Feds sell land to highest bidder, snubbing state park and earning local enemies

In spring, schoolchildren come to Crown Memorial State Beach armed with nets and wearing boots up to their hips so they can sift through the mud flats and eelgrass of an inlet known as Crab Cove.

The California state park is popular among locals for its marine reserve and 2.5 miles of beach on San Francisco Bay. But soon, visitors will share the view with a housing development, after the General Services Administration denied attempts by local officials to buy adjacent federal property for more parkland.

GSA's actions have turned the usually innocuous agency into a symbolism of government overreach among residents of Alameda Island, where the park is located. Animosity only increased last month, as GSA began court proceedings to seize the park's road and utilities through eminent domain -- largely to benefit the housing development.

"This sets a huge precedent for the federal government to come and take public state property for the benefit of private developers," said Bob Doyle, general manager of the East Bay Regional Park District. "No matter how they spin it, that's what they're doing."

The fight looks likely to escalate. The park district has sued over zoning issues, California has pledged to fight any federal eminent domain action, and national environmental groups have asked Attorney General Eric Holder to intervene.


The controversy illustrates one pitfall of the White House's efforts to quickly consolidate federal space and sell off excess property for a profit. While the law allows the government to give land to local jurisdictions for public benefit, GSA says it must sell this property to the highest bidder in order to recoup the costs of relocating the Department of Agriculture.

GSA has heralded the sale as part of "ongoing efforts to remove excess federal facilities off taxpayers books while creating the greatest possible value." It counts the sale as one of 400 transactions since 2010 totaling $145 million in proceeds.

But to the East Bay Regional Park District -- as well as national environmental groups and state officials -- the sale ignores the public's desire for parkland and puts the government in cahoots with a private developer.

In short, they think the debate boils down to one question: Which is better for the public, a new state park or saving money through the profitable sale of federal property?

Playing the real estate market

While the state of California owns Crown Memorial State Beach, the East Bay Regional Park District manages it, recently pouring $5.7 million into a project that restored 82,000 cubic yards of sand to the shoreline.

The beach is the park's "showpiece," but the land also comes with history: It once housed bathing spas that staged concerts, carnival rides and baseball games in the early 20th century. Today, the beach is bordered by a green lawn, with a nearby visitor's center featuring exhibits on the area's past.

Right next door -- separated by McKay Avenue -- sits Alameda Federal Center, a drab-looking property with 1940s-era buildings and a parking lot with grass poking through the asphalt.

Almost eight years ago, USDA decided to consolidate its workforce onto half of the 7.6-acre property. That left GSA to sell off almost 4 acres of land next to the largest beach on San Francisco Bay.

The park district jumped at the chance to acquire the property and build new parking lots, staff offices, a service yard and lawns.

By 2008, voters in Alameda and Costa counties had approved a ballot to provide more than $6 million to buy the old USDA facility and expand the park. But that turned out to be the least of the park district's obstacles.

Park officials assumed the agency would help them purchase the land; in their mind, the voters had spoken, and a park was the best possible use.

But GSA did not sell the property as part of the surplus process, which would have been more friendly to a public benefit conveyance to East Bay Regional Park District. Instead, it moved forward under the procedures for a relocation, which can only occur if the proceeds from a sale exceed the costs of relocation.

USDA spent $2.9 million to relocate its operation, according to a letter GSA sent to former Rep. Pete Stark (D-Calif.) in 2012. That means the agency needed to get $2.9 million from the sale of the 4 acres USDA had vacated.

But potential buyers didn't think it was worth that much.

The park district commissioned an appraisal that valued the property at less than $1.5 million. Limited by law on how much it could spend above the appraisal, it offered GSA about $1.5 million.

Tim Lewis Communities bid $300,000 more, winning the bidding process with a $1.8 million offer. But that still wasn't enough to cover USDA's relocation costs.

So GSA made Tim Lewis an offer: Raise the bid in return for an 18-month closing period. The company agreed to almost double its offer, to more than $3 million.

'Conspiracy theory'

In the letter to Stark, GSA said it made the offer after it took into consideration "the significantly increased sale price, depressed market conditions, time and expense to remarket the property, and uncertainty of results of another public sale."

Park district officials and environmentalists remain suspicious about the process. They say that use of the only road and utilities to the property don't convey with it, as they are state-owned. Without such easements, the company wouldn't be able to build homes, nor would it be able to get insurance to cover any losses from the lack of such easements.

"Why would a developer pay double our price -- almost double their price -- when they knew they didn't have title insurance?" Doyle asked. "Because somewhere there was a conversation that it would be OK."

John Russo, the Alameda city manager, thinks that's a ridiculous "conspiracy theory."

"It really comes down to the park district doesn't want to pay what the federal government says it's worth," he said.

Russo drew the ire of the park district after the city rezoned the GSA property to residential, as part of a housing plan designed to meet state requirements. Alameda has long struggled with minimum housing requirements, due to a community of single-family homes and opposition to development.

The rezoning effectively made the property more valuable and paved the way for the developer's plans to build 48 two- and three-story homes.

The park district has filed a lawsuit against the city for the rezoning, claiming it failed to prepare an adequate environmental impact report, among other things. Residents, meanwhile, have filed a petition to put a measure on the ballot in November to rezone the property as parkland.

"The city's caught in the middle here," Russo said, calling the park district's lawsuit "outrageous." "We just all wish the park district and the federal government would go off and figure out what they want to do with the property and just tell us."

But beyond keeping the residential zoning, Tim Lewis Communities still faces another significant obstacle: use of the road and utilities shared with the park.

Eminent domain

McKay Avenue is the only access to the land, and it's state-owned. Though the federal government enjoys access rights, the state of California has refused to grant the housing developer the same easements.

It's unclear what GSA told Tim Lewis Communities about McKay Avenue, but it was a source of uneasiness as early as 2011. In June, the company's director of land, James Meek, emailed GSA to ask about an exclusion in a preliminary report on title insurance for the property.

The report specified that insurance would not cover any claim made because of easements that "will expire" when the government doesn't own the land.

"I would love to bid on this property but will need to resolve 8a of the attached preliminary title or understand it to the point I don't feel land locked," Meek wrote.

Three years later, GSA is dealing with that very problem. State officials won't grant access, claiming the utilities aren't adequate, and the park district won't coordinate with the developer to modernize those utilities.

So GSA plans to take the road through eminent domain, to enable residential development.

"[I]t will be necessary for GSA to acquire such rights in order to carry out the will of Congress in disposing of real property efficiently and for highest monetary return to the federal government," Andrew Goldfrank, chief of the Department of Justice's land acquisition section, wrote in a November letter to state officials. "Condemnation will enable it to do so."

The move has made GSA more enemies. A coalition of 11 local and national environmental groups recently sent a letter to Attorney General Holder, asking him to intervene. The GSA's use of eminent domain, they argue, "supports a contrary notion that parklands are trivial in the face of commercial demands and can be easily undone."

"That's like the federal government coming in and taking part of the state forest" for private gain, said Norman La Force, chairman of the San Francisco Bay Chapter of the Sierra Club. "That's not right. It's really not been done, and this is really wrong."

California Attorney General Kamala Harris also has indicated that she believes the move is disingenuous. In a letter to the Justice Department last November, Supervising Deputy Attorney General John Devine wrote that the office was "extremely troubled by GSA's intent to take public land for a private developer's benefit."

"[W]e fail to see how GSA will ever convince a federal court that a street and sidewalk already devoted to a 'public use' still necessitates the federal condemnation of it," Devine wrote.

The state has pledged to fight any eminent domain action.

"Ultimately, the federal excess land ought to be owned and controlled by the State of California or East Bay Regional Park District because that indisputably would be the best and highest use of it," Devine wrote. "The question now facing the federal government is how that can be accomplished in a manner that safeguards the interests of all."


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