Changing the Rules at Alameda Point

The developer SunCal delays its planned initiative, but still plans to go through with its end run around city officials.

In the three months since the developer SunCal first sought to get
its plan for the former Naval Air Station on Alameda’s November ballot,
this small town with a reputation for big disagreements has certainly
lived up to expectations. The signature-gathering process escalated
from mailers and mayoral endorsements, to petitioner misrepresentations
and a movement to withdraw signatures, to an outright altercation after
one signature gatherer shoved an Alameda Sun editor for daring
to take her picture. The company that hired the petitioners boasts on
its web site of once “Qualifying a measure in Alaska in under three
weeks in the midst of minus 40-degree weather and an exploding
volcano,” but such acts of nature are apparently no preparation for
weathering an Alameda development debate.

Now the drama has a new twist. Last week, SunCal decided not to
submit those signatures to the city by its self-assigned deadline of
June 15. Instead, the company announced that while it had gathered
8,083 signatures — more than enough to qualify the initiative for
the November election — it would wait until later to submit them.
So Alamedans may have to wait until early 2010 to vote on the measure
that would amend the city’s prohibition on most multiple-dwelling units
to allow SunCal to build a mixed-use, transit-oriented community at
Alameda Point. Currently owned by the Navy, the 1,078-acre Superfund
site is in the slow process of clean-up and conveyance back to the
city, which hopes to then turn the land over to SunCal for development
and a much-needed infrastructure upgrade. But the Navy and SunCal are
currently at odds over how much the property and its big-ticket bay
views are worth, and the complexities of that negotiation are why
SunCal says it set its sights on 2010.

“While our desire is to get this important issue before the voters
as soon as possible, targeting a 2010 election is prudent and allows
all parties time to complete the necessary discussions before this
revitalization plan is voted on,” acting SunCal project manager Pat
Keliher said in last week’s statement. The press release cited a need
for more time so that the city, the developer, and the Department of
Defense can hash out the particulars of the property transfer.

Interim City Manager Ann Marie Gallant agrees that more time is
necessary. “Clearly we have to come to some understanding of what we
are going to be paying for the property,” she said in an interview.
“This has to be our first priority in terms of this deal.” But even
though Gallant calls pushing back the initiative a “wise move at this
point for everybody,” her reasons for that position don’t line up with
SunCal’s.

Gallant welcomes the extended timeline because she and other city
administrators would rather not see this particular initiative go to
the ballot. She notes that if the measure passes, SunCal will have set
in stone a variety of issues that city officials would prefer to
negotiate with the company. Gallant, a new hire to a non-political
office in a city whose mayor, Beverly Johnson, has so supported the
SunCal initiative that she recorded robo-calls urging its support, is
insistent that vital parts of the measure take away Alameda’s ability
to “negotiate what we think is in the best interest of the city.”

Unresolved financial issues aren’t what stick out when you pick up
SunCal’s inch-thick, 1.5 lb, 288-page voter-sponsored initiative.
Instead, the focal point is the development’s New Urbanist vision of a
planned community consisting of up to 4,346 residential units, 186
existing collaborative housing units, and 309 housing units from reuse
of existing structures. The proposal also calls for up to 350,000
square feet of retail and 3,182,000 square feet of other commercial and
business park uses, plus up to 260,000 square feet for institutional
and civic uses and approximately 145 acres of parks and open space,
among other amenities.

But Gallant and her staff are more focused on the 42 drab pages that
bring up the rear of the initiative: Exhibit F, the development
agreement. A development agreement is a planning document that vests
entitlements on a piece of property. Typically negotiated between
parties, it includes details about what public benefits a developer
will provide a city in exchange for the breaks it receives. “Even
though a developer submits a request and says ‘We want fee waivers, we
are interpreting this, we are deciding that,’ this does not mean the
city agrees to it,” Gallant said. “The city only agrees to it when
those documents are prepared and submitted to a council for legislative
action with staff’s recommendation.”

But SunCal has taken a different route. There is only one way to
adopt a development agreement without negotiation, and that is through
a voter-sponsored initiative. Essentially, in the process of taking the
Measure A issue to voters, the developer is attempting to bypass the
usual way of doing business and seeking to set a number of its own
terms.

“It’s pretty one-sided,” said Assistant City Manager David Brandt.
“They wrote it and it wasn’t negotiated. Typically, if there was no
initiative, they might have submitted a draft and we would have sent it
up marked-up six ways to Sunday.”

SunCal spokesman Adam Alberti, of the PR firm Singer Associates,
said that while the developer understands that city officials might
have preferred a negotiation, it wanted to present voters with a full
plan. “We didn’t want to ask them simply for an exemption to do some
arbitrary thing that they couldn’t trust — we felt that if the
voters were going to be exempting the Point from something, they wanted
to know what they were granting that exemption for

Brandt characterizes the scope of the initiative differently. “If
you’re going to do it, might as well grab everything you can,” he
said.

Of particular concern to Brandt are the financial provisions
included in the development agreement, especially the $200 million cap
on the developer’s obligation to pay for public benefits. That
obligation is contingent upon the city providing funding through
redevelopment mechanisms overseen by agencies not party to a
development agreement. Brandt said the approach is novel. “I don’t know
that the way that they’ve drafted it is per se illegal,” he said, “but
I’ve never seen it done before.”

In addition, the details of the public benefits that SunCal must
provide are unusually vague, says Brandt. “Typically, in a negotiated
agreement, you would have it much more buttoned-down on both sides so
that everybody knew what the obligations were. And the money part
wouldn’t necessarily be in the development agreement.” Instead, those
financial details would be spelled out in a separate “disposition and
development agreement” — a document that also would cover the
nitty-gritty specifics of timeframe, funding, performance guarantees,
and the actual land acquisition and is expected to be negotiated by
SunCal and the city’s redevelopment agency after the election. But with
such language up for a public vote, the financial details would become
binding upon passage of the initiative, and Brandt said the city’s
redevelopment agency would have to negotiate a disposition and
development agreement “under the sort of shadow of this whole
initiative.”

According to a recent report requested by the city council, that
shadow could be a dark one. “The initiative does not calculate the
total cost of infrastructure for the project,” the report noted.
“Therefore, it is unknown whether the $200 million will be sufficient
to fund all of the aforementioned improvements. The project will also
construct other project-related infrastructure, including street trees,
storm drain, water, sewer, electrical, and telecommunications utility
systems.”

The “aforementioned improvements” named in the initiative and thus
covered by the $200 million cap are a regional sports complex; parks,
publically accessible open space and public art within the project;
improvements to lagoon frontage; a bay trail extension; on-and-off-site
traffic and transit improvements; a ferry terminal and transit hub;
improvements to the existing fire station; and a branch library.

And because state law exempts voter-sponsored initiatives from the
usual requirement that an environmental impact report be completed at
this stage, it is currently unknown how much mandated environmental
mitigations would cost. The city report concluded that some of those
mitigations would probably also be covered under the $200 million cap.
Gallant says that infrastructure improvements at Alameda Point are
currently estimated to cost $679 million. The city estimates the total
cost of public improvements to the site at $1.6 billion. SunCal’s
estimates are private.

That’s why Gallant and other city administrators continue to
negotiate with SunCal toward a development agreement and hope that
those efforts will result in a better deal for the city than what’s in
the current initiative. By the time of a 2010 election, said Gallant,
“I would hope that we would be further along in the negotiations with
respect to an agreement that both parties find mutually
beneficial.”

However a SunCal spokesman said in an e-mail that SunCal does not
intend to rewrite and resubmit its initiative. In a separate statement,
a SunCal spokesman said the company had developed its initiative based
on community and city input. “At every stage of the process, we have
worked positively and cooperatively with the city’s elected leaders and
its staff to ensure that the development agreement would result in the
best plan possible for the city and people of Alameda,” the statement
said.

One of the most prominent proponents of the SunCal plan, Councilman
Frank Matarrese, said he is enthusiastic about the chance the plan
presents for Alameda to fix crumbling infrastructure at Alameda Point,
increase retail expenditures, and reclaim jobs lost when the Navy left
the island. Nonetheless, Matarrese champions the efforts of city staff
to help the council and the voters thoroughly understand the current
initiative. Matarrese said he wants to see further study of the
initiative so that it will be fully understood by the voters. Among
other questions, he wants to know what will happen if the city is
unable to settle on a disposition and development agreement with
SunCal.

And echoing concerns he’s heard from constituents, Matarrese also
wants to know what would happen if SunCal goes bankrupt. This concern
was echoed by the approximately one hundred protesters who attended a
recent march and rally sponsored by opponents of the plan doing
business as “Protect the Point” — including Matarrese’s council
opponent on the SunCal issue, Vice Mayor Doug deHaan. And, due in part
to SunCal having 27 entities in bankruptcy protection — partial
leftovers from the company’s disastrous dalliance with the defunct
investment bank Lehman Brothers — it’s a concern that the
military echoes as well. A Navy communication to the city obtained by
the Express puts forth fourteen questions about the finances of
SunCal and its capital partner D.E. Shaw, wondering about those
bankruptcies and about whether the company will be able to cover “the
annual deficits from approximately $53 million in 2011 to $148 million
in 2013” the Point project is expected to incur “before revenues
produce annual surpluses in later years.”

“This won’t be the last set of questions that are asked,” Matarrese
added.

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