Ferryboats and McMansions

It was a good week for developer Ron Cowan but a bad week for Alameda residents, who may have to put up with more airport noise thanks to his new luxury homes.

It’s good to be Ron Cowan, and to have friends like Alameda Mayor Beverly Johnson and State Senate boss Don Perata. Thanks to them, Cowan is on his way to building a bunch of new McMansions made attractive by a ferryboat service subsidized by taxpayers.

But there are losers in this story, too. They include Alameda residents who may have to endure more deafening jet noise and the Vallejo commuters who may lose funding for the Bay Area’s best ferry service. In the end, Cowan’s good fortune appears to be just another case of his political friends coming to his rescue even if it means screwing some of the people who elected them.

Not long ago, Alameda’s premier developer was on the ropes. Cowan had lost most of his Harbor Bay Business Park by defaulting on $43 million in loans, and it looked as if the city of Alameda might block his plans to build 104 luxury homes on the last slice of land he owns on the island.

But then Cowan did what he usually does when he’s in trouble — he hired lawyers and leaned on his pals in politics. His first move came in July when he sued the city of Alameda over its concerns about his planned luxury home development. The suit sought to allow him to build the McMansions on 12.2 acres of industrial land and let him circumnavigate the city’s affordable housing law, which requires that all new housing developments include homes for the poor.

When news broke about the suit (see Full Disclosure, “Cowan’s Latest Lawsuit,” 7/11/07), some believed his real intention was to obtain another favorable settlement from the city. After all, he had sued Alameda in the 1970s and 1980s while building 2,973 homes in what is now known as Harbor Bay Isle. Each time, the litigation resulted in settlements that allowed his plans to move forward.

Sure enough, on October 9, the Alameda City Council, led by Mayor Johnson, voted 3-2 in a closed-door meeting to give Cowan much of what he wanted. Employing some tortured logic, the council majority reasoned that the affordable housing law didn’t apply to Cowan because it was predated by a 1989 deal between him and the city that stated he could build a total of 3,200 homes on the island.

As a result of the settlement, Cowan dropped his suit and agreed to put $1 million into the city’s affordable housing fund — but only if the council later gives final approval for his new homes. Councilmembers Marie Gilmore and Frank Matarrese also voted for the settlement, while Doug DeHaan and Lena Tam voted against it, DeHaan said.

Neither Cowan nor Johnson returned calls seeking comment, but the settlement came as no surprise. After all, Cowan and Johnson are friends. He helped her win the mayor’s office in 2002 when he donated $25,000 to a political committee that papered Alameda with mailers supporting her candidacy. Johnson, meanwhile, is one of Perata’s closest political allies, and campaign finance records show that he and political campaigns associated with him spent at least $37,552 on her behalf in 2002 and 2006. Cowan, in turn, is one of the senator’s top donors, giving at least $210,300 to Perata campaigns and those associated with him from 2000 through 2006.

But while the housing deal promises to revive Cowan’s fortunes, it’s likely bad news for much of Alameda. In fact, officials at Peet’s Coffee and Tea, one of the city’s prized new corporate citizens, are livid about the planned houses, because they will be right next to the company’s new $17 million headquarters and roasting plant. Peet’s moved to Harbor Bay Business Park last year precisely because it wanted to get away from the condo-building boom near its former plant in Emeryville.

In addition, Cowan’s new homes could result in ear-splitting jetliner noise for the rest of Alameda. Because the houses will be so close to Oakland International Airport, it could spoil the informal agreements the community has with various airlines. “These homes will effectively be at the end of runway 29,” said local activist Dave Needle, of Citizens League for Airport Safety and Serenity, better known as CLASS, a grassroots group that has successfully curtailed airport noise over the island.

Airlines such as Southwest currently tell their pilots to not turn over Alameda, Needle said. The issue is important, because when a plane banks and turns overhead, it can generate foundation-shaking decibels for what seems like an eternity. But if the city agrees to allow Cowan to put new homes directly in the planes’ path, the airlines — which were never happy about Cowan’s original homes — may view it as a slap in the face and abandon the agreements. “The damage that he’s going to do to this entire city is big,” Needle said.

Both Peet’s and CLASS have indicated that they may sue to overturn the settlement. Both had petitioned the court to allow them to intervene in Cowan’s suit against the city, but the case settled before a judge could rule on their motion.

So how does Vallejo fit into all this? Well, it turns out that Perata’s efforts to help Cowan also involve Vallejo’s valuable ferry system.

With more than 800,000 passengers a year, the Vallejo-to-San Francisco ferry is one of the region’s most cost-efficient transportation systems, routinely requiring fewer public subsidies to stay afloat than other ferries. The reason is simple — BART doesn’t go to Vallejo, so Solano County commuters must either catch the ferry or slog through the Bay Area’s worst traffic along Interstate 80.

By contrast, the Harbor Bay ferry, which Cowan operates and which departs right near his planned luxury homes, has been one of the worst performers on the bay for years. Historically, it hasn’t attracted enough commuters, and thus has required the highest public subsidy per rider of any ferry in the region. The reason also is simple — Harbor Bay is in a relatively remote spot and, over the years, the business park has failed to attract enough businesses to keep the ferry viable.

The ferry has done so poorly, in fact, that not long ago, it appeared to be in danger of losing some of its public subsidies. According to two sources familiar with the situation, the Metropolitan Transportation Commission, the state agency that controls Bay Area mass transit public funds, had warned Harbor Bay Ferry that if it did not increase ridership and improve efficiency, its funding could dry up.

According to MTC statistics, the public subsidy for the Harbor Bay ferry accounted for a whopping 76 percent of its total $1.3 million operating costs in the 2004-05 fiscal year. In other words, for every dollar it cost to run the ferry, ticket buyers only paid 23 cents, while the rest was paid by non-ferry-riding taxpayers.

Without a significant subsidy, the Harbor Bay ferry probably would shut down. And if that happens, it would deal a serious blow to Cowan’s luxury home plans. With no ferry, the value of those houses likely would drop because they are in such an out-of-the-way spot. In fact, Cowan’s settlement agreement with the city of Alameda specifically notes that the new homes and the viability of Harbor Bay ferry are inseparably linked.

But as we said, it’s good to have friends like Perata. In early September, Perata backed legislation that could keep the Harbor Bay ferry public subsidy intact indefinitely. The bill, SB 976, which the senator pushed through without debate at the end of the legislative session, called for a state takeover of both the Vallejo and Alameda ferries and to strip MTC’s control over ferry funds. “It hijacks the money directly from MTC,” one of the sources said.

Governor Arnold Schwarzenegger signed the takeover bill on October 14, five days after Cowan’s lawsuit settlement, capping the developer’s very good week. Cowan, you see, was one of the primary backers of the state takeover, and is now a frontrunner to serve on the new five-member board that controls the ferries’ purse strings.

The bill calls for Perata to select one of the board members, with Assembly Speaker Fabian Núñez choosing another, and the final three by the governor. The bill, however, also gives Perata power over Schwarzenegger’s picks because they have to win approval from the state Senate, which Perata controls. In other words, Cowan likely no longer has to worry about threats to withhold subsidies from the Harbor Bay ferry.

Not surprisingly, Vallejo Mayor Anthony Intintoli strongly opposed the bill. But at a press conference last week, announcing the signing of the bill, Perata attempted to assuage Vallejo officials by telling reporters that the state will compensate Vallejo fairly for its four boats and its ferry terminal. But tellingly, Perata has made no mention of whether Vallejo’s ferry will lose any ongoing operational revenue to Cowan’s Harbor Bay route.

None of this, however, should distract from the masterful way that Perata sold the ferry takeover to the public and the press. The main reason for the bill, Perata has said, was to coordinate ferry service during an earthquake disaster, noting that ferryboats played a key role following the 1989 Loma Prieta Earthquake.

His argument was immediately embraced as being perfectly logical, even though, as pointed out on these pages (see “Smoke and Mirrors on the Water,” 3/8/06), the creation of a regional ferry system as a backup for commuters during an earthquake is a monumental waste of public funds. Indeed, it’s instructive that not a single earthquake safety expert has come out in support of Perata’s bill.

And why haven’t they? Because state taxpayers already are spending a total of more than $7 billion to retrofit the Transbay BART tube and to build a new eastern span of the Bay Bridge. Earthquake experts say that when these projects are done, there will be no need for a regional ferry system, because both the bridge and the BART tube should be fully functional after a major quake.

In fact, the only transportation system that likely will be inoperative after a large temblor will be ferries. That’s because most of the land along San Francisco Bay, where the ferry terminals are located, is expected to liquefy in a major earthquake, thus making the roads that lead to the ferryboats impassable.


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