The audacity of hope?

On Wednesday, the ARRA (city council sitting as a redevelopment agency) heard a report on a bill moving through congress sponsored by Duncan Hunter. Now I’m not a big fan of Hunter’s, but the city has a lobbyist working on issues surrounding the Alameda Point transfer. (paid for by SunCal who is required by contract to expend money on the project each quarter at the city’s behest.)

The issue is this, the current deal that has been negotiated with the Navy was done by a consortium of single family home builders, it was written by the developers to meet their direct needs, specifically that none of the residences that they build would be anything besides SFH. (Take a look at the PDC, they have put SFHs on every available plot of land that they could). As a part of this deal, the city, via the developer, is on the hook for $108 million for the Alameda Point land (if they build all ~1700 houses in the PDC) AND then $75,000 per unit for each unit over that.

On top of that they city is requiring 25% of the housing to be subisdized, which adds further costs to each market rate house. The combination of these two factors (but mainly the $75K) makes the building of any additional housing units highly unfeasible.

Which brings us to Duncan Hunter’s bill, which includes language that would set up a three-tiered agreement for the transfer of Alameda Point:

  1. SunCal and the US Navy would have until mid-2009 to renegotiate a new agreement for the Point.
  2. If no agreement is reached, the Navy will accept $10 million PLUS 12% of any net profits from the development that is created.
  3. In the instance that neither #1 or #2 is attainable, then the US Navy will give the land to the City to auction off and the City and the Navy will share in the proceeds (City 20%/Navy 80%) and the city will have some decision power in who is chosen.

This is a necessary process to redefine for the city, because right now, the Alameda Point agreement is one that was written for another time, to benefit a different company (one of the problems of past council’s abdicating its proactive oversight of the process and allowing the developer to drive the process towards its own specific needs in order to avoid dealing with contentious issues like Measure A, but that’s another story entirely).

The current (and most likely only possible) master developer has said that the city’s PDC is unbuildable. And so, this proposal will allow the city and the developer the flexibility of building a more community driven (and yes possibly more “new” developer driven) plan. It gives flexibility where it’s needed. It allows SunCal to walk away and not leave the city wondering where the process is headed. It’s a big development for Alameda, and appears to be a very positive one.

It will be interesting to see if our Congressional Delegation will support this as it’s offered by Rep. Hunter who is not exactly aligned with Stark, Boxer and Feinstein.

On a completely unrelated note: Huge props to fellow bloggers Michele Ellson and Eve Pearlman for their solid, fact-based, coverage of the unfolding Measure H ballot count. Their professional work over the last few days has been a joy to follow and has kept many of us informed as to what is happening at the Registrar of Voters. Their work shows the power of blogs to provide important information on critical issues. Information that has not been available, in a reliable fashion, in the past.

7 comments for “The audacity of hope?

  1. notadave
    June 6, 2008 at 9:26 am

    FYI, the bill, which is actually the defense authorization act, has already passed the house, and is in the senate. Apparently, towards the end of the House process the VA got some language put in that the City isn’t too happy about and will attempt to get taken out in conference. I know this will get some folks saying “see I told you so”, but I am not happy abut the way the City negotiated the legislation without letting the community know about it until it was a done deal, thus depriving us of the opportunity to let our Representatives know how we felt about it. Personally, I think they made it too easy to get to the auction stage. Suncal has already said they don’t liket the current term sheet, and I doubt they would be too thrilled with option 2. In today’s market, an auction would probably lead to landbanking, which would further delay the project. Besides, the ability to auction is predicated on the City’s ability to renegotate the Tidelands trust, which is apparantly a much harder task to do than the City has been letting on.

  2. Mark Irons
    June 6, 2008 at 10:10 am

    I’m not surprised that the Tidelands Trust issue is a pain, no matter how it’s been spoken to at the Point. I once attended a meeting hosted by the Waterfront Coalition across the estuary where a state attorney tried to explain the issue, which is complicated in every aspect, including determining the tide lines before land fill.

    Could you elaborate on “land banking” and relation to auction? Heard the term but not familiar. I’ll go to Wiki too.

  3. Mark Irons
    June 6, 2008 at 10:14 am

    Wiki was good. It’s just what it sounds like. Buy it and bank it as an investment. I’m curious who would buy and what it would cost them to do nothing while they waited for the market to make their investment worth selling or developing.

  4. June 6, 2008 at 12:08 pm

    I actually don’t think option 2 is that bad for SunCal. $10 million is a steal and the additional monies would be limited to how successful the project is. They don’t have to pay the $108 million off the bat.

    And a year is a long time for option 1, I imagine that SunCal will be looking to hire some big guns to help them negotiate with the Navy.

  5. Richard Bangert
    June 7, 2008 at 8:00 am

    Lauren Do is absolutely right. Not only is Option #2 “not that bad,” that is exactly what they should be asking for under Option #1. The single most important aspect (after successfully cleaning up toxics) of making the redevelopment of Alameda Point an economic success is the price of the land. An outlandish price for the land will forever be priced into the various projects (on top of the huge infrastructure costs). Getting the land for a bargain price will give a competitive edge over other vacant commercial/industrial land vying to attract business development. Even more sensitive to land valuations will be potential future homebuyers who cannot resort to business accounting to absorb the higher cost.

    Having SunCal (or some other master developer) successfully acquire rights to the land is the most desirable outcome because that would allow for a planned, comprehensive installation of underground and street infrastructure. From there, parcels can be developed as conditions permit. If, on the other hand, we ended up with the land going to auction, who would be putting up the infrastructure money to actually make these individual parcels viable? The whole reason why the city decided to partner with a master developer in the first place is because Alameda does not have the financial strength to float $100 million in infrastructure bonds. If we did, then the city could be its own master developer and forget about “profit-sharing.”

    Also, there would likely be one bidder at an auction that we would not want to see: The Port of Oakland. They have deep pockets, a long planning timeline and a lot of political clout. Use your imagination to figure out if that would be a good outcome to have them owning part or all of Alameda Point.

  6. June 8, 2008 at 7:54 am

    Richard B. brings up a really good (and scary) point about the possibilty of going to auction. While there could be a lot of undesirable bidders, the Port of Oakland is probably one that we could all foresee a lot of negative impacts for Alameda as a whole.

    Regarding the price, remember that SunCal spent around $100 million for the Oak Knoll parcel. $10 million for a much larger parcel plus 12% of net profits, it’s probably a better deal than they would be getting from any investor that they would need to solicit to try and pony up the $108 million under the orginial term sheet.

  7. June 8, 2008 at 10:00 pm

    I don’t know where you folks think that Suncal is going to get money from. Sure isn’t going to be Lehman Bros. any more.

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