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TerraMark, on the other hand, hopes to construct twice as many condos without taxpayers' help. The deal would enable the district to pay off much of its state debt in five to seven years instead of twenty. Under the plan, the state could move the district headquarters and at least one of the high schools on the property into schools Ward closed in 2004. And if the state were to accept TerraMark's lower bid of $45 million for 6.2 acres ($7.5 million per acre), then it could build a new campus for a small high school and elementary school on the remaining three acres. The district already has $22 million in construction funds set aside for such a project.
After Ward and his staff recommended the TerraMark deal to O'Connell, the state superintendent quickly signed a letter of intent with the company. Most of Ward's major tasks were now finished, but he still wanted to stay in Oakland. He continued to ask for a one-year contract extension. E-mails obtained by the Express show that he repeated his request in November 2005, and again in February, April, and May of this year. The last one was dated June 16. Each time, however, he was denied. He finally got the message, and on June 28, the 49-year-old announced that he was going to be the new San Diego County superintendent of schools.
Despite Ward's accomplishments, some Oakland activists and union members still viewed him with contempt. At a July 12 public hearing, local progressives packed the boardroom to denounce the TerraMark deal. It was not surprising; many of the same people have opposed nearly every major development in Oakland since Jerry Brown took office. But what was surprising at least for those unaware of what had happened behind the scenes is that the progressives were joined by community leaders and pro-development officials with ties to Perata.
Among them was Lillian Lopez, a leader of Oakland Community Organizations, the most influential grassroots group in the city. Lopez, who is close to De La Fuente, told the standing-room-only audience that if it were not for Perata there would have been no public hearings. Ward said later that her claim was untrue.
Another opponent at the public hearing was school board member Noel Gallo, also a close ally of De La Fuente's. In an e-mail dispatched a week later, Gallo argued that the TerraMark proposal was "nonresponsive" because it did not include a specific provision for including La Escuelita or the district headquarters in the condo project. He then pushed for a hybrid "education center" of schools and homes. He never mentioned Dones and Grigsby by name, but his proposal mirrored theirs.
The most vocal opponent of the deal has been City Councilwoman Pat Kernighan, who is backed by Perata and is an ally of De La Fuente's. At a public meeting one week later, Kernighan derided the TerraMark proposal as "a bad deal," "a stinky project," and "a crazy, crazy deal." But like Gallo, she didn't speak out against selling the property she just didn't want it sold to TerraMark. Kernighan said her primary objection was that the total amount of money the company will pay the district depends on how many condos the city council approves. If the council orders TerraMark to build fewer units, then the district will receive less money, she warned. "I can't imagine anyone who would enter a deal that bad," she told members of the Metropolitan Greater Oakland Democratic Club on July 20. "There's no way in the world that anybody should support it."
Yet just two nights earlier, Kernighan herself wholeheartedly supported a different deal containing a somewhat similar provision. The Signature Properties' pact for Oak to Ninth stipulated that if the council turned down the condo project, the entire deal would be scuttled. Kernighan also failed to note that the pro-development council has never asked a developer to build fewer housing units in a major development during the Brown administration. On the contrary, council members were greatly disappointed when Forest City's original proposal to build two thousand units plummeted to seven hundred, and then cheered when Signature's jumped from two thousand to 3,100.
Nonetheless, all eight current council members, including De La Fuente, have now come out against the TerraMark proposal. So it's clear that if O'Connell finalizes the deal in the next month, it will face an uphill battle. If the council kills it, Dones is ready to step in. "Absolutely, we're interested, should the opportunity arise," he said.
Consider this precedent. Before Brown and Perata gained control of the Port Commission, the port agreed to sell Jack London Square to a San Francisco developer for $44 million. But after Brown had appointed a majority of the commissioners, that deal fell apart and was replaced with one involving Perata's former chief campaign fund-raiser, James Falaschi. The new deal, which sparked outrage and calls for a federal probe, allowed Falaschi and his partner, Hal Ellis, to buy Oakland's top tourist attraction for just $17 million. The port then agreed to pay the two $10 million to build a new parking garage and improve "public access," $1 million a year to manage the square, and $5.5 million a year from rent proceeds generated by the square's tenants. In other words, the port had given Perata's friends millions of dollars to take Jack London Square off its hands.
A similar opportunity may arise for Dones and Grigsby. Although O'Connell appears determined to push forward with TerraMark, the city council has final say over development in Oakland and can place numerous regulatory roadblocks in the company's path. Perata also has plenty of leverage. If O'Connell wants to be governor someday, he'll need the backing of the state Democratic Party, and Perata is one of its leaders and top fund-raisers. As senate president, he also enjoys considerable power over the state budget. And his bill forcing O'Connell to visit Oakland remains valid until the current legislative session ends on August 31. Even if it expires, he can reintroduce it in December.
Last week, however, TerraMark made a new offer that may be too difficult for O'Connell to refuse. The company said it would not only pay $60 million for the entire 9.47 acres, but would lease back 3.2 acres to the district for $1 a year for 99 years. That way the district can still build its new elementary school and small high school on the site. The new offer amounts to a whopping $9.57 million per acre.
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