The Secret News breaks silence with city developer loan scandal

Published On July 4, 2014 | By Rob Arias | News & Commentary, Planning & Development, Politics

Welcome back Secret News! Emeryville’s first pro-resident news blog, started in 2008, has been on hiatus for nearly a year while editor Lillian (AKA Tracy) Schroth recovered from an RSI injury that limited her use of a keyboard. The news team that has broken stories including a series of posts that discredited former Mayor & long-time Councilman Ken Bukowski is back with a doozy.

The Secret News, who broke the original story back in July 2013, revealed last week that an Alameda County Civil Grand Jury found the terms of a loan deal between the city and Bay Street developer Madison Marquette severely shortchanged the city and its residents, and that the city was “seemingly blinded by the opportunity to generate immediate cash.” The deal would have allowed Madison Marquette to repay only $12 million of an $18 million redevelopment loan based on an apparently unheard of calculation method. Fortunately, the Grand Jury report found, the deal did not go through because the County-level Oversight Board rejected it. This board is in charge of monitoring the city’s transition after the elimination of redevelopment funds.

“I received the news of the grand jury report and decided I had to write about it.” noted Schroth on her reasons for re-entering the Emeryville blogosphere “It’s a very important story on so many levels. It raises many troubling questions about the motives and judgement of city staff and the city council majority in supporting the loan deal. And these are the kinds of stories The Secret News cares about, consistent with our mission”. The wife of recently declared City Council candidate Scott Donahue, we were beginning to wonder if we’d ever hear from the Secret News again. “I had always intended to resume the Secret News at some point” added Schroth “My intention is to keep the Secret News going”. Apparently the city needs as many eyes on it as possible.

One of the ongoing narratives in our city is often tied to the perceived sweet deals that developers have gotten during the redevelopment era. Did a savvy developer attempt to take advantage of an inexperienced city staff in this case? Named in this report are former City Manager Patrick O’Keeffe, recently retired Director of Economic Development & Housing Helen Bean & City Attorney Michael Biddle. Although no laws were broken and the County Oversight Board did its due diligence by thwarting the deal, the jury made recommendations that “decision makers would recognize when more data and expert advice is required to fulfill their fiduciary duty to the citizenry”. Absolved in the scandal are outgoing Councilmember Jennifer West and current Mayor Jac Asher who both went against staff recommendations and opposed the measure. No one I reached out to within the city staff would comment on this story.

The Conclusion of the Grand Jury report was as follows:

The Grand Jury concludes that the city of Emeryville failed to conduct appropriate due diligence to determine if the method suggested by the developer for calculating the prepayment of a fixed interest rate loan was the proper method. Furthermore, the Grand Jury also concludes that city staff lacked the expertise to make such a recommendation on their own. Fortunately, the oversight board chose not to approve the Note Prepayment Agreement for the reasons outlined in this report. Although the review of the city’s actions by the oversight board clearly worked in this case, it is troubling to the Grand Jury that the city would commit to such a significant financial decision based upon insufficient research into best practices and accepted industry standards. In determining their options, decision-makers were seemingly blinded by the opportunity to generate immediate cash.

Read More on The Secret News →

The Grand Jury report can be read in its entirety on the Alameda County Website (Pages 95-98).

The City Presentation of the proposed deal can be watched on the EPOA YouTube Channel:

About The Author

is a third generation Californian and East Bay native who moved to Emeryville in 2003. A new parent in the community, he can often be seen walking his French Bulldog rescue "Fiona" around his Park Avenue District neighborhood, traversing the greenway on his bike or enjoying his favorite Emeryville small businesses. Rob's "day job" is as a creative professional.

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