Investor who profited is hired as consultant for Modesto courthouse project

kvaline@modbee.comSeptember 3, 2013 

  • ABOUT THE REPORTER
    alternate text Kevin Valine
    Title: Reporter
    Coverage areas: City of Modesto and nonprofits
    Bio: Kevin Valine has been a copy editor and reporter at The Bee since January 2006. He's worked at the Reno Gazette-Journal, Sarasota (Fla.) Herald-Tribune and Paradise Post as a reporter and copy editor. He's a graduate of San Jose State.
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    E-mail: kvaline@modbee.com

The Modesto City Council gave staff the go-ahead Tuesday to hire real estate investor Paul Draper's firm, Centerra Capital, as a consultant on the downtown courthouse project.

The council vote was 5-1 with Councilman John Gunderson voting "no" and Councilman Joe Muratore not taking part because of a conflict of interest.

The state proposes to build a $277.2 million courthouse on land bordered by Ninth and 10th and G and H streets. The city owns five of the 11 parcels at the site. The rest are owned by private landowners.

City officials say the courthouse is a key component in their plan to revitalize downtown in general and 10th Street in particular.

Centerra would represent the city and the landowners in their negotiations for the city to buy the six parcels. Centerra then would represent the city as it sells the 11 parcels to the state.

Centerra would earn a 3 percent commission from the city for selling its parcels to the state and a commission from the private landowners for their parcels.

A Sunday story in The Bee ("Investor profited may consult for city," Page A-13) raised questions about the city's purchase of land from Draper several years ago for a low-income housing project called Archway Commons.

Draper and Sylvia E. Cox bought the Carver Road land for Archway Commons for $2.8 million in March 2007 and sold it to the city for $3.5 million in April 2009 despite rapidly declining real estate prices.

The city's purchase price was considerably more than what comparable land was selling for at the time. Draper and Cox also collected $460,000 in fees, deposits and settlement funds from EAH Housing, the Archway Commons developer. An EAH official said the city provided EAH with the $460,000 to pay Draper and Cox.

Mayor Garrad Marsh said in Sunday's story that there were good reasons why the city paid more than the appraised value for the Carver Road land. The property is near downtown, large enough for the project, close to public services and in a blighted neighborhood that needed to be cleaned up.

City officials Tuesday focused on the value they said Draper brings to the courthouse project.

Economic and Community Development Director Brent Sinclair said Draper is familiar with the site and the private landowners because of his involvement with Team Modesto. Team Modesto was a group of businesspeople who hoped to build a seven-story tower of condos, offices and shops at the site several years ago, before the recession.

Approached three years ago

Sinclair said he approached Draper about three years ago to work with him on the courthouse project. He said Draper has spent hundreds of hours on the project without pay. Sinclair said Draper understands he will be paid only if the state buys the land for the courthouse.

Councilwoman Stephanie Burnside asked Sinclair to revisit what happened at Archway Commons. Sinclair said he could not because it was not his project.

Modesto's negotiations for the Draper and Cox land were led by City Manager Greg Nyhoff and Parks, Recreation and Neighborhoods Director Julie Hannon. Neither was at Tuesday's council meeting. Nyhoff was on vacation; Hannon had a previous engagement. Draper also was not at the meeting. Sinclair said he was out of town.

Modesto has been criticized because much of the work on the courthouse project has taken place outside of the public's view. Sinclair said he shares that frustration but said the city is following the ground rules set by the state.

Gunderson said after the meeting that he voted against hiring Draper because he did not believe the city needed a consultant and that no consultant should earn a commission for selling city land to the state. Gunderson said he also had concerns after Sunday's story about Archway Commons.

Three audience members questioned the hiring of Draper, including council candidate Jenny Ketchum Kenoyer. She said about a third of the 200 people she spoke to while campaigning Sunday were concerned about the council's honesty.

But Stanislaus County Superior Court Judge Ricardo Cordova urged the council to act because he feared any further delays in the project could cause it to lose its state funding.

Bee staff writer Kevin Valine can be reached at kvaline@modbee.com or (209) 578-2316.

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