City As Speculator, Council as Conflicted


In June 2012, the Palo Alto Housing Corporation (PAHC) entered into a contract to purchase 2.46 acres of land adjacent to Maybell Avenue in the Green Acres neighborhood, within a block of Arastradero Road and two and one-half blocks from El Camino Real. The price was $15.6 million and close of escrow was set for five months later.

PAHC is a not-for-profit corporation that develops, acquires, and manages below-market rate housing in Palo Alto. Their plans for the Maybell Avenue site included a building devoted to low-income seniors.

As the escrow deadline neared, PAHC asked the city for financial assistance to complete the purchase. The first request was in September 2012 for $6.5 million. Two months later, the city agreed to loan PAHC $3.2 million with the possibility of more if needed.

The city has funds earmarked for below market rate housing. However, they are generally used in connection with construction after a project has been approved.

The city also acquires or owns land that can be donated for such projects, as occurred at 801 Alma Street, the 50-unit affordable housing project developed by Eden Housing on the former site of Ole’s Car Shop and the Alma Street Electrical Substation.

But what the city has not done before, and should not have done in regard to the Maybell Avenue site was to loan money to PAHC to purchase it prior to the approval of a project.

For one, the city became a participant with an outside developer in a land use speculation. If the PAHC business plan proved successful, the city would recoup its money. But what if something unexpected happened that would negatively impact the sale. The city could lose quite a bit of the money. But whatever way things might turn out, loaning public money for a speculative land use venture is not proper.

And there is another very important matter here to understand. The council’s decision, 8-0, to loan PAHC money to complete this purchase meant they took a stake – an economic interest — in the project, and therefore they could no longer claim to be completely objective when the formal proposal would come before then for review and decision.

This action may not constitute a legal conflict of interest for council members, because, the loan was the city’s (i.e., the public’s) money and not their personal money, but it is still improper because it negatively impacts a fair process.

When PAHC came to the city and asked for money to help then complete the purchase of the Maybell Avenue site prior to approval of any project, the proper response was “No.”

Say “no” to the city as speculator.

Say “no” to council decisions that are anything less than completely unbiased.


Vote Against Measure D.


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