Coliseum Transit Village deal could cost Oakland millions

A rendering of the Coliseum transit village that a nonprofit has planned to build at the Coliseum BART Station parking lot. A rendering of the Coliseum transit village that a nonprofit has planned to build at the Coliseum BART Station parking lot. Photo: Courtesy, Pyatok Architects Photo: Courtesy, Pyatok Architects Image 1 of / 1 Caption Close Coliseum Transit Village deal could cost Oakland millions 1 / 1 Back to Gallery

A long-gestating transit village might finally sprout up next to the Oakland Coliseum BART Station, covering a slab of parking lot with 110 apartments and 1,500 square feet of retail.

But the project could come at great cost to the city, which for 12 years has pinned its hopes on a transient cast of businessmen who formed their own nonprofit corporation to clinch the deal.

The Oakland City Council’s Community and Economic Development Committee will vote Tuesday on whether to sign a development agreement with that group and its partner, local real estate firm UrbanCore. The agreement would require Oakland to become a partner and loan $11.6 million to the project with no guarantee of ever getting it back.

Conceived in 2003 as a sweeping plan to encircle the Coliseum BART Station with stylish apartments, offices and shops, the Coliseum Transit Village has since been reduced to one apartment building on a 1.3-acre lot. Until recently, it was planned as a market-rate project, but now the developers say that half of the apartments would be affordable.

The plan requires Oakland to provide public funds via an $11.6 million loan with a 55-year term and a stipulation that Oakland Economic Development Corp. won’t have to pay a cent back if half the apartments remain affordable. BART would have to agree to lease the parking lot to the developer.

Oakland Economic Development Corp. has no website and no real estate portfolio. Its former president, James Head, said he is no longer involved with the group. Clint Bolden, a local businessman who volunteered with the group at its genesis, then charged $125 an hour to review its contracts with the city, said the group is now a coterie of volunteers aided by an “advisory committee” of lawyers and power brokers — including Councilman Larry Reid’s longtime chief of staff, Ray Leon.

The group’s current chair, Sylvester Grigsby, did not return multiple phone calls.

Reid chairs the council’s Community and Economic Development Committee and has supported the transit village since the idea was first pitched more than a decade ago. He is one of many city officials pushing the city to take a chance on the Oakland Economic Development Corp. despite its lack of a track record. He did not return calls seeking comment.

Larry Gallegos, the city staffer assigned to the transit village, called the group a “valuable partner” in a plan that could transform an area long known for blight and crime.

Councilwoman Annie Campbell-Washington, who sits on the Community and Economic Development Committee, said she plans to vote in favor of the project Tuesday.

“I really believe this was the true and honest reason that redevelopment was set up in the first place, to support housing projects in low-income neighborhoods,” she said, acknowledging that the deal requires “some pretty significant subsidies.” But she said it should be easier to get funding from the state and county once the council approves the $11.6 million loan.

In the summer of 2013 the council voted to give the group a $400,000 loan with a promise that the group wouldn’t have to pay back anything until the project was finished. By then the Internal Revenue Service had revoked Oakland Economic Development Corp.’s nonprofit tax-exempt status because it had failed to file tax forms for at least three consecutive years.

The group spent the entire $400,000 by January, allocating more than half the money to environmental, parking and traffic studies and paying more than a quarter — $104,000 — to developer Michael Johnson, who heads UrbanCore. Much of the rest went to Johnson’s consultants and lobbyists. Eighteen thousand dollars went to Bolden.

Oakland Economic Development Corp. got its tax status reinstated in September, two months after a Chronicle report on its tax status problems and dealings with the city.

The new deal requires the development team to put little on the line. The $1.25 million that Oakland is asking UrbanCore and Oakland Economic Development Corp. to contribute is “nominal,” wrote the city’s hired land economics consultants, Jason Moody and Michael Nimon, in a memo to city officials.

That nominal contribution is about a tenth of what most Oakland developers commit for market-rate projects, which is usually in the range of 30 to 40 percent, said John Protopappas, who has built many successful real estate projects throughout the city.

Though the Coliseum Transit Village is loosely modeled after a transit village in Fruitvale that Oakland built in collaboration with the Spanish-Speaking Unity Council, the terms of the Coliseum Transit Village are much more generous to the developer.

Johnson said it would be unreasonable for the city to ask his team to share more of the financial burden. He pointed out that market rents near the Coliseum can be as low as $2.25 a square foot, half as much as Jack London Square or the Uptown area.

“BART has wanted to get some transit-oriented development on this property for a long time, and the market just wouldn’t support it,” Johnson said, adding that even $1.25 million is a lot to gamble on a distressed area.

Rachel Swan is a San Francisco Chronicle staff writer. E-mail: rswan@sfchronicle.com Twitter: @rachelswan