.Developer Losing Support for Initiative

After mayor and councilman renounce their support of ballot measure to back development at Alameda Point, developer promises to clean up deficiencies before election.

Alameda’s latest round of robo-calls doesn’t have quite the clout of
the last one. Last month, Mayor Beverly Johnson, who earlier this year
lent her voice to calls urging support for developer SunCal, dropped
her endorsement of the company’s Alameda Point redevelopment
initiative, saying that the measure would have “devastating financial
impacts” on the city. With that high-placed defection — coming a
few weeks after the Alameda Chamber of Commerce gave the measure its
own thumbs down — a bit of hell broke loose on the island.

On February 2, SunCal will ask city residents to vote on a measure
that would allow it to construct approximately 4,800 homes, 350,000
square feet of retail, 3.2 million square feet of commercial space, 145
acres of parks, and a passel of public facilities at the 1,078-acre
former Naval Air Station, all while amending the city’s general plan
and zoning ordinance, adopting a comprehensive land plan, and exempting
the whole shebang from Alameda’s much-debated low-density charter
amendment, Measure A. The aftermath of Johnson’s about-face saw the
developer trying to patch up its problems by promising to address the
initiative’s perceived deficiencies in a variety of side deals.

“While we understand that there has been concern raised in the
election report regarding the fiscal protections and provisions of the
initiative, we believe that these issues could and would be resolved
prior to the vote on the initiative,” SunCal’s Pat Keliher wrote
Johnson in reference to concerns outlined in a city report on the
developer-drafted, 288-page initiative. “To that end, we have been
working in good faith over the past several months in weekly meetings
with the city manager and staff to address the election report concerns
and incorporate appropriate protections through legally binding

But that approach didn’t sway Councilman Frank Matarrese, who
dropped his support for the initiative the following week, citing a
loss of state redevelopment funds, the Obama administration’s
opposition to no-cost transfers of military land, and the same
potential financial impacts that drove the mayor to the other side of
Alameda’s most divisive debate. “There are good features in the land
plan,” Matarrese said. “The finances, though, I believe put the city at

At issue is the inclusion of an unusual development agreement in the
inch-thick initiative. Most development agreements are negotiated
directly between a public agency and a developer. But SunCal and its
financial partner, hedge fund D.E. Shaw, opted instead to insert a
non-negotiated agreement into its initiative, effectively sidestepping
the city council. In addition, they included many elements that are not
typically the domain of a development agreement.

Chief among those elements is a $200 million cap on the developer’s
obligation to pay for public benefits. The initiative makes this
obligation contingent upon the city’s redevelopment agency providing
the maximum allowable tax-increment financing. Beyond the unusual
nature of this inclusion — after all, the redevelopment agency is
not party to the development agreement — the number itself has
become an issue of debate as the city says its estimates put the cost
of the described public benefits at between $300 and $375 million.
Keliher, in turn, has argued that the $200 million figure is derived
from “detailed cost analyses performed by independent consultants” that
were reviewed by the city.

In a recent letter to Interim City Manager Ann Marie Gallant,
Keliher pledged that SunCal would “commit funds in excess of the $200
million cap on public benefits” through legally binding agreements, and
would also use such agreements to “consent to additional property
taxes” in excess of the 2 percent rate cap outlined in the initiative.
Additionally, Keliher offered, SunCal would “ensure that redevelopment
funds can be spent outside the project area if the needs of the project
are met.”

But can such side agreements trump what’s in a ballot initiative
should the voters pass the measure into law? “That’s an open question,
I think,” Matarrese said. “And of course there is the question of ‘Can
we come to an agreement?’ Which is a timing thing as well as a
substance thing.”

Time is short: The measure goes to the voters on February 2.
Meanwhile, the exclusive negotiating period between Alameda and SunCal
ends in July 2010.

SunCal did not respond to questions about the state of negotiations.
Gallant has written to SunCal that “the mechanism for resolving
differences” between a voter-approved initiative and the redevelopment
bodies that would actually negotiate the land sale with the developer
is “unclear.” Asked about the status of any side deals, Gallant said
Alameda is trying to “negotiate through” the conditions that would be
imposed by the company’s initiative.

Walnut Creek attorney Michael P. Durkee, vice chair of California
Land Use Practice at law firm Allen Matkins and co-author of the books
Ballot Box Navigator and Land-Use Initiatives and Referenda
in California
, suggests that highly complex initiatives may pose
much more basic problems than whether side agreements can be made.

“One of the big questions is, can you legally do a development
agreement by initiative, period?” he asked. “We know from the statute
that it’s explicitly subject to referendum. But the statute doesn’t
say, ‘And it can be initiated.’ So query number one: Can you initiate a
development agreement at all when they tend to be negotiated

Additionally, Durkee said, “certain things in redevelopment plans
are absolutely beyond the reach of initiative.” So if redevelopment
issues bleed into the Alameda Point project, that could complicate the
legality of whatever’s being proposed. “I’m not saying it would or
would not be legal,” Durkee added, “just that these are complicating

Whether these issues could lead to future headaches for Alameda and
SunCal remains to be seen. In the meantime, more immediate headaches
loom: The Oakland Chinatown Chamber of Commerce, Asian Health Services,
and the City of Oakland have been vocally unhappy about Alameda putting
the SunCal initiative on the ballot without a prior environmental
review, and an attorney for the Chinatown entities has threatened legal

One headache, at least, has been dodged. At the city’s pleading,
last month Alameda County agreed to change the ballot designation of
the initiative. It originally was to bear the name of the charter
amendment it would partially amend: Measure A.


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