This was by design. A way for members of the board to avoid the political difficulties of saying “Yes, we like that” but, as Tracy Jensen so rightfully pointed out on the campaign trail last fall, it also was a massive failing of the Board, giving all the power in decision-making to City Staff and what ever developer the Council had told them to work with at the time. The Council encouraged SunCal to go to the ballot, again looking to avoid responsibility, and SunCal overreached, setting up the Measure B debacle.

So in August, Interim City Manager Ann Marie Gallant brought forward a plan for Going Forward at the Point (fun-fact: originally the process was to be called “Moving Forward” but then Councilmember deHaan started using the name for his own set of personal meetings, something that made Gallant none-to-happy). The plan was presented as information item, and the Council was not given the option of giving direction on either the goals of the project, or the input that should be taken.

The resulting process includes an internet component for those who couldn’t make the in-person meetings (it takes about 20 minutes, but can be broken up into small chunks, start here). More on this another time.

Staff promised the Council that they’d be back by June with a plan, and the next step is to visit many of the boards and commissions to gather input.

The problem is, the process continues to be directionless. It may be that Gallant had a goal, but it was never expressly stated, and the Council never bought into it. Which brings us to January, Gallant is out on administrative leave, the process continues to move forward, it’s the municipal planning process version of Unstoppable.

With a new council, claiming a new commitment to oversight and public involvement. Now would be the time, before another Going Forward related meeting takes place, for the ARRA to give specific direction on what they want the process to achieve, what is the purpose and objective of it. As it sits now, Going Forward is a strategy without a purpose. The ARRA should discuss whether a planning process is the appropriate thing, when the development process is completely unknown, and shape the process to give information that will be useful under a number of scenario’s.

This all may be where the Going Forward process is headed (it’s being run by two very capable, competent, and smart folks, Andrew Thomas and Jennifer Ott). But without the direction of Alameda’s elected body , after all what is planning of 1/3 of the Island if not a huge policy decision, there are two likely outcomes. Either the lack of buy-in on the process means there’s no buy-in on the results, so the entire process becomes a waste of time. Or, we head off in a familiar direction, where the Council idly sits by, watching the decisionmaking process, but never participating. And a few years down the road, we’ll all find out that people are unhappy with the results or want changes, but those will be much more difficult to effect because of how much work has already gone into the process.

The good news is that Mayor Gilmore announced at the last ARRA meeting that staff would be bringing the process to the next ARRA meeting in order to have a discussion about it. Comments from both the Mayor and Lena Tam seem to indicate that they want to have the ARRA more involved in the process this time around, so the voters of Alameda might actually see the folks they elected taking control of this unwieldly, 15-year process and start moving it forward successfully…finally.

Th

As we head (thankfully) into the last weekend before Tuesday’s Measure B vote, I figured I’d layout why I’ll be voting “Yes.”

To me, Measure B is a choice between moving forward to develop a very good, sustainable (environmentally and economically) vision for Alameda Point. The question before us is, will we (the city) be able to see this vision come to fruition, and after much research and thought, I’ve decided that yes, we will.

No matter what path the city chooses to take, there will be risks and Alamedans will need to remain engaged in the process through to the end, Measure B is no different. The East Bay Express got it wrong in their endorsement, which for some reason decided to take shots at proponents, rather than clarify their position. Alamedans do not have to rely on the good-will of the developer to negotiate in good faith, they have to rely on their elected officials to negotiate in the best interest of the city. The same people who be involved in the same negotiations whether B passes or loses.

The financial arguments that are being used are “worst possible case” in the words of former Asst. City Manager David Brandt, who wrote the city’s election report, upon which much of the No on B talking points are based. Subsequent numbers are downright incorrect, outspoken critics can’t seem to find a number they can stick with, because every one they choose turns out to be wrong.

Measure B is a first step, not perfect, not what I would have written has I been in charge, but an OK first step that contains the protections the city needs to move forward in developing Alameda Point. It contains a vision supported by 4 city council members, the chamber of commerce, every media outlet that has made an endorsement and most community groups that have taken a public stance. It will be interesting to see if these individuals step up after the election and take control of the process to get this done, or not. I have very serious doubts.

At the end of the day, the city retains all the power it needs to make sure the project proceeds in the way that detractors claim it must. To quote from Renewed Hope’s “Doubtful Promises” report:

“If the initiative passes, the city’s only practical power to avoid environmental impacts would be to refuse to convey the property to a developer on a timeline required by the development agreement.”

SunCal has to come to the table and negotiate, or in the end, there’s no project for them to develop. The worst case scenario of Measure B is that we’re back where we started. Which is where we will be on Feb. 3 if it doesn’t pass.

I wanted to talk about the conversation around the leases, especially with Darcy Morrison running around claiming that Alameda Point has generated $126 million in net income over 12 years. As proof, she points to David “Action Alameda” Howard’s “analysis” of the ARRA’s cash flow analysis. That should have been her first tip off that she should check her math. The second should have been the overall post that she links to, which claims that Alameda Point is making money because they have revenue and then adds up a bunch of numbers that don’t mean what Howard claims they mean.

Morrison’s math, based on Howard’s sheet (and actually written on it) actually ignores $70 million in “Property Management Expenditures” (aka costs) which are clearly included in a line called “Total Expenditures” which totals $158 million. Of course, this line is wrong as well, Howard’s personal subtotals are missing over $3 million in costs because he forgot to total them.

I converted the PDF from Action Alameda (the base numbers are Howard’s, I’ve only corrected the totals and labels), it’s a google spreadsheet so you can see the math for yourself:

Second, Morrison and Howard manage to fall victim to some really bad labeling on the city’s part. The cash flow analysis shows two lines, “Total Lease Revenue” and “Total Revenue,” one of which is not what it says it is. “Total Lease Revenue” is the actual income from the Point.

“Total Revenue” should be labeled “Cash Balance after Revenue” because it is a combination of the Actual Revenue and the Beginning Fund Balance for the year (This is confirmed with Leslie Little at Development Services). Howard and Morrison are double counting $52 million as “revenue” the kind of accounting that got Enron in trouble.

Here’s what the City’s numbers show (I can’t figure out the 2005 numbers, so I’m starting in 2006).

2006 – Beginnig Fund Balance: $6,591,526

2017 – End Fund Balance: $3,167,008

Somehow, Morrison and Howard would like Alamedan’s to believe that despite the fact that Alameda Point will have lost $3.4 million over 12 years (without major capital expenditures like the FISC fire), the Point’s revenues “generally exceed the expense to maintain it.

As per usual, numbers, simple math and accounting comprehension escape David Howard, who Pat Bail says is “always 100% right on the facts” (some day I’ll dig up that video gem!)

High on that list is the less-than-tight rope walk that staff did in ignoring the controls that the City Council holds over this project after the vote, including the ability to keep the project from moving forward. I checked in with an expert on redevelopment law, former Assistant City Manager David Brandt, who re-confirmed to me that it’s the DDA that controls what happens to the development and not the DA.

The city’s presentation ignored this even in the face of direct questions from Boardmember Spencer about SunCal’s ability to transfer the land with no say from the City. The City said “yes,” but that’s not true.

The DA allows for the transfer of the development rights, but the land transfer will be handled in the DDA, where the ARRA (aka City Council) can, as they have in other land agreements, make sure that they have oversight in what happens to the land, including approvals of transfers.

Look the dirty little secret of this initiative is that it does not cut the City out of the process moving forward. The only way that could happen, again confirmed with David Brandt, who knows this process inside and out, is if the city sends a cardboard box in to negotiate with SunCal.

On February 3, the City Council (those who aren’t against everything) will have an opportunity to put their money where their mouths have been. Either the initiative passes, whereby the council needs to take control of this process and get it done, or it fails and the council needs to back up their “support for the plan” by using the final 5 months of the ENA to negotiate a deal.

The key moment in the meeting came right before the public comment, when Pat Keliher had explained that SunCal’s intention in writing the initiative was that the Alameda Point TDM program is separate from the Public Benefits package (something I would argue is correct based on the fact that they are separately called out in the initiative) and Alameda’s Public Works Director Matt Naclerio said he disagreed. At that moment, City Manager Ann Marie Gallant summed up the difference as “the problem is the intent and the initiative language are two different things, and we opted to go with what the initiative language says.”

This is really important. First, she’s absolutely correct, and at the same time, she set up a completely false premise, one that says the City’s analysis is not an opinion, and very pessimistic one at that, but an arguable piece of fact. It was reminiscent of the election date scheduling meeting, where the City Attorney presented a vague, complex legal opinion as “the only reading there is,” even though there was no way to be definitive in that case.

Gallant is correct that anyplace where the initiative sets out clear language, the initiative is the ruling document of the day. But she starts to veer into disingenuousness when she presents the election analysis as some sort of “this is what will happen” every time they found the language to be vague or unspecific. In that sense, the city has taken on the role of NIMBY, whereby any argument that can be found, no matter how small the possibility, becomes the ruling fact.

Which is not to say that the City’s election reports are wrong, just that they are presenting a single reading, a “worst-case scenario” if the City Council (and City Manager) turn out to be the worst negotiators in the world.

The Public Benefits discussion is a case in point. SunCal’s argument in defense of the $200 million cap is: 1) The city is including project infrastructure costs that SunCal does not consider Project Benefits, 2) that the cap refers to “hard costs” not including “soft costs” like contingencies, plan review, etc. and 3) that the Public Benefits are separate from the TDM program. Adding “We’ve given you this information in writing.” All of this is consistent with the initiative.

The City’s response is: “The initiative isn’t specific in those areas, so we assume that all of those costs are a part of the public benefits,” a position that is also consistent with the initiative.

The problem, as I see it, is that both views are valid and will be resolved through negotiations of the DDA, where SunCal’s written assurances of what is and isn’t a Public Benefit will have actual weight and legal meaning. Yet the city is promulgating the fiction that only their point of view, which is the worstest case in the world scenario, is valid, and have written a document that does nothing to acknowledge this.

Now don’t get me wrong, the city is doing its due diligence in presenting “what could possibly go wrong.” But they would also be that if they had just presented what they wrote initially, that because of the vagueness of the language, it’s possible that the $200 million cap will not cover all the costs. Instead, they decided to go a step further and define a range for their pessimistic world view and then choose the biggest end of the range as “our number of what those costs will be.” No gray room, no doubt, despite the fact that there is a lot of doubt.

For another day, we can discuss Frank Matarrese defending the “no on B’s” $500 million shortfall number as valid, the way he jumped on it, I wonder if he isn’t the one who developed it. On the day he announced he was running for mayor, it was a real low point showing he either has a hard time with financial numbers (I don’t think so) or he’s willing to stretch his credibility with numbers that not even the City Manager is willing to accept. It was a real disappointment.

There are a couple of questions I’m hoping will get asked, actually more than a couple, but the big two have to do with the City’s Public Benefits calculations and the Fiscal Neutrality of the project. A letter has gone out from the Mayor that uses the much bandied about $500 million shortfall, a “fact” that is so specious it should be embarrassing for the public officials who are attaching their names to it), and in fact look at the breakdown for this number the only “grain of truth” in the whole lot is the City’s claim that SunCal’s Public Benefits, which are currently capped at $200 million, could cost as much as $375 million (thus a $175 million shortfall).

But what is this $375 million number? Well, $224 million of it are for “on-site and off-site traffic and transit improvements,” which looks odd when one only has to reference the Draft Alameda Point Transportation Strategy document from November 2008 to see that SunCal has proposed a traffic mitigation plan that costs less than $90 million (that’s $134 million of the supposed $175 million dollar shortfall).

Included in this number $50 million for exclusive bus lanes on Lincoln Avenue, something the city’s traffic report did not consider, which is odd. It seems that the city is penalizing SunCal on the financial end for building something and then penalizing them on the traffic analysis end by not actually crediting them for it. But that’s another story.

In order to come up with $224 million in traffic/transit benefits, the city has added $106 million in fees and contingency costs to their own calculations of $117 million in infrastructure and operations costs, including 45% in contingency fees.

Stranger still, and someone correct me if I’m wrong here, but there are $48 million in the creation of the projects internal streets and roads, not only do I believe that the Public Benefits in the initiative did not include these based on my reading the Alameda Point transportation strategy document, but some quick research into the definition of “Public Benefits” confirmed that this would not typically be considered included.

Brad K. Schwartz writes in Development Agreements: Contracting for Vested Rights

“Likewise, the legislative findings and declarations in Hawaii’s statute [*PG730]points to “predictability,” “public benefits,” and the “vesting of development rights” as solutions to the problems caused by the “lack of certainty” in the development process.”

And concludes:

[M]unicipalities are able to exact public benefits in excess of what would otherwise be allowed by the regulatory takings rules.

It’s possible for roads to be a public benefit in this discussion, if the roads would be outside the scope of what the city could require be built as a part of the project. An example would be improvements to roadways outside the project, like queue jump lanes on Webster St. or Appezzato Parkway, but not roadways that must be built in order to have a development at all.

The city’s defense, in the election report, is that since the public benefits are not spelled out, they can be at liberty to define them as broadly as they like. Like much of that report, the public benefits discussion is left vague with a near meaningless throwaway line:

“The Initiative does not calculate the total cost of infrastructure for the project. Therefore, it is unknown whether the $200 million will be sufficient to fund all of the aforementioned improvements” [page 17]

Strangely, the City never reports this number, it’s just a number thrown out in presentations and in a November 18, 2009 letter from the City Manager to SunCal. Now that the City has helped make this a cornerstone of the initiative discussion, they should take the time tonight to explain how it is that their numbers differ so vastly. Given the number of electeds who have signed their names to these numbers (four will be on the dais tonight), hopefully a better explanation will be given at the meeting.

And to quickly wrap up the long-winded post, the same November 18 letter from the City Manager to SunCal stated:

“While SunCal’s and the City’s confidential financial analysis on the project did model fiscal neutrality, the financial assumptions were not grounded in a negotiated and approved agreement with SunCal.”

If this says what it appears to say, that the City actually found the project to be fiscally neutral but didn’t want to “promise” something that required future agreements to be signed to be locked in, then that’s about the height of disingenuousness. The opposite of “informing the public” which is what tonight’s meeting is supposedly all about. Yes, the city should have made it clear that future agreements would have to be signed in order to “guarantee” the fiscal neutrality of the project, but to ignore that the analysis showed this result plays into the appearance that there was a specific proactive motivation in writing what was suppose to be a neutral presentation on the initiative.

Tonight will be interesting. Will there be a real discussion, or will it be another round of Kabuki theater? Only time will tell.

The responses that I received were great, a lot of time and effort went into them and I wanted to post them in a way that respected that. However, I have not up to now, because honestly, I just couldn’t find the time. But I didn’t want Eve’s work to go to waste, and so I am posting the full responses, which include my sometimes awkwardly written questions. In a few cases, there are just declarative statements, which the preamble to my questions made clear I was just asking for clarification or back up on.

Since the responses are 13 pages long, I figure I’ll write about them individually over time, but for today I’ll just say this: I think that the title of the report, Doubtful Promises, sums up many of its findings. It was clearly written from a position of finding fault, rather than looking at solutions, where there is flexibility or non-specificity, the absolute worst case scenario is assumed. The last half of that sentence was confirmed by Eve, it’s not my supposition. In fact, the paper’s insistence on calling the initiative the SunCal/DE Shaw Hedge Fund initiative makes clear that this is a piece of campaign material, not a work to inform the broader discussion. (again, this doesn’t mean that what’s been written is not meaningful).

There’s nothing wrong with this, and in fact, I think that the debate is helped by understanding the possible pitfalls, etc. that may occur along the way.

However, the debate is also harmed by such analysis when the analysis is presented as scholarly, independent, neutral, etc. One of the co-authors of the report (Mr. Smith, who I like even when we disagree) had been railing about the project and SunCal for well over 6 months—months before the initiative existed—before this paper was produced.

An example of the tone and focus that jumps out immediately is the fact that the proposed initiative will both be “greater than the site can allow” and contains “a cap that [SunCal never] anticipate ever coming close to reaching.” It’s both too big but also refuses to guarantee that will ever be built that way. Dichotomies like this are frustrating.

The report highlights a lot of things that are not hammered out in full detail (phasing is a good example). These are things that are typically hammered out in a DDA, which the City and SunCal are currently talking about. Issues, like the phasing, will still be hammered out in this way. It’s unorthodox to say the least. But the premise that we can’t trust the city to work them out, while arguing that the entire process should be hammered out by the same people is awkward at best.

First, it was sent out from the City of Alameda, not from the Mayor. The council has not taken a position on the issue, which means that it was simply a single persons opinion, and yet it was sent out in a way that would suggest that it was more than that. Now there’s nothing illegal about council people sending out press releases on City Stationary, though it almost never happens, and its even rarer when the issue is a contentious one where there is not Council unanimity.

But then….

I happened to visit the city’s website last night, looking for something, and was very surprised to find the entire homepage dedicated to the Mayor’s letter. Typically, the website is a typically a hodgepodge of announcements–see the image on the right from 10/14, the day before the press release, a typical page. Tuesday night’s update is on the left.

What’s going on? First off, city staff are not allowed to take a position on this issue (legally), they have to remain neutral and work in good faith with the developer. The city’s website is not something the Mayor oversees, it’s a staff creation, and it would seem to be inappropriate for staff to be pushing one person’s agenda. And it’s now being used to voice the opinion of a single person who has zero individual power in this process. What’s next, a full page supporting the City Manager’s proposal to use WW funds for the Boys and Girls club?

Has the council lost complete control of the city? It doesn’t take a conspiracy theorist to see that decisions are taking place without council approval on major issues in town and this would seem to be leaving the City open to a very big breach of contract filing from SunCal, not to mention undermining the power of the Alameda City Council. Which opens up a whole lot of questions.

Which brings us to the Mayor’s interesting press release last week, which essentially said, “I had no idea what I was supporting when I supported the SunCal plan,” and then went on to explain that she had concerns about the initiative and was against it. Flat out.

So which is it? Is the City negotiating to get a better deal for Alameda in the D.A.? Or are there no changes that will make it palatable, so why bother? And quick aside, if the City is negotiating with SunCal, why wouldn’t the Mayor issue a press release making her support conditional along the lines of “I can’t support the initiative as written, but hopefully SunCal will come to the table in good faith and fix these concerns so that I can support the initiative when it goes to the voters?” As written, and given her continued support of the Plan (per The Island), the Mayor would appear to be suggesting that the multitude of negotiations, past and future, with SunCal are a complete waste of time, if not money.

Which brings us to tomorrow night (Tuesday), the Council will discuss having a public presentation of the City’s election reports. Great idea, but absent a corresponding discussion of what can and cannot be negotiated prior to the vote, the presentation will not be informing people about the issues, only that there are concerns. No context of whether they can be dealt with or not.

Given the City and SunCal’s statements, it looks like both parties believe that they can be legally dealt with (wouldn’t be good-faith negotiations if they didn’t).

Tomorrow night, we’ll know if the Mayor and the Council are sincere about supporting The Plan. Or are they’re just looking for another CYA moment, burying their collective head behind a staff report without any meaning.

If one supports The Plan, and one believes that the major concerns can be dealt with (and all signs point to “they can,”) then the only course of action is to fix the problems in order to end up with an initiative that can be supported.

Therefore, the council should make sure to include in their request, a general discussion on what issues can or cannot be dealt with prior to the election. This way the ultimate goal of informing voters will be met.

D.E. Shaw, the financial partner involved in the Alameda Point Revitalization project, has routinely been one of the top performing hedge funds over the last tumultuous years, and hasn’t gone under, threatened bankruptcy, etc. No bailout here. So the undefined attack on the source of the money seems strange.

Which brings us to the latest gaffe from Action Alameda (and trust me, they have been gaffe-a-rific over the last couple of weeks). This is the website that defines news as “anything that anybody doesn’t want somebody to know.” Now that’s laugh out loud funny!

Their lead weekend head line was “DE Shaw Real Estate Deal in Florida in Foreclosure” running under the “Save Our City! Alameda” which apparently is their “we’re just making stuff up” category. The story is that D.E. Shaw is a financial backer of Metro Development (one of many backers) and that Metro has over 9,000 homes in foreclosure. But a cursory Google search on the issue shows this isn’t true. (But what is truth when you can quote out of context). From Tampa Bay Online story on the issue:

Metro was rolling in money. The company had revolving lines of credit from five different banks to the tune of $175 million, and it had just formed a joint venture with D.E. Shaw Co., one of the world’s largest hedge funds, that backed the Lennar and M/I deals with $250 million.

….

While the projects purchased with the Shaw backing are still solvent, everything else Metro touched has fallen apart.

The Shaw projects are not in foreclosure. But just like when Action Alameda/Save Our City! Alameda write about the Oak Knoll project, they leave out key, important information that actually makes the story the exact opposite of what it is.

Good stuff…Action Alameda is giving the Alameda Daily Noose a run for it’s money these days.