The federal Veterans Affairs department rejected San Joaquin County’s $1-a-year lease offer for 8 acres of land on which to build a new clinic and nursing home, and is instead now deciding among several offers to buy about 20 acres for a sprawling campus that will likely cost hundreds of millions of dollars.

But San Joaquin is not out of the running, county officials say, having offered up three parcels — toured by federal officials just two weeks ago — near county-run San Joaquin General Hospital and where the VA already has a clinic.

Also in play is influential Stockton developer Greenlaw “Fritz” Grupe of the Grupe Co., and possibly developer Howard Arnaiz of Stockton. Almost certainly other landowners have made a pitch to the VA, which will not discuss the number of bids it received or say who they were from.

After years of lobbying, San Joaquin County officials and Rep. Jerry McNerney, D-Pleasanton, cheered earlier this year when Veterans Affairs chose San Joaquin County over Stanislaus County or areas around Livermore as the site for a 120-bed nursing home and outpatient clinic.

And when the county’s board of supervisors offered to lease to the federal agency 8 acres of land for $1 a year next to San Joaquin General, there seemed to be a feeling here that the VA would jump at the deal.

Not so.

In July, the Veterans Affairs announced it wanted to buy 20 to 25 acres of land, and the push to submit bids was on.

Let the bidding begin

“We were always going to buy,” explained VA spokeswoman Kerri Childress. “Owning the land gives you a lot more choices in the future.”

The federal agency wanted land specifically near the Stockton corridor of Interstate 5 and Highway 99 and the Crosstown Freeway, a stretch of Highway 4 that connects the two.

That alone was almost enough to dissuade Tracy’s Tony and Mike Souza of Souza Realty and Development from trying to make a pitch for a Tracy site, Mike Souza said. And when one official working with the VA told Souza his proposal would immediately get tossed, Souza said he didn’t bother.

But the county acted quickly to put together an offer that would convince the federal agency to build somewhere in French Camp, which officials believe would boost business at San Joaquin General, which stands to lose about $15 million this fiscal year.

“We think it can only be helpful to the hospital’s future,” said board of supervisors Chairman Leroy Ornellas of Tracy.

In its August proposal to the VA, the county offered the agency one of three choices, said Elena Reyes of the county administrator’s office.

County officials said they would give away 8 acres next to the existing Veteran’s Administration clinic on Mathews Road west of I-5.

But since the VA is looking for 20 or more acres, officials also offered to sell about 19 acres the county owns just east of I-5 and west of El Dorado Street, the onetime site of a golf driving range that’s now a weed patch.

The county also said the VA could buy a stretch of about 25 acres it owns just south of the hospital.

“The French Camp area is certainly not out of consideration,” Childress said.

But it will likely take until next year before the VA decides where to build the nursing home and clinic, Childress said, as officials there sort through geographic and environmental considerations.

Grupe president and CEO Kevin Huber thinks his company has a good shot at landing the VA’s decision.

Grupe has offered 25 of the 102 acres it leases in University Park in Stockton, across the street from St. Joseph’s Medical Center and about 1 mile from Dameron Hospital.

Huber said the environmental work has already been done at the site, it’s close to stores, there are plans to build more there, and it already has some roads, underground pipes and utilities in place that could give it a leg up on other sites. It’s also near medical laboratories that service St. Joseph’s.

It’s also got a couple of bus stops, and Grupe has plans for a magnet high school that focuses on health care, among other advantages, Huber said.

Aside from the fact that it’s in the middle of town and at least a mile from a freeway exit, county officials see a big hurdle for Grupe — the desire of the VA to own the land it buys.

Grupe has a 50-year lease with four 10-year options it signed in 2004 with the Site Authority, a merger of Stockton and California State University, Stanislaus, that runs the property for the state of California, which owns the land where once sat the old state psychiatric hospital.

But Huber thinks title on land at University Park can be transferred merely by filling out paperwork, and even if it’s impossible to transfer title, Childress said the VA has long-term leases on some of its other properties.

When asked if a deal could be made with someone who has a long-term lease on land rather than ownership, Childress said, “I don’t think anything precludes it at this point.”

Ornellas said developer Howard Arnaiz of the Arnaiz Development Co. has also offered about 25 acres of land to the VA near San Joaquin General, though no one from the company could be reached to confirm that assertion.

Though Childress said the exact budget for the nursing home and clinic is a secret until the bid is awarded, she said it will likely cost at least $200 million.

She also said the VA, regardless of whether the clinic is built in French Camp or somewhere else, will double the size of its existing clinic next to San Joaquin General at about 20,000 square feet.

And when the big complex is built, perhaps by 2015, the nearly 70,000 veterans in San Joaquin and Stanislaus counties will be able to stay at a nursing home or go to a clinic that will also have a pharmacy, a radiology department, physical and occupational therapy, and a range of other treatments.

“We’re going to have facilities and services in the Central Valley that we’ve never been able to provide before,” Childress said. “And we’re getting the money that we need to do that.”

• Contact Tracy Press City Editor Eric Firpo at 830-4223 or efirpo@tracypress.com.