Did Two Politically Connected Developers Get a Pass on VTA Project’s Key Requirement?

When the Santa Clara Valley Transportation Authority (VTA) opened a call for proposals to build a mixed-use development near the Tamien light rail station in 2016, the agency required bidders to include a multilevel parking garage. Now, the terms under which CORE Development and and Republic Urban won the competition may be relaxed—without putting the project back out to bid.

The recent reversal on the garage raises questions about whether the requirement was a way to reward a preferred or politically connected team of contractors. Close ties between developers and some members of the VTA Board of Directors suggest that political favors tainted the bidding process.

Six companies applied when the agency solicited bids, prompting VTA board member and Santa Clara County Supervisor Cindy Chavez to lament how so few submitted a proposal for the 7-acre site between Willow Street and West Alma Avenue in San Jose’s Willow Glen neighborhood. The reason VTA wound up with such slim pickings? Because the garage on the west side of Highway 87—a key feature that VTA mandated while courting proposals—posed a major financial hurdle to prospective bidders.

By requiring the structure to replace an existing 275 parking spaces on the site, the VTA board eschewed a competitive offer from ROEM Development that would have delivered 50 more affordable housing units in an area that desperately needs it.

Instead, the transit board awarded the deal to CORE and Republic, which teamed up as UrbanCo-Tamien with a pitch to build 440 housing units—only 88 of them reserved for people earning no more than 60 percent of the area’s median income—with 3,000 square feet of ground-level retail and, possibly, a child care center. The winning bid, which was endorsed by the San Benito and Santa Clara County Building and Construction Trades Council, also included a $23 million concrete parking garage big enough for 900 cars.

Records show that another competitive offer may have been passed over in favor of developers with a long history of donating generously to certain VTA officials’ political campaigns. A long trail of campaign contributions leading from UrbanCo-Tamien to Chavez and her political allies, county Supervisor Dave Cortese and San Jose Councilman Raul Peralez, may offer clues about why ROEM’s bid ultimately lost.

CORE was a major contributor to campaigns for Peralez, Chavez and Cortese over the years, with much of the nearly $100,000 that Republic gave over the past decade to various candidates weighted toward the latter two. In total, records show 38 contributions totaling $23,650 to Chavez, Cortese and San Jose Councilman Don Rocha from people at both companies.

During her 2006 run for San Jose mayor, Chavez received $5,500 from several people at Republic, including a secretary and a driver, while the company separately chipped in $50,000 to the Santa Clara County Democratic Party. This was all after Republic, along with Barry Swenson’s Green Valley Corp., was selected by the Chavez-chaired VTA board to develop a parcel on San Carlos Street into high-density housing.

Chavez recused herself from voting on the Tamien contract last year because of political contributions in past races from developers competing in the bid. But her protege, Peralez, who’s running for re-election in San Jose’s District 3 where the project is located, voted yes on the CORE-Republic proposal. Months later, CORE President David Neale and his son, Executive Vice President Chris Neale, each gave $600 to Peralez’s campaign and endorsed him for re-election.

VTA staff, however, says UrbanCo-Tamien won the deal for reasons that were practical, not political. Ron Golem, the agency’s deputy director for real estate and joint development, says the board picked the CORE-Republic team because it “did not have the same sharing of risk” when it came to building a pricey parking garage.

ROEM’s parking structure was $10 million less than UrbanCo-Tamien’s estimate. But VTA Chief Financial Officer Raj Srinath wrote in a March 2017 memo that “the low cost and lack of ROEM’s commitment to build the structure irrespective of actual cost results in a substantial risk to VTA.” By demanding that developers finance and build the parking garage before housing without tapping into VTA money, the agency may have have scared off other suitable contenders.

“Many of these developers indicated that they could not submit a proposal for the Tamien site because of the challenge to formulate a feasible development project … with no VTA funds available for the replacement parking structure,” Srinath wrote in the same planning document from last year.

VTA’s concerns about parking and financial risk are now apparently a moot point, however, because the board summarily removed the garage requirement from the project. Republic CEO Michael Van Every says the parking structure was eliminated because it would worsen traffic in surrounding neighborhoods and because the company plans to work with the park-and-ride surface lot that’s already there. CORE Executive Vice President Neale echoes his counterpart at Republic.

“We just thought for housing, it was way over-parked,” he says.

Plenty of neighbors would disagree. Many of them have been pleading with VTA to build more parking before adding any high-density housing in the area.

Not everyone sees the elimination of a parking garage as a drastic revision in the scope of the development. Golem says it’s unlikely that the VTA will reopen bidding because “the project has not fundamentally changed.”

But some elected officials and ROEM Executive Vice President Alex Sanchez say that eliminating the garage mandate alters the project’s economics enough to warrant a new call for proposals.

“Many experienced and financially capable private developers were eliminated by unreasonable financial requirements which are now being changed,” Sanchez says. “The VTA and the public are being denied the benefits of a truly competitive process that seeks to obtain the services of a large group of qualified developers that can produce projects that are models for the Tamien site and future VTA joint development efforts.”

Brett Bymaster, an activist who’s been trying to get VTA to re-bid the project to bump up its affordable housing units from 88 to 150, says he’s hopeful that will happen.

“The VTA staff, from the beginning, told the developers that they wanted to enter into an exclusive negotiating agreement and make changes to the original [request for proposals],” he says. “And that’s exactly what they’ve done, much to the benefit our low income community which is starving ... for low income housing.”

According to an analysis by Bymaster and other community organizers, there are more than 100 affordable housing units in the project’s zip code for people who make six-figure incomes—and zero for those who make $30,000 a year.

Former San Jose City Councilman Pierluigi Oliverio, who recently received a $1,000 donation from David Neale for his Santa Clara County supervisor campaign, also thinks reopening the project to bid is the fairest way to ensure that taxpayers “get the best deal.”

“If it’s a substantial change, it might behoove a government organization to rebid a project and see what else is out there,” Oliverio says. “Since this is public land, I could only assume they’d want to get the best deal.”

VTA board member and San Jose Councilman Johnny Khamis—who recused himself from voting on the Tamien project because of past campaign contributions from the companies vying for the deal—says he supports a renewed call for proposals.

“Because,” he says, “every bidder should be playing on the same playing field.”

Fellow board member and San Jose Mayor Sam Liccardo, who recused himself from the Tamien vote for the same reasons, says he believes the project should include a garage.

“I think the community expects that,” he says, “and it’s been in the plans for many years.”

Source: Valley Transportation Authority

19 Comments

  1. > Did Two Politically Connected Developers Get a Pass on VTA Project’s Key Requirement?

    Some wise guy once observed that when a newspaper asks a rhetorical question, the answer is always “Yes”.

  2. Glad to see you guys picked up Julia Baum, she is a great reporter and it would be sad to lose out on all of the knowledge/experience she has accumulated working for the Merc.

    • Excellent! Another left wing activist from the ashes of the Murky News. Will she be keeping up the practice of bashing our public safety in the face of all the crime issues in San Jose? I suppose when a rhetorical question is asked the answer is probably “yes”.

      • It’s always interesting to know what strangers think of me. My dad used to call me the family Republican when I was in high school (why that was is still weird and confusing–maybe just because I listened to AM radio sometimes?), while others have called me a social anarchist (another head-scratcher). Not really an activist of any kind, though…I haven’t been part of any political march in about 15 years, I can’t recall the last time that I signed any petitions…I also don’t live in the county so I’m not personally vested in advocating or protesting about any local issues. I just like to geek out on local government and write about it :)

        • > so I’m not personally vested in advocating or protesting about any local issues.

          Maybe. It would be unusual and would require extraordinary detachment from other people’s daily lives.

          A churchmen observing the public scene once remarked to me that “one cannot NOT have a philosophy.” He attributed this to an ancient Greek philosopher.

          “Not having a philosophy” IS a philosophy.

        • The Murk has left a bad taste in my mouth. Julia thanks for responding. I know its a far stretch but Im hopeful that someday there will be unbiased reporting in the southbay.

  3. CORE has built many successful projects in SJ for a couple of decades. Nevertheless, when the rules are changed, equity and honesty require reopening the bidding process.

  4. This article specifically details how in one particular instance local governance may have been compromised due to favoritism to specific developers by specific government officials. And that’s great. I commend SJI and the reporter for noticing this and for passing it along to us.
    But I’d be a lot happier if SJI and this reporter would open their eyes and expand their imaginations to the point that it finally dawns on them that we voters, in alliance with the local press have, for decades now, given tacit approval to our local governments to give us governance that is “tainted” by ties to developers.
    How convenient to the pocketbooks of developers is it that the “issues” that are nearest and dearest to the hearts of our elected officials- homelessness, affordable housing, immigrant’s “rights”, etc.- always seem to have “solutions” that profit developers? That require massive high density developments? What a coincidence.
    So in my opinion this particular story simply highlights one specific manifestation of a much more serious and systemic problem.

    • I like the conspiratorial take on how issues associated a shortage of housing could be somehow helped by more housing.

  5. With all of the RECUSAL going on due to so many politicians being on the dole of the Developers, it’s a wonder if anyone is left to carry out their oath of office and the democratic process.

    Is it possible our electeds have just become the arm of big business instead of working for the people which actually voted them into office?
    (How’s that for rethorical?)

  6. Great story. Please look over to the side at Santa Clara

    +Caserta running for Supervisor, several thousand donated to him by CORE
    +CORE files major donor papers for the county
    +For over two tears, CORE has been dragging its feet on a proposal to develop 90 Winchester, the BAREC site.
    +It has scaled back, scaled back, stalled, scaled back project
    +Teresa O’Neill who sits on VTA Board meets with CORE all the tine.
    +At the core of CORE, is a rotten apple core

  7. I would like to second the opinion that Julia Baum is a good reporter. On another note, I live in a neighborhood where we currently have four affordable housing projects, one homeless housing project to be opened in October 2018, and another one pending for affordable senior housing.

    I have reported to Council member Peralez that I would not want another Roem housing project in my area due to poor management and upkeep of maintenance. I also have a Core Development project in my area and find their management is way better than Roem. Core development is located at S. 6th and Keyes and Roem’s housing is at S.12th and Keyes. Please note due to having experiences with affordable housing, I feel the garage is needed. Parking will impact the surrounding businesses and residents. Cameras are a must in today’s world and they should be located inside the building and outside for security and safety. This should be a requirement in any housing development today and must be written into the Planned Development Permit. I feel that affordable housing can be made better and neighborhoods should be educated on who to report blight when landscaping and generally maintenance is not being properly addressed. This is my personal opinion and have only experiences with the affordable housing in my neighborhood.

  8. The evergreen “senior housing” proposal is a real developer scam. Their mailed propaganda is very misleading. Different topic same but a real issue

  9. Needs to go out for Re-bid. The whole scenario has changed.

    The change is a major factor in the bidding process along with the construction costs

  10. I think this article misses a very key point. I was the community member representative on the committee to select a developer. We went through a thorough process to make a developer recommendation to the VTA board. That process and decision making in no way involved campaign contributions. We picked what we felt was the right developer. And I completely stand by that decision! Further, this article misrepesentated me. It says, “Brett Bymaster, an activist who’s been trying to get VTA to re-bid the project to bump up its affordable housing units from 88 to 150, says he’s hopeful that will happen.” I am NOT SUGGESTING THAT THE PROJECT IS REBID. I sent an email to the Metro specifically saying that the think the process was fair and transparent.

    I also want to ask where this quote came from:
    “Plenty of neighbors would disagree. Many of them have been pleading with VTA to build more parking before adding any high-density housing in the area.”

    The community meetings have been prominently about affordable housing. Parking is important, but if there’s a parking solution that allows for more affordable housing, then we should do it!

    As a community member that lives right next to the proejct, I would strongly advocate that the project NOT BE RE-BID. We should continue to work on the project through the exclusive negotiating agreement that was signed with Republic-Core and continue to partner with them to find creative ways to get more affordable housing.

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