By Zusha Elinson, The Bay Citizen

BART has quietly reopened the bidding to develop valuable real estate near the Millbrae BART station, leading to calls for a public hearing on negotiations that have been shrouded in secrecy and marred by accusations of favoritism.

Last May, the BART board voted to enter into exclusive negotiations with Justin Development to build a hotel, even though studies showed that Republic Urban’s proposal to develop an office complex would likely mean more money and riders for the transit agency.

Justin is owned by Lawrence Lui, a friend and campaign contributor to BART Director James Fang. Behind closed doors, Fang persuaded the board last year to vote for Justin and against Republic Urban, a developer backed by BART Director Joel Keller.

millbrae bart — Florence Fang, the mother of BART Director James Fang, owns an office building around the corner from the Millbrae station, indicated by the red arrow. (Zusha Elinson/The Bay Citizen)

But following another closed-door meeting this July, the BART board directed staff to allow Republic Urban to submit a new bid, according to interviews and documents obtained by The Bay Citizen. In a confidential memo dated Sept. 27, BART General Manager Grace Crunican wrote that the transit agency would accept best and final offers from both developers on Sept. 28.

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The memo did not give any explanation for the decision, and BART spokesman Jim Allison declined to comment.

Despite the transit agency’s decision to reopen the bidding, Fang told the Millbrae City Council last month that the BART board was working with Justin Development on a hotel project.

After the meeting, Crunican fired off a memo to the Millbrae City Council, apologizing for Fang's failure to mention that BART is now looking at proposals from two developers.

“I regret that this information was not made clear during the City Council meeting and I apologize for any confusion that this omission may have caused,” Crunican wrote.

Republic Urban executives were angered last year when the BART chose to negotiate with Lui, who contributed $3,500 to Fang’s 2010 re-election campaign and also helped pay for a $10,000 trip to China that Fang had organized for San Francisco officials.

Michael Van Every, a senior vice president at Republic, called it a “clear conflict of interest with Mr. Lui and Mr. Fang” at the time.

Fang’s mother, former San Francisco Examiner owner Florence Fang, also owns an office building in view of the Millbrae BART station, whose value could be affected by the development.

Fang countered at the time that Republic Urban had lobbied the board with even greater gusto. A lobbyist for Republic donated $450 to Keller’s campaign. Fang also said that the donations and his mother’s property played no role in his advocacy.

BART prohibits its directors from taking more than $1,000 in campaign contributions from contractors who have pending bids, but has no such limits for developers. Last year, Fang returned a $7,000 donation to a contractor, Kal Krishnan Consulting, that had a bid pending before the board.

In a brief interview this week, Fang declined to comment on the conflict accusations. But he said he thought that the board had voted to work with Justin Development.

“There seems to be some sort of misunderstanding,” he said. “I think we need to take a look at it in front of the full board.”

Keller and Lui did not return calls seeking comment, and a Republic Urban representative declined to comment.

The Millbrae BART station is one of the Bay Area's biggest transit hubs, where Caltrain, BART and local bus service converge. Lui told the Millbrae City Council last month that his company would like to build a hotel, along with apartments and retail and office space on the land BART owns around the station. Republic has proposed a mixed-use office development.

A study by an independent consultant found that the hotel project wouldn’t be profitable without a subsidy. Separately, Republic Urban officials said an office complex would earn $5.2 million more than the hotel for BART because it would generate more users of the transit system.

Millbrae’s refusal to subsidize Lui’s project with revenue from its hotel occupancy tax was a factor in BART’s decision to reopen the bidding process, according to Lynette Sweet, a BART board director.

“They said, ‘We want the hotel, but we’re not willing to give you anything for it,’ and that pretty much killed deal,” Sweet said.

Millbrae Mayor Marge Colapietro asked Fang directly if the city would be required to subsidize the hotel project, “We will not be obligated to give money to the project … it’s either yes or no.”

“I would say generally yes,” Fang answered.

City Council members seemed frustrated by the lack of specific information on the project. Councilman Robert Gottschalk told Fang, “I would expect at some point we would hear a more formal presentation of what the project is envisioned to do."

BART officials now say they want the development deal to get a full airing in public.

“Instead of negotiating in closed session with a developer, we should do this in a public forum,” said BART Director Tom Radulovich.

“We have this agreement with this one guy, and now were going to back to the other one?” said Sweet. “The lawyers are going to have a field day.”

This story was produced by The Bay Citizen, a project of the Center for Investigative Reporting. Learn more at www.baycitizen.org.

Justin DevelopmentJustin Development

Behind Closed Doors, BART Closes, Reopens Bids on Contested Project