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2007-05-08 ARRA packetAGENDA Special Meeting of the Governing Body of the Alameda Reuse and Redevelopment Authority Alameda City Hall Council Chamber, Room 390 2263 Santa Clara Avenue Alameda, CA 94501 1. ROLL CALL 2. CONSENT CALENDAR Tuesday, May 8, 2007 Meeting will begin at 7:01 p.m. Consent Calendar items are considered routine and will be enacted, approved or adopted by one motion unless a request for removal for discussion or explanation is received from the Board or a member of the public. 2 -A. Approve the minutes of the Regular Meeting of April 4, 2007. 2-B. Review and approve all new and existing subleases at Alameda Point. 2 -C. Disposition of Personal Property -- Proposed Sale of 45 Foot Yard Tug Boat. 3. REGULAR AGENDA ITEMS 3 -A. Consideration of Master Developer Partnership Agreement and Master Developer Selection. 3 -B. Approve Draft Comment Letters on Record of Decision for Installation Restoration Sites 1 and 25 and Authorize Executive Director to Submit Comment Letters to the Navy. 4. ORAL REPORTS 4 -A. Oral report from Member Matarrese, Restoration Advisory Board (RAB) representative. 5. ORAL COMMUNICATIONS, NON - AGENDA (PUBLIC COMMENT) (Any person may address the governing body in regard to any matter over which the governing body has jurisdiction that is not on the agenda.) 6. COMMUNICATIONS FROM THE GOVERNING BODY 7. ADJOURNMENT ARRA Agenda — May 8, 2007 Page 2 This meeting will be cablecast live on channel 15. Notes: ■ Sign language interpreters will be available on request. Please contact the ARRA Secretary at 749 -5800 at least 72 hours before the meeting to request an interpreter. ■ Accessible seating for persons with disabilities (including those using wheelchairs) is available. ■ Minutes of the meeting are available in enlarged print. • Audio tapes of the meeting are available for review at the ARRA offices upon request. APPROVED MINUTES OF THE REGULAR MEETING OF THE ALAMEDA REUSE AND REDEVELOPMENT AUTHORITY Wednesday. April 4, 2007 The meeting convened at 7:13 p.m. with Chair Johnson presiding. 1. ROLL CALL Present: Beverly Johnson, Chair of Alameda Marie Gilmore, Boardmember, City of Alameda Doug deHaan, Boardmember, City of Alameda Frank Matarrese, Boardmember, City of Alameda Lena Tam, Boardmember, City of Alameda 2. CONSENT CALENDAR 2 -A. Approve the minutes of the Regular Meeting of February 7, 2007. 2-B. Approve Subleases for Trans- Freight Express and Bay Ship & Yacht at Alameda Point. Approval of the consent calendar was motioned by Member Tam, seconded by Member Matarrese and passed by the following voice vote: Ayes — 5; Noes - 0; Abstentions — 0. 3. REGULAR AGENDA ITEMS 3 -A. Selection of a New Master Developer for Alameda Point. Debbie Potter, Alameda Point Project Manager, gave an overview of the staff report and summarized the selection process to date. Afterward, each of the three master developer teams (order chosen randomly by Chair Johnson and Lena Tam: Catellus, Lennar, SunCal) used a 3- minute public speaker opportunity for final remarks before the item was opened for regular public comment. There were several speakers on this item, most commended the Board on the selection process and did not make specific recommendations (for a developer), but discussed certain issues they would like to see the chosen developer address. After the public comment, Debbie Potter informed the Board of an additional staff recommendation to identify a back -up developer in the event that, at the end of the 60 -day due diligence period, the selected developer declines to go forward. Chair Johnson said they would consider this recommendation. Members of the Board directed specific questions to each developer team before entering into discussion. The following motions were made: Member Matarrese motioned to select Catellus as the Master Developer with Lennar as the back up developer. Motion was seconded by Chair Johnson and failed by the following voice vote: Ayes — Z (Johnson, Matarrese), Noes — 3 (deHaan, Tam, Gilmore). Member Tam motioned to select SunCal as the Master Developer with Lennar as the back up developer. Motion was seconded by Member dellaan and failed by the following voice vote: Ayes — 2 (Tam, deHaan), Noes — 3 (Johnson, Matarrese, Gilmore). Page 2 Chair Johnson repeated the motion to select Catellus as the Master Developer with Lennar as the back -up developer. Motion was seconded by Member Matarrese and failed by the following voice vote: Ayes - 2 (Johnson, Matarrese), Noes — 3 (dellaan, Tam, Gilmore). Member Gilmore motioned to select both Catellus and Lennar as Co- Master Developers. Motion was seconded by Chair Johnson. After seconding the motion, at 10:10 p.m., Chair Johnson called a 10 minute recess so that Catellus and Lennar could discuss the partnership option. The meeting reconvened at 10:25 with Catellus and Lennar requesting 30 days to formalize a partnership agreement. The motion to select Catellus and Lennar as Co-Master Developers was passed by the following voice vote: Ayes — 3 (Johnson, Matarrese, Gilmore), Noes — 2 (deHaan, Tam). Catellus' and Lennar's request for an additional 30 days to formalize a partnership agreement was also granted. 4. ORAL REPORTS 4 -A. oral report from Member Matarrese, RAB representative. Member Matarrese attended the March 1 meeting. The two main topics included Site 26, and the remediation action workplan (RAW) for Sites 1, 2, and 32. Additional sampling was being done along Site 26, east of the seaplane lagoon, and there was discussion regarding the different types of remediation design, including bio remediation and oxidation. There was a presentation on Sites 1, 2 (most contaminated area) and 32. The RAW was being finalized the prior week and the RAB will draft a record of decision (ROD) on Site 1. Member Matarrese anticipates that staff will have comments on the draft ROD and will present them to the ARRA at its next meeting. 5. ORAL COMMUNICATIONS, NON - AGENDA (PUBLIC COMMENT) Bill Smith spoke about various topics. 6. COMMUNICATIONS FROM THE GOVERNING BODY Member deHaan clarified that the ■TC's presentation at the March 29th Community Workshop was a conceptual plan of a transit oriented community and that there was no real overlay in the constraints. 7. ADJOURNMENT Meeting was adjourned at 10:38 by Chair Johnson. Respectfully submitted, Irma Glidden ARRA Secretary Alameda Reuse and Redevelopment Authority Interoffice Memorandum May 8, 2007 TO: Honorable Chair and Members of the Alameda Reuse and Redevelopment Authority FROM: Debra Kurita, Executive Director SUBJ: Review and Approve all New and Existing Subleases at Alameda Point Background In accordance with a policy established in 2004, the ARRA governing body reviews and approves all new and existing Alameda Point subleases with a lease term greater than one year. Routine subleases and renewals are presented as Consent Calendar reports. New, longer term, and more complex leases will be considered on the Regular agenda as needed. Discussion Attachment A describes the business terms for the proposed subleases. The leases are for Alameda Power & Telecom, Auctions by the Bay, Bay Ship & Yacht, Event Productions, Jim Bustos Plumbing, NRC Environmental Services, Puglia Engineering of California, and Revolution Foods. This is a lease renewal for Alameda Power & Telecom for Bldg. 162. The rent for ALAMEDA POWER & TELECOM is $129,360 annually, or $0.28 per sq. ft. in the first year, escalating 3% in the subsequent year for a 38,200 sq. ft. building. The utility uses this building for storage in support of the electric and cable business. Building 162 is in fair to poor condition. This is a lease renewal for Alameda Power & Telecom for a 52,595 sq. ft. fenced lot. The rent for ALAMEDA POWER & TELECOM is $1 2,624 annually, or $0.02 per sq. ft. in the first year, escalating 3% in the subsequent year. The lot is being used as a temporary corporation yard in support of the electric and cable business. This is a lease renewal for Auctions by the Bay for Bldg. 25. The rent for AUCTIONS BY THE BAY is $54,396 annually, or $0.25 per sq. ft. in the first year, escalating 3% in the subsequent four years. This lease reduces the area of the building previously occupied to one bay, or 18,131 sq. ft, that Auctions by the Bay occupies, making room for Rosenblum Cellars to store wine in the remaining two bays. Auctions by the Bay will continue to use this space to hold monthly auctions of material they do not sell from the main auction house in Building 18. Building 25 is a former corrosion control facility, is in good condition, and has been occupied by several tenants over the years. Honorable Chair and Members of the Alameda Reuse and Redevelopment Authority May 8, 2007 Page 2 This is a lease renewal for Auctions by the Bay for Bldg. 29. The rent for AUCTIONS BY THE BAY in Building 29 is $58,440 annually, or $0.25 per sq. ft. in the first year, escalating 3% in subsequent years. This 19, 480 sq. ft. space is used for storing and cataloging items that will be sold at auction either in the main auction house in Building 18 or in the overflow space in Building 25. Building 29 is the former gun test facility that was previously occupied by Rosenblum Cellars. The building is in good condition. This is a lease renewal for Bay Ship & Yacht for Bldg. 292. The rent for BAY SHIP' & YACFIT is $12,888 annually, or S0.40 per sq. ft. in the first year, escalating 3% in subsequent years. Bay Ship & Yacht uses this 2,700 sq. ft. building for office and storage in support of MARAD ship repair. This building is in fair condition. This is a lease renewal for Event Productions for a portion of Bldg. 91. The rent for EVENT PRODUCTIONS is $44,496 annually, or $0.12 per sq. ft. in the first year, escalating 3% in the subsequent year, for 30,000 sq. ft. This is a lease for only a portion of Building 91; the rest of the building is occupied by the Alameda Civic Light Opera. Event Productions uses this building for storing and production of event equipment and booths. This building is in fair to poor condition. This is a renewal lease for Jim Bustos Plumbing for Bldg. 612. The rent for JIM BUSTOS PLUMBING is 521,540 annually, or $0.45 per sq. ft. in the first year, escalating 3% in subsequent years for a 4,000 sq. ft. building. Jim Bustos Plumbing is a local plumbing company, using the building as its main office. The building is in good condition. This is a lease renewal for NRC Environmental Services for Structure D -13 and Bldg. 616. The rent for NRC ENVIRONMENTAL SERVICES is $61,728 annually, or $0.19 per sq. ft. in the first year, escalating3% in subsequent years. The lease for Structure D -13 and Bldg. 616 is essentially a ground lease for 26,606 sq. ft. with a small shed on the site. NRC Environmental uses this space for parking, maintenance, and storage of trucks and materials in support of their environmental response business. This space is not used for storing any hazardous materials or waste. The building and property are in good condition. This is a lease renewal for Puglia Engineering for Bldg. 67. The rent for PUGLIA ENGINEERING OF CALIFORNIA is $60,600 annually, or $0.36 per sq. ft. in the first year, escalating 3% in the subsequent year. Puglia Engineering uses the 14,000 sq. ft. building for office, storage, and light manufacturing in support of MARAD ship repair. This building is in fair condition. This is a new lease for Revolution Foods for Bldg. 119. The rent for REVOLUTION FOODS is $25,380 annually, or $0.45 per sq. ft. in the first year, escalating 3% in subsequent years. Revolution Foods intends to use the 4,700 sq. ft. Bldg. 119, the former location for "The Source ", to prepare meals for local school districts. Building 1.19 is in good condition. Budget Discussion/Financial Impact The leases are expected to raise $481,452 in the first year. These funds will be retained by the ARRA. Honorable Chair and Members of the Alameda Reuse and Redevelopment Authority Recommendation Approve the proposed sublease agreements. By: Leslie Little Development Services Director Nanette Banks Finance & Administration Manager Attachment: A. Proposed Sublease Business Terms B. Site Map May 8, 2007 Page 3 ATTACHMENT A PROPOSED SUBLEASE BUSINESS TERMS TENANT BUILDING SIZE (SF) TERM RENT Alameda Power & Telecom 162 38,500 2 yrs $10,780/mo. Alameda Power & Telecom Fenced Lot 52,595 2 yrs $1,052/mo. Auctions by the Bay 25 18,131 5 yrs $4,533/mo. Auctions by the Bay 29 19,480 5 yrs $4,870/mo. Bay Ship & Yacht 292 2,700 3 yrs $1,074/mo. Event Productions 91 30,000 2 yrs $3,708/mo. Jim Bustos Plumbing 612 4,000 3 yrs S 1,795/mo. NRC Environmental Svcs. 6161D -13 26,606 3 yrs $5,144/mo. Puglia Engineering of CA 67 14,000 2 yrs $5,050/rno. Revolution Foods 119 4,700 3 yrs $2, 1 15/mo. ATTACHMENT B OAKLAND INNER HARBOR 3493 31 316 33013n 3410 S3'90 EVENT PRODUCTIONS PUGLIA ENGINEERING REVOLUTION FOODS ALAMEDA POWER & TELECOM AUCTIONS BY THE BAY NEC ENVIRONMENTAL SERVICES JIM BUSTOS PLUMBING BAY SHIP & YACHT 1 617A vPC WHARF PG NAS ALAMEDA INNER HARBOR Alameda Reuse and Redevelopment Authority Interoffice Memorandum May 8, 2007 TO: Honorable Chair and Members of the Alameda Reuse and Redevelopment Authority FROM: Debra Kurita, Executive Director SUBJ: Disposition of Personal Property — Proposed Sale of 45 -Foot Yard Tug Boat Background In June 2001, the ARRA established a procedure for the disposition of personal property. The procedure delegated authority to the Executive Director to declare, as surplus, any item of personal property which is valued at less than S10,000, and which is not required for use by the ARRA in the administration of its powers and duties pursuant to the Joint Powers Agreement. The ARRA Governing Body must approve this transaction because the revenue generated from the sale exceeds the administrative approval level. Discussion When the Navy transferred title of personal property to the ARRA, it included a 45 -foot Yard Tug Boat, designated a Yard Working Boat (YWB), Serial Number YWB 4553256. Trident Management has stored this tug boat in a fenced yard for the past five years. Recently, ARRA staff was contacted by a private citizen, George Beglitsoff, with a $25,000 offer to purchase this tug. Prior offers for disposal of the tug boat were refused because the offers were contingent upon the ARRA paying for its removal, rather than gaining revenue for its sale. Mr. Beglitsoff will pay for the removal of the tug boat. Fiscal Impact $25,000 of revenue will be added to the ARRA fund. Recommendation Approve the proposed sale of the 45 -foot Yard Tug Boat. Res ectfli subrn1tted, Leslie Little Development Services Director By: Nanette Banks Finance & Administration Manager Alameda Reuse and Redevelopment Authority Interoffice Memorandum May 8, 2007 TO: FROM: Debra Kurita Executive Director SUBJECT: Honorable Chair and Members of the Alameda Reuse and Redevelopment Authority Consideration of Master Developer Partnership Agreement and Master Developer Selection Background On April 4, 2007, the Alameda Reuse and Redevelopment Authority (ARRA) selected Catellus Development Group and Lennar Urban as co- master developers for Alameda Point and requested that the two firms prepare a partnership agreement within 30 days. The � selection of Catellus and Lennar as co- master developers was the culmination of a six-month process to identify a new master developer following the September 2006 withdrawal of .Alameda Point Community Partners (APCP) as master developer. Discussion A A On May 2, 2007, Catellus and Lennar submitted the attached four and one-half -page document entitled Term Sleet Catellus /Lennar Alameda Point Joint Venture. The document is not a partnership agreement. It is a non- binding term sheet that generally describes provisions that will be contained in a to- be- negotiated Operating Agreement. In addition, many, if not most, of the key substantive provisions that staff would expect to be contained in a partnership docurnent are either missing altogether or are explicitly deferred until completion of negotiations on the Operating Agreement. Some of the missing terms include: the use of third party equity capital, the terms under which new partners may be added to the partnership, and the conduct of each P artner that would constitute a default of the partnership. Other important terms such as remedies for breach of the terms of the partnership, dispute resolution procedures, and the percentage of the vertical development reserved to each partner, are deferred to later agreements. Finally, important terms such as "major decisions" that must be made by unanimous consent of the partners are not defined. The term sheet proposes to negotiate an Operating Agreement over the next 60 days. Honorable Chair and Members of the Alameda Reuse and Redevelopment Authority Basis of the Evaluation May 8, 2007 Pg. 2 of 7 The evaluation team, consisting of Alameda Point project staff and a principle from Economic and Planning Systems (EPS), the ARRA's economic consultant, has reviewed the non - binding term sheet. EPS has prepared the attached analysis that evaluates the terra. sheet pursuant to the selection criteria contained in the original Request for Qualifications (RFQ) and identified through the ARRA's follow -up questions raised at the February 7, 2007 Board meeting. Key criteria include: commitment of experienced. and senior -level management to the project over the long - term; streamlined decision - making process; ability to self-finance the project; required minimum Internal Rate of Return (IRR); ability to make the necessary investment in the project consistentl y and on a timely basis; commitment to a timeline to redevelop Alameda Point; and the importance of the relationship between residential and commercial aspects of the project. Many of the criteria identified as important factors when selecting a new master developer were based on the ARRA's experience working with APCP over the last five years. APCP was a partnership of Shea Homes, Centex Homes, Shea Properties, Industrial Realty Group (IRG) and Morgan Stanley. The partnership was fanned by the entities when Shea /Centex was short- listed, along with IRG /Morgan Stanley, as p art of the original master developer selection process. Even though the two groups had never worked together before, they determined that if they joined forces they would be more competitive. The result was that APCP submitted a joint proposal and was selected as the Alameda Point master developer in August 2001. In November 2003, IRG and Morgan Stanley withdrew from the partnership. A primary reason for Morgan Stanley declining to continue in the partnership was the investment criteria for Morgan Stanley's equity funds. Those criteria required a return on investment within a timeframe that was much shorter than the Alameda Point project could accommodate. Without Morgan Stanley, IRG either did not have the necessary equity funds to commit to the partnership or chose not to commit them. As a result of the reformation of the partnership, the ARRA agreed to proceed with the remaining partners, funding all of the pre - development activities with ARRA funds. APCP continued to work as the master developer for the next three years with three member partners. As the project grew more challenging due to the requirement from the Navy that a purchase price be negotiated and the decline in the residential market it was more difficult for the partnership to reach consensus decisions regarding expenditure of funds, commitment of staff time, and the hiring of technical consultants. With the partnership led by hornebuilders, as opposed to a true land developer, a decision was made to disband the partnership when the residential market continued to slump. The experience working with APCP highlighted the importance of partnering with a master developer that, by virtue of its core business, is primarily self - financed, is comfortable with the long -terra nature of complex mixed -use projects, can weather market cycles, and has a streamlined decision - making process. Based on the ARRA's Honorable Chair and Members of the Alameda Reuse and Redevelopment Authority May 8, 2007 Pg. 3of7 prior experience with APCP, Catellus' and Lennar's inability to negotiate anything more than a non - binding term sheet within a 30-day timeframe raises concerns about their ability to successfully function as co- master developers. If the term sheet is relied upon as an indicator of the ultimate partnership agreement, the evaluation team has identified the following areas of concern: Management Structure One of the few items the non- binding term sheet covers in some detail is the proposed project management structure. Pursuant to section (d), Catellus and Lennar each contribute two members to a Membership Committee. The Membership Committee shall prepare the Operating Agreement, the Business Plan, a Financing Plan and a Marketing Plan. All decisions of the Membership Committee must be unanimous. Provisions on how to proceed, or on what measures to take if there is not a unanimous vote of the Membership Committee are deferred to the preparation by the Membership Committee of the Operating Agreement. Catellus is named the "Managing Member" but may not deviate from any of the plans prepared by the Membership Committee and may not make "major decisions" without approval of the Membership Committee. Catellus appoints a Project Director to supervise the day -to -day operation of the project. However, Lennar also appoints a Project Manager to "coordinate" with the Catellus Project Director on all strategic activities. The term sheet does not address how disputes between the Catellus Project Director and the Lennar Project Manager are resolved or how they are intended to coordinate their activities. 60 -day Due Diligence Period The term sheet proposes that an Operating Agreement will be negotiated between Catellus and Lennar during the next 60 days. As envisioned in the RFQ process, and agreed to by the Navy, the next 60 days is an exclusive due diligence period for the selected master developer. During that time, the master developer should be focused on understanding all aspects of the project including updating the project pro forma; working with stakeholders on entitlement issues such as historic preservation; meeting with environmental insurers; conferring with the Navy regarding the draft conveyance term sheet; negotiating an Exclusive Negotiation Agreement (ENA) with the ARRA, etc. rather than negotiating an agreement on how the master developer will be structured and operate internally. A key element of the 60 -day due diligence is negotiating the ENA between the ARRA and master developer that will govern the project schedule, major milestones, ARRA cost recovery, etc. over the 24 -month entitlement process. It will be difficult to negotiate the ENA if the master developer entity is not fully established. Therefore, there is concern that major items will not be concluded within 60 days, inevitably resulting in a request for a time extension. In addition to the commitment of timely redevelopment, the Navy Honorable Chair and Members of the Alameda Reuse and Redevelopment Authority May 8, 2007 Pg. 4 of 7 has expressed its interest in moving the conveyance forward as quickly as possible. It is important that the ARRA and Navy know that there is a master developer willing and able to move forward with the project at the end of 60 days. Cost of' Funds While the non- binding term sheet contemplates third party debt financing after conveyance of the property, it is silent regarding the possibility of third party equity financing. Catellus was the only developer to commit to self-financing the Alameda Point project if it were selected as master developer. If Catellus and Lennar agree to third party equity financing, that money would be more expensive to use than Catellus' or Lennar's own funds. The more costly funds would negatively impact the pro forma and make it more difficult to achieve the target IRR. In addition, a third party equity p artner would become a member of the partnership with its own set of funding requirements and funding disbursement criteria and project oversight. An additional layer of requirements could slow pre- development activities as partners evaluate the expenditure of dollars and the hiring of necessary staff and outside technical experts against different criteria and benchmarks. Partnership of Homebuiider and Non-Residential Developer Lennar is fundamentally a horebui lder. Catellus is a non - residential developer that builds commercial product ranging from retail and office to adaptive reuse and warehouse space. Catellus determines if it will sell its commercial product or retain and manage it on a project -by- project basis. Catellus' approach to residential development is to secure the entitlements and construct the backbone infrastructure and then sell the improved land to third party homebuilders based on a competitive process that ensures the highest price for the land. Lennar's approach to non residential development is to bring in a partner with expertise in commercial development to help finance and entitle the project or to sell the property to a third party developer /end user. While it might be argued that a hornebuilder and commercial developer combined would offer the broadest range of expertise, there is concern that a partnershi p requires uires q consensus decision - making that consists of partners with different approaches to their core businesses could hamper the redevelopment process. For example, the partnership could be less flexible regarding strategies to meet changing market demand. If the residential market begins to recover, there may be resistance to providing land for non- residential uses or for retaining historic buildings. Alternatively, if the residential market does not look strong over the short to m (three to five years), there may be reluctance to move forward with the project and a desire to hold the land until the market turns. The partnership's ability to quickly and aggressively adapt to market changes, and its willingness to embrace a range of development alternatives based on the market, is key e to timely redevelopment versus holding property to control land inventory. The issue of how divergent approaches to the market would be addressed is not included in the term sheet, short of an agreement that all "major decisions" would be made by consensus. Honorable Chair and Members of the Alameda Reuse and Redevelopment Authority May 8, 2007 Pg. 5 of7 The term sheet does acknowledge the need to establish a process for selling land to member partners. Typically, a master developer would entitle the project, construct the backbone infrastructure and undertake a competitive process to sell the improved land at the highest price. With two developers with vertical interests (residential and commercial), the obligation to ensure that the finished lots are sold at market prices falls to the ARRA. l f a master developer is not engaged in "arm's length" transactions as described above, but rather prescribing a process upfront for selling to member partners, the ARRA will need to ensure that the Disposition and Development Agreement (DDA) has provisions that protect ARRA's ability to maximize land values at Alameda Point. Absent a true competitive process, this task is quite difficult. Approach to Development The term sheet contemplates a committee structure and does not provide for a single point person who is empowered to make decisions on behalf of the committee. Based on responses to the RFQ and follow-up questions from the ARRA, Catellus and Lennar have different approaches to redeveloping Alameda Point. Catellus has accepted the conditions in the draft conveyance terra sheet with the Navy. Lennar has stated that it would require several key changes to the term sheet to proceed with the project, including re- visiting the $108.5 million land purchase price. Catellus has a goal of a 20 -22% 1RR, whereas Lennar has a goal of a 25% IRR. Catellus has stated it would self - finance the project. Lennar intends to use equity partners to finance a portion of the project. The term sheet does not contain a schedule of milestones; therefore, staff is unable to determine if Catellus and Lennar are in agreement on the pace and timing of redevelopment at Alameda Point. Given the differences on these important issues, and the requirement for a committee structure and consensus decision- making, the staff has concerns about the effectiveness of the partnership to redevelop Alameda Point. In the event that the partnership agreement does not work out, buy -out, default, and assignment provisions could add additional costs to the project. Conclusion Based on its analysis of the non- binding term sheet submitted by Catellus and Lennar, the evaluation team has concluded that it is unlikely that a partnership agreement can be negotiated that will maximize the timely, cost - effective and market -- driven redevelopment of Alameda Point. Therefore, staff recommends that the ARRA Board consider setting aside the co- master developer approach and select one developer as the Alameda Point master developer. Throughout the master developer selection process, the evaluation team has provided analysis to the ARRA Board to assist it in its decision - making process. The evaluation team conducted one -on -one interviews with the prospective master developers, checked references, analyzed responses to the RFQ, participated in the community Open House, observed the presentations to the ARRA Board, and analyzed responses to the ARRA's Honorable Chair and Members of the Alameda Reuse and Redevelopment Authority May 8, 2007 Pg. 6 of 7 additional written questions. Based on this work, the evaluation team recommends that the ARRA select Catellus as the Alameda Point master developer. Catellus' participation at all levels of the selection process illustrates its ability to meet the key selection criteria. Catellus has direct experience in the role as master developer. It has committed to the financing and staffing necessary to complete the project over the next 12-15 years. Catellus' organizational structure allows for streamlined decision - nakin.g with a five - member investment committee that meets weekly and has authority over a $3 billion line of credit. It is the only developer willing to self-finance the project and its IRR goal of 20-22% was at the lower end of the minimum acceptable IRR range for all the developers. Catellus has agreed to the conditions in the draft conveyance term sheet. It is generally experienced in complex redevelopment, brownfields and military base closure projects, and has staff that is particularly experienced in working in Alameda and at Alameda Point in particular. Catellus has pledged to develop a green and sustainable project and has already submitted the Alameda Landing project to the U.S. Green Building Council for consideration as a LEED for Neighborhoods pilot project. Catellus' approach to developing Alameda Point makes it the better partner for ARRA as it moves forward to integrate the future development of Alameda Point into the 'larger community. Fiscal ;Impact There is no direct fiscal impact to the ARRA of reconsidering the co- master developer approach and selecting Catellus as the Alameda Point master developer. Recommendation Reconsider the co- master developer approach, as Catellus and Lennar were unable to negotiate a partnership agreement within the agreed -upon 30 -day timeframe and select Catellus as the Alameda Point master developer. Respectfully submitted, David Brandt Assistant City Manager By: e,bie Potter Base Reuse and Community Manager Honorable Chair and Members of the Alameda Reuse and Redevelopment Authority May 8, 2007 Pg. 7 of 7 Attachments: 1) Term Sheet CatelluslLennar Alameda Point Joint Venture 2) EPS Memo Regarding Review of Catellus/Lennar Joint Venture Term Sheet TERM SHEET CATELLUS[LLNNAR ALAMEDA POINT JOINT VENTURE May 2, 2007 The following is a summary of the indicative basic terms and conditions for the J o joint proposed ' .� venture transaction between Catellus Development Group, a ProLogis Company ("Catellus") and Lennar Communities, Inc. ("Lennar " ). Under no circumstances shall the indicative terms and conditions constitute or be deemed to constitute a legally binding commitment on the art o p of Catellus or Lennar with respect to the transactions described below The individual terms and conditions define the basic terms and conditions of the transaction, are to be used as a framework upon which the documentation for this transaction shall be created and structured, and shall serve as a basis for further discussion and negotiation of the overall terms as may be appropriate. Pose: The purpose of the transaction, and the formal agreements that are yet to be negotiated and entered into is to form a joint venture between Catellus and Lennar for the acquisition, horizontal development and disposition of that certain real property (the " "Pro ert p y) commonly referred to as the Alameda Point Property in Alameda, California (the "City "). The transaction contemplated hereby shall be consummated through the use of a "joint venture" which will take the form of a Delaware limited liability company (qualified to do business in the State of California) formed in order to accomplish the purpose set forth herein (the "Project LLC"). The Project LLC will entitle the Property for residential and commercial uses and then acquire, master develop, improve and re- develop (i.e., the existing warehouse space) the Property, as appropriate, for the purpose of selling parcels to residential merchant builders and commercial developers and re- developed warehouse space to end users and/or to the Members of the Project LLC (the "Members "), as provided below (the "Project"). In connection therewith, subject to paragraph g. below, (i) Lennar will have the right to purchase an agreed upon percentage of the residential parcels and (ii) Catellus will have the right to purchase an agreed upon percentage of the commercial and re- developed warehouse components of the Project. ENA and DDA: Catellus and Lennar have been selected as the developer of the Project by the City and intend to negotiate with the City with a view to entering into an exclusive "ENA") agreement (an ENA77 ) with respect to the Project. The ENA will establish the process for further planning of the Project and negotiation of a Development and Disposition Agreement (a "DDA ") to acquire the Property in one or more takedowns (each a "Takedown "). 99999\1277787v7 Activities pities Prior to ENA Execution : The parties will promptly prepare and agree on a preliminary budget ("Preliniinary Budget ") and schedule of responsibilities for their due diligence and other activities which must take place prior to the execution of the ENA. Each party will fund 50% of the expenses incurred pursuant to the Preliminary Budget and undertake the responsibilities assigned in the agreed schedule of responsibilities. Lie Closing: Subject to review and agreement an final tci ms, Catellus and Lennar intend to enter into an "Operating Agreement" ent" .for the Project LLC, on the terms provided for in this Term Sheet, no later than five (5) business days prior to execution of the ENA (tic "LLC Closing "). Other Terms Of the o ei-atir A reeme t: The Operating Agreement of the Project LLC will generally provide as follows: a. Members: The Members of the Project LLC shall be Catellus and Lennar. b. B!dgets: The Members will agree upon an initial business plan (the "Business Plan ") which will cover the horizontal development of the Property, including entitlement, infrastructure implementation and parcel development and will be attached as an exhibit to the Operating rcenent. The Business Plan will contain a project budget ( "Operating Budget ") and a schedule (including a list of target dates by which certain specified tasks are projected to be completed) and will be updated at least annually. c. cp.p.i1Q1Siat_ributio is and Financing. (i) initial capital Contributions: Upon the LLC Closing, the Project LLC shall reimburse the Members for all verified expenses incurred since the date of this term sheet to the extent contained in the Preliminary Budget. The "Members shall make initial cash contributions to the Project LLC in order to reimburse such expenses in the following ratio (the "Percentage Interests "): Catellus: Lerman 50 ?% 50% Additional pre- ]Jevelo next Ca ital: The Members shall each make any additional capital contributions required by duly adopted Operating Budgets or to otherwise fund cost 99999\1277787v7 2 overruns, In accordance with their respective Percentage interests, in connection with e ltitie . ent and pre- development work on the Property and in order to comply with the terms and conditic ns of the DDA prior to any Takedown ('Pre -- Development Capital"). At this stage (the "Pre-Development Stage "), it is anticipated that it will not he necessary to acquire any portion of the Property pursuant to the DDA until the required entitlements have been obtained. (iii) Additional Project Capital. Following the Pre.. Development Stage, the Members shall each make any additional capital contributions required by duly adopted Operating Budgets or to otherwise fund cost overt-ins in accordance with their respective Percentage Interests in order to fund the acquisition, development and construction activity of the Project LLC. (iv) Remedies for Failure to Contribute. Appropriate remedies shall be provided for a Member's failure to make required capital contributions. Such remedies shall include both Men -fiber and company Loans, dilution and discounted default buy out rights_ (v) cl. Man C�) Third Party Financing: If the Members mutually agree to obtain conventional (i.e., nonpartieipatingfnonconvertible) third party real property secured debt financing, then Catellus and Lennar shall work together to arrange for such financing in accordance with the Financing Plan (defined below) (on a non-recourse basis) to fund development and improvement costs associated with the Property. The Members shill consider at the time whether to provide guaranties, indemnities or additional security for such loans, and any required subdivision or other surety bonds, which may be required by lenders. The Members shall cross-indemnify each other for any payments made under such guaranties, indemnities, etc in a manner disproportionate to their Percentage Interests. ProjectILCmb ,, s Committee. The Project LLC shall have a Members Committee. Each Member shall have the right to appoint two members to the Members Committee. Prior to the LLC Closing the Members Committee shall establish and approve the Business Plan, the Operating Budget, a Financing Plan (updated semi -- annually and 99999\12777870 3 which shall be subject to the restrictions on financing provided above) and a Marketing Plan (updated quarterly). The "Managing Member" (defined below) shall have the authority to carry out the day to day management of the business and affairs of the Project LLC; provided that the Managing Member shall not materially deviate from the Plans described above or make certain other specified decisions without consent of the Members Committee (each a "Major Decision"). The Members Committee shall act upon the unanimous vote of its members. The Operating Agreement will include appropriate procedures in the event of an inability to reach a unanimous vote within the Members Committee on a Major Decision or the decision of either Member not to proceed with the Project. The Members Committee may elect to approve the Plans in two stages, one for the Pre- Development Stage and one for the remainder of the Project following obtaining entitlements. (ii) Managing Member. The Managing Member of the Project LLC shall be Catellus. The Managing Member shall designate a Project Director who will have primary responsibility for the supervision of the day-to-day operation of the Project. In addition, the Project Director will work with and coordinate the strategic activities of the Project (e.g., ENA and DDA negotiations, property acquisition and disposition, project entitlements) with a Project Manager assigned to the Project by Lennar. e.yilmggLiit The Managing Member will be entitled to a monthly fee as set forth in the Operating Agreement. in addition, each Member will be entitled to reimbursement for personnel engaged in the business of the Project, excluding members of the M enhhers Committee, to the extent such reimbursement is contemplated by an Operating Budget. '. Distributions and Profit and Loss Allocations: Absent a default by a Member, distributions of available cash shall be made quarterly as follows: i) first, to pay any accrued and unpaid Manager Fees, (ii) second, to repay any loans approved and made by the Members to the Project LLC, and (iii) third, to the Members in accordance with their Percentage Interests (subject to any dilution thereof for failure to contribute required capital). Profits and losses shall be allocated in a manner consistent with the foregoing distribution scheme and all federal tax laws. 91999 12777h7v7 4 Marketin a d Disposition of Lots: The Operating Agreement will provide for the marketing of the lots created by the Project LLC in a manner reasonably calculated to produce the highest price and best terms to the Project LLC. Consistent with this principle, each Member shall have the first right to purchase at fair market value an agreed upon percentage of such lots to the extent and in the manner set forth in the Operating Agreement Bach party acknowledges and agrees that the above terms of this Term Sheet are non-binding and no party shall have any obligation to the other respecting the transactions described herein unless and until Lennar and Catellus shall have executed a final definitive operating agreement on terms and conditions acceptable to both such parties in their respective sole and absolute discretion. This Term Sheet may be signed in counterpart copies and faxed signatures are acceptable. Cat Catellus Development Group, ProLogis Company, a division of ProLogis, a Maryland real estate investment trust Lennar Comrnunities Inc. a California corporation By:, Name: Title: 99999\1277787 v7 5 g. Marketing and Disposition of Lots: The Operating Agreement will provide for the marketing of the lots created by the Project LLC in a manner reasonably calculated to produce the highest price and best terrns to the Project LLC. Consistent with this principle, each Member shall have the first right to purchase at fair market value an agreed upon percentage of such lots to the extent and in the manner set forth in the Operating Agreement. Each party acknowledges and agrees that the above terms of this Term Sheet are non - binding and no party shall have any obligation to the other respecting the transactions described herein unless and until Lennar and Catellus shall have executed a final definitive operating agreement on terms and conditions acceptable to both such parties in their respective sole and absolute discretion. This Term Sheet may be signed in counterpart copies and faxed signatures are acceptable. Catellus: Catellus Development Group, A ProLogis Company, a division of ProLogis, a Maryland real estate investment trust By: Name: Title: Lennar: Lennar Communities Inc., a California corpor at' on 99999 \1277787v7 5 'on Planning Systems Real Estate Economics Regional Economics Public Finance Land Use Policy MEMORANDUM To: David Brandt, Debbie Potter From: Jim Musbach Subject: Review of Catellus/Lennar Joint Venture Term Sheet; EPS #14012 Date: May 3, 2007 Economic & Planning Systems has reviewed the Term Sheet for the Catellus/Lennar Alameda Point Joint Venture, dated May 2, 2007. On a general level, the Term Sheet is incomplete, and lacking in substantive terms that are critical to defining a viable partnership and management structure. The partnership elements that are specified raise significant issues with respect to the ability of the proposed Joint Venture to operate effectively as a single entity in the complex DDA negotiations, entitlement process, and development execution of the Alameda Point project. Specific issues are discussed below. No Resolution of Differences in Approach. In the RFP process, Catellus and Lennar expressed substantive differences in development approach, financing, return requirements, and other considerations. The Term Sheet provides no indication that these differences have been resolved in the creation of the Joint Venture. Specific examples include the following. • Catellus proposed a competitive bidding process to select builders of residential product to ensure product diversity. As a home builder, Lennar will seek to develop as much of the residential product as possible. • Catellus indicated its return expectation, or hurdle rate, is an IRR of 20 to 22 percent. Lennar seeks a minimum return of 25 percent IRR. To the extent that this difference is resolved by defaulting to Lennar's higher hurdle rate, additional financial pressure will be placed on project feasibility. • Catellus indicated a willingness to accept the existing Navy deal and other business terms that have been negotiated. Lennar has expressed stronger reservations regarding these terms, and indicated their desire to review them carefully in the due diligence process. While either point of view may be valid, it BERKELEY 2501 Ninth St., Suite 200 Berkeley, CA 94710 -2515 www.epsys.com Phone: 510- 841 -9190 Fax: 510- 841 -9208 SACRAMENTO DENVER Phone: 916 -649 -8010 Phone: 303-623-3557 Fax: 916- 649 -2070 Fax: 303-623-9049 Memorandum David Brandt, Debbie Potter May 2, 2007 Page 2 is not clear that the parties have come to terms about how they will deal with these issues as a unified entity. • Catellus has stated that they intend to self finance the project, providing their own equity for pre-development and subsequent investment. Lennar has indicated that they would likely seek one or more third party equity partners. As discussed below, the addition of equity partners could impact the operations and financial efficiency of the Joint Venture. Potential Third Party Equity Partners. The term sheet makes reference to debt financing, but is silent on third party equity. As mentioned above, Lennar's prior submittals and statements at the ARRA Board meeting indicate that they are likely to seek one or more third party equity partners. If they do, the structure of the development team will be very similar to the original APCP structure, which turned out to be unworkable as a result of differing investment criteria and cumbersome decision- making among the multiple partners. Third party equity will also increase the cost of capital, putting further stress on project economics. Management Structure. The management structure described in the term sheet clearly indicates a "management by committee" approach, rather than granting executive authority to a single representative of the entity. Consequently, decision making during negotiation of the DDA, and subsequent financing and development, may be cumbersome and contentious. Moreover, the individuals who would be involved in the management of the project are not named, so the quality of the management expertise cannot be evaluated based on the Term Sheet. • Catellus is designated the Managing Member of the LLC, and is authorized to appoint a project director, who will have day-to-day responsibility to supervise the project, but will be required to coordinate strategic activities with a Project Manager assigned by Lennar. • The Project Director will report to a Members Committee, consisting of two members from Lennar and two from Catellus. The Members Committee will establish the Business Plan, Operating Budget, and Financing Plan, and will update these on a periodic basis. Actions of the Membership Committee would be subject to a unanimous vote of all four members. • The Project Director will not be allowed to deviate from the adopted plans or budgets, or make "...certain other specified decisions ..." without a unanimous vote of the Members Committee. Thus, little executive authority is granted to the Project Director. • No specific individuals are named in the agreement, either for the Members Committee, or for the Project Director and Project Manager positions. Thus, it is not possible to gauge the seniority or quality of management expertise that would be devoted to the project by the parties. G:\Base Reuse& Redeup \ DehbiePotter \AP Master Developer \)Vterrnsmert .doe Memorandum David Brandt, Debbie Potter May 2, 2007 Page 3 Marketing and Disposition of Lots. Each of the developers would be granted first right of refusal for an unspecified percentage of the lots at "fair market value ". Catellus would have refusal rights for commercial lots, and Lennar for residential. To the extent that lots go primarily to Catellus and Lennar, the DDA will need to establish more complex methods to ensure "arms length" lot pricing. Also, to the extent that vertical development is done primarily by the two entities, architectural and product diversity will be more difficult to achieve. Assignment or Substitution. No provisions are included in the agreement to limit the assignment of the developers' positions, or the substitution of other development entities in the event of default or buyout of one of the original members of the joint venture. Without such provisions, the development team could be changed in unpredictable and potentially unacceptable ways. Operating Agreement Negotiations. The Term Sheet essentially leaves negotiation of the partnership operating agreement for the due diligence period. There are several concerns with deferring this effort. • Operating Agreement negotiations will distract from the work that needs to be done during the due diligence period to prepare for entering into the ENA with a solid understanding of issues and positions. • In light of the substantial deposit required at the time of executing the ENA, it is likely that there will be delays in the process, if it is not possible to conduct a thorough due diligence and resolve all the substantive partnership issues during the allotted 60 days. • Given the incomplete and highly qualified terms in the Term Sheet, it is by no means certain that Catellus and Lennar will come to terms on a workable partnership agreement. G:\Base Reuse& Redevp \ DebbiePatter \ AP Master Developer \ jVtermsrr em.doc Alameda Reuse and Redevelopment Authority Interoffice Memorandum May 8, 2007 TO: Honorable Chair and Members of the Alameda Reuse and Redevelopment Authority FROM: Debra Kurita, Executive Director RE: Background Approve Draft Comment Letters on Record of Decision for Installation Restoration Sites 1 and 25 and Authorize Executive Director to Submit Comment Letters to the Navy. At the October 4, 2006, ARRA Board meeting, several Board Members requested an opportunity to review comments that ARRA staff proposes to make to the Navy concerning the remediation process. In particular, the Board expressed an interest in reviewing proposed comments when policy issues are involved. The Navy recently issued two draft Records of Decision (RODs) that are the final step in selecting the clean -up remedy for Installation Restoration (IR) Site 1, the landfill at the northwest corner of Alameda Point, and soil at IR Site 25, Coast Guard North Village Housing. Draft comment letters for the two draft RODs are attached. The discussion below provides background and summarizes the comments in the draft letters. Discussion IR Site 1 The 78 -acre IR -1, located at the northwestern most corner of Alameda Point, includes a 14.7 -acre landfill that was used to dispose of most Naval Air Station wastes from 1943 until 1956. Originally, IR -1 consisted of the approximate footprint of the landfill, but its boundaries were later expanded to include the surrounding area encompassing all radioactivity detected during a radiological survey. The Navy recently issued a draft ROD for IR Site 1' (IR -1 ROD). The selected remedies in the IR -] ROD closely track those recommended in the September 2006 Proposed Plan for IR Site 1. ARRA staff prepared a November 1, 2006, environmental remediation update for the ARRA and, at the ARRA' s direction, submitted comments to the Navy on that Proposed Plan on November 9, 2006. The formal Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA aka Superfund) process does not provide an official opportunity for public comment on RODs; 1 Draft Record of Decision for Installation Restoration Site 1, 1943 -1956 Disposal Area, Alameda Point, Alameda, California, April 11, 2007. Honorable Chair and Members of the Alameda Reuse and Redevelopment Authority May 8, 2007 Page 2 public comment on remedy selection primarily occurs at the Proposed Plan stage. However, the ARRA is not precluded from submitting comments at this point in the process. The environmental . regulatory agencies are to submit their comments on the IR-1 ROD by June 10, 2007, whereupon the Navy will prepare a draft final version of the ROD, which responds to comments it has received. The attached draft comment letter on the IR -1 ROD reiterates and expands upon the comments ARRA made on the September 2006 Proposed Plan for this site: Institutional controls (ICs) should not restrict or prevent land - disturbing activities and disruption of pavement in areas that are clean; and 2. The Navy inappropriately uses an abbreviated selection process (presumptive remedy) to select containment, rather than excavation and removal, as the remedy. IR Site 1 is subdivided into multiple Areas for remedy selection purposes: 1. Area la, the main waste disposal area or landfill. The Navy proposes to contain the buried wastes in this area with a soil cover four feet thick and to use ICs to protect the cover. This outcome was selected because it is often the presumptive remedy for landfills. 2. Area lb, the northwest corner of the waste disposal area where wastes were burned at the time of landfilling, also called the "burn area The Navy proposes to excavate the burn area completely, with off -site disposal, and to use ICs to restrict land- disturbing activities. 3. Area 2a, paved runways east and south of the main disposal area By definition, this area is outside of the landfilling area The Navy proposes ICs to prevent disruption of the pavement, even though no known contamination exists in this area 4. Area 2b . aved runwa s north of the main dis . osal area As with Area 2a, this area is outside the landfill, and no contamination is known to be present. However, aerial photographs from the late 1940s show material storage in this area Accordingly, the Navy's proposal to use ICs to preserve the pavement in this area has some basis, although sampling to confirm or refute potential soil contamination would have been helpful. 5. Area 3, unpaved areas that are outside the landfilling area The Navy proposes to excavate and remove the few "hot spots" of contamination in Area 3 and to use ICs to restrict land - disturbing activities. 6. Area 4, the former firing range berm. As a separate project, the Navy will excavate and remove the berm completely. No ICs related to land - disturbing activities are proposed for Area4. 7. Area 5, the shoreline. The Navy proposes "hot spot" excavation and removal, with ICs restricting land - disturbing activities. The ROD justifies the ICs as "necessary to protect the effectiveness of the remedy, including any shoreline slope stability, surface runon and runoff, and erosion control measures implemented as part of the remedy." S. Site-Wide Radiologically Impacted Soil. The Navy proposes to excavate all known radiological contamination outside of Area la, with disposal beneath the Area la soil cover. One radiological waste disposal trench in Area la is to be excavated, with offsite disposal. As a separate project, this work is currently being conducted by the Navy. Low -level radiological contamination has been found only at IR Site-1. 9. Groundwater. The Navy proposes to treat the most contaminated groundwater using in situ chemical oxidation, with monitoring and ICs to prevent groundwater use. Honorable Chair and Members of the Alameda Reuse and Redevelopment Authority May 8, 2007 Page 3 With respect to the over- reaching ICs, the attached draft comments focus on ICs restricting soil - disturbing activities in Areas lb and 3, and pavement disrupting activities in Area 2a. At its core, the comments state that where all known contamination has been removed, there is no need to restrict contact with the soil. In the case of the Area 2a runways, there is no more reason to expect contamination beneath the pavement there than anywhere else under runways at the west end of Alameda Point. With respect to the decision to contain, rather than excavate, the wastes landfilled in Area la, the draft comments argue that the presumptive remedy process is inappropriately applied at this site, leading to faulty remedy selection. The containment presumptive remedy is inapplicable because Area la is likely not comparable to a municipal landfill, the groundwater is shallow, and wetlands, San Francisco Bay, and other sensitive habitats are present. IR Site 25 Soil The 46 -acre IR-25 includes Estuary Park, the Coast Guard Housing Management Office, and the currently unoccupied Coast Guard North Village Housing. IR -25 soil is contaminated with polynuclear aromatic hydrocarbons (PAHs), which were present in the dredge sediments that were used to fill the marsh formerly present at the site. Near - surface soil in areas not covered by buildings, hardscape, or trees, where the PAH levels were the highest, was excavated and hauled away in 2001 and 2002. In an earlier removal effort, the Navy excavated soil to a depth of four feet beneath Cloverleaf Park, which is located within North Village Housing. The Navy recently issued a draft ROD for IR Site 25 Soil2 (IR -25 ROD), which closely tracks the Proposed Plan for IR Site 25 Soil3. By April 18, 2007, all of the environmental regulatory agency enc � y comments on the IR -2.5 ROD had been submitted to the Navy. A draft final ROD for this site is expected by June 18, 2007. The November 1, 2006, ARRA staff report also covers the environmental status of IR Site 25 soil. The attached draft comments on the IR -25 ROD focus on two issues: ICs would require future landowners to obtain approval from environmental regulatory agencies and from the Navy before conducting certain restricted activities, such as digging g g deeper than four feet or removing pavement. Environmental regulatory agencies are fully able to review and decide upon requests to conduct restricted activities. Requiring Navy y approval too, is inefficient and an undue burden on future homeowners or other landowners. 2. ICs would require future landowners to obtain prior approval and to comply with a Site Management Plan before demolition or removal of buildings or hardscape (e.g., structures, concrete roadways, parking lots, foundations, sidewalks). Future landowners must enter into an enforceable agreement with EPA and DTSC before building removal and major site work. These ICs are unreasonably burdensome on homeowners and, at best, will likely result in compliance problems. 2 Draft Record of Decision, Site 2.5 Soil, Alameda Point, Alameda, California, December 2006. 3 Proposed Plan for IR Site 25 Soil, Former NAS Alameda, Navy, August 2006. Honorable Chair and Members of the Alameda Reuse and Redevelopment Authority Recommendation May 8, 2007 Page 4 Approve the draft comment letters on Record of Decision for Installation Restoration Sites 1 and 25 and authorize Executive Director to submit comment letters to the Navy. Respectfully submitted, " David Brandt Assistant City Manager By: Debbie Potter Base Reuse and Community Development Manager Attachments: Draft comment letter on IR Site 1 ROD Draft comment letter on IR Site 25 Soil ROD Attachment 1 May 9, 2007 Mr. Thomas L. Macchiarella BRAC Environmental Coordinator Navy BRAC Program Management Office 1455 Frazee Road, Suite 900 San Diego, CA 92108-4310 Re: Comments on the April 11, 2007 Draft Record of Decision for Installation Restoration Site 1, 1943 -196 Disposal Area, Alameda Point, Alameda, California Dear Mr. Macchiarella: Thank you for providing the Alameda Reuse and Redevelopment ent Authority`(ARRA) with a copy of the Navy's April 11, 2007 Draft Record of Decision /oi IInstallation Restoration Site 1, 1943 - 1956 Disposal Area Alameda Point, Alameda, California (ROD). At its meeting on May 8, 2007, the ARRA Board directed staff to submit the following comments. 1. Residential land use is not planned for any portion of Installation Restoration Site 1. The Navy's response to ARRA Comment 1 on the Installation Restoration (IR) Site 1 Proposed Plan erroneously suggests that ARRA's comment related to future residential use. "Although the Navy believes that proposed soil excavation and removal in areas outside Area 'l a should remove all hazardous substances osin unacceptable risk p g unacce p for planned recreational reuse and ecological receptors, there is some remaining uncertainty regarding the potential presence of residual concentrations of chemicals in soil presenting unacceptable risk receptors under to (sic) other future scenarios (for example, the residential scenario)." (ROD, p . C -3, Attachment C. emphasis added) `. Reference to the residential use scenario in the response to ARRA's comment is rrelevant. The comment took issue with restrictions on contact with subsurface soil during non - residential use. Residential use is not planned for IR Site 1. None of ARRA's comments on the Proposed Plan and none of the following comments suggests institutional controls (ICs) restricting residential use are improper. 2. The proposed ICs for Area lb, the burn area, should not restrict land - disturbing activities. This area will be completely cleaned. "Soil Alternative 81-4a [the selected remedy] for Area 1 includes ... excavating and disposing of all contaminated soil and waste material from this area off site, Mr. Thomas L. Macchiarella Pg. 2 of 11 and replacing the removed materials with clean imported backfill." (ROD, p. 12- 3, Section 12.2.11. emphasis added) Thus, the active remedy for Area lb consists of completely removing all contamination from which future site users might need protection. Nevertheless, the ICs proposed for Area 1 unnecessarily restrict land - disturbing activities even in Area lb, which is to be completely cleaned. This IC should apply only to Area la, the main waste disposal area adjacent to the Area lb burn area. "Excavation into the 4- foot -thick soil cover over Area la will be restricted, as well as excavation and/or disturbance of soil ...outside the boundary of Area l a, unless transferees gain regulatory and Navy approval and comply with a risk management plan." (ROD, pp. 12 -1 & -2, Section 12.1. emphasis added) One of the IC objectives for Area 1 is as follows. "Land disturbing activity is prohibited unless conducted pursuant to a RMP approved by the Navy and DTSC. `Land; disturbing activity' includes but is not limited to... (2) construction of roads, utilities, facilities, structures, and appurtenances of any kind... (5) excavation and or disturbance of soil ...and (6) any other activity that involves movement of soil to the surface from below the y �' surface of the land. (ROl). .1 2 -66 p , Section 12.2.1.1) Neither the ROD nor any of its predecessor decision documents provide any rationale for such IC objectives in an area where all contamination has been completely removed by excavation and off site disposal. The ROD contains two passages that sugges the final ROD is not intended to encompass Area lb with these restrictions: 1) Prohibitions related to land- disturbing activities in the Description of Alternatives section refers only to the soil cover over Area la, not to Area lb where the wastes are to be removed. "The ICs for this alternative [Alternative S1 -4a, the selected remedy] are the same as those for Alternative S1-2." (ROD, p. 9 -2, Section 9.1.1.4) Alternative S1-2's ICs address only the soil cover, which will not be constructed over Area 1 b because the waste will have been completely removed. "ICs [for Alternative S 1 -2 ] would prohibit use of the property for residential [and other sensitive uses]. ICs would also prohibit actions that could damage or otherwise reduce the effectiveness of the soil cover and require compliance with a soil management plan approved by the FFA signatories for any excavation into the cover." (ROD, p. 9 -2, Section 9.1.1.2, emphasis added) Mr. Thomas L. Macchiarella Pg. 3 of 11 2) The ROD suggests that ICs prohibiting land- disturbing activities will not remain after the Area lb soil has been excavated and disposed off site. "ICs [for Area 1] will remain in place until RAOs and remediation goals have been achieved." (ROD, p. 12 -6, Section 12.2.1.1, emphasis added) All RAOs and remediation goals will have been achieved by completely removing all contamination from which future site users might need protection. This is precisely what the ROD directs be done in Area :lb. 3. The proposed ICs for Area 2a, the paved areas outside of and south and east of Area 1, should not restrict disturbing the paved surface. There is no indication of any contaminated soil in Area 2a. The only portion of Area 2 for which any potential for contamination has been documented is Area 2b, not Area 2a. "Area 2... includes the paved surfaces outside of the waste disposal area. Paved surfaces include the former concrete runways.. . and asphalt areas adjacent to the runways. Prior to 1947, materials were stored on unpaved surfaces in Area 2b (BET 2006). In 1953, Area b was aved...." (ROD, . 93 Section 9.1.2. P p emphasis added) Aerial photographs from 1947, 1949, and 1953 do not show evidence of material storage in Area 2a, only in Area 2b.1 Historical material storage in Area 2b does not suggest y storage gg similar activities.occ reed in Area 2a, , because se these areas are not contiguous. Area 2a is more than 300 feet from Area 2b at its closest point, and most of Area 2a is more than 1,000 feet from Area 2b. By definition, Area 2 does not contain landfill wastes. To assure this, the ROD requires precise delineation of the landfill as a corn remedy of the P P y for Area 1. "Before design activities and site work begin in Area 1, a geophysical survey will be performed and test pits and soil borings will be installed to completely identify the spatial limits of contaminated soil." (ROD, p. 12 -4, Section 12.2.1.1. emphasis added) Thus, there is no indication of contamination in Area 2a from which future site users might need protection. The ROD's Principal Threat Waste section does not list any wastes in Area 2, although wastes are listed for other IR Site 1 areas. The ROD's Description of Alternatives section explains the requirement to maintain the pavement or any protective cover installed over it. 1 Final Feasibility Study Report, 1R Site 1, 1943 -1956 Disposal Area, Alameda Point, Alameda, California, Bechtel Environmental, Inc. Figures 2 -2 through 2 -4, February 8, 2006. Mr. Thomas L. Macchiarella Pg. 4 of 11 "Under this alternative, the existing pavement would be maintained indefinitely to prevent deterioration. Preventing deterioration of the pavement would prevent exposure to potentially contaminated soil underlying the pavement. If redevelopment of Area 2 involves covering the pavement with at least 2 feet of soil, the need for continued maintenance of the pavement would be unnecessary. ... ICs would also prohibit actions that could damage or otherwise reduce the paved surfaces and effectiveness of the soil cover and require compliance with a soil management plan approved by the FFA signatories for any excavation into the cover. ICs would 'prohibit demolition or removal of hardscapes unless transferees gain regulatory agency approval and comply with a soil management plan." (ROD, pp. 9 -3 & -4, Section 9.1.2.2. emphasis added) "Potentially contaminated soil underlying the pavement is no more likely in Area 2a than in any other portion of the extensive runways on the western end of Alameda Point. Nevertheless, the ICs proposed for Area 2 unnecessarily restrict disturbing the paved surfaces in Area 2, without distinguishing between Area 2a and 2b. "ICs also will be implemented to prohibit any excavation or disturbance of the paved areas of Area 2, including demolition activities, unless transferees gain regulatory and Navy al plan." (ROD, pp. 12 -2, Section 12.1) "The same ICs described for Soil Area 1 will be implemented for Soil Area 2. The ICs will be implemented in accordance with the procedures and requirements ents outlined in Section 12.2.1.1." (ROD. 12 -8, Section 12.2.1.2 p 12.2.1.2) One of the IC objectives in Section 12.2.1.1 for Area 1 is as follows. "Land disturbing activity is prohibited unless conducted pursuant to an RMP approved by the Navy and DTSC `Land disturbing activity' includes but is not pp y � y l ite to... (2) construction of roads, utilities, facilities, structures and appurtenances of any kind; (3) demolition or removal of paved areas ... (5) excavation and or disturbance of soil ...and (6) any other activity that involves movement of soil to the surface from below the surface of the land." (ROD, p.12- 6, Section 12.2.1.1. emphasis added) The ROD' s response to ARRA's comment about this issue in the Proposed Plan for IR Site 1 is relevant only to Area 2b, but not to Area 2a. "At Area 2, ICs will ensure the integrity of the existing cap (the runway), which provides an extremely effective means of protecting against any residual contamination because there is no exposure pathway. ... As it currently exists, the runway provides a highly effective barrier that protects potential receptors from any potential contamination that may exist below the concrete cover." (ROD, p. C -3, Attachment C) Mr. Thomas L. Macchiarella Pg. 5 of 11 Although aerial photographs from the 1940s show "material storage" in Area lb, this is not the case in Area 1 a. There is no basis for ICs restricting disruption of the pavement in Area la. Neither the ROD nor any of its predecessor decision documents provide any rationale for such IC objectives in an area where there is no documentation of suspected contamination. This restriction will be counterproductive and unnecessarily burdensome to ARRA, the transferee. 4. The proposed ICs for Area 3, the unpaved areas located outside of the former disposal area, should not restrict land- disturbing activities. The Navy's sampling of Area 3 has documented PAHs (polynuclear aromatic hydrocarbons), PCBs (polychlorinated biphenyls), metals, and radium in surface soil "hot spots ". The Navy collected eight soil samples in Area 3 from below two feet bgs (below ground surface). Although the Navy analyzed these;sarples for a wide suite of analytes, none of the soil samples from deeper than two feet bgs in Area 3 exceed any USEPA PRGs (preliminary remediation goals). The R D's Principal Threat Waste section acknowledges that Area 3's contamination is in surface soil. "... surface soil containing concentrations of aeais, PAHs, and PCBs above remediation goals within Area 3 ... are considered a principal threat waste." (ROD, p. 11 -1, Section 11.0. emphasis added) Area 3 will be completely cleaned. "Selected soil areas where chemicals exceed remediation goals for humans and terrestrial olo a receptors tors would be excavated from g p Area 3 and relocated to the interior of Area 1 under a soil' cover or cap. Excavated areas would be backfilled with clean fill soil." (ROD, p. 9 -5, Section 9.1.3.2, ern p hasis added) Thus, the selected remedy for Area 3 consists of removing all contaminated soil from which future site users s rr��t need protection. Nevertheless, the Ids proposed for Area 3 unnecessarily restrict land-disturbing activities. "Demolition activities will be prohibited [in Area 31 and excavation and/or disturbance or (sic) soil restricted unless transferees gain regulatory and Navy approval and ;comply with a risk management plan. This alternative will provide excellent short -term and long -term . rotection of human and ecolo .ical rece . tors by permanently removing contamination...." (ROD, pp. 12 -2, Section 12.1. emphasis added) The selected remedy's ICs for Area 3 are the same as for Area 1, which are described above in comments concerning Soil Areas lb and 2a. "The same ICs described for Soil Area 1 will be implemented for Soil Area 3 soil. The ICs will be implemented in accordance with the procedures and requirements outlined in Section 12.2.1.1." (ROD, p 12 -9, Section 12.2.1.3) Mr. Thomas L. Macchiarella a Pg. 6 of 11 Neither the ROD nor any of its predecessor decision documents provide any rationale for such ICs in an area where all contamination has been removed. The ROD contains three passages that suggest the final ROD is not intended to apply these restrictions to Area 3. 1) The Description of Alternatives section does not include any prohibitions related to land - disturbing activities at Area 3. "Following soil relocation and backfilling [of Area 3], ICs would be implemented to prohibit use of the property for residential [and other sensitive uses] unless approved by the Navy and DISC." (ROD, p. 9 -5, Section 9.1.3.2) 2) By its reference to Area 1 ICs, the ROD suggests that ICs prohibiting land-- disturbing activities will not remain after the contaminated soil in Area 3 soil has been excavated and disposed in =Area la. "ICs will remain in place until RAOs and rernediation goals have been achieved." (ROD, ' ` `1 -�G s Section an 12 . Z P . l . emphasis added) All RAOs and remediation goals will have been achieved by removing all contamination from which future site users rriit: need protection. This is precisely recisel what the ROD directs be done in Area 3. 3) The ROD's Table 12-1 Cost Estimate for Soil Alternatives does not include any cost for ICs at Soil Area 3, although this cost item is included for Soil Areas 1 and 2. It appears that, after 'considering ARRA's torments on the Proposed Playa for IR Site 1, the Navy `' decided to remove these ICs from m y a Area 3. Although the revision to delete these ICs was done correctly in the y cost estimate (Table 12-1) and the description of alternatives (Section 9.1.3.2), the ICs remain in the Selected Remedy section as an anachronism. 5. The SOD does not respond to ARRA's Comment 1 on the Proposed Plan. ARRA's comment on the Proposed Plan specifically questions the rationale for ICs restricting" soil- disturbing activities and disruption of the pavement in areas where contamination is not expected to remain. "The remedial investigation provides no rationale for concluding subsurface soil in IR Site 1 is any different from subsurface soil elsewhere in the runways area. Significantly, neither the Navy nor any environmental regulatory agency has identified the need for similar institutional controls on any other portions of the runways area." (ROD, p. C -2, Attachment C) Mr. Thomas L. Macchiarella Pg. 7 of 11 With respect to Area 2, the Navy's response discusses "any residual contamination" and "any potential contamination ". These terms are applicable to Area 2b where aerial photographs from the 1940s show material storage occurred, but not to Area 2a. There is no evidence of residual or potential soil contamination in Area 2a, and the Navy's response to ARRA's comment does not address this fact. Nonetheless, the ROD claims to have addressed this comment. "The responsiveness summary portion of this ROD addresses the public's comments and concerns about the selected remedial alternative for soil in Area 2 (Alternative S2 -3)." (ROD, p. 10 -5, Section 10.1.2.9) Similarly, the ROD's response to ARRA's comment does not discuss the basis for requiring ICs to restrict soil- disturbing activities in Area 3. Area 3 is not mentioned in the Navy's response. Nevertheless, the ROD claims to have addressed this comment. "The responsiveness summary portion of this ROD addresses the public's comments and concerns about the selected remedial alternative for soil in Area 3 (Alternative S3 -4)." (ROD, p. 10 -7, Section 10.1.3.9) Either the Navy should expand its responses in Attachment C to the ROD to address ARRA's comment, or revise the Acceptance sections (10.1.2.9 and 10.1. } y p 10.1.3.9) to state that the responsiveness ss suanar y does not address all of the public's comments. 6. The ROD inappropriately relies on EPA's: presumptive remedy for municipal landfill sites. The ROD incorrectly bases its remedy selection for IR Site l's waste disposal area (Area la) on. EPA guidance and policy for municipal landfills, which identifies containment as the presumptive remedy under CERCLA for municipal landfills. The ROD cites 1996 p p y p EPA guidance and policy to conclude the containment presumptive remedy is applicable to this `military landfill. 3 However, according to EPA's 1996 guidance, the containment presumptive remedy is not appropriate for Area la for several reasons. ) EPA's decision framework to evaluate applicability of the presumptive remedy to military landfills requires an affirmative answer to the following question: "Do andfill Contents Meet Municipal Landfill—Type Waste Definition?" "The...presence, proportion, distribution, and nature of waste are fundamental to the application of the containment presumptive remedy to military landfills..." 2 Presumptive Remedy for CERCLA Municipal Landfill Sites, US Environmental Protection Agency, Office of Solid Waste and Emergency Response. Directive No, 9350.49FS. September 1993. 3 Application of the CERCLA Municipal Landfill Presumptive Remedy to Military Landfills, US Environmental Protection Agency, Office of Solid Waste and Emergency Response. Directive No. 9355.0- -67FS. December 1996. (EPA 1996) Mr. Thomas L. Macchiarella Pg. 8 of 11 "The proportion and distribution of hazardous wastes in a landfill are important considerations. Generally, municipal landfills produce low - -level threats with occasional hot spots. Similarly, most military landfills present only low -level threats with pockets of some high- hazard waste. However, some military facilities (e.g., weapons fabrication or testing, shipbuilding, major aircraft or equipment repair depots) have a high level of industrial activity compared to overall site activities. In these cases, there may be a higher proportion and wider distribution of industrial (i.e., potentially hazardous) wastes present than at other less industrialized facilities." (EPA 1996, pp. 2 & 3, emphasis added) As a major facility for maintenance and repair of ships and aircraft, Naval Air Station Alameda acted as a "major aircraft or equipment repair depot" when the IR Site 1 landfill was operational. "[The Navy] conducted a variety of operations at Alameda Point, including aircraft, engine, gun, and avionics'; maintenance; engine overhaul and repair; fueling activities; and plating, stripping, and painting activities. "4 Thus, Area la's contents probably do not meet the municipal landfill type waste definition, as required to use the presumptive reined Unfortunately, the s q P p �' Y� Navy relies on the presumptive remedy process for IR Site 1, no samples of the landfill's contents have been collected for characterization P rP u oses. In its response to a aRRA comment on the IR Site 1 Proposed Plan, the Navy characterizes Area la as a municipal landfill. "The waste disposal area meets the definition of a former municipal P P landfill because it contains a combination of principally municipal and, to a lesser extent, hazardous wastes (EPA 1993)." (ROD, p. C -6, Attachment C) This speculative characterization of Area la's contents is unsubstantiated, because the Navy has not sampled the landfill's contents at all. Available documentation does not disclose the amounts of hazardous versus non - hazardous waste disposed in Area la, nor whether the different types of wastes were segregated in different areas of the landfill during disposal. Pot holing or other sampling would have allowed objective evaluation of the Navy's assertion. In response to another ARRA comment on the IR Site 1 Proposed Plan, the Navy downplays the likelihood of landfilled drums that will cause future releases. 4 Draft Site Inspection Report, Transfer Parcel EDC -12, Alameda Point, Alameda, California, p. 1-2, Section 1.3, October 11, 2006. (emphasis added) Mr. Thomas L. Macchiarella Pg. 9 of 11 "According to the initial assessment study, historical information indicates that drums were crushed during disposal (Ecology & Environment, Inc. 1983). This fact coupled with the fact that wastes were buried beneath the current groundwater table, makes it unlikely that drums remain intact within the disposal area. Because the waste is positioned primarily in the saturated zone, the Navy believes that over the years, significant decomposition has already occurred." (ROD, p. C -7, Attachment C) An "indication" of drum crushing in historical documents does not guarantee that crush was always, or even routinely, conducted. Despite these "facts" cited in the ROD's response to ARRA's comment, it is not known whether the Navy attempted to crush all drums and other containers disposed in Area la over the period 1945 to 1956; nor is it known how effective any crushing efforts were. Given the compressibility of wastes during landfilling, it is plausible that some, perhaps many, drums were not effectively ruptured during the crushing step. Further, buried drums would not necessarily have decomposed by now. The likelihood of drums having already failed and their contents dissipated depends on the in situ environment of the landfill, such as, pH, salinity, and redox potential and the drums' characteristics, such as material of construction, wall thickness, presence of a liner, etc. In situ conditions at Area 1 a are completely uncharacterized because the landfill contents have not et been sampled and y p analyzed. 2) EPA's 1996 guidance and policy lists conditions, which are present at Area la, that argue against using the presumptive remedy. Stte- specific conditions may limit the use of the containment presumptive remedy at military landfills. For example, high water tables, wetlands and other sensitive environments, and the possible destruction or alteration of existing habitats as a result of a particular remedial action could all be important factors in the selection of the remedy." (EPA 1996, p. 3, emphasis added) Area la has a high water table. wetlands occur on Area la. The sensitive San Francisco Bay shoreline borders Area la. As to existing habitats, they will be destroyed whether the selected remedy is implemented for Area la or the wastes are excavated and disposed elsewhere. With excavation of the landfill, habitat disruption` will occur only once. For these reasons alone, use of the municipal landfill presumptive remedy is inappropriate. 3) Third, the .Navy's election to use the presumptive remedy decision process is not available after an RI/FS has been completed. "The site manager will make the initial decision of whether a particular military landfill site is suitable for the presumptive remedy or whether a Mr. Thomas L. Macchiarella Pg. 10 of 11 more comprehensive RI1FS is required. This determination must be made before the RI/FS is initiated." (EPA 1996, p. 6) The Navy has already completed a full RI/FS for IR Site 1. The major motivation for pursuing the presumptive remedy approach is to streamline the process. "As noted on pages 1 and 2 of this directive, the presumptive remedy approach allows you to streamline and focus the FS or EE/CA by eliminating the technology screening step from the feasibility study process.... Thus, the FS analyzes only alternatives comprised of components of the containment remedy.... In addition, the focused FS or EE/CA should include a, site - specific explanation of how the application of the presumptive remedy satisfies the National Contingency Plan's three site - specific remedy selection criteria (i.e., compliance with state applicable or relevant and appropriate requirements, state acceptance, and community acceptance)." (EPA 1996, p. 8, emphasis added) The Navy did not complete a focused FS for I Site 1. Instead, the FS extensively evaluates general response actions and screens remedial technologies. By doing this, the FS defeats the purpose of using the presumptive remedy process. Because the FS analyzes alternatives other than containment, it is inappro riate for the ROD to select the containment alternative on the basis of containment being the presumptive remedy. The ROD should select the remedy in light of the full FS analysis, without regard to presumptive remedies.'` Finally, the ROD does; not explain how the selected remedy satisfies the community acceptance criterion. In summary, the? s selection of the presumptive remedy is faulty. Alternative S1-5, complete removal, should have been selected as the most appropriate remedy for all of Area 1, not just Area lb. The ROD inappropriately selects a remedy without even nominal characterization of the landfill's contents. With reference to an ARRA comment on the Proposed Plan for IR Site 1, the ROD' responsiveness summary does not justify the Navy's omission of landfill characterization. "Area 1 was not fully characterized because it is a waste disposal area, and EPA presumptive remedy guidance does not require full characterization (EPA 1993 and 1996).... EPA's policy is that response actions that require characterization of disposed wastes...are impracticable for landfills such as Area 1 landfill because of the size and heterogeneity of the disposed wastes (EPA 1993).... It should be noted that throughout the investigation years, by collecting samples at 307 locations, the Navy went Mr. Thomas L. Macchiarella Pg. 11 of 11 well beyond the requirements necessary for characterizing a waste disposal area." First, even if the presumptive remedy guidance process were applicable to Area la, the Rap's acknowledgement that the landfill is "not fully characterized" is a broad understatement. Not a single sample has been collected and analyzed from the contents of Area la, the main waste disposal area. All of the 307 sample locations avoid the contents of the Area la landfill. Further, the assertion that Area la's wastes are heterogeneous is speculative, because of the absence of any sampling of its contents. In conclusion, the remedy for Area la should be sected only with proper characterization of the landfilled wastes. Thank you for considering ARRA's comments. Sincerely, Debbie Potter Base Reuse and Community Development Manager cc: Xuan -Mai Tran, USEPA Dot Lofstrom, DTSC Erich Simon, Water Board Peter Russell, Russell Resources, Inc. Attachment 2 May 9, 2007 Mr. Thomas L. Macchiarella BRAC Environmental Coordinator Navy BRAC Program Management Office 1455 Frazee Road, Suite 900 San Diego, CA 92108 -4310 Re: Comments on the December 2006 Draft Record of Decision, Site 25 Soil, Alameda Point, Alameda, California Dear Mr. Macchiarella: Thank you for providing the Alameda Reuse and Redevelopment Authority (ARRA) with a copy of the Navy's December 2006 Draft Record of Decision, Site 25 Soil, Alameda Point, Alameda, California (ROD). At its meeting on May 8, 2007, the ARRA Board directed staff to submit the following comments. . Institutional controls should allow routine future use by average people. Alternative 2, the ROD's selected remedy, consists of institutional controls (ICs). One of the long -term ICs imposes inefficient and unwieldy responsibilities on future homeowners at Installation Restoration (IR) Site 25. "Requirement of the future landowner to gain wrtten a pp roval from the • regulatory agencies and the DON [Depaiiment of the Navy] and comply with a SMP [Site Management Plan] before demolition or removal of buildings g s or hards c. a p e (e.g., structures, concrete roadways, p arkin lots, foundations, sidewalks ) e i tin at the time of ROD issuance.). (sic) EPA and DTSC will require the fut ure non- federal landowner to enter into an enforceable agreement for building removal and major site work." (ROD, p. 12 -2 Section 12.1.3 emphasis added) f a developer or other large business is the landowner, a high compliance rate with this IC is likely. However, it is unreasonable to expect an average homeowner to obtain written 'approval from the Navy and multiple environmental regulatory agencies and to adhere' to a highly technical SMP before repairing or replacing his walkway, sidewalk or driveway. ` It would be very unusual for either EPA or DTSC to enter into an enforceable agreement with a homeowner over a home remodeling project. This IC is based upon a strategy that is probably unworkable. Confusion and lack of awareness among average homeowners likely will result in frequent noncompliance, especially with the passage of time. Accordingly, this aspect of the selected remedy does not protect public health as required by the remedial action objective (RAO). "The RAO developed for soil at Site 25 is to prevent human exposure to soil containing PAHs [polynuclear aromatic hydrocarbons] at concentrations that Mr. Thomas L. Macchiarella pg. 2 represent a lifetime cancer risk exceeding the risk management range (RMR) or exceeding the non - cancer hazard index (HI) of 1.0." (ROD, p. 8.1, Section 8.0, emphasis added) 2. Future non- federal landowners should not be required to obtain Navy approval as part of the ICs. Both of the long - term ICs in the selected remedy require future non - federal landowners to obtain Navy approval before undertaking certain activities. In addition to the IC recited in comment one above, an excavation IC in included in the remedy. "Prohibition against excavation of soil from depths greater than 4 feet in areas not covered by existing buildings and hardscape, unless the future landowner gains regulatory and DON approval and complies with a Soil Management Plan (SMP)." (ROD, p. 12 -2, Section 12.1.3, emphasis added) Requiring approvals from environmental regulatory agencies and from the Navy is inefficient and unnecessarily burdensome. Environmental regulatory agencies protect public health and the environment as their primary responsibility. The Navy's primary responsibility is national defense, not considering petitions from homeowners and other future landowners concerning property maintenance. There is no question the environmental regulators will remain staffed and pre ared to manage environmental institutional controls. This is not necessarily the case with the Navy, which may have y � y more ressin riorities. If the homeowner/landowner ner /landowner also has to engage the Navy gp y to p lant a tree requiring excavation cavation dee er than 4 feet, for example, compliance will incrementally suffer: Thank you for considering the ARRA's cornmen Sincerely, Debbie Potter. Base Reuse and Community Development Manager cc: Anna -Marie Cook, USEPA Dot Lofstrom, DISC Erich Simon, water Board Peter Russell, Russell Resources, Inc.