The Fresno City Council voted unanimously Wednesday to back out of the project at the old University Medical Center in southeast Fresno.
The popular plan aimed to turn the rundown former University Medical Center hospital into 800 new housing units plus a senior center and some retail.
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But after pandemic and financial delays, it hit a new hurdle Wednesday.
"This is a very unfortunate predicament for this neighborhood and our residents who want to see this property thrive sooner rather than later," said Fresno City Council Vice President Nelson Esparza.
He called an emergency meeting to get the city out of the deal.
Fresno County owns the building and agreed to sell it to CMG Construction, which planned to renovate.
Because it would be 40% affordable housing, CMG could buy it without competitive bidding.
The city's only involvement would be to make sure it lived up to affordable housing standards. The deal wouldn't work without that regulation.
They agreed to do it in 2019, but this week Esparza said they should back out because a county employee who was heavily involved in the deal is facing felony conflict of interest charges.
"We can't in good conscience just look the other way on these unresolved allegations and issues and how this project potentially came to life in the first place," Esparza said.
Steve Rapada was arrested in October and for the first time, Action News can report why.
The chief of staff to Supervisor Sal Quintero spent months helping to negotiate the deal between the county and CMG.
An arrest warrant reveals the county uncovered emails from Rapada's personal account to CMG's owner.
Investigators say the emails show Rapada's loyalties on the deal were with CMG, not the county, and bank records show he billed CMG for at least $25,000 in consulting fees after the deal went through. He collected about $16,000.
We tried to reach CMG's owner and Rapada, but couldn't contact them.
CMG's owner told investigators he paid Rapada for other work unrelated to the UMC project, and Rapada's criminal defense attorney told us there was no conflict of interest.
He's due in court in May.
The deal isn't necessarily dead. CMG could find another agency to regulate the aspect of affordable housing. The county typically doesn't do that, especially on larger projects.
Without a new regulatory agreement, the county might just have to find a new buyer.