Palo Alto Weekly

News - August 16, 2013

Maybell opponents accuse city of 'fraud'

Critics of proposed housing development scrutinize developer's and city's applications

by Gennady Sheyner

When Palo Alto officials agreed last week to send a controversial housing development on Maybell Avenue to a November vote, they urged both sides to stick to the facts and to be respectful of one another.

Judging by the comments made by project opponents at the meeting, that request may be a bit much to ask.

Shortly before the council voted unanimously to schedule an election for this November, one speaker after another levied accusations of fraud against the City Council and the Palo Alto Housing Corporation, the nonprofit behind 567 Maybell Ave. Two charges were repeatedly brought up during the meeting. First, the city was premature in reporting to the state Tax Credit Allocation Committee that the Maybell project has received a needed zone change. Second, the city had repeatedly reported that it had loaned $5.8 million to the Housing Corporation for purchase of the 2.4-acre site. Yet a June 18 letter from city planner Tim Wong to the Housing Corporation states that the council "has approved a funding commitment totaling $7,320,200" for the development, which includes a 60-unit complex for low-income seniors and 12 single-family homes.

The rhetoric over these two issues became heated, with numerous speakers calling for the council to correct these errors and not proceed with an election this year. Many urged the council to delay the election until November 2014, in order to clear up the perceived discrepancies. Among them was Tim Gray, former City Council candidate and treasurer of a new group, Palo Altans to Preserve Neighborhood Zoning.

"This is a fraudulent information that the developer has represented to the state Tax Credit Allocation Committee, and failure to immediately correct it with a written correction will make you all co-conspirators to a fraudulent act," Gray said.

Jennifer Fryhling, an opponent of the Maybell proposal, spoke for a group of 10 people, and asserted that the Palo Alto Housing Corporation is "under penalty of perjury" for representing to the tax committee that the zoning had gone through before the change became effective.

The council voted unanimously on June 17 to rezone the site to "planned community," which allows greater density at the site. That approval, however, did not become final until a formal "second reading," which occurred on June 28. The ordinance to rezone the property also states that it "shall be effective on the thirty-first day" after the second reading. The state-mandated delay, known as a "referendum period," is intended to give residents a chance to gather signatures and challenge the decision. By submitting more than 2,298 verified signatures, critics succeeded in suspending the PC zone and ensured that the site will retain its prior residential zoning at least until the November vote. Existing zoning allows development of up to 46 housing units, which could be a combination of apartments, houses or condominiums.

The letter from Wong to the tax committee, which states that the project will be located in a PC zone, is dated June 26. For critics, this is a sign that the city and the Housing Corporation have acted prematurely. For the Housing Corporation, the rhetoric from project opponents was much ado about nothing. The accusations from critics "simply aren't true," said Candice Gonzalez, the agency's executive director. In an interview with the Weekly, Gonzalez said the Housing Corporation had a July 3 deadline to submit its verification of zoning to the tax credit committee. It submitted the application in late June, after the council unanimously approved the change. The application, Gonzalez told the Weekly, was "completely honest."

The fact that the "second reading" hadn't yet happened didn't change anything, she said. The Housing Corporation was obligated to submit a second application to the state committee within 30 days, stating whether anything had changed with the zone change. Had the project not been cleared on the second reading, the Housing Corporation would have reported that on the supplemental application, consistent with the process. In this case, the approval cleared the second reading with no complications.

Gonzalez pointed to the complexity of putting together an application and said everything in the Housing Corporation's application was "above board and honest."

"Unless you're in the industry, picking out bits and pieces doesn't give you the full picture or understanding of how to put the application together," Gonzalez said.

Gonzalez also told the Weekly in an email that the California Tax Credit Application Committee is "fully aware of the referendum" and that the Housing Corporation's application is "still pending."

She attributed the perceived discrepancy over the city's financial contributions to the project to the different funding sources. The city approved a $5.8 million loan to the Housing Corporation for the purchase of the orchard site at Maybell and Clemo avenues. But the approval also requires the private developer who would be building the 12 homes to contribute an "in lieu fee" to the city for affordable housing. That fee was added to the sum, even though it would come from the developer.

"The $1.5 million that is dedicated to the project — that was part of the condition of approval," Gonzalez said.

The accusations from project opponents gained little traction with the council. Only Greg Schmid asked staff for a response to these claims. Senior Assistant City Attorney Cara Silver said the tax committee is "well aware that the zoning did not go into effect right away" and aware that there is a referendum challenging the project. The city's planning department had been in contact with the tax committee throughout the process and had given the committee an update as recently as Aug. 8.

That explanation appeared to satisfy the council, which voted minutes later to proceed with an election in November. Numerous council members urged respect between the two sides.

"My plea to the people involved in these campaigns and who've already been making statements is that you make informed statements," Councilwoman Karen Holman said. "That you make statements that are informed and accurate. That we be respectful of each other and respectful of the democratic process and the people's rights to have their own views."

Staff Writer Gennady Sheyner can be emailed at gsheyner@paweekly.com.

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