Grand jury slams Oakland City Council’s ‘backroom dealing’

Oakland City Hall. Oakland City Hall. Photo: James Tensuan, Special To The Chronicle Photo: James Tensuan, Special To The Chronicle Image 1 of / 8 Caption Close Grand jury slams Oakland City Council’s ‘backroom dealing’ 1 / 8 Back to Gallery

The Oakland City Council disregarded open government laws while pursuing multimillion-dollar deals with developers over public land, a civil grand jury investigation released Monday found.

Council members made decisions in closed-session meetings that should have been made in public session, as required by the state law known as the Brown Act and by the city’s more stringent Sunshine Ordinance, according to the Alameda County grand jury’s report.

The grand jury looked at the council’s actions for three contracts, together valued at more than $500 million, and found that agreements in all three cases were hashed out through “backroom deals” that received little public input and that raise the specter of favoritism, the report said.

The Brown Act requires that legislative bodies of local governments conduct their meetings in public, with few exceptions, one of which allows for private real estate negotiations so that an agency’s bargaining position is kept confidential. The grand jury concluded that Oakland council members have “seized upon” the real estate exception for closed-door meetings to discuss terms outside the scope outlined by the exemption.

Huge transactions that shape the city’s budget, skyline and real estate portfolio thus are subject to little public scrutiny, the grand jury said.

“While there is ample opportunity for the public to comment at each open meeting, the ability to speak has limited value if the public does not know what substantive discussions took place in closed session,” the grand jury reported.

A spokesman for the Oakland city attorney’s office did not respond to a request for comment.

Grand jurors investigated the deal-making behind three proposed projects — two high-rises on Telegraph Avenue in the Uptown district and a one-acre patch of land adjacent to Lake Merritt on East 12th Street. But beyond the three probed examples, the grand jury said it was concerned that abuse of closed-session meetings could be a systemic problem.

The investigation found that council members often talk with developers privately, even while competitive bidding is under way, and there’s no rule requiring they disclose their communications. Well-connected developers may be favored in the selection process and could exert “undue influence” through secret conversations, the grand jury said.

Councilwoman Lynette Gibson McElhaney, who was council president for most of the years covered in the grand jury investigation, strongly disputed its findings. She said the properties received plenty of public hearings and that all disclosable deliberations done in closed session were reported properly in open meetings.

“Sometimes the grand jury looks at a very narrow set of documents and interviews,” McElhaney said, adding that she wasn’t personally interviewed. “I just don’t find (the conclusions) to be true.”

One of the examined projects involved plans to build a 27-story residential tower and hotel complex on city-owned property at 1911 Telegraph Ave., across the street from the Fox Theater.

The council selected San Diego developer Oliver McMillan and the Oakland-based Strategic Urban Development Alliance for the project after allowing the group to make 11th-hour changes to its proposal and letting it skip a requirement to publicly disclose its financial statements.

Even though city staffers scored proposals by two other developers higher than the chosen group, council members nonetheless gave the deal to the group and entered into an exclusive negotiating agreement in March 2016, for reasons they never explained publicly, the grand jury found.

But in the year since, the city’s contract with the group has expired, the project was abandoned, and it’s unclear what will happen next.

“The city has not announced publicly how it intends to proceed,” the report said.

In the second project reviewed by the grand jury, the City Council green-lighted an unsolicited $200 million residential and hotel project on city-owned land at 2100 Telegraph Ave. in the fall of 2014. The council held 24 closed-session hearings on the project, and never issued a “request for proposals” typically done for large-scale projects, which allow for multiple companies to compete.

The final project examined in the investigation — a city-owned lot bounded by East 12th Street, Second Avenue and Lake Merritt Boulevard — was initially supposed to be turned into a luxury condo building, but drew protests at the single public meeting at which it was discussed.

The council has 90 days to send a response to the investigation to Morris Jacobson, the presiding judge of the Alameda County Superior Court.

The civil grand jury report released Monday included findings from other investigations. Among them:

• Youth Uprising, an East Oakland neighborhood nonprofit, received preferential treatment by the county Board of Supervisors over other community-based organizations. The county gave a $1 million bailout to the organization last year when it ran into financial problems.

• Oakland and the World Enterprises, an organization founded by Alameda County Supervisor Keith Carson along with his staffer and former Black Panthers leader Elaine Brown, received more than $800,000 in county funds in a move rife with conflict of interest.

• Another county supervisor improperly intervened in the selection of a chaplain for the Alameda County Juvenile Hall — part of a pattern of “political interference” by elected officials on behalf of favored constituents.

Kimberly Veklerov is a San Francisco Chronicle staff writer. Email: kveklerov@sfchronicle.com Twitter: @kveklerov