BACKROOM DEALING IN DEVELOPING CITY-OWNED PROPERTIES IN OAKLAND

This is the Executive Summary, Conclusion, Findings and Recommendations only. For the entire report go to:   2016 – 2017 Final Report

EXECUTIVE SUMMARY

 The Grand Jury investigated complaints that the Oakland City Council makes important decisions about the development of city-owned property behind closed doors. We examined three parcels of city-owned property in which the city held more than 45 closed session meetings for projects valued at more than $500 million. The Grand Jury found that the Oakland City Council discussed key matters such as project vision, feasibility, and proposal requirements in closed session, and ultimately deliberated about and selected the project developers in private meetings not subject to public scrutiny.

Although the state’s Brown Act and city’s Sunshine Ordinance require open discussions for all but a handful of matters, the City Council has seized upon one of them – the real estate exception – to allow important decisions affecting city-owned property to be made without public participation. The plain wording and intent behind the open-meeting statutes allows public boards to discuss in closed session items that would affect an agency’s bargaining position in a real estate transaction, but does not permit a City Council to keep its deliberation about the basic nature of a transaction confidential.

This conduct precluded participation by the public in determining the best use of city- owned property and the selection of developers. Openness in government is a foundation of our democracy. It protects the public from backroom dealing and helps to ensure that government is transparent and accountable. The city must provide a “level playing field” by seeking meaningful community input and deliberating publicly before selecting its developers.

The Grand Jury found that the Oakland City Council discussed key matters … in closed session, and ultimately deliberated about and selected the project developers in private meetings not subject to public scrutin

CONCLUSION

 The city’s process for selection of developers for city-owned property is not open and transparent. The real estate exception to the Brown Act does not give the council free reign to discuss policy, project vision, and RFP terms, or the authority to deliberate about and select developers, in private meetings. These matters are intended to be discussed openly in public, not behind closed doors. When deliberations occur in closed sessions, the public and those doing business with the city are given the perception that backroom deals are being made. Key questions are left unanswered for the public. Intended to protect the financial interests and negotiating position of a public agency, the Brown Act’s real estate negotiation exception limits closed-door discussions to providing direction to its negotiator regarding the price and terms of payment.

While the Grand Jury only investigated three recent city development projects, it is concerned that the city’s misuse of closed sessions in discussing development of city property is a systemic problem. Public deliberations are important. The city must provide an environment whereby public participation in developer selection is invited. In addition, developers must believe that they will be treated fairly and equitably, thus promoting a competitive selection process benefiting the city. The city must follow open meeting laws to prevent further misuse of closed session meetings and eliminate the inequities in the developer selection process.

FINDINGS

 Finding 17-1:

The Oakland City Council misapplies the real estate negotiation exception to the open- meeting requirements of the Brown Act and the Oakland Sunshine Ordinance, thereby shielding the deliberative processes – including discussions and debates regarding project vision, project scope, feasibility issues, community benefits, and the ultimate selection of a developer – from public scrutiny.

Finding 17-2:

The city’s closed session agendas for discussions of the 1911 Telegraph and 12th Street Remainder projects did not comply with disclosure requirements in the Brown Act and the Oakland Sunshine Ordinance.

Finding 17-3:

The Oakland City Council violates the city’s Sunshine Ordinance by failing to discuss publicly the advisability of selecting particular developers for projects on city-owned property before making final decisions (section 2.20.120(B)) and failing to disclose the parts of closed session discussions that were not confidential (section 2.20.130).

Finding 17-4:

Unauthorized closed sessions prevent the public from witnessing council deliberations, preclude public input into planning, and restrict public participation in the selection of appropriate developers for city-owned property.

Finding 17-5:

The city of Oakland unfairly applied the requirements of its RFP for 1911 Telegraph by allowing the successful proposer to wait until after it was chosen to provide required financial information.

Finding 17-6:

A developer was allowed to change the scope of its proposal for 1911 Telegraph at the last minute. This put the other proposers at a disadvantage, and resulted in the city choosing that developer without the benefits of staff analysis of the new proposal.

Finding 17-7:

Oakland City Council members privately discuss projects with developers whose proposals are pending, and the communications are not disclosed publicly before one developer is selected. This compromises public scrutiny of the selection process because citizens have no ability to assess the strength or weakness of private arguments made by developers in support of their proposals.

RECOMMENDATIONS

 Recommendation 17-1:

The city of Oakland must comply with the Brown Act and city of Oakland Sunshine Ordinance provisions relating to the real estate exception. The city must limit closed session discussions concerning proposed real estate development projects to price and terms of payment, and ensure that deliberations on matters such as project vision, project scope, feasibility issues, community benefits, and selection of a developer are conducted openly, allowing the public to be informed about and comment intelligently upon proposals for use of city-owned property.

Recommendation 17-2:

The city of Oakland must follow its Sunshine Ordinance by conducting open meetings in which councilmembers discuss publicly the advisability of any proposed disposition of city-owned property before making final decisions.

Recommendation 17-3:

The city of Oakland must update its training for public officials on open meeting laws to prevent the city from misapplying the real estate negotiation exception.

Recommendation 17-4:

The city of Oakland must enforce requirements of its RFPs even-handedly to create a level playing field for all proposers, and to allow city staff a full record with which to vet competing proposals.

Recommendation 17-5:

The city of Oakland must treat developers who respond to an RFP equitably by informing all RFP respondents whether changes to proposals after the submission date are permitted.

Recommendation 17-6:

The city of Oakland must adopt rules to address private communications between councilmembers and proposing developers before a developer is selected.