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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