San Diego — Last summer's trial of San Diego councilmen Michael Zucchet and Ralph Inzunza produced an unexpected candor from the city's Redevelopment Agency. On June 24, Zucchet's attorney Raymond (Jerry) Coughlan called agency employee Alex Greenwood to the witness stand. The move seemed intended to hammer home a point: that since the beginning of his only city council term, Zucchet's "first, second, and third priorities" had been to get rid of the Body Shop and Les Girls strip clubs in Loma Portal. Coughlan had said earlier in the trial, according to Kelly Thornton's May 11 story in the Union-Tribune, that Zucchet was willing to listen to Galardi's representatives about no-touch at Galardi's club, Cheetahs in Kearny Mesa, "if they talk about Mr. Galardi buying [Les Girls and the Body Shop] and turning them into Krispy Kreme (doughnut shop) or a sports bar."

In the June 24 court transcripts, attorney Coughlan began by asking Greenwood to describe the Redevelopment Agency. "We look at blighted areas of the city," said Greenwood, "and [put] together real estate deals to bring in new businesses, new housing, new office and other uses to create new jobs and revitalize the area." Greenwood went on to include as part of the agency's work planning and providing public infrastructure for the blighted areas.

Coughlan asked the witness about the concept "blighted area." "I take it," said the attorney, "that that's a term of art within redevelopment jargon. Is that correct?"

"Yes," Greenwood answered. "Under the California Health and Safety Code, there's a specific definition of what a blighted area is. An example...would be an area that suffers from dilapidated buildings, parcels that are so small and irregular that they cannot accommodate modern development, lack of public amenities or infrastructure, broken sidewalks, for example, [or] crime."

The most recent assignment Greenwood had with the Redevelopment Agency was to oversee the North Bay Redevelopment Project Area, 1360 acres along Interstate 5 and Pacific Highway and in the Midway area. Greenwood told the court that "one of the main, prominent gateways into that area is off of the freeways on Camino del Rio [West] and Rosecrans [Boulevard], and there is about a 5-acre area there that we zeroed in on. Because of its prominent location, we thought it was a potentially good site for some sort of real estate project." Greenwood labeled the area blighted.

The five-acre site described (and most of the North Bay Redevelopment Project Area) lies within Zucchet's former council District 2 and contains the Body Shop and Les Girls strip clubs. Greenwood described for the court how, beginning on March 24, 2003, shortly after Zucchet came into office, he met with the councilman every couple of months, and with the councilman's staff almost weekly, to figure out ways to move the strip clubs and an adult bookstore out of the area. Also in attendance at the first meeting with Zucchet was Greenwood's boss, Hank Cunningham, the city's director of the Community and Economic Development Department and assistant executive director of the Redevelopment Agency.

Greenwood said he pointed out to Zucchet that the adult-entertainment businesses were likely "cash cows" that the city could not afford to buy out by itself. He also told Zucchet that rezoning the area to try to force them out would not work, since they were "grandfathered in." Eventually, Greenwood testified, he convinced Zucchet that the redevelopment plan for the area around the strip clubs would be sufficient to do the trick.

Greenwood then told the court, "We developed a list of opportunity sites. We analyzed the parcels, looking at such things as property tax data, zoning, and sales tax data.... We looked specifically at the area inclusive of and surrounding the Body Shop and Les Girls sites." Greenwood continued moments later in the same vein: "We tried to get a good idea of...the underground soil conditions, the appraised value of the land, all the information that a developer might want to know before they started thinking seriously about it. We contacted several developers to see if there was any interest in pursuing it; some people seemed interested, some people didn't. We really tried general marketing to try and develop interest in that site, and nothing worked at first for several months.... It was all me and one other person working on this. We worked very hard on it."

Since Les Girls and the Body Shop sit on small parcels of 5000 to 10,000 square feet apiece but bring in large amounts of revenue, Greenwood said he figured he needed additional parcels to go along with them. "Buying other pieces of land at a cheaper price because they don't have such income-producing uses on them would allow you to get enough land to do a modern development, and it would also lower your average cost of acquiring the land."

"Is this a project," asked Coughlan, "that the developer and your agency...would work on together?"

"Yes, through a development agreement," answered Greenwood. "The classic agreement would be the developer...would take the lead on this. They would take the lead on buying all the land, and we would help support them either financially or using our negotiating powers to try and purchase the land."

Coughlan then inquired about the condemnation tool.

"Under redevelopment law," Greenwood replied, "if we're in a redevelopment agreement with a developer and they use their best-faith efforts to acquire land just through the private market but fail, if there are one or two people that will not sell their land at a fair market value, we can then come in and negotiate with them.... And if that fails, then we have the legal ability to condemn the property and take ownership of it. We pay the property owner fair market value and any other costs associated with that, but we take possession of the land by force."

"Did somebody step forward and make a proposal to develop this piece of property [at and around Les Girls and the Body Shop]?"

"Yes. All through 2003 we were doing marketing efforts to different developers and other stakeholders. In late [2003] I was approached by a community leader who said, 'Be prepared, you're going to get a proposal from a local property owner. He owns land immediately behind Les Girls and the Body Shop, and he wants to do some sort of project there.' And sure enough, in February [2004], we got a written proposal from a local property owner saying he wanted the agency's assistance in acquiring a large amount of land."

"Is this what's known as an owner-participation effort or offer?"

"Yes."

During cross-examination, assistant U.S. attorney Paul Cook asked Greenwood whether Councilwoman Donna Frye had shown an eagerness similar to Zucchet's to get rid of Les Girls and the Body Shop. A small part of the North Bay Redevelopment Project Area lies in Frye's District 6.

"No, her focus was very different," Greenwood replied. "Her agenda for District 6 and the North Bay redevelopment was more concerned for helping small businesses. She was very suspicious... about any heavy-handed use of redevelopment."

"By 'heavy-handed,' " inquired Cook, "you mean she had some concerns, perhaps, about this condemnation procedure that Mr. Coughlan asked you about, where the city goes in and condemns property and then buys out someone whether they want to sell or not?"

"Absolutely. And, in addition, I think she is reluctant to support any large redevelopment real estate project," said Greenwood. "She just has a distrust of developers, if I may say."

Cook then asked whether Zucchet shared "those same views. [Did he] have a distrust of the heavy-handed use of condemnation procedures?"

"I didn't really get that sense from him. He seemed to want aggressive and forthright actions from the Redevelopment Agency," said Greenwood.

To better appreciate Greenwood's candor while under oath, we jump to late December 2004. That's when Greenwood wrote to the owners of the "opportunity sites" -- ten parcels between Kurtz and Hancock Streets behind Les Girls and the Body Shop. In the letter, Greenwood told the owners that he had received on December 14 an official, "unsolicited" written proposal to build condominiums on their properties from business neighbor Bill Kenton, owner of 40 percent of the land in question. Although none of the owners except Kenton had ever heard of the city's designs on their area, Greenwood gave them 30 days to sign on to the new proposal, agreeing to sell to Kenton, or to draw up and present their own owner-participation offer. In other words, the majority of the owners were to receive a month to develop an owner-participation offer like the one that Kenton had been collaborating on with the city since the previous February.

In response to the letter, Joe Fritzenkotter, owner of Vanard Lithographics, one of the targeted businesses and employer of 100 skilled workers, told me he invited Greenwood to tour his facilities in January 2005. He mentioned to Greenwood that once, during the previous year, Bill Kenton had made an offer to buy his property but without suggesting the deal was part of city redevelopment plans. It therefore took Fritzenkotter aback several months later, he says he told Greenwood, when Kenton "hinted" that the city might take his property in an eminent domain action if he continued refusing to sell. "Greenwood said that I must have misunderstood," said Fritzenkotter, "that eminent domain was not being considered."

Greenwood's letter to the business owners eventually provoked a storm of protest among all of them except Kenton. On March 21, 2005, a subcommittee of the North Bay Redevelopment Project Area Committee met to hear their complaints and make a recommendation. During the meeting, Chris Clifford, who owns a small share in one affected business, accused Greenwood and Kenton of working behind the backs of the other owners. Greenwood denied it. But the subcommittee recommended that the Kenton proposal be rejected.

On March 29, Greenwood appeared with Kenton and Vanard Lithographics representative Rene Coons on the KPBS program Full Focus. The show's host, Gloria Penner, asked how well the redevelopment plan for the Body Shop and Les Girls area was being received. Greenwood suggested that people in the area were excited about change.

Almost three months later, Greenwood was testifying under oath in the councilmen's trial. In between, court records show, the FBI interviewed him concerning his conversations with Zucchet. Although both Greenwood and Cunningham resigned their positions over the spring and summer, proponents of the redevelopment plan are going ahead with what they now call "the Gateway Project." On December 15, the North Bay Redevelopment Project Area Committee will elect nine new members; the committee will then have to address "Gateway" again.