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Is Cronyism Costing BART Millions?

Accusations fly in Millbrae hotel deal that even Millbrae doesn't want

After a development project to transform the Millbrae BART station went to the buddy of BART director James Fang, the losing bidder, some BART officials and even the Millbrae mayor say it's a bad deal that will cost the agency millions of dollars.

Republic Urban, a San Jose real estate and development firmhad proposed building a mixed-use office complex on the empty parking lots surrounding the Millbrae station, an important transit hub that is also a Caltrain stop.

But after two years of closed-door meetings, the BART board of directors voted three weeks ago to give the exclusive negotiating rights to Lawrence Lui, a close friend and campaign donor of Fang who wants to build a hotel on the site. 

Republic Urban officials claim that their office complex would earn $5.2 million more than the hotel for BART because it would generate more users of the transit system.  

"How does an office development that is in a location that's arguably very well positioned, that is willing to pay market-rate ground rent, that is consistent with the city of Millbrae's plans lose out here?" said Michael Van Every, senior vice president at Republic Urban. "How did we not get the right to proceed forward?"   

Van Every said that Republic estimated that it would pay between $300,000 to $700,000 every year to BART to lease the land. He said studies by BART and the city of Millbrae show that a hotel could not pay as much and would need a public subsidy. 

"There is a clear conflict of interest with Mr. Lui and Mr. Fang," said Van Every.

As first noted by The Bay Citizen three months ago, Lui donated $1,000 to Fang’s re-election campaign in September and helped pay for a $10,000 trip to China for local officials organized by Fang last summer. Unlike some cities in the Bay Area, companies seeking contracts with BART are allowed under BART campaign finance rules to donate up to $1,000 to campaigns.

Fang’s mother owns a large office building around the corner from the Millbrae BART station. Fang insists that his decision won’t affect the value of her property.

Neither Fang nor Lui returned calls seeking comment Monday. 

Fang at a recent BART meeting
Thor Swift/The Bay Citizen
Fang at a recent BART meeting
Thor Swift/The Bay Citizen

Fang, the well-connected son of Florence Fang, the former owner of the San Francisco Examiner, acknowledged that Lui was a friend three months ago when The Bay Citizen first reported the potential conflict. But Fang has repeatedly denied playing favorites, saying that building a hotel is a better deal for BART and Millbrae.

Republic's lawyers sent BART a public records request seeking all communication relating to the decision and called for a public hearing on why the BART board selected Lui's hotel project.  

The board was deadlocked for months. Another board member, Joel Keller, pushed hard for Republic Urban, which lobbied board members to vote for their office project.

But at a meeting in late May, the BART board voted 6-2 in favor of Lui. Keller was furious. He grilled the BART staff after the vote to make his point that the office complex would bring BART more riders and more money.

“Which of the proposals -- the hotel or the office -- had the highest revenue to BART?” Keller asked Paul Oversier, BART’s assistant General Manager.

“Republic Urban in terms of revenue to the transit district,” Oversier acknowledged.

In an interview, BART board president Bob Franklin said Lui’s hotel deal could bring in more money to BART because the transit district would potentially share revenue generated by Millbrae’s 12-percent hotel occupancy tax. 

“A better deal for BART alone might not have been the better deal for the city,” said Franklin. “The question is what’s the better deal for both?”

But Millbrae Mayor Dan Quigg said that he doesn't want to share the hotel tax with BART. He also said that he doesn't want a hotel near the station. When BART first approached Millbrae about building a hotel, Quigg said that BART officials asked the city to refund the hotel tax to the developer for ten years to subsidize the project.

Quigg said that he won't support Lui's hotel project, which needs approval from the city.

"[BART] is doing a terrible job," said Quigg. "They know what they're going to present to us is not going to fly." 

Franklin argued said that the Lui project would provide a hotel for travelers just one BART stop from the San Francisco Airport. Franklin said there would be no additional public hearings to discuss the why Lui won the bid. Franklin also said that the financial details of both proposals were confidential and that the board would now begin negotiations with Lui to hammer out the details.

Republic Urban's Van Every said that his company wants to know what happened. But he would not rule out a lawsuit.

"It's not a business practice of Republic to sue local agencies because we do a lot of public-private deals," said Van Every. "But given the smell test on this deal you have to keep it on the menu." 

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