrote. "This undue emphasis is made clear," he wrote, "when the audit itself concludes that no actual conflicts of interest of city employees or CCG officials were revealed."
The project itself may have been a success, Ruby said, but that doesn't mitigate her concerns about the process by which it was done -- especially with the half-billion-dollar Oakland Army Base project on the horizon, currently under the stewardship of the same people who ran the Fox project.
Ruby, Santana and Tagami all agreed that the City Council had clearly hoped from the beginning to see the Fox undergo a "full Broadway show" transformation. But they disagreed on whether the city ended up overpaying.
Ruby's report found that the city overpaid for labor, sometimes writing checks for worker wages that were 60 percent above the state average.
Ruby also found that each time the council was asked to approve an increase in the project's scope, it was never offered less expensive alternatives to consider at the same time: It was either yea or nay on every proposed increase, and each one came in piecemeal.
Santana argued that, adjusting for inflation, the "full Broadway show" costs projected in 2001 would have come to about $98 million, so the project ended up coming in under budget.
That doesn't sync up with the audit, which reports that the full restoration of the theater was estimated in 2001 at $60 million. According to Santana's office, this is mostly because the unexpected skyrocketing price of steel, concrete and other construction materials in the years before the recession would have caused inflation of almost $25 million.
In her only direct public response to the public comments by Santana and CCG this week, Ruby said the issues they raised "have already been addressed within the audit report itself and provided no basis for altering the report's findings."
Despite some disagreements, Santana said she found the audit helpful in some ways, and her office is developing proactive plans now to improve future oversight.
Contact Sean Maher at 510-208-6430.