Chastened by accusations of poor transparency, Palo Alto officials on Monday night offered apologies to the community for their private and ultimately ill-fated negotiation with billionaire developer John Arrillaga and vowed to change their procedures to avoid similar blunders in the future.
Days after City Manager James Keene drafted a response that acknowledged a "flawed" process in the city's 2012 discussions with Arrillaga, the council agreed to take the atonement a step further. One after another, council members apologized to the community for their private talks with Arrillaga over a proposed office-and-theater complex near the downtown Caltrain station and, on a parallel track, over a 7.7-acre parcel of undeveloped city-owned land that Arrillage wanted to buy. Both proposals ultimately fell through, but not before sparking a public outcry and a critical audit from the Santa Clara County Grand Jury, which concluded in its June report that the city "has failed to meet expectations of transparency."
While Keene wrote in the response that the public process in the Arrillaga discussions "could have been better," council members agreed that this is putting it too mildly. Councilman Pat Burt proposed changing the "could" to "should" and said the response should "have an even more clear acceptance of responsibility and an even more clear delineation of corrective actions we're taking."
Burt called the Arrillaga episode a really strong reminder of how any public agency, particularly in Palo Alto, needs to lean on the side of keeping its decisions public whenever possible. The "default," he said, needs to be "a public process unless we have a really compelling reason otherwise."
"In the whole, we let down the community and we should accept the responsibility for that," Burt said. "I want to offer the community my personal apology for having gone down a process that in hindsight was wrong."
Several of his colleagues followed suit during a discussion that stretched past midnight and occurred in front of a mostly empty Council Chambers. Councilwoman Karen Holman, who in 2012 privately raised concerns about the council's undisclosed meetings with Arrillaga, said she should have done more at the time. She called the council's conduct in the Arrillaga negotiations "not good" and characterized the episode as an "error," for which she then apologized.
"For myself personally, I did ask questions about the process and I want to apologize to the public because the discomfort I was feeling -- I was not forceful enough in acting on that discomfort," Holman said. "I felt I also let the community down and should've been more forceful in my objections."
Councilman Greg Scharff agreed and offered his own apology.
"In hindsight, it's definitely a horrible process," Scharff said.
No one disputed this characterization. Rather, the council voted 8-0, with Gail Price absent, to have Burt and Councilman Greg Schmid revise Keene's response to the Grand Jury to emphasize the actions that the city plans to take to fix the flawed process. In the case of the 7.7-acre site, these mistakes were numerous, according to the Grand Jury. The city did not disclose to the public that it was considering selling the land to Arrillaga, a proposal that only became public after it was placed on the council's closed-session agenda. The city also did not follow its procedure for disposing of "surplus" land, which typically involves reaching out to public agencies and going through a formal bid process.
The Grand Jury also noted in its report that the parcel was donated to the city by the Lee family and that the deed from the family required that the land only be used for park and recreation purposes. Nevertheless, city staff leased the land in the late 1990s to Arrillaga so that he could use it to store construction equipment while working on his property adjacent to the parcel. After the second lease expired, it was not renewed and Arrillaga spent the next five years and 10 months as a "holdover" lessee, paying for the lease on a month-to-month basis. The Grand Jury noted that the city staff did not provide any information regarding whether the City Council or the public were made aware of his holdover.
Council members re-emphasized Monday that at the time of their negotiations with Arrillaga, they didn't even know that this city-owned parcel existed (much less, its complex history). Scharff called the city's holdover lease arrangement with Arrillaga "amazing" and said one of the city's actions in the wake of the Grand Jury report should be "a way to respond so that this could never happen again."
That is one of numerous reforms that will now be weighed by council's Policy and Services Committee. The committee will also discuss the city's existing holdings of donated land and its rules for going into closed session. Schmid suggested that any time the council goes into closed session to discuss a piece of property, that the context for the discussion be made public. He also proposed strengthening policies to make sure the council doesn't engage in "serial meetings," a term that refers to a situation in which elected officials hold multiple meetings in groups that are too small to explicitly violate the Ralph E. Brown Act but that collectively serve to foster a unified decision.
Schmid and Holman both requested a list of all "underutilized" city-owned land. Holman also proposed having all projects that don't comply with the city's Comprehensive Plan go to the council for a "pre-screening" early in the process. Scharff noted that one of the problems with the proposal for 27 University Ave., which featured four office buildings and a performing-arts theater, is that Arrillaga never actually filed an application. The council had expected Arrillaga's offer to go to the public for a debate, but that debate never took place. The city, he said, should make it clear that developers have to abide by the planning process and submit applications if they want their proposals to be considered.
"If this had occurred, it would have been a much better process," he said.
Mayor Nancy Shepherd said it was a "shock and a surprise to her" to hear about the Foothill Park parcel, which the council recently agreed to officially dedicate as "parkland,"
"I think the city deserves to have an explanation about the journey this property has been on," Shepherd said.
She also noted that as bad as the negotiations with Arrillaga looked to the public, it's not uncommon for council members to attend meetings that may make people uncomfortable, whether it's meeting with a neighborhood group or people from the Sierra Club. Her meeting with Arrillaga, Shepherd said, took 20 minutes and was "an all or nothing deal, then I was out."
"This does look as if there were secrets and backroom deals, but I don't ever remember any kind of a process that would allow for that," Shepherd said. "I never participated in any of that kind of conversation."