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2008-08-19 Special ARRA MinutesAPPROVED Present: Chair Beverly Johnson Boardmember Doug deHaan Boardmember Frank Matarrese Boardmember Marie Gilmore Vice Chair Lena Tam 2. CONSENT CALENDAR 2 -A. Approve the minutes of the Special Meeting of July 1, 2008 and the Special Joint City Council and Community Improvement Commission Meeting held on August 5, 2008. 2 -B. Authorize Negotiation and Execution of a Sublease for Rockwall Wine Company, Inc. at Alameda Point. 2 -C. Authorize Negotiation and Execution of a Sublease for Auctions by the Bay, Inc. at Alameda Point. 2 -D. Authorize the Executive Director to Enter a Contract, through PM Realty Group, with General Constriction Company to Dredge the Alameda Point Channel and Turning Basin in an Amount Not to Exceed $2,586,675. Approval of the Consent Calendar was motioned by Member Tam, seconded by Member deHaan and passed by the following voice votes: Ayes: 5, Noes: 0, Abstentions: 0. Member Gilmore abstained from approving the minutes of the Special Joint City Council and Community Improvement Commission Meeting held on August 5, 2008. 3. REGULAR AGENDA ITEMS 3 -A. Recommendation to concur with the Non - Binding Summary of Terms and Conditions for a transfer of the Exclusive Negotiation Agreement with SCC Alameda Point LLC to a New Entity with D.E. Shaw or transfer of an Ownership Interest in the SCC Alameda Point LLC to D.E. Shaw; and Recommendation to authorize the City Manager /Executive Director to negotiate a Second Amendment to the Exclusive Negotiation Agreement with SCC Alameda Point LLC. Debbie Potter, Base Reuse and Community Development Manager, discussed Suncal's request for authorization to secure a financial partner to complete it's obligations under the ENA. Approval to secure a financial partner is in Alameda's sole discretion, and authorization must be granted by the CC, ARRA, and CIC. This request was originally scheduled for consideration in June. At that time, staff had prepared a report that identified a number of key provisions that should be part of any partnership agreement, including that SunCal should retain day -to -day management responsibilities, continue to have equity stake in the project, and no removal of SunCal as a partner except for cause; and that there should be a commitment of fiends sufficient to fiend the ENA obligations and activities. Another key provision is that SunCal , as master developer and managing investor, should retain key decision - making authority. Lastly, there is a key provision prohibiting cross - collateralization and cross - default, essentially protecting Alameda Point from being put at risk based on the activity or performance of other SunCal properties. The executed term sheet between SunCal and D.E. Shaw provides for some, but not all, of core provisions: D.E. Shaw cannot remove Suncal as the managing investor for one year, SunCal must maintain a $1.5 million stake in the pooled fiind, and D.E. Shaw expects to invest $10 million in the ENA entitlement process. However, D.E. Shaw remains the ultimate decision - maker over the project budget, business plan and other major decisions. In addition, SunCal can be removed for cause or no cause after one year as the term sheet is presently drafted. Given the changed nature of the project and that the term sheet does not include all core provisions, staff recommends that Alameda consider directing the City Manager to negotiate a second amendment to the ENA that would allow us to manage some of the risk the City might be exposed to by our inability to retain some of these core provisions in the term sheet. Amending the ENA in several areas should include: requiring that the completion of the conveyance term sheet with the Navy, that is now part of special legislation, be a mandatory milestone; and secondly, that we tighten up and revise some of the timeframes that are currently contained in the ENA that don't reflect the project going to a ballot, most likely in the land plan that SunCal's pursuing, and that we look at an outside expiration date of the term sheet so that we have an ability to evaluate where we are one year from now and see how the project has changed and the progress that has been made. The recommendation is that Alameda concur with the provisions of the term sheet and that the operating agreement come back to the City, ARRA, and CIC in closed session for final approval of the assignment and transfer, and that the ENA be amended and returned to the ARRA Board at the same time for approval. There were several speakers including Michael Kruger, who spoke in support of SunCal and its aggressive plans to address the climate protection issues. Richard Banger spoke about his main concern regarding the 2" a amendment and the decision making powers of D.E. Shaw. He stated the importance of, once a 2" a amendment is drafted, that a well - publicized community meeting take place for the public to offer comments. Helen Sause, of HOMES executive board, spoke on behalf of SunCal, urging the City to make it possible for them to continue their work and expressed HOMES support of SunCal, stating that the City is best serviced if the Navy doesn't auction the land. Doug Biggs of APC also supports the efforts of SunCal, expressing how very innovative, engaging and open they are when negotiating with APC. Elizabeth Krase asked why the term sheet is not public record, and expressed concerns regarding the possibility of the constriction of buildings 12 to 20 stories high (as discussed at the Aug. 7th Community Workshop on the USS Hornet) and that there was no solution for transportation or traffic discussed and it is not realistic. Chair Johnson thanked the speakers and clarified that the Alameda Point redevelopment Project, itself, was not before the ARRA tonight, and that the request by SunCal for authorization to secure a financial partner was the item before the Board. Vice Chair Tam asked the City Attorney or staff to respond to Ms. Krase question regarding the term sheet being public. Terri Highsmith, City Attorney, explained that the term sheet is a confidential real property document. It is not finalized and still being negotiated, so it is appropriate to be viewed in closed session. Once the project is completed and every action has been taken to finalize it, any real property document discussed in closed session will become public record. Vice Chair Tam continued to discuss assurance that Suncal and D.E. Shaw are committed to each other with regard to the ENA and would like to see the agreement reflected in the ENA with regard to the financial plan. Chair Tam described an analogy about finding a different mortgage company to re- finance your home, that they are looking at the fine print. She supports directing staff to ensure the ENA reflects the commitment to have SunCal as master developer and that the timeline comports with timelines that are expected. Member deHaan was concerned and asked whether SunCal would be willing to continue, or had a fall -back plan, in the event a non - Measure A compliant plan did not pass. Pat Keliher, SunCal's Alameda Point Project manager, replied that indeed they have a fall -back plan and have discussed Measure A compliant plans internally. He stressed that SunCal would not just walls away from the project and would continue in the process for the long term Member Gilmore thanked SunCal and D.E. Shaw for their transparency and honesty with their public presentations and comments to the Board in closed session. She expressed that the Board will be looking very closely at the operating agreement. Maintaining Suncal as the master developer during the ENA process is important because that is the expectation of the community, and that SunCal remain the master developer until it is mutually decided the project doesn't work or is not feasible. We made a commitment to SunCal, not to a third party. Member Gilmore stated that SunCal has been straightforward and that the desire is to move forward together with the appropriate protection in place for the community. Member Matarrese discussed bringing the ENA back to the Board, as its purpose is to drive us to a Development Agreement. He stressed that the 2" a amendment to the ENA should include provisions that protect the city. He motioned for the following amendments: 1) that we can terminate the ENA for reasons other than for cause, either illegal activity or other malfeasance; 2) the timeline should be capped to remove the current flexibility which was termed as an "automatic extension" and should be adjusted to meet current progress; and 3) insulate Alameda Point from cross - default. The 2" a amendment should be brought back to the ARRA for review with the public and then finalization. Member deHaan asked for clarification on the relationship between D.E. Shaw and Lehman Brothers. Debbie Potter explained that SunCal had anticipated they would self - finance, but had initially identified Lehman Bros. as a possible financial partner. SunCal will continue to self — fund until Alameda approves the operating agreement and 2" a amendment to the ENA. Member deHaan wanted to know where D.E. Shaw was receiving its fiends. Ms. Potter explained that D.E. Shaw is a typical hedge fiend with various investors and $40 —$50 billion in funds available. David Brandt, Deputy Executive Director, further explained that D.E. Shaw is a privately held hedge fund, and that the identities of their investors is confidential, we know the volumes, but we don't know individual investors. Member Gilmore expressed a main concern about cross default, urging that we make sure that in the event something was to happen to another of Suncal's project, the ripple effect stops before it reaches Alameda. Member Matarrese summarized and reiterated his motion stated earlier. Member Tam seconded the motion and it was passed by the following voice votes: Ayes — 5, Noes — 0, Abstentions — 0. 3 -B. Oral report from Member Matarrese, Restoration Advisory Board (RAB) representative. Member Matarrese did not attend the RAB meeting, as it conflicted with the Community Meeting, which he attended. He made one comment regarding an 8/13 front -page Chronicle article about the US Army giving the Fort Ord reuse authority 3300 acres and providing $100 million for remediation. He asked if this was true. David Brandt affirmed it is true. Member Matarrese stated that we should talk to our elected officials on federal level and ask them why we can't get far less acreage and the money for clean -up. Chair Johnson questioned whether $100 million was enough for the clean up. Mr. Brandt responded that the Environmental Protection Agency (EPA) and the Department of Toxic Substances Control (DTSC) believe that it is sufficient, and that the Army is still liable for that waste. Member deHaan confirmed that once that land is transferred to the Fort Ord reuse — it was their plan to be dissolved. Chair Johnson discussed that this privatized clean up was what the Navy had proposed at one point, except that we're paying for it, and that the Army operates differently than Navy. 7. ADJOURNMENT Meeting was adjourned at 8:43 p.m. by Chair Johnson. Respectfully submitted, Irma Glidden ARRA Secretary