In September 15, 2011, the City of Oakland, acting by and through its Board of Port Commissioners (the “Port”), made and entered into an agreement (the “2011 Contract") to sell approximately 64 acres along the Oakland Estuary and the Embarcadero to Oakland Harbor Partners, LLC, succeeded by assignment by Zarsion-OHP I, LLC (the “Insiders”).
The 2011 Contract states in its Recitals that the Port and the Insiders “entered into that certain Option to Purchase and Ground Lease Real Property, dated November 7, 2003… [granting] the option to purchase certain portions and ground lease other portions of the Property” (the “2003 Option”).
Thus the 2011 Contract grew out of the 2003 Option, and it was presented for approval by the 2011 Board of Port Commissioners as such. It was not until the execution of the 2011 Contract that a taxpayer exercising reasonable care should have discovered the 2003 Option, the existence of which had been downplayed and concealed by both the Port and the Insiders. It was not until the execution of the 2011 Contract that taxpayers suffered any damages from the 2003 Option. And it was not until 2014 that the larger picture of this multi-faceted, decade-long scheme to rezone the property and transfer it free-of-charge to the Insiders became reasonably apparent.
And the 2003 Option grew out of an even more questionable transaction: the award of a 2001 Request for Developer Qualifications ("2001 RFDQ") to Oakland Harbor Partners by the Port. The 2001 process suggests it was procedurally and substantively invalid for a few reasons:
a. There were only two competing proposals, and the Shorenstein proposal was superior on its face to that of Oakland Harbor Partners in terms of both the quality and details of the proposals themselves as well as the background, experience and qualifications of Shorenstein versus Oakland Harbor Partners
b. The selection was delegated to a three-person Commercial Real Estate Committee.
c. The most objective member, of the committee, Commissioner Kiang, recused himself from the decision apparently in protest.
d. The remaining two Commissioners Tagami and Protopappas failed to recuse themselves despite glaring conflicts of interest with Oakland Harbor Partners and Mike Ghielmetti both before and after the decision. For example, a few years after the 2001 decision Ghielmetti sold or gifted to Tagami an ownership in hi family's La Rochelle winery. For an example, from 2000-2006, Signature Properties (the successor-in-interest to Oakland Harbor Partners) and Signature's partner in the Oak to Ninth deal, Reynolds and Brown, donated $175,800 to Perata and campaigns associated with him, making them Perata's third biggest East Bay donor. It was Perata who sponsored the bil....[ADD here regarding SB____ etc.]
Over and above the invalidity of the 2001 decision, the scope of the 2001 Port decision never included the aggressive profit-oriented residential real estate development currently proposed. Instead the 2001 decision was explicitly limited to implementing the public-oriented Estuary Policy Plan. The 2001 RFDQ and the Estuary Policy Plan called for "the transformation of maritime and marine industrial uses into a public-oriented waterfront district that encourages significant public access and open space opportunities" and encouraged "a mix of light industrial, manufacturing, artist lofts and workshops, hotel, commercial-recreation, cultural uses, and water-oriented uses that complement the recreational and open space character of the waterfront." (See, 2001 RFDQ at p. 1.) That is, the only proposal that the Insiders were awarded on an ostensibly competitive basis (and even this competition was rigged as just discussed) was for a public-oriented redevelopment project.
Most recently, this rigged award of a public-oriented 2001 RFDQ to Mike Ghielmetti and the Insiders by his friends Jon Protopappas and Phil Tagami has morphed into the sale to the Insiders of the entire 64-acre parcel in question for $18 million in return for nothing more than a down payment of $460,000 in 2011. Two years later, the City of Oakland repurchased 6 of those same 64 acres back from the developer for $21.5 million in cash. In return for an investment of $460,000, the Insiders received $3.5 million in cash and sixty acres of waterfront property worth as much as $300 million.
In sum this episode of municipal corruption involves the gifting gift a sixty-acre parcel of waterfront property in a prime location with panoramic views – property worth as much as $300 million – to a private developer while circumventing competitive bidding. The $300 million in question would be sufficient to finance the entire annual budget of the Oakland Unified School District. We seek emergency injunctive relief to halt the so-called Brooklyn Basin development until and unless a fair and competitively-determined price is paid to the taxpayers for the sixty acres of waterfront property.