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 agreements."

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 risk."

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 concepts?"

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 factors."

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 action.

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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