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Real estate battle erupts over “Oklahoma land rush” in Bay Area city

EAST PALO ALTO — A possible land rush of development projects in East Palo Alto could hinge on the fate of an obscure public agency that serves the Bay Area city.

Development companies that have proposed 20 projects, both office and residential, in the Peninsula city say they have been stymied by the refusal of the East Palo Alto Sanitary District to allow sewer connections to serve the endeavors.

Some developers are asking the sanitary district to expand the capacity of connections to their projects. Numerous existing connections can accommodate a discharge of 1,000 gallons a day. But in some instances, developers want to see the capacity of the sewer connection increased to a capacity of 11,000 to 12,000 gallons a day, according to Akin Okupe, general manager of the East Palo Alto Sanitary District.

“Most of the developers that have proposed projects are attempting to exploit the community,” Okupe said. “The developers have been attempting to exploit East Palo Alto for a long time.”

University Circle office complex phase 2, totaling 180,000 square feet, located at the corner of University Avenue and Woodland Avenue, concept. 

Okupe maintains that the sanitary district simply can’t afford to agree to the connection upgrades that the developers urge.

The district would have to obtain loans or float bonds to bankroll the cost of upgrades for the projects, debts that the district shouldn’t Wide-ranging sewer connection upgrades and replacements would cost a huge amount of money the district simply can’t tap without going into debt, according to Okupe.

“It would cost $45 million for us to replace all the pipes,” Okupe said. “I’m telling the developers they should pay for the upgrades.”

Okupe points out that the district’s annual budget is around $5 million.

“You cannot just push all of these costs on East Palo Alto Sanitary District,” Okupe said. “The developers don’t want to pay, they just want to exploit.”

Some developers are attempting to remove as an obstacle to development the tiny district, whose roots stretch back to the Great Depression.

“The district was formed in 1939, long before the formation of the city of East Palo Alto, to serve the needs of this diverse and neglected community,” stated Mark Williams, an attorney with law firm Fagen Friedman & Fulfrost, which is representing the sanitary district in its dispute with the development firms.

The real estate firms have pressed San Mateo County’s Local Agency Formation Commission, or LAFCo, to consider allowing another government organization to take over control of the East Palo Alto Sanitary District. LAFCo oversees the boundaries over cities and special districts in San Mateo County.

“Lack of East Palo Alto Sanitary District sewer collection system capacity is an impediment to development in the city,” Rob Bartoli, LAFCo’s executive director, stated in a report to the organization’s commissioners.

The real estate firms have expressed concerns that the connection costs are “prohibitively expensive,” Bartoli wrote in the report.

“East Palo Alto Sanitary District has been unwilling to discuss financing options to make connections more feasible,” Bartoli wrote in the report. “Efforts to date to resolve this issue have been largely unsuccessful.”

Real estate firms have proposed at least 20 major projects in East Palo Alto, consisting of projects that would create a combined 1,469 residential units in the city and office complexes totaling 4.24 million square feet.

The district at present services 3,739 units, which means the proposals would increase the number of connections it serves by 39%.

The office space proposed for East Palo Alto would be slightly less than the equivalent of the combined size of Apple’s new spaceship headquarters in Cupertino, which totals 2.8 million square feet; and the size of the Googleplex in Mountain View, totaling 2 million square feet.

“An ‘Oklahoma land rush’ of development” looms in East Palo Alto, Williams stated in his letter on behalf of the sanitary district.

Yet East Palo Alto, as is the case with every other city in the Bay Area, is under intense pressure to approve and ensure the completion of a certain number of residential units to do its share to alleviate the housing shortages in the nine-county region.

From 2023 through 2031, East Palo Alto is responsible for assuring the development of 829 residential units, Bartoli stated in his report.

LAFCo is considering multiple options for the East Palo Alto Sanitary District: disband the agency, retain the status quo, make the agency a subsidiary of the city of East Palo Alto, or annex East Palo Alto Sanitary District into the West Bay Sanitary District.

The oversight commission was scheduled to consider the recommendations at a meeting today.

The Sobrato Organization, Sand Hill Property Co., Eden Housing and Seven Bridges Properties, in a letter issued by Holland & Knight, a law firm that represents several developers, said that some projects have been held up for years.

“East Palo Alto Sanitary District has instituted a de facto development moratorium” in the Silicon Valley city, Kevin Ashe, an attorney with Holland & Knight, stated in a May 2022 letter to LAFCo.

Okupe, the sanitary district general manager, believes real estate executives are attempting to take advantage of the residents of East Palo Alto.

“If they can get the district dissolved, the developers believe they can get any project built and they can do whatever they want,” Okupe said. “Because this is a minority community, they think they can walk all over us.”

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