For years, Ignacio De La Fuente sought to transform wide swaths of Oakland's remaining industrial land into condominiums. But then last week, the city council president agreed to a plan that will keep most industrial property untouched, except for a sliver of land along the estuary. It turns out that the owners of this so-called Tidewater property include some of De La Fuente's closest friends and biggest campaign contributors, and they stand to profit handsomely from the deal.
In fact, thanks to De La Fuente and the council's approval of a new industrial zoning policy, the value of the Tidewater land likely will double, if not triple. Property owners in Tidewater include the council president's friends and donors, Ana Chretien, owner of ABC Security, which has private security contracts to guard City Hall and parts of the Port of Oakland; Anthony Batarse Jr., president of the Oakland port commission and owner of several car dealerships; and Carlos Plazola, an Oakland lobbyist and former De La Fuente aide.
In July 2004, Chretien, Batarse, Plazola, and a partner purchased 2.51 acres of vacant Tidewater property, directly beside the estuary, for $1.87 million, property records show. Around the same time, De La Fuente began his campaign to rezone much of what was left of the city's industrial land to housing. The council president argued that Oakland's industrial base has been dwindling for years, leaving vacant warehouses that should be replaced with condos. During his 2006 unsuccessful mayoral campaign, the poster child for his industrial property makeover was Tidewater.
But then last month, Mayor Ron Dellums made a counterproposal that would protect Oakland's industrial property, which the mayor views as a scarce resource. Dellums' proposal, which was based on input from the city's industrial businesses, labor, and the Metropolitan Chamber of Commerce, seeks to protect blue-collar jobs and turn some of Oakland's traditional manufacturing base into a hub for the new green economy.
Councilman Larry Reid, who has shared De La Fuente's vision to rezone industrial land into housing, immediately offered a proposal of his own. Reid's plan would have turned seven of the city's seventeen industrial areas into a housing-business mix. But the council decided to delay acting on either the mayor's or Reid's proposals, thereby giving the chamber and the Alameda County Labor Council time to sell Dellums' plan.
As the two groups lobbied councilmembers behind the scenes, Councilwoman Nancy Nadel, a staunch supporter of protecting industrial land, worked out a compromise deal with De La Fuente. This new plan would keep most of the city's industrial property industrial, except for Tidewater. Nadel knew that De La Fuente cared more about Tidewater than any other industrial zone in the city, despite his past sweeping efforts to transform much of Oakland's industrial property. Neither Nadel nor De La Fuente returned phone calls seeking comment for this story, but Reid was clearly frustrated. "It was simple," Reid said. "Nancy worked out her own plan with Ignacio."
In the end, the council passed the Nadel-De La Fuente proposal 5-3. Councilmembers Jane Brunner, Jean Quan, and Henry Chang joined the majority, with Reid, Pat Kernighan, and Desley Brooks voting against.
Because land zoned for housing is much more expensive than land zoned for industry, the council's actions substantially increased the value of Tidewater property. The Nadel-De La Fuente plan also could cost taxpayers up to a half-million dollars, while saving the council president's friends lots of money.
Typically, when property owners seek to rezone their industrial land to housing, they must apply for what's known as a general plan amendment. It's an expensive legal process that includes conducting an environmental impact report. However, De La Fuente's friends will not have to pay those bills, because the council acted unilaterally to rezone Tidewater, which means the city is on the hook for the general plan amendment costs and the EIR. Together, these changes could cost the city $500,000, according to Dan Lindheim, Dellums' acting planning director. "Clearly, what the council did was grant a potential subsidy to the landowners and to people who want to develop there," Lindheim said of Tidewater.
In addition to the council president's pals, other Tidewater owners who may pocket a substantial public subsidy include Ed DeSilva, an East Bay road builder and developer who ranks among the biggest campaign contributors to state Senate boss Don Perata — who, in turn, happens to be De La Fuente's closest political ally. DeSilva owns Gallagher and Burke, the city's primary paving contractor, which is headquartered within Tidewater, at the foot of the High Street Bridge. DeSilva currently uses the property as a rock-crushing facility, but he has several other such operations in the East Bay, and could easily move, allowing him to sell or develop his Tidewater land for a huge profit.
Another beneficiary of the deal appears to be Lily Hu, another close friend of De La Fuente. Hu, a former Perata aide, was a onetime powerhouse Oakland lobbyist until she became ensnared by the FBI public corruption probe of the senate president pro tem. Hu had been partners with Chretien, Batarse, and Plazola on their Tidewater deal. But then in October 2006, she sold her share of the 2.51 acres to her boyfriend, Jerrold Kram, an Oakland physician, for less than what she originally paid for it, property records show.
It's not entirely clear why Hu sold the property. Neither Kram nor Hu's attorney, Doron Weinberg, returned phone calls seeking comment. However, the deal may have been to protect the Tidewater property from federal forfeiture laws. Should the US Attorney's Office ever indict Hu on bribery or kickback charges, the land may be exempt from seizure because it's in Kram's name, not hers. Regardless, the De La Fuente-Nadel compromise deal also serves a nice gift for the former Perata aide, who from all indications has not been a cooperative witness against the senator.
Another bad deal from Sheila?
In the current real estate downturn, it makes no sense to buy property without trying to get the seller to lower the asking price — especially if you're using public funds. But that's apparently what Sheila Jordan has done. The Alameda County superintendent of schools, who has never enjoyed a reputation for possessing fiscal smarts, is on the verge of spending $3.9 million in taxpayer funds on several pieces of property in the Fruitvale District without attempting to negotiate a lower price, said Gay Plair Cobb, a member of the Alameda County Board of Education.
Jordan did not return a phone call seeking comment, but according to public documents, she plans to buy five parcels on International Boulevard, including two buildings that from the outside appear to be run down. The superintendent, who has the worst record in the state in terms of making sure school districts in her county don't get into financial trouble, plans to use the property for the county's educational program for pregnant teens and teenage moms.
Cobb, who voted against the plan along with board member Dennis Chaconas, had no complaints about the planned use of the property, only of how Jordan is handling the transaction. "It's a buyer's market," Cobb said. "I think it's astonishing that in this soft real estate market there apparently hasn't been any negotiation of the price."
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