For almost a decade, many Oakland leaders have either been catastrophically wrong about their city, or else they've been lying to us to make money for their friends.
Oakland's days as the Baltimore of the West Coast ended with the dot-com boom. Today, middle-class professionals pay top dollar to live in condos downtown and along the city's waterfront. Yet the city council and the port commission keep giving our property to politically connected developers and asking for next to nothing in return. Each time, the rationale is the same: Oakland can't do any better.
At least Oakland school officials haven't been part of this process. For the last year, they have been negotiating perhaps the best land deal in the city's history. TerraMark LLC, a New York-based development company, has offered $60 million to buy the school district headquarters and an adjacent property that houses an elementary school, two tiny high schools, and two childcare centers. That's $6.3 million an acre, more cash than the city has ever seen. With this one deal, the school district could practically wipe out its debt to the state and return control of the schools to the people of Oakland.
And almost to a person, Oakland's leaders are shitting all over the deal. City Councilwoman Pat Kernighan even wrote a proclamation to that effect, which was signed by five of her colleagues; the other two have since made it unanimous. "It's quite possible that a good deal could be crafted," she says. "I don't think this one is it." Council President Ignacio De La Fuente was even more blunt. "It's the worst piece-of-shit deal I've ever seen," he said. When asked about a rival bid for the property, submitted by bond financier and Don Perata crony Calvin Grigsby, De La Fuente said, "I don't think that's a good deal either. The only way we can get the best possible deal is an open process to have proposals from developers all over."
Funny, that's not what De La Fuente said a year ago, when he signed a letter backing the very same proposal. The Grigsby deal would give the district only $43 million, and the district also would have to spend $87 million to build a new school and district headquarters, which means the schools would wind up losing money. But De La Fuente wanted to make the deal even worse: He signed a letter that explicitly supported Grigsby's plan to have the city also give him $33 million in handouts. "Your project, as I understand it, seems to merit tax increment support as it continues our policy of encouraging housing in the city," De La Fuente wrote.
Now, fifteen months later, a separate deal that offers the district $17 million more and seeks no handouts whatsoever is a "piece of shit." What happened? Could it be that company behind the better proposal has no ties to the East Bay's political machine?
According to De La Fuente, today's investment climate is simply better. "We've seen more institutional private investment in the last four years," he says. "There's been thousands of units that have already been built and thousands of units on the way; you increase the property values."
But if anything, the investment climate has gotten worse in the last year. And if De La Fuente suddenly got religion on the idea that Oakland can write its own ticket, he couldn't have been converted earlier than June, when he voted to support the Oak to Ninth project, which surely ranks as one of the worst land deals in the city's history.
I have no quarrel with the development itself; it's the price tag that's so appalling. Think about it: The Port of Oakland just sold 64 acres of prime waterfront land to Signature Properties, which will build enough condos and stores for $2 billion in revenue at current real-estate values. What was the port's asking price? Just $18 million. Now, consider how much the port would have gotten if it had demanded what TerraMark hopes to pay for the district headquarters. At $6.3 million an acre, the port could have netted $403.2 million, minus cleanup costs. That's $400 million it could have used to finish the airport expansion, build the BART extension to the airport, create waterfront parks along the estuary, or deepen shipping lanes and guarantee the seaport's future into the 21st century. If business development isn't your thing, the port could have sold the land to the city for a dollar, and the city could have spent $400 million on social programs and libraries, or cops and potholes. Remarkably, Councilwoman Kernighan, who has gone on record calling the TerraMark proposal a "crazy, crazy deal," says of the Oak to Ninth project, "I think we got as much from the deal as we could have gotten."
Oakland can't do any better. It's a refrain we hear over and over again, with each new giveaway. When the city gave the Forest City development firm $61 million to build shoddy apartments in the Uptown district, Mayor Jerry Brown told the Oakland Tribune that if this deal didn't go through, "we'll be looking at dead dirt for the next 25 years."
In 2001, the Port of Oakland practically gave away the retail and entertainment complexes at Jack London Square the greatest tourist destination in the city, the heart of Oakland's entertainment industry to Perata crony James Falaschi. The price? Just $17 million, for land that yields $5 million a year in rent. Plus the port pays Falaschi $1.1 million a year to manage the properties. Port officials claimed that this was the fair market value of the properties.
In 2002, when the Navy offered to sell the Oak Knoll hospital to Oakland, city officials claimed the property was worth only $11 million. When the Navy put the land up for auction three years later, it got $100 million. Oakland can't do any better. Time after time, city and port officials have undervalued key public property, and time after time, their friends pick up that same land for next to nothing.
Now, TerraMark has shown not only that Oakland can do better but that all those previous deals amounted to a betrayal of the public trust. In the last few days, TerraMark has made the best deal in Oakland's history even better: In addition to the $60 million already proposed, it offered to rent the school district back a piece of the property for a dollar a day, for 99 years. Now the district wouldn't even have to move its elementary school. Even so, school board member Kerry Hamill, who supports the deal, thinks city officials will find a way to kill it. "I'm very pessimistic," she says. "I think people have made up their minds. There's a lot of fear and loathing, and not a lot of factual conversations about how we're going to build a district for the future."
If they approve this deal, Oakland's leaders will show that they've long been wrong about the city's true value. But we'll forgive them, because they'll have paid off the school district's debt and proved that sometimes they don't do what their developer friends tell them to. If they don't, we'll have no choice but to conclude that, for years, they've been stealing from us to enrich their friends, and they've done it by convincing us that Oakland is broken, poor, miserable, desperate, and worthless. Oakland can do one hell of a lot better than that.
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