The Billion Dollar Lie Part 2

How City Officials Made an 18-Story Building Disappear

In November 2001, the City of San Jose Finance Department presented a Measure I legal recertification study to the city council. (The Measure I initiative, approved by San Jose voters in 1996, required that a new civic center could only be built if it were cost effective.) The city’s recertification analysis concluded that if commercial lease rates dipped to a level of $28.11 per square foot, building a new complex would not be cost effective, and the city would be obliged not to pursue the construction of the new center planned for Santa Clara Street.

But instead of calculating lease rates on a basis that reflected true market conditions, city staff relied on an industry publication called “Colliers International Market Research” to determine that the average commercial real estate rate for downtown San Jose was around $42 per square foot.  This inflated lease rate made it easier to justify the project.

According to a deputy city manager, city staff was not required to investigate real-time commercial rental rates, and instead used “existing contracts.” 

At the time, the nearly-completed, empty 18-story Sobrato Tower at 488 Almaden Blvd. was not factored into the equation.  Empty buildings, by their definition, don’t have “existing contracts.”  By using only “existing contracts,” the Gonzales Administration was able to make the 18-story office tower on Almaden Blvd. effectively disappear!

The Sobrato Tower would later “reappear” in a letter sent by developer John Sobrato to the city manager’s office.  “We are fully prepared to guaranty to the city of San Jose a maximum project cost for the entire city hall project…”  Sobrato’s letter offered the 388,000 square foot structure at 488 Almaden Blvd. to the city for $160 million.  The cost for the entire project package, including a new four-story, 93,000 square foot adjoining structure that would have been built, was submitted to the city for $210.5 million.

“This cost on a per-square-foot basis is over 40 percent less than the current estimated cost for the Santa Clara Street plan,” Sobrato wrote in his May 2, 2002 letter to Deputy City Manager Terry Roberts.

Part 3 follows next week.

Pete Campbell is a former political writer for La Oferta newspaper.  He recently served as a member of the Reed Transition Team.

21 Comments

  1. Pete, good article!  For those who paid attention, it was obvious from the beginning that our politicians cooked the numbers to justify the City Hall building.  Every manner of financial chicanery was used to back into a scenario that would make our boat anchor City Hall look good on paper.  I truly believe that our Mayor and City Council members had low self-esteem and needed a shiny, glitzy new building to bolster their egos.

  2. I have 2 questions….What is in place it ensure that another injustice placed on the taxpayers of San Jose never happens again ?  If there are no oversights in our city, how can we develop some ?

  3. I’ve noticed that the new City Hall has come up for discussion here, and I thought seeing the actual text of Measure I as it appeared on the ballot in November 1996 would be helpful.

    “City Civic Center Relocation. Without imposing additional taxes or taking money from other city programs, shall Ordinance No. 14224.1 be amended to permit the relocation and consolication of civic offices in the downtown so long as the costs are paid by using the proceeds from the sale or lease of the old civic complex and other land, savings from the elimination lf leased office space, and consolication of city faciliies and services?”

    Measure I was adopted under the administration of Mayor Susan Hammer.

  4. Certainly Gonzales and his comrades who voted for the Hall deserve a heap of blame, but don’t forget to give former “City Manager” Borgsdorf his share of blame as well. If he had done his job and provided complete information to the Council (and allowed his staff to do the same) we might not be in quite the mess we are in today. He did a great disservice to the citizens of San Jose, almost as much as the Mayor and Council did.

  5. We have to face the fact that to tear it down would really be expensive. However, there is one action that can be taken that would rebuke those who wasted our tax money and put this ugly building in downtown.
    We should have the signs, inplace in the building, removed of any names of individuals and replaced by a simple statement: “Built by the citizens of San Jose”. That should deflate a few egos and remove any reference in the future to our failed government. They haven’t earned the right to such recognition.
    Let’s just hope that we don’t have any problems like this with the old City Hall.
    Re. the oversight issue, a thorney subject. Any oversight has to be taken out of the hands of the politicians and given to tax paying citizens of the city. We have no reason to trust them to do the right thing. Any oversight group should not have long term members to insure that fresh ideas and thoughts are in place to protect the public. It’s a harsh way to operate and after a long period of time may not be necessary. In the meantime, we have a lot of problems to solve and the city must move forward.
    Was reviewing the pictures that showed the former and present views of the city linked to on another post. Looked the big winner in all of them was our local auto drivers. Lot’s of wider streets but no, and I stress no, areas for pedestrians. Cars do not make a friendly city!

  6. Does anyone know if there is a chance of civil action against the council and those who prepared the reports? 

    To me, it was a clear breach of fiduciary responsibilities.  Voters did not authorize a plan which was funded from the general fund.  And the council voted to do just that.

    It’s not very far from a mutual fund whose prospectus says “Asia”, but which invests the money in Europe.

    It wouldn’t be financially significant to the city, but serious individual damages might deter this kind of game in the future.

  7. Pete—Terrific and timely piece! Bergsdorff? What would Les White have done? Great sug-
    gestion to erase the politicians’ credits from the structure, but what an insult to put the tax-
    pers in their place on this white elephant. They are not responsible. Maybe something like “Al Ruffo Said This Building was a Stupid Idea”. Some perspective: the Queen Elizabeth II, all opulence, built for pleasure, cost as much as the City Hall fiasco—a mere billion dollars. The Disney Center Concert Hall,
    a gorgeous, wonderfully sited building, best acoustics in the world, only cost 273 million dollars—ALL OF IT PRIVATE MONEY. And we’re still in the woods with the old city hall.
    But I can’t see Chuck Reed making a mess of that, though I’ll bet he won’t take my suggestion to sell the Dumb Dome to Tiffany’s to get shopping started downtown—or trade the Sobratos the old city hall for his Big Blue Building and stuff all the extraneous bureaucrats in rented spaces into it. (Still wouldn’t be big enough, I’ll bet.) George Green

  8. #5 Glenn, you’re kidding, right?  First and Second Streets have been constricted down to single lanes in an attempt to create a pedestrian transit “mall” scene.  What they succeeded in doing was making dead zones out of the the entire “mall” stretch (these two streets looked more lively even in 1975) as well as adding tons of time to light rail commuters’ trips as every lousy train is forced to do the mall crawl.  Like forcing people to pass through downtown was going to make them like it better.  And creating that mall scene wasn’t cheap.  Another case of taxpayer dollars wasted on a bad project.

  9. Whatever happened to the idea that the Murky News was going to “watchdog” the entire city hall project to point out inconsistencies and cost overruns?  Were they reeled in and duped?  Did they intentionally turn a blind eye (or were their eyes on San Francisco, Oakland, Fremont, Hayward, San Mateo, Dublin, and Marin?)?

  10. Mercury has lost most of their investigative reporters and experienced reporters to early retirements and cost cutting as ad revenues dropped because of Internet – EBay, Craig’s List, Job Boards and Community email lists

    Blogs have not been used effectively by reporters to generate investigative reporting leads and could be a future great source

    If you want good investigative reporting by newspapers today you need to do a lot of research, hand them facts and good leads to follow up since they do not have either experienced reporters or time to do good investigative reporting

    City Hall project, politics, lobbyists and costs is a great example of what would have been in past a good investigative journalism article which Mercury ignored

    Maybe Mercury has too many examples of poor or scandal ridden San Jose city government to investigate all of them

  11. Gee Pete – I don’t know, maybe asking San Jose to use real numbers to justify City Hall, Grand Prix, BART, Airport, and downtown RDA projects rather than using San Jose political project numbers to spend hundreds millions of taxpayers dollars is too radical for San Jose’s city government and too much of a change from historical city hall political practices

    What will happen to poor developers and their lobbyists, former politicians and staffers? 

    Can we actually ask them to work for a living like the rest of us between elected or appointed political jobs?

    We are breaking tradition to not name building after our politicians and I was so looking forward to going to Gonzales Rotunda in new City Hall for the next political fund raiser

    Didn’t City Council pass a law making what you propose illegal or downright unfair for former former politicians and staffers plus where will elected officials get the money for their next musical chairs political office campaign?

    Don’t think it will work or they will actually do real work after all these years of easy money, back room deals and big lobbyist paydays

  12. CH Insider   Your kidding – Right

    Most of us believe Gonzo, fellow indictees and unindicted co-conspirators not city employees caused problems so Reed should give city employees until summer to clean up CH mess  

    If no major changes, Reed should start cleaning CH from top down of those not working for taxpayers

  13. Pete – Great Blog today and last week to discuss the lack of community involvement in past large spending and public policy decisions like City Hall and how these projects affect San Jose’s future budget and the need for more citizen involvement and oversight in city public decisions

    Sunshine Reform Task Force is looking at and has or will be making recommendations to address the many known city government and public participations issues.  A few of which are:

    1) Single Master City Official Calender, 10 day Policy Body (City Council , Redevelopment, Council Committees, Commissions etc ) meeting notice meeting notice rather than 3 day Public meeting agenda documents will be availability at least 10 days prior Other Public Meetings (Ancillary Body) will have 3-4 notice for other public meetings so residents can obtain adequate notice and information so public can participate and make comments that are part of input before the decisions are make. 

    2) Providing analysis and justification to public 10 or more days prior to public meetings on all non San Jose government expenditures over $200,000 paid by city or Redevelopment tax money and city expenditures over $1 million that will include impacts on jobs, tax revenue, future projects, city or community goals and what city projects will not be funded if tax money is spent on the proposed project and what are those impacts along with some other to be determined criteria to better spend our scarce city tax revenue and receive real tax paybacks for tax money spent

    3) All Closed Session meetings will be audio recorded and limited topics discussed unlike the past where a single topic justified closed session and wide ranging topics were discussed

    4) Public Outreach and Public records availability will be improved

    Look forward to additional Blogs by Pete to focus our SJI community discussion on what specifically needs to be done or changed to bring public participation into city government decisions using past San Jose examples or what is being done in other cities

    The meeting are public meetings and we welcome additional public comments and have received 100’s of public comments

    http://www.sanjoseca.gov/clerk/TaskForce/SRTF/SRTF.asp

    There are few simple or easy solutions to San Jose many complex challenges especially how to improve our jobs and tax revenues to pay for city government and adequate services but with the entire community participating we can develop balanced community solutions

  14. If you want to see what Sobrato’s City Hall would have looked like with the dome check out architectural rendering/montage on this planning firm’s website:

    http://www.squareoneproductions.com/

    You’ll need to click on the projects link, then choose the “architecture: large” text links in the middle of the next page.  The Sobrato City Hall rendering is Picture #22 so you’ll need to scroll right and click on the small thumbnail photo to enlarge.

    I tried to attach or paste it into this e-mail but was unsuccessful.  I don’t know who commissioned the drawing but my guess is that it was possibly the SJ RDA folks. 

    Hey, Pete did Chuck ever see this drawing? Maybe we could convince the County to move in since Ken Yeager is now a Sup!

  15. My thoughts on the new City Hall or “The house that Gonzo built”:
    It was nice to have a world class architect design our City Hall but if it were not for the mayor and council, there never would have been a glass dome.  (I think think this was one of the few good ideas Gonzo’s administration ever had)  I recently went to an event there and thought it was quite nice.  I wouldn’t like to have to clean the glass or try to fix a leak and I’m sure there will be some, but for now it is beautiful. As for the Sobrato tower vs the Mayier (sic) tower, though I have never been inside the Sobrato Tower I feel it has much greater curb appeal.
    The new City Hall tower looks a bit like a 1960’s Holiday Inn, especially when you are going west on Santa Clara St.  When I visited the Getty Museum in L.A. designed by Mayier I though it was beautiful.  The setting, the building and the landscape.  Though he used his same trademark white monocromatic style on our City Hall, it doesn’t work the same as it did at the museum where it had a brown and green mountain as a back-drop.  The landscape at the museum was as beautiful as the building and the sum was greater than the parts.  The landscape at the New City Hall is at best lacking.  Also in this day and age, why isn’t it a green building?
    Though I felt that the Victorian City Hall never should have left Plaza Park, I was never sure that we should leave our 1950’s location to come home again.  The 50’s City Hall was not great but it had easy access from hwy.87.  Though I have always felt City Hall belonged in the downtown, it was a matter of money. Those on this blog have made us aware that we could have buit it for less and that many of the estimates they used were not accurate.  We are stuck with what we have so I now I ask, what have we learned, and how can we improve on our new City Hall ?

  16. How can we improve on our new City Hall ?

    Plant some trees / green spaces on both sides of Santa Clara and behind building towards SJSU

    Add solar panels

    Add City Hall user paid child daycare for staff and public evening meetings

    Make it family with children friendly

    Have taxpayer paid City Council and staff vehicles be electric or high mileage small vehicles not SUV or gas guzzlers

    Add meeting / event information computer screens in public areas so we know where meetings are

    More evening and weekend public meetings less workday meetings

    Build out empty lots around City Hall with street level retail, office space, child care, resturants and residential mid or high rises with public green open space – City Hall looks like in empty dirt lot redevelopment zone

    Plant grass until development is started in empty lots around City Hall

  17. #17 I just tried the link and it works. 

    You may need to manually type in the address into your browser address bar and then follow these directions.

    Once you’re on the main SquareOne website page, click on the White “projects” link at the bottom of the page.

    This will bring you to another page for projects. Next click on the actual word “Large” link which is next to the word Architecture near the bottom of the page but above the “home” link

    This will bring you to the large scale architecture page. Next you’ll need to use the right scroll arrow until you can see the 2nd to the last small thumbnail photo.  Click on that photo and it will bring up the photo of the Sobrato building with the City Hall dome design incorprated.  If you’re unsure about which thumbnail photo it is, put your cursor over the correct photo and an “edge city” tag pops up.  That’s the one you want to click on.

  18. I say there’s some thanks to be given to Pete for letting all San Josean’s know the facts behind the building of the City Hall.  This at least shines some light on what was taking place during the run up to building the facility.  I wonder how many readers realize what took place and how all the citizens were “duped” at that time.  Also this article should open peoples eyes as to how the City Council was maneuvered and arm twisted into voting with Gonzales to go ahead with the project.  Isn’t it amazing what corruption, lobbyist, and who knows what special favors can due to sway expenditures and the direction a City will take.

    Concerned Citizen

  19. Sound to me that at this point you are just looking for scandals. Give it a rest. You elected Chuck and final. Wait, lets see what he pulls out of his hat.

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