Berkeley manages its properties so poorly it lost track of a building, audit says

At one point, the city was not aware it owned this building at 1890 Alcatraz Ave., according to a new audit report. Credit: Ximena Natera, Berkeleyside/CatchLight

As both landlord and tenant, Berkeley is disorganized to the point it may be losing money and has already lost track of a building, according to a new report from City Auditor Jenny Wong. She has recommended a series of policy and practice reforms, many of them echos of a 2009 audit that turned up some of the exact same problems with how the city leases out buildings it owns and rents space in buildings it doesn’t.

Most notably, Berkeley “lacks a clear approach to lease management, a relevant policy to guide leasing and licensing decisions and a complete inventory of leases and license,” she wrote in the executive summary of her Jan. 24 report, which is a follow-up to the 2009 audit. The city has 57 lease or license agreements with “outside entities” who use city property and buildings, she said.

The city is likely leaving money on the table as a result of the disorganization, but how much remains unclear. The city has more than 20 leases in “holdover” — that is to say, running on autopilot on the last agreed-upon terms after the leases expire — several of which ended over a decade ago, according to Wong.

“With so many leases in holdover, the city may miss out on opportunities to adjust rent amounts to better cover its costs, or match market rate,” Wong wrote. “This could result in financial loss if lease agreements and terms including rental amount are not renegotiated.” And conversely, in cases where the city is the tenant in an expired lease, landlords could simply ask the city to leave, she said.

Inconsistencies what the city charges for rent

Old City Hall is one of many buildings Berkeley has leased out to other entities. Credit: Melati Citrawireja

Wong’s review turned up a number of inconsistencies, among them that some nonprofits pay below-market-rate rents while others do not, as “there is no standard process for determining when to offer rent below market rate,” she wrote. Berkeley does not actively keep track of “whether tenants are nonprofit organizations or commercial entities,” she told Berkeleyside in an email. Among other things, Wong recommended that the Public Works Department start tracking information like fluctuations in the cost of living and rental rates and set up a lease inventory to track information like lease terms and lengths.

Wong drew a contrast between two buildings, one that the city owns but leases to an outside entity, the other that Berkeley rents space in from an outside entity. Berkeley leases out a city-owned courthouse building to the state judiciary for less than $1 a year, but pays the Berkeley Unified School District $1,200 for each day that the City Council, Zoning Adjustment Board, Rent Stabilization Board or any other city commission meets at the district’s building at 1231 Addison Street. “Without keeping some detailed financial information in one central location, the city cannot assess the costs and benefits of renting to or from other entities,” Wong wrote.

Wong also warned that “the city could lose track of its property,” which, in fact, has already happened, at least once, “with a building at 1890 Alcatraz Avenue which the city was at one point unaware that it owned,” she wrote.

The West Oakland Health Council began renting out the building in 1989 to run an adult daycare program, said Seung Lee, a spokesperson for the city. “It’s hard to pinpoint exactly when the city ‘lost track,’ but if a date has to be given, it would be 2010, when the original lease with WOHC went into holdover,” Lee said in an email.

“Three key factors converged in 2010 which severely impacted the operations of the city’s real property team at the time: the ongoing economic downturn from the 2008 financial crisis which impacted the city greatly; the incomplete responses to the 2009 lease audit; and the beginning of the closures of all California redevelopment agencies,” Lee said. “The real property team’s focus from 2010 onwards was the selling off of RDA property. By 2013, all members of the real property team resigned or were reassigned.”

Around the time that the city needed to find a new home for its adult mental health clinic in 2017 was when the building popped back onto the city’s radar, Lee said. The city terminated its lease with the West Oakland Health Council and moved its own clinic into the building. Most recently, 1890 Alacatraz has become the proposed site for a new Berkeley African American Holistic Resource Center, although structural problems derailed the building’s planned restoration. The current plan is to build an entirely new building on the parcel.

Recommendations made in earlier audits

Wong set out to review whether the city had made good on recommendations from another, 16-year-old auditor’s report, which reported similar findings — that city staff were ignoring leasing rules and regulations, that there was no central inventory of city leasing information and that, “lease oversight remained largely decentralized despite steps taken to centralize this function.”

In her 2025 report Wong emphasized that she had not come down on one side or another as to whether Berkeley’s lease management should be centralized, but that there were “some risks” with the haphazard way in which the city goes about leasing now.

It was even further back, in 2002, that the City Council voted to centralize lease management, creating a “real property administrator” position to take charge of leasing, acquiring and offloading properties, real-estate appraisal and valuation, real property negotiations, contract administration, and a number of other property- and building-related responsibilities.

But, as of the 2009 audit, that plan “has not been implemented,” then-City Auditor Ann-Marie Hogan wrote at the time. Even though the city had hired a real property administrator by 2009, that person was not involved in lease negotiations. Nor did the city ever hire the additional staff that administrator needed.

The Telegraph Channing Mall is one of many city-owned buildings leased out to other parties. Credit: Emilie Raguso

“There is a striking disconnect between the city manager’s lease management policies and procedures and actual staff practice citywide,” Hogan wrote at the time.

The city hasn’t had a real property administrator since 2013, and the year after that, the position was eliminated.

Hogan wrote in 2009 that despite “making substantial progress in certain areas of lease management,” the Public Works Department “is not performing many of the basic responsibilities assigned to them.”

There was no centralized accounting of city leases, so Hogan said she had no way to determine how much money the city was pulling in from leases of its own buildings or spending on leases of others. At that time, some leases were missing entirely.

Need for a lease inventory

Besides setting up a comprehensive lease inventory, and making sure city staff actually adhere to leasing and licensing policies and practices, Wong recommended the city once again try to tackle several more of the 2009 audit’s original goals.

The Public Works Department should first figure out what information would be necessary to build that database, and get everyone in the city’s other departments who also manage leases to get on board with tracking it.

Once that database is built, “Public Works should make the lease inventory detail available to city staff so they can utilize the information to make informed decisions,” according to the original 2009 wording. “If possible, this information should be available online in a format that allows controlled updates of information.”

Wong also referenced a recommendation from 2009 that public works and finance officials should figure out if they are even able to build the sort of database they would need with the systems the city already has and, if not, consider new software or systems.

The Public Works Department and City Manager’s Office said they should be able to implement Wong’s recommendations within the current calendar year, according to her report. Lee said the changes should not affect or postpone other public works projects.