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2006-12-06 ARRA PacketAGENDA Regular 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 Wednesday, December 6, 2006 Meeting will begin at 7:00 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. Approval of the minutes of the Regular Meeting of November 1, 2006. 2 -B. Approval of Sublease for Architectural Glass and Aluminum at Alameda Point. 2 -C. Approval of a 7.5 -year lease with Area 51 (retroactive to October 2005), including a Workout Plan as Conditions of the New Lease for Hangar 24. 3. REGULAR AGENDA ITEMS 3 -A. Alameda Point Project Update 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 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. November 1, 2006 The meeting convened at 7:19 p.m. with Chair Johnson presiding. 1. ROLL CALL Present: Marie Gilmore, Boardmember, City of Alameda Doug deHaan, Boardmember, City of Alameda Frank Matarrese, Boardmember, City of Alameda Tony Daysog, Boardmember, City of Alameda Absent: Beverly Johnson, Chair of Alameda 2. CONSENT CALENDAR 2 -A. Approval of the minutes of the Regular Meeting of October 4, 2006. Member Daysog pulled Item 2 -A to articulate what he meant when he referenced certain letters regarding the ARRA's No -Cost EDC with the Navy. He reiterated his point that if we could return to the original understanding of the housing units that could be built -out per the documents agreed to by the ARRA and the Navy, perhaps we would not have to pay the $108,000 million the navy is now requiring. Member Daysog wanted to make sure this point was captured in this evening's meeting, since it was missed in the Minutes of October 4th. 2 -B was motioned by Member Daysog, seconded by Member deHaan and passed by the following voice vote: Ayes — 3; Noes — 0; Abstentions —1 (Member Gilmore was not present at the 10 -4 -06 ARRA meeting). 2 -B. Recommendation to approve consultant agreement with Moffatt & Nichol Engineers for Pier Condition Analysis at Alameda Point in an amount not to exceed $170,226 Approval of 2 -B was motioned by Member Daysog, seconded by Member deHaan and passed by the following voice vote: Ayes — 4; Noes — 0; Abstentions — 0 . 3. REGULAR AGENDA ITEMS 3 -A. Alameda Point Project Update Debbie Potter, Acting Alameda Point Project Manager, gave an overview on the Master Developer RFQ process. At the direction of the Board, the RFQ was issued on October 19th with a mandatory bidder's conference on Monday, October 30`h. There were 20 firms that attended the bidder's conference. All due diligence documents were provided on a CD and an PIP site available for all interested firms, and a comprehensive download of the land planning, the environmental issues, the public trust, summary of term sheet; and an opportunity for those present to ask questions. One -on -one meetings were also offered with the firms intending to respond, with nine firms signed up. Responses are due December 4, 2006 and need to be Page 2 accompanied by a $20,000 non - refundable filing fee. The responses received will be evaluated and brought back to the ARRA should we receive responses with a recommendation to enter into a 45 -day negotiation period. There was one speaker slip, Andrew Slifka, long -time Alameda resident and also a representative of the Carpenter's Union in Alameda County, and speaking on behalf of the Construction Building Trades Council of Alameda County. Mr. Slifka addressed concerns and disappointment with the Alameda Point Community Partners (APCP) withdrawal from the project since they had a Project Labor Agreement with APCP. He urged the Board to look at the same requirements for any developer that should come forward, because Project Labor agreements bring value to the community, well - paying jobs with benefits, careers and local work opportunities. Member Daysog asked if specific questions regarding the financing of the project were outlined in the RFQ. He commented on the financing/business model associated with revitalizing the Catellus project and how it was distinct from the business model that was employed for the rest of Alameda Point. He also discussed incorporating a different business model. David Brandt, Deputy Executive Director, responded that developers will be asked who their source of capital is and for a deposit of "earnest money" in the amount or $1 million before a developer is selected. This information will be provided to the Board. Member Daysog asked if the potential developers understood the amount of property open for redevelopment. Ms. Potter responded that the $108 million purchase price is based on Phases 1 and Phases 2, which is essentially everything but the Wildlife Refuge and the area south of Atlantic Ave. and north of the 26 -acre park, plus the golf course. David Brandt also clarified that we were careful to let the developers know that the PDC wasn't an entitlement. Member Matarrese asked whether a Project Labor Agreement (PLA) was presented to the bidders as part of the package that APCP (former master developer) put together. Debbie Potter responded that a PLA was not included in the RFQ and that it was not a requirement of the City when the first master developer was selected; but that a PLA was voluntarily agreed to by at least two out of the three finalists during the first master developer selection process. Member Matarrese requested that bidders be notified that a PLA was part of the original agreement and that the City does have a policy on prevailing wage. He was concerned that bidders would try to make their numbers work at the cost of labor. Ms. Potter said that a copy of the previously agreed -to document will be posted on the RFQ FTP site. Member deHaan discussed extending the current month -to -month leasing policy to a year -to- year policy in anticipation that the master developer would start taking down property. David Brandt acknowledged that the current ARRA direction is that all leases over a year come to the ARRA, and that potential tenants are told that redevelopment is imminent so long term leases are not being offered. This is being reevaluated to decide whether to start bringing longer term leases to the ARRA. Page 3 Leslie Little, Development Services Director, agreed to revisit the leasing policy at the beginning of next year in anticipation of activity after the master developer selection process. She added that some tenants, approved by ARRA, have longer leases because they are making significant improvements and receive rent credit for those investments, not done by ARRA. Member Gilmore wants the public to know what kind of timeline we're working with and asked what was the soonest possible time frame after the master developer is selected will we enter into an agreement (not even actually shoveling dirt or tearing down buildings, etc.) David Brandt responded that the soonest would be two years. Member Gilmore commented that this increases the timeframe "window" and recommended that when staff returns in January with the study session of the leases, it might be worthwhile to take a look at not just the 3rd and 4th phases, but the 1st and 2nd phases, too. Ms. Little clarified that we will be presenting an entire overview of all the leasing and it can be compared against the PDC. No action was taken on this item — it was an update and for informational purposes only. 3 -B. Alameda Point Environmental Remediation Update: Western Shoreline — IR Sites 1,2, and 32, Soil at IR Site 25 (Coast Guard North Housing), and Compliance with Marsh Crust Ordinance Debbie Potter gave an update on the clean -up status of these specific IR sites, as requested at the October 4 ARRA meeting. Peter Russell, environmental consultant from Russell Resources, was available to answer questions from the Board as a follow -up to the staff report provided. Member Matarrese's main concern was the Navy's option to install an engineered cap rather than a soil cover over landfill waste. Member Matarrese, along with the rest of the Board members, discussed at length their preferred alternative: having the Navy scoop out the landfill sites and haul it away. Debbie Potter discussed the process by which Peter Russell reviews all documents the Navy promulgates regarding all IR sites. She explained that we comment during the public comment period, but we do it at a staff level. She agrees with Member Gilmore about the policy -level decision that we want clean -up to a level that supports the community reuse plan and the PDC, and that the Navy has committed to clean -up to the reuses that are identified in the PDC. Ms Potter further explained, and reiterated by Peter Russell, that the ARRA- preferred option to scoop and haul the landfill is not economically feasible — and an engineered cap is potentially equally effective. She said that the City advocated the engineered cap since the beginning when we secured the pilot grant from EPA. Ms. Potter stated that the engineered cap is financially viable and is scientifically the best solution, a decision staff concluded in consultation with environmental experts. Member Matarrese commented that he had issues with the feasibility, that it didn't sound so daunting at the RAB meetings and that the scoop and haul option is actually feasible. Peter Russell responded that from a technical standpoint, the scoop and haul option would cost more. Debbie Potter sought direction from the ARRA as to a response for the public comment period due to the Navy by Nov. 10`h Page 4 Member Matarrese motioned to direct staff to submit a letter to the Navy during the public comment period to include the ARRA policy aspect and endorse the preferred solution of scoop and haul, rather than an engineered cap. This motion was seconded by Member Daysog and passed by the following voice vote: Ayes — 4; Noes — 0; Abstentions — 0. 4. ORAL REPORTS 4 -A. Oral report from Member Matarrese, RAB representative. Report was covered in discussion of Item 3 -B, above. ORAL COMMUNICATIONS, NON - AGENDA (PUBLIC COMMENT) Mayoral Candidate, Kenneth Kahn, stated that it would be an honor to serve with all of the members of the Board. 5. COMMUNICATIONS FROM THE GOVERNING BODY Member deHaan clarified a comment that was made regarding parolees working at Alameda Point. He stated that we indeed had parolees working at Alameda Point about 10 years ago through the Volunteers of America Program, under the control of the Navy. He explained that we were short of man- power, so we utilized San Quentin inmates that were being transitioned for landscaping and maintenance. 6. ADJOURNMENT Meeting was adjourned at 8:37 p.m. Respectfully submitted, Irma Glidden ARRA Secretary Alameda Reuse and Redevelopment Authority Interoffice Memorandum December 6, 2006 TO: Honorable Chair and Members of the Alameda Reuse and Redevelopment Authority FROM: Debra Kurita, Executive Director SUBJ: Approval of Sublease for Architectural Glass and Aluminum at Alameda Point Background At the December 2004 ARRA Board Meeting, the ARRA elected to review and approve all subleases at Alameda Point. Discussion The subject action is a renewal of the lease with Architectural Glass and Aluminum for Building 117. The rent will be $0.12 per square foot or $87,588 annually for this structure which is a warehouse in fair to poor condition with no loading docks. Attachment A describes the business terms for the proposed sublease. Fiscal Impact The rent for Architectural Glass and Aluminum is $87,588 annually or $0.12 per sq. foot. Recommendation Approve the proposed sublease. Respectfully submitted, Leslie Little Development Services Director By: Nanette Banks Finance & Administration Manager Attachment: A. Proposed Sublease Business Terms B. Site Map Honorable Chair and Members of the Alameda Reuse and Redevelopment Authority ATTACHMENT A PROPOSED SUBLEASE BUSINESS TERMS December 6, 2006 Page 2 TENANT BUILDING SIZE (SF) TERM RENT Architectural Glass & Aluminum Portion of Building 117 60,828 1 year and 2 months $7,299/mo. go I CO I 0 c\2 0 T-1 00I •1 ri up co CV -7 10 Is t\,1 oRjp., \ 1 1 , , /DI I .....\\....„\,...\\,.....\ z \\\. • \\. r=1:1 , \\\ \\ \ .,\ 001Z , rzI col , i `4. \,:\ •,....... ' 1 i•-• 1 44-1 i • 4 N.-1 • Cn CV ril I , CD N•••=1 1 / CO 4.-1 i 4 = 4 = = 1 4 1•••?'" 4- C\ 4/ 4 ril 1 4 4 '01 • I 1 I op 0) • crD N N co INTO d mffiad 0 0 o Alameda Reuse and Redevelopment Authority Interoffice Memorandum December 6, 2006 TO: Honorable Chair and Members of the Alameda Reuse and Redevelopment Authority FROM: Debra Kurita, Executive Director SUBJ: Approval of a 7.5 -year lease with Area 51 (retroactive to October 2005), Including a Workout Plan as Conditions of the New Lease for Hangar 24 Background Since 1997, the ARRA periodically awarded licenses to Area 51, a special events production company, to hold events at Alameda Point. In early 2001, Area 51 was awarded a license for a portion of Hangar 25 on a periodic basis to facilitate these events. In 2002, they were awarded a license for a portion of Hangar 24, instead of Hangar 25, on a full time basis. In early 2003, a lease proposal was prepared that allowed Area 51 to occupy Hangar 24 for five years. The term of the proposed lease was March 1, 2003 to February 28, 2008 at a rate of $16,974.00 per month. During the course of the lease negotiations, the then leasing agent, Industrial Realty Group, allowed Area 51 to occupy the space prior to finalizing the terms of the agreement. In the period of time between October 2003 and February 2005, Area 51 constructed $207,481 in tenant improvements required in order to obtain a Certificate of Occupancy (C of 0) for the building. Based on the leasing agent's estimate to obtain a C of 0 for the building, the terms of the lease provided that $100,000 of the costs for these improvements would be credited toward the payment of rent. However, during that period, the tenant paid rent for only nine of the 16 months. In December 2004, after considering a recommendation to file an unlawful detainer to evict Area 51 from the premises, the ARRA Board directed staff to continue to negotiate with the tenant in an attempt to cure the defaults. In those negotiations, which were lead by Interim City Manager Norton, Area 51 requested a significant rent reduction, repayment of the arrears over 7.5 years, a longer lease term with renewal options and an expansion of the leased premises. In the interim, Area 51 continued to occupy Hangar 24 and in October 2005 made one additional payment of $16,400 in order to obtain licenses for three special events they scheduled for the fall. As of October 31, 2006, Area 51 is $504,034 (including the $100,000 credit) in arrears, is not paying rent, and ARRA staff has suspended issuing Honorable Chair and Members of the December 6, 2006 Alameda Reuse and Redevelopment Authority Page 2 license agreements for new events. Up to this time, Area 51 paid for licenses totaling $90,000. Over the course of the past two years, staff and representatives from Area 51 have continued to negotiate regarding the terms of a long -term lease and a workout plan. Recently, there was a change in Area 51's negotiating team, and the parties have come to a resolution that utilizes a different rent structure and model for performance. Discussion ARRA staff is proposing a lease workout and new lease. In exchange for accepting the workout proposal, the ARRA will receive access to the large event space improved by Area 51 during the term of their lease. The ARRA will be able to market and lease this space to generate additional revenue. Workout Proposal Area 51 did complete $207,481 in required tenant improvements to the building. Consistent with the lease terms, they were credited for only $100,000 of those documented improvements against rental payments, resulting in adjusted arrears because the leasing agent estimated that the cost of C of 0 improvements would be approximately $100,000. The $207,481 in actual cost has been documented by receipts. The workout proposal includes: 1. Crediting Area 51 with an additional $107,481 in tenant improvement/C of 0 credits. 2. Rewriting the current lease retroactive to October 2005, to release Area 51 from rent for two 20,000 sf bays of Hangar 24, totaling $161,600. 3. Auditing Area 51 operations for the actual days used from October 2005 to present and charging a fee at the rate of $750 /day for set -up and $1500 /day for production activity for those days. 4. Creating an unsecured note for the $178,311 and a payback schedule of equal payments ($4,953) over 36 months from the time a revised lease is executed to repay the amount past due. New Lease The new lease proposed for Area 51 is a 7.5 -year lease for only the office space and some limited storage space at Hangar 24 at a rate of $500 per month beginning October 2005 and ending March 31, 2012. The retroactive effective date gives Area 51 6.2 years of amended lease terms going forward. In addition, Area 51 would be required to license on a case -by -case basis, portions of Hangar 24, if available, and continue to license the taxiways, that Area 51 uses regularly for special events. Honorable Chair and Members of the December 6, 2006 Alameda Reuse and Redevelopment Authority Page 3 Fiscal Impact ARRA will receive $4,953.08 a month for 36 months in delinquent rent for a total of $178,311 and $500 a month for office space and storage space, and special event license revenue. The audit of event activity from October 2005 to present will result in an unknown amount of additional revenue. Area 51 will receive a write -off of $161,600, but the ARRA will gain access to event space for leasing it would not have had, creating an opportunity to recoup this credit. Recommendation Approve the 7.5 -year lease with Area 51 (retroactive to October 2005), including the Workout Plan as conditions of the new lease for Hangar 24. Respectfully submitted, Leslie Little Development Services Director By: Nanette Bahks Finance & Administration Manager DK/LAL/NB:dc Attachments: 1. Map of Leased Premises Lease is on file in the City Clerk's office 599 1 0 0 0 0 6.) J ATTACHMENT 1 z\) J Li 01 SNOIL fUOZid Alameda Reuse and Redevelopment Authority Interoffice Memorandum December 6, 2006 TO: Honorable Chair and Members of the Alameda Reuse and Redevelopment Authority FROM: Debra Kurita, Executive Director RE: Alameda Point Project Update Background On October 4, 2006, the ARRA Board directed staff to initiate a Request for Qualifications (RFQ) process to determine if there is a qualified developer interested in assuming master developer obligations and rights pursuant to the draft conveyance term sheet negotiated with the Navy in June. On November 1, 2006, staff provided the Alameda Reuse and Redevelopment Authority (ARRA) with a project update, including an update on the status of the RFQ process. Discussion The RFQ and a press release notifying the public of the availability of the RFQ for an Alameda Point Master Developer was issued on Thursday, October 19, 2006. On October 30, 2006, there was a mandatory bidders conference with 20 firms attending. Presentations on land planning, environmental issues, the public trust, and the conveyance term sheet were provided. An opportunity for those present to ask questions followed the presentations. All due diligence documents were provided on a CD and an HP site is available for all interested firms. On November 14th and 15th, staff held one -on -one meetings with a total of eight firms interested in responding to the RFQ. Based on several requests during these meetings, the proposed Exclusive Negotiation period following selection of a master developer was extended from 45 days to 60 days. On November 20`h, a two hour teleconference was scheduled with the environmental consultant, Peter Russell of Russell Resources. There were 12 participants representing six firms on the call. The conference call provided an opportunity for firms to ask in -depth and technical questions regarding the environmental status of the property. Responses to the RFQ are due on December 4, 2006. Along with their qualifications material, the developers will be obligated to submit a non- refundable fee of $20,000 in order to be considered. Staff will report to the ARRA at the regular meeting on December 6th regarding the outcome of the RFQ process. Honorable Chair and Members of the December 6, 2006 Alameda Reuse and Redevelopment Authority Page 2 Fiscal Impact It is anticipated that all costs to evaluate the developer qualifications will be covered by the responders' $20,000 non - refundable deposits. Recommendation This report is for information only. Respectfully submitted, David Brandt Assistant City Manager By: Debbie A`ott Acting Alameda Point Project Manager Alameda Reuse and Redevelopment Authority Interoffice Memorandum December 1, 2006 TO: Honorable Chair and Members of the Alameda Reuse and Redevelopment Authority FROM: Debra Kurita, Executive Director RE: Alameda Point Project Update: Status of No -Cost EDC/Property Conveyance Strategies Background On October 4, 2006, staff provided the Alameda Reuse and Redevelopment Authority (ARRA) with a project update. The update included a chronology of negotiations with the Navy, a summary of APCP's election to withdraw from the project and an explanation of initial next steps. Following the presentation, the ARRA Board directed staff to conduct additional research regarding the status of the ARRA's No -Cost Economic Development Conveyance (EDC) Memorandum of Agreement (MOA) with the Navy and to explore other potential conveyance mechanisms. Discussion Status of No -Cost EDC MOA ARRA's willingness to undertake its 2004 "new beginnings" initiative with the Navy and negotiate a "for cost" EDC was based on the discrepancy in the amount of commercial and residential development identified in the 1998 EDC application and the 2003 General Plan Amendment (GPA). The attached chart shows the proposed land uses as contained in the EDC application, the GPA EIR and the Preliminary Development Concept (PDC) and Golf Course EIR. As illustrated, the EDC application and PDC /Golf Course EIR identify approximately the same amount of commercial/industrial uses (3.53 million square feet vs. 3.7 million square feet). The GPA (based on the December 2002 EIR) provides for only 2.32 million square feet of commercial/industrial uses. The EDC application contemplates 352 new residential units; whereas the GPA and PDC anticipate 1,728 and 1,735 new residential units respectively. The 1998 No -Cost EDC application identified a project that would consist of 3.5 million square feet of commercial and industrial development and 352 new residential units. As the project evolved over time, and as the City prepared its General Plan amendment to accommodate the land use goals and objectives contained in the Community Reuse Plan and to address the affordable housing regional fair share requirements of the new Housing Element, the allowable cap for new housing units increased to 1,728 and decreased to 2.32 million square feet for Honorable Chair and Members of the December 1, 2006 Alameda Reuse and Redevelopment Authority Page 2 commercial and industrial development. This is an increase from the EDC application of 1,376 residential units and a decrease from the EDC application of 1.21 million square feet of commercial and industrial development. It could be argued that adoption of the General Plan, with more housing units and less commercial and industrial development, does not by itself constitute a breach of the Memorandum of Agreement with the Navy regarding the No -Cost EDC because it is not an entitlement and only establishes maximum development caps (i.e., even with an allowable cap of 1,728 units, the City could approve a project that is limited to 352 new residential units). However, under California law the General Plan is considered the "constitution" for a city's land use approvals. On that basis, the Navy could require the City to amend its General Plan before honoring the No -Cost EDC. That position is reflected in a January 13, 2004 letter from Deputy Assistant Secretary of the Navy Wayne Arny to Mayor Johnson, which states, "the GPA is so different from the No -Cost EDC application that the No -Cost EDC provisions no longer apply." It is assumed that the Navy would also consider the PDC to be inconsistent with the No -Cost EDC. If the ARRA decided to pursue its No -Cost EDC application, given the discrepancy in the number of residential units anticipated, it would need to amend its General Plan to rescind the 2003 GPA and adopt new general plan land use designations that are substantially the same as the land uses in the No -Cost EDC application. It is important to note that the City's conditionally approved Housing Element requires enough land at Alameda Point to be zoned for residential use to support 612 units affordable to very low -, low -, and moderate- income households. Therefore, the Housing Element of the General Plan would also have to be amended. Such a process would require CEQA review, consultation with the State Housing and Community Development Department and public hearings, and could take up to one year to conclude. Even, if the ARRA were to revise the General Plan to be completely consistent with the existing No -Cost EDC MOU, the Navy might still disapproved the EDC application because BRAC requires that No -Cost conveyances be financially viable. 32 Code of Federal Regulations 174.9(g) states in part that "the following factors will be considered...in evaluating the [No -Cost EDC] application...(4) financial feasibility of the development...." Economic & Planning Systems (EPS) has prepared the attached memo that discusses the financial projections and feasibility considerations for the PDC as well as the EDC application. EPS concludes that the EDC application, which limits the number of new residential units to 352 and includes a 25% affordability requirement, poses major financial constraints that would require significant cost reductions in the overall project. Some cost reductions could be achieved through reduced infrastructure if the land plan is less dense. In addition, if public benefits and fiscal mitigations, such as the sports complex, branch library, public open space, etc., are decreased or eliminated, further savings could be realized. However, any reduction in cost is probably not sufficient to make the project financially viable. With the current Phase 1 level of infrastructure, public benefits and fiscal mitigation, the No- Cost EDC land plan would be cost $140 million more than the market value of the development. If public amenities such as the sports complex or transportation solutions were eliminated or deferred to later phases, the savings is only $20 million and the remaining deficit Honorable Chair and Members of the December 1, 2006 Alameda Reuse and Redevelopment Authority Page 3 is $120 million. It is possible that a project with more than 352 new residential units and less than 1,735 units may be financially viable and therefore theoretically eligible for a No -Cost conveyance. To determine that would require a financial analysis of a number of land plans to find the right mix of financial feasibility, fiscal mitigation, public benefits, affordable housing, commercial development to support job generation, etc. Once that land mix was identified, the ARRA would have to prepare a formal amendment to its EDC application and it would be up to the Navy to determine whether or not the revised project met the No -Cost conveyance requirements. The Navy is under no legal obligation accept this revised project. Beginning in 2002, ARRA staff and the Navy held numerous meetings and exchanged correspondence regarding the status of the ARRA's No -Cost EDC. It was ultimately determined in 2004 that the community would be better served if the ARRA, along with its Master Developer, negotiated a land price for the property. The ARRA's goal was to expeditiously receive property that could be remediated and put into active reuse to provide the community with jobs, affordable housing, new recreational opportunities, enhanced open space and access to the waterfront, and a vibrant new neighborhood. The 2004 decision to negotiate a land price led to the "new beginning" effort and a draft conveyance term sheet in June 2006. Unfortunately, the Master Developer withdrew from the project in September 2006. As described above, the ARRA is pursuing an RFQ process to determine developer interest in assuming the previously negotiated term sheet. Other Conveyance Mechanisms In addition to the existing, or an amended, No -Cost EDC application, the ARRA Board asked about other possible conveyance mechanisms, particularly the Presidio Trust model. Presidio Trust Model The Presidio Trust was created under unique circumstances associated with the formation by Congress of the Golden Gate National Recreation Area ( "GGNRA ") in 1972. At that time, the following provision was included in the GGNRA legislation: When all or any substantial portion of the remainder of the Presidio [other than Baker Beach and Crissy Army Airfield, which are covered by separate provisions of the GGNRA Act] is determined by the Department of Defense to be excess to its needs, such lands shall be transferred to the jurisdiction of the Secretary [of Interior] for purposes of this Act. Accordingly, when the Presidio was closed in 1994 pursuant to BRAC 1988, it became part of the GGNR. In 1996, Congress determined that the Presidio should be financially self - supporting and passed The Presidio Trust Act. The Presidio Trust is a "wholly -owned government corporation" run by a seven - member board of directors. The Trust manages the property in accordance with the purposes of the GGNRA Act and with the mandate to achieve self - sufficiency within 15 years. Equivalent special legislation would be required for ARRA to pursue reuse of Alameda Point consistent with the Presidio Trust model. Honorable Chair and Members of the December 1, 2006 Alameda Reuse and Redevelopment Authority Page 4 Public Auction Any form of public auction pursued by the Navy would most likely need the City's cooperation, both as the land use regulator and as the trustee for the Public Trust. Although the Navy has disputed the status of the Public Trust on the former Alameda NAS property, it would be problematic for them to auction the property without first prevailing in a quite title litigation. It is doubtful that the Navy would prevail in such litigation is as there is a published lower Federal Court opinion that directly holds that the Public Trust is not extinguished at Alameda Point. Public Trust lands cannot be conveyed into private ownership. The City of Alameda was granted ownership and management of the public trust lands by an act of the Legislature in 1913 as trustee for the people of the State of California. In 1917, the Legislature amended the 1913 act and authorized the City to transfer land at what is now Alameda Point to the United States. The 1913 and 1917 Acts do not allow the City or its successors to convey ownership of the land to "any individual, firm or corporation." The City has resolved future public trust issues with the State Lands Commission, the agency responsible for assuring that trustees such as Alameda perform their trust duties, through the Alameda Public Trust Exchange Act ( "2000 Act "), which authorizes terminating the public trust on land that is no longer useful for public trust purposes in exchange for land that is useful for trust purposes, and makes the ARRA co- trustee with the City. Therefore, the Navy must work with the City /ARRA to ensure that any auction is compliant with the 2000 Act. In addition to the Navy's inability to extinguish the Public Trust on Alameda Point lands, once Alameda Point is transferred out of Federal ownership, it will be subject to the City's land use authority. Hence, any development application would require a City determination that it is consistent with the General Plan and Zoning Code and properly conditioned land use entitlements would need to be approved. Furthermore, CEQA compliance would be required. Finally, given the extent of the environmental contamination present on the property, it is likely that the cost to complete the environmental remediation program exceeds the value of the property. Consequently, it is likely that at least some of the property would need to be conveyed through a "negative auction" where the Navy conveyed the property together with a grant to fund the remediation liability. A "negative auction" has never been conducted through the BRAC process and could only be conducted at Alameda Point with the consent of the regulatory authorities of the State of California. Cooperative Public Sale /Negotiated EDC Another conveyance approach that was used by the Navy at the former Naval Training Center at Orlando, Florida, is a For -Cost EDC to a Local Reuse Authority with a provision that all or a portion of third party land sales proceeds be paid to the Navy. With this approach, the LRA has substantial control over the selection of the developer, but receives less or none of the land sale proceeds from the selected developer. This approach works best with property that does not require substantial environmental remediation. Honorable Chair and Members of the December 1, 2006 Alameda Reuse and Redevelopment Authority Page 5 Because Alameda Point is has extensive environmental contamination, special provisions would need to be made to ensure, to the satisfaction of ARRA and the environmental regulators, that any selected developer had the experience and financial resources to ensure that remediation goals could be met. However, if the Navy were to require a "price competitive" selection process as they have indicated they would, all of the development and environmental remediation qualifications criteria would need to be pre - negotiated between the ARRA, the environmental regulators and the Navy. In addition, because of the extensive amount of remedial activity required, it is likely that the eventual land price would be negative, meaning the Navy would be required to contribute the land for non -cost and pay a Environmental Services Contract grant to the selected developer. Special Legislation The ARRA could pursue special federal legislation to directly transfer Alameda Point from the Navy to the ARRA, similar to the legislation that authorized the transfer of the FISC to the ARRA in 2000. It is difficult to predict the success of such an effort because of the inherent political nature of the approach. However, special legislation of this type is not usually enacted over the objections of the effected federal entity. In addition, in order to affect the transfer as well as the environmental remediation of Alameda Point, the ARRA would need to have special legislation to authorize the direct transfer of the property as well as a separated special appropriation to fund the required environmental remediation activities. Special appropriation legislation is potentially even more difficult to obtain than special legislation to affect a direct transfer of property because these types of appropriations necessarily reduce funds available for other Congressional priorities. As a consequence, it is possible that the ARRA could receive a direct transfer of the property with insufficient resources to complete the remediation of the property. This report is provided to the ARRA for information only. Alameda Point project updates will be provided on a regular basis as the disposition process moves forward. Recommendation This report is for information only and no recommendation is required Resp,eptfully submitted, David Brandt Assistant City Manager By: Debbie Potter Acting Alameda Point Project Manager DB:DP:sb ATTACHMENT 1 PDC (Feb. 2006) and Golf Course (July 2006 EIR) Not included `c7) o o o N: 0) co 05 in co cr) .. ,- Not included Not included o o (1 to co N: ,-- + o 0 c5 , GPA (Dec. 2002 EIR) Not included 2,316,750 sf co CJ 1--. Not included Not included o 0 Ci co CV N._, 1- co CO 16 EDC Application Dec. 1998 (no estuary crossing) 4C-6 o 0 o N.: co 3,530,000 sf 00 V) (0.. 0 0 9 C.0 0 (0 0 0 (NI . ('4 to co + 0 0 o ci Proposed Land Uses JOB GENERATING LAND USES • FISC Development (N. Waterfront) (already conveyed) • Alameda Point Commercial/Industrial RESIDENTIAL UNITS • Total Housing Units contemplated • Exclude East Housing (already conveyed) • Exclude Coast Guard Housing • Exclude AP Collaborative Housing • Total New Alameda Point Residential Units Job Generated (not including FISC Annex) ATTACHMENT 1 -0 C 0 CC 0 ui 0 8 3 :8 CI 0 0 0 CL N N '5 >% LL Proposed Land Uses Not included Not included 4E" 2 a) "a' --a a) a) C2- > 0 c Do > >, a -0 0 (,) C-f5 • 3,697,000 sf 2,316,750 sf 3,530,000 sf Commercial/Industrial • Alameda Poin co C)).. oo 0) • Total Housing Units contemplated 0 Not included 1-9 Exclude East Housing (already conveyed) • Not included Not included CD Exclude Coast Guard Housing • cJ cj Exclude AP Collaborative Housing • 10 CY) T." c 715 4- c 0 co 0 CCc 0 a 0 as co 0 0 1- 0 0 Job Generated (not including FISC Annex) ATTACHMENT 2 Econo Planning Systems Real Estate Economics Regional Economics Public Finance Land Use Policy MEMORANDUM To: Debbie Potter. From: Darin Smith Subject: Feasibility Comparison of Alameda Point PDC and EDC Plans; EPS #14012 Date: October 24, 2006 This memorandum presents a brief discussion of the financial projections and feasibility considerations pertinent to the current Preliminary Development Concept plan for Alameda Point, as well as the previous plan as conceived under the Economic Development Conveyance. Through this analysis, EPS has concluded that the EDC plan —which allows only 352 housing units instead of 1,181 —poses major feasibility constraints that would require significant cost reductions. Some cost reductions may be achieved through reduced infrastructure and public benefits (including the sports park, transit facilities, etc.), a reduced level of public services to the project (police, fire, etc.), or a reduced burden on the project to mitigate the costs of those public services. However, these cost adjustments may cause the project to become a net "drain" on City resources without the benefits envisioned in the planning process. GENERAL FEASIBILITY PRINCIPLES A project of the scale and complexity of Alameda Point presents numerous planning challenges, including the selection of appropriate land uses, urban design, transportation and other infrastructure, and community benefits such as affordable housing and recreational areas. Each of these plan aspects affects the financial performance of the project, by adding or subtracting costs or revenues. A central challenge for urban development projects involves balancing these many plan characteristics in a way that both offers optimal benefits to the community and will attract investors who can provide the capital resources required to realize the plan. In addition to these general principles that affect all comparable development projects, the City of Alameda has determined that redevelopment of Alameda Point must not negatively affect the City's General Fund or level of public services (police, fire, etc.). As BERKELEY 2501 Ninth St., Suite 200 Berkeley, CA 94710 -2515 www.epsys.eom 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 Debbie Potter October 24, 2006 Memorandum Page 2 a result, the Alameda Point development must show that it generates adequate fiscal resources, or else provide additional funding to mitigate fiscal shortfalls. This requirement adds an additional constraint on the feasibility of development at Alameda Point. As such, the development must be able to generate adequate revenues — through land sales, leasing or sales of existing buildings, and financing supportable by the development itself (Mello -Roos bonds, tax increment financing, etc.) —to over all of the development costs and generate an adequate return for a developer. PDC VS. EDC DEVELOPMENT PROGRAMS The Preliminary Development Concept (PDC) allows up to 1,181 housing units to be built in Phase I of the Alameda Point redevelopment. This figure does not include the 200 Collaborative units, but does include 113 affordable apartments (the "Clayton Guyton units ") and an additional 210 affordable "duets," for a total of 25 percent affordable housing. By comparison, the Economic Development Conveyance (EDC) plan allowed only 352 housing units to be built in Phase I of Alameda Point. EPS has assumed that 88 (25 percent) of these units would also be affordable, with 58 affordable duets and 30 affordable apartments. The PDC and EDC plans have approximately the same amount of retail, office, industrial, and adaptive reuse building space. PDC VS. EDC FINANCIAL PROJECTIONS As shown on Table 1, EPS has prepared a comparison of the financial projections of the PDC program and the EDC program. The first column of figures, labeled "PDC Appendix E," shows figures as presented in the PDC document. These figures were current as of spring 2005, at which time the PDC was being drafted. EPS has used the same underlying financial assumptions to test the feasibility of an EDC -based plan, in which only 352 housing units would be developed in Phase I. To be most optimistic about these EDC -based financial projections, EPS has assumed that all of the market -rate units would be the highest priced units in the Alameda Point program ( "carriage" units), with the affordable units being priced for very -low, low, and moderate income households per the City's inclusionary housing requirements. As Table 1 illustrates, the "PDC Appendix E" projections indicated that the revenues from the project would exceed the costs of development and fiscal mitigation, thus producing some net revenues that could represent the developer's return on investment, land payments to the Navy, and /or opportunities for the City to receive additional financial or in -kind benefits. The EDC program, however, generates far lower revenues than costs ($140 million less), and thus would only be feasible if the costs were substantially reduced. P: \ 14000s \ 14012alapoint \ Corres \ 102406mmFin.doc Debbie Potter October 24, 2006 Memorandum Page 3 Such cost reductions would require a lower investment in infrastructure, including streets, parks, transit facilities, etc. While it is possible that an EDC -based plan would not require the full level and cost of infrastructure as required by the PDC plan, it is unlikely that infrastructure cost savings would adequately address the financial gap created by the EDC plan's reduced revenues. For example, to generate a similar amount of net revenues as could be generated by the PDC plan (roughly $50 million), the infrastructure costs would have to be reduced by nearly 75 percent, from $260 million to $70 million. Given that only the residential portion of the development program is assumed to be reduced in the EDC plan (rather than the office /industrial or retail components), it seems improbable that such substantial infrastructure cost savings could be realized. Even if the Sports Complex and Transportation Solution costs were eliminated from Phase I, only about $20 million would be saved, and the project would not convey the broader public benefits envisioned. Cost savings could also be generated through reduced fiscal mitigation payments — either by reducing the level of public services provided to Alameda Point or by having the rest of the City bear the burden of those unmitigated costs. Again, however, the potential reduction of these fiscal mitigation costs would have a minor effect on the overall project feasibility, and would result in the project being a fiscal "drain" on the rest of the City. In sum, EPS concludes that the EDC plan allowing only 352 housing units at Alameda Point does not present a financially feasible alternative to the PDC plan. P: \ 14000s \ 14012alapoint \Corres \ 102406mmFin.doc Updated EDC Project Description Project Revenues (2005$) o 0 0 0 o o 0 o co 0000 o o o o o o o o • c5 Lo (e) ,. T. 60 EA 69. (%1 t)9. op 0 0 0 01 0 c> 0 cp o 0! o 000000) 0 0 0 0 0 0cs O o o o o 0! 0 00(300p CI cc6 - c::;" 1.6 o 1.-: a, 0.4 •,-- csi co v. "Cr N 69 69. 69 tr) Ei9 69. zoi (=> o 0 01 0 0 0 0 0! 0 o cp 0 0! 0 0 o 0 0! 0 0 o o cz) ez ccoq0J 0 ci c 0 01 0 ci ci 0 co cs 0 O 000ct, o o o o o ob 0 0000p 0 0 0 0 0 p 0 0i 0- c5 a cs 0 <5 c5 Lri to 6' o> co oo co 01 co to T. N 01 Eg) LO N Eft 69. T-- +41. N 69- ER 69. co) 4A9 69 14 69 ss. (0) C C 0.9 C 0) it c 73 c, Q u7 r3 C a) -C-U "41 • -J 0 O C C • 5 '5 CO 1.- CO CO CO a. i".• Development Costs (2005$) E. a) o c ez) w Q . .5 c 2-Q w -17/ co 2 > 2 E „a ) • as a) 0. ct o 2 E ca) 75> cSD 175 -Ft al 0 4- 0 5 2 cu L. co a. 0 0 0. 0 0 - • P. .,- ..e co o •:t. cs, (z) Z.3 Q (1. co _a. (0 o o 0 44 0 0 0 -2 o Z 13 0 0 0 ..c a co Q. = ca ..c.i. C • 0• 6 -C-4 c to o = c o Ei 8 Z.!: c ei- o 4 F. o -0 .0 '0 • c., :CS E -o .CD 0)0) CC cl) = _c to lc o c u) .— 7, 0)0) 5 ° .0 2 CL e O c0) = *6- .E— co Lc> c ci .4. 6LE 9. >-. ...6 03.. 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