The idea was ambitious: To give hundreds of impoverished families in East Oakland a chance to live in stylish apartments near a BART station, in a part of town long known for crime and desolation.

City Councilman Larry Reid has pushed the plan since 2003, when he co-founded a nonprofit charity, the Oakland Economic Development Corp., to make it happen. Two years later, the charity persuaded the city to grant it exclusive rights to pursue a housing development in the parking lot of the Coliseum BART Station. The Oakland Economic Development Corp. had no experience in taking on a project, yet in 2013, Reid and his colleagues on the City Council voted to give the group $400,000 in public funds so it could forge ahead.

Now that public money is gone, the transit village appears to be dead, and the city stands to lose an $8.5 million state grant if the village isn’t built by October 2017.

Records show the group spent all $400,000 in city funds and lost its federal charitable tax-exempt status, which city officials say must be reinstated for the project to move forward. Meanwhile, the exclusive agreement the nonprofit signed with Oakland to pursue the project expired.

Questions about whether the nonprofit could pull off the project had been building even as the city invested its hopes and money in the group. The nonprofit’s business address was its president’s home address. Its listed board of directors included people who told The Chronicle they had little or nothing to do with the nonprofit. BART, which would have to agree to the project, all but laughed the nonprofit’s representatives — including Reid — out of the room when they pitched their most recent proposal.

Big blow

The Oakland Economic Development Corp. — formed by Reid, local attorney James Head and others — began with a lofty goal to blanket a swath of public land around the Coliseum BART Station with hundreds of apartments and more than 10,000 square feet of retail, plans that would have required a $35 million subsidy from the city.

But over the years, the nonprofit hit obstacles. Its original developer partner, the Bay Area real estate firm MacFarlane Partners, bowed out. The housing market flopped in the economic crash of 2008, making it difficult to secure investments.

The biggest blow came in 2011, when the state dissolved city redevelopment agencies, which had long bankrolled real estate projects that depended on public subsidies. That year, the nonprofit partnered with another local developer, UrbanCore, and scaled back the transit village to 110 apartments and about 1,500 square feet of retail on a 1.3-acre parcel — a fragment of the original idea.

By then, the Oakland Economic Development Corp. had stopped filing its federal tax forms, and in May 2013, the Internal Revenue Service revoked the group’s charitable status after it failed to file taxes for at least three years.

‘Nothing to report’

“It was just one of those periods where there was nothing to report,” said Clint Bolden, a local businessman who originally volunteered with the Oakland Economic Development Corp., then charged $125 an hour to review the group’s contracts — work that was paid for with city-supplied funding.

To this day, the nonprofit has not won back its charitable status, has no website, and lists its address as a residence in the Oakland hills belonging to Head, the group’s president. It also has nothing else in its portfolio: Bolden said it was formed with the sole purpose of clinching the transit village deal.

Yet, despite the setbacks and lack of a track record, the group had unwavering support at Oakland City Hall and from the philanthropic community.

In 2005, when Head was in charge of the Oakland Economic Development Corp., he was also program director at the San Francisco Foundation, and that year the foundation awarded the Oakland Economic Development Corp. a $30,000 grant to pursue the Coliseum Transit Village. Head says he was not involved in disbursing the grant. Last year, he took on a new post as chief executive officer of the East Bay Community Foundation, the largest philanthropic organization in the East Bay. He also remains chief at the Oakland Economic Development Corp.

Generous terms

In 2013, when the City Council awarded the Oakland Economic Development Corp. public funding for the transit village, it came in the form of a $400,000 loan with generous terms: no interest, 55 years to pay it back, and a promise that the group wouldn’t have to pay anything until the transit village was finished and generating revenue

Erroneous information

Council members who approved the loan that summer had received a city staff report that erroneously called the group a tax-exempt nonprofit. The city’s report also praised the group’s board of directors for having “economic development expertise from the business, government, nonprofit and community sectors of Oakland.”

Yet, among the individuals Head listed that same year as board members in filings with California’s Registry of Charitable Trusts are two who told The Chronicle they had not been associated with the group for years.

“That’s news to me,” a city employee named Douglas Cole said when told he was listed as a board member. He said he was drafted for the board more than a decade ago and attended only three meetings early on. “I’d forgotten about it. I didn’t know it was still intact.”

Bishop Bob Jackson of Acts Full Gospel Church in Oakland was also surprised to be listed as a board member. “I haven’t been a part of that in a long time,” Jackson said.

Another listed board member, Robert Harris, a retired attorney for Pacific Gas and Electric Co., said he last met with the board for a 2014 tour of the transit village site.

One board member did not return calls, another hung up the phone when told the purpose of the call, and two more could not be located.

Asked to explain the seeming nonexistence of his board, Head e-mailed a new list of seven people. Cole and Jackson were off the list and the only new name was Ed Fitzpatrick, a luxury car dealer who could not be reached for comment.

Funds exhausted

By January 2015, the Oakland Economic Development Corp. had spent every penny of its $400,000 loan, which came from bonds earmarked for Coliseum-area development. More than half the funds paid for environmental, traffic and parking studies to determine the viability of the project.

About a quarter of the loan, $104,000, was paid to Michael Johnson, president of the project’s partner development firm, UrbanCore. Much of the rest went to pay for lobbyists and consultants, including Bolden, who took $18,000.

Reid, who made the motion to award the loan at the City Council meeting in 2013, said he is not active with the group he founded. Records show that his chief of staff is copied on e-mail correspondence related to the transit village between October 2013 and June 2014.

Reid characterizes his role as that of a political advocate, campaigning for the project because he wants African Americans to build real estate projects in their own neighborhoods. He says the Coliseum Transit Village was modeled after a transit village in Fruitvale that Oakland built in partnership with the Spanish-Speaking Unity Council.

“It gave African Americans a sense of hope that they could be part of the changing landscape of our city,” Reid said. If Latinos could spruce up their neighborhood with a BART transit village, he said, then African Americans could do the same.

California conflict-of-interest law bars elected officials from voting on projects from which they will financially benefit, and Reid said he has never profited from the transit village development. He also says that although he was a founder, he holds no position on the organization’s board.

His involvement, he says, is driven by a desire to see improvements in his district. Reid and other council members said it is not unusual for Oakland elected officials to help facilitate projects in the areas they represent.

BART’s reaction

Reid recently attended a meeting with members of the development team, city staffer Larry Gallegos and Robert Raburn, the elected member of BART’s Board of Directors who oversees the Coliseum Station. At that meeting, the developers asked for a ground lease for the parking lot and proposed that their first payment be deferred by about 10 years, Raburn said.

Raburn didn’t bite. “At the end of our meeting, they dropped their numbers on me,” he recalled. “I said, ‘You’ve got to be kidding.’”

For now, development of the Coliseum Transit Village is stalled. Gallegos, who has continued working on the project even after the city’s agreement with the Oakland Economic Development Corp. expired in January, says the development team is trying to secure financing.

As for why he has continued to work on the development despite the expired agreement and the nonprofit’s tax problem, Gallegos said he and other officials are “very much interested” in advancing the project. City officials had already invested “considerable” time and a $400,000 loan on the deal, he said.

The city also does not want to lose the $8.5 million state grant, Gallegos said.

Program ending

The grant is non-transferrable to another project and if Oakland loses it, it will be unable to get another because the program, based on the 2006 voter-approved Proposition 1C, is ending. Prop. 1C was a $2.9 billion bond measure to raise public funds for affordable housing and urban development near transit hubs and is managed by the state Department of Housing and Community Development.

“We’ve tried to be very flexible and work with them,” said state Housing and Community Development spokeswoman Evan Gerberding.

Meanwhile, momentum to improve the area around the Coliseum has been building. In March, the City Council approved a new zoning plan for 800 acres near the Coliseum BART Station. The area is primed to be a new urban center, and out-of-town speculators are vying for portions of the land.

“Let’s face it,” Raburn said. “A lot of people are coming in and saying they’d love to have a project around the BART station ... a lot of it is foreign capital.”

Raburn said he liked the idea of building housing around a BART station, and he also liked working with a community group that would “keep the money local.”

But Raburn also said it’s important to vet any plan before BART signs a lease. The parking lot generates money for BART, and Raburn doesn’t want to see it squandered.

“We’re not going to just give away public land,” he said.

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

Twitter: @rachelswan