Housing agency pushes back on report over San Jose building blunder

SAN JOSE — A housing agency has pushed back on some findings and recommendations of a Santa Clara County civil grand jury regarding the organization’s blunders with a San Jose office building.

In June, a grand jury issued a scathing report that criticized how the Santa Clara County Housing Authority handled its purchase and then the sale of a big office building at 3553 North First Street in San Jose.

“Flawed information, flawed decisions” was the title of the civil grand jury report on the Housing Authority’s botched efforts to handle its ownership and disposition of an office building on a prominent north San Jose corner that the housing agency had once eyed as its headquarters.

The Housing Authority’s purchase of the office building and the agency’s subsequent sale of the empty property triggered a jaw-dropping $16.2 million loss in less than two years for the county organization, the grand jury determined in its June 10 report.

Among the key findings by the grand jury — and the responses by the county Housing Authority:

— The County Housing Authority executive management presented “incomplete and financially incorrect analytical documents about the property: and omitted viable options for occupying, using, or selling the property. The Housing Authority responded that it “disagrees in whole” with this assessment.

— The housing agency’s current five-year plan doesn’t establish measurable objectives, goals, or accomplishments to enable a measurable way to assess its performance. The Housing Authority responded that it “disagrees in part” with this analysis.

— The County Housing Authority’s five-year term plan does not identify specific office space needs and a funding plan to support those requirements. The housing agency stated it “agrees with this finding.”

— The grand jury recommended that the Housing Authority’s board establish a standard operating procedure that requires executive management to use internal or external experts to confirm the validity of financial analytical documents. The housing agency said it won’t implement this recommendation.

— The civil jury proposed that the county housing agency amend its five-year plan to include actionable performance targets and measurable objectives. These performance targets should be made part of the annual reviews for the housing agency’s executive director and staff, the jury stated. The Housing Authority said this recommendation will be implemented by July 2025.

— The Housing Authority should include an assessment of space needs and necessary funding requirements as part of its five-year plans, the grand jury recommended. The agency responded that it plans to institute the proposal by July 20

The county’s housing agency landed in hot water due to its decisions — and how it arrived at them — for transactions related to the 3553 North First office building, which totals 86,100 square feet.

In December 2020, the Housing Authority paid $37.5 million for the office building — which, ominously, was once occupied by LeEco, a China-based tech company whose Silicon Valley operations imploded without warning.

In September 2022, the Housing Authority sold the office building — which the county agency never occupied — for only $24 million. That was a core loss of $13.5 million.

Insurance, maintenance, deferred maintenance and other costs tacked on another $2.7 million, which produced an overall loss of $16.2 million for the office building, the grand jury report found.

The Housing Authority’s quest for a new headquarters began because its downtown San Jose offices at 505 West Julian Street were too old and cramped.

An early option was to build a new headquarters on East Santa Clara Street near the downtown. The Housing Authority deemed the project’s $100 million cost prohibitively expensive.

That eventually led the Housing Authority to the 3553 North First site, a property purchase that became a real estate debacle for the county agency, the grand jury report found.

The errors were compounded by what seemed to be lax oversight by the county Board of Supervisors while the housing agency’s blunders mounted with the North First Street site, the grand jury stated.

Some county supervisors were unaware of the mammoth money loss. Other county supervisors displayed no concerns about the fiasco because the lost money the county government didn’t lose money.

“This laissez-faire attitude is concerning to the civil grand jury,” the report stated. “The county Board of Supervisors must be acutely aware that any significant loss of public funds for housing is a lost opportunity for the county to address the overwhelming need for affordable housing opportunities.”