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2008-10-07 Joint CC ARRA CIC MinutesMINUTES OF THE SPECIAL JOINT CITY COUNCIL, ALAMEDA REUSE AND REDEVELOPMENT AUTHORITY (ARRA), AND COMMUNITY IMPROVEMENT COMMISSION (CIC) MEETING TUESDAY- - OCTOBER 7, 2008- -7:27 P.M. Mayor /Chair Johnson convened the Special Meeting at 8:02 p.m. ROLL CALL - Present: Councilmembers / Board Members / Commissioners deHaan, Gilmore, Matarrese, Tam, and Mayor /Chair Johnson - 5. Absent: None. MINUTES (08 -51 CIC) Minutes of Special Community Improvement Commission Meeting held on September 16, 2008. Approved. Commissioner Gilmore moved approval of the minutes. Commissioner Tam seconded the motion, which carried by unanimous voice vote - 5. AGENDA ITEMS (08 -52 CIC) Recommendation to accept and endorse the Park Street north of Lincoln Avenue Strategic Plan. The Development Services Manager gave a brief presentation. Ian Ross, The City Design Collective, gave a Power Point presentation. Vice Mayor Tam stated the form based concepts are innovative; Council has discussed CalTrans' plans regarding Highway 880 and the potential closing of Glascock Avenue because of Union Pacific's plans; inquired whether there has been any outreach to understand how said issues would factor into the Strategic Plan. Mr. Ross responded that he is not aware of any additional outreach with CalTrans. Vice Mayor Tam stated Mr. Ross mentioned that auto servicing businesses would continue even without auto dealerships because there is sufficient customer base. Special Joint Meeting Alameda City Council, Alameda Reuse and 1 Redevelopment Authority, and Community Improvement Commission Meeting October 7, 2008 Mr. Ross stated [auto] dealerships are anchors; some auto servicing businesses will close or look elsewhere, but there is demand within the City to sustain many of the uses. Vice Mayor Tam stated very few businesses have the ability to produce the same level tax revenue as auto dealerships; inquired whether Mr. Ross concurs that loss in sales tax revenue cannot be replaced with mixed uses. Mr. Ross responded auto dealerships are the main tax producing entities within cities; stated auto dealerships are abandoning small cities and moving to auto malls; replacing auto dealership revenue is very difficult; hotels, motels, and destination retail uses are possible revenue generators; said businesses prefer to be on gateway streets. Vice Mayor Tam stated that Mr. Ross noted that residential development could act as a catalyst; inquired whether work /live opportunities would differ from the City's current constraints [ordinance]. Mr. Ross responded that residential development has been one of the primary driving engines for revitalization within City districts; stated recommendations are to create as much flexibility in the land use code as possible in order to attract work /live, retail, and commercial. Councilmember deHaan inquired whether office and tech opportunities would be beneficial. Mr. Ross responded that a strong office base is always good; stated Alameda has vacancies in some of the larger office parks; small, professional offices are in demand; the office market is not as strong as in the past. Councilmember deHaan inquired whether high tech could be a driving force. Mr. Ross responded that he hopes that high tech would develop office space in the future; stated small, incubator flex space is in demand now; office developments love vibrant centers. Councilmember Gilmore stated the Planning Board recommends not to allow any drive - through access on Park Street; inquired what is the thinking behind the recommendation. Special Joint Meeting Alameda City Council, Alameda Reuse and 2 Redevelopment Authority, and Community Improvement Commission Meeting October 7, 2008 Mr. Ross responded one of the overall goals is to make the district walkable; stated he would recommend reducing the number of curb cuts; drive - through businesses generate conditions for cars to drive across sidewalks. Councilmember Matarrese stated that he likes the way function and form has been laid out; inquired whether the Transportation Demand Management (TDM) is intended to be a district wide or development - by- development program. Mr. Ross responded the Transportation Master Plan has Citywide recommendations and regulations; stated any future transportation modifications would be in keeping with the Transportation Master Plan. Mayor Johnson opened the public portion of the hearing. Opponent (Not in favor of the staff recommendation) : Arthur Lipow, Alameda. Proponent (In favor of the staff recommendation): Robb Ratto, Park Street Business Association (PSBR). Neutral: Bill Smith, Alameda. There being no further speakers, Mayor Johnson closed the public portion of the hearing. Mayor Johnson inquired whether any thought has been given to advocating for auto sales tax revenue being distributed to the city in which the purchaser resides. The City Manager responded sales tax distribution has been reviewed but still remains at the point of sale. Mayor Johnson stated that efforts should be made to review the matter; communities with dealerships are siphoning a lot of sales tax revenue. The City Manager stated the League of California Cities could be asked to explore the matter; opposition would come from cities benefiting from the revenue. Mayor Johnson stated fewer cities have larger dealerships; efforts should be made to advocate for reallocation [of tax revenue]. Special Joint Meeting Alameda City Council, Alameda Reuse and 3 Redevelopment Authority, and Community Improvement Commission Meeting October 7, 2008 Councilmember Matarrese stated staff recommends that Council accept and endorse the Park Street north of Lincoln Strategic Plan and direct staff to amend the City's zoning regulations; inquired whether direction is to include expanding the Work /Live Ordinance; stated that he advocates using work /live beyond the current scope in order to review rehabilitation and reuse of historic buildings outside zones currently designated and as a way to meet Community Action for a Sustainable Alameda (CASA) goals. The Development Services Director stated the Strategic Plan provides a framework; the next step would be to start exploring form -based zoning. Councilmember Matarrese stated that he does not advocate changing the interior Work /Live Ordinance requirements but expanding locations within the Ordinance. Councilmember deHaan stated six properties fall under the Work /Live Ordinance; only one property has moved forward; the work /live idea seems to have hit a wall; the proposed plan sets benchmark visions. Vice Mayor Tam stated the City has the opportunity to take control of its destiny by going through concerted efforts with the Planning Department rather than allowing haphazard market forces to decide. Vice Mayor Tam moved approval of the staff recommendation. Councilmember Matarrese seconded the motion with direction to put effort into the Transportation Demand Management (TDM) plan, including the integrated area and review expansion of the Work /Live Ordinance. Under discussion, Mayor Johnson stated direction should include review of obstacles associated with work /live projects because only one project has moved forward; the Work /Live Ordinance is a critical piece for reuse of historic assets in the northern waterfront area. Vice Mayor Tam and Councilmember Matarrese concurred to amend the motion to include Councilmember Matarrese's and Mayor Johnson's recommendations. Mayor Johnson stated the area should not be named the Gateway District. Councilmember deHaan stated a better name would be one that is historical in nature. Special Joint Meeting Alameda City Council, Alameda Reuse and 4 Redevelopment Authority, and Community Improvement Commission Meeting October 7, 2008 Mayor Johnson concurred with Councilmember deHaan; stated a temporary name should be used. Vice Mayor Tam stated that the motion should also include assurance that the TDM addresses what would happen on the other side of the [Park Street] bridge. Councilmember deHaan stated Council continually discusses sales tax leakage; the area provides an opportunity to capture sales tax leakage. On the call of the question, the motion carried by unanimous voice vote - 5. (08 -413 CC /ARRA /08 -53 CIC) Recommendation to approve the second amendment Point LLC. to the Exclusive Negotiation Agreement with SCC Alameda Debbie Potter, Base Reuse and Community Development Manager, gave an overview of the proposed Second Amendment to the ENA, stating that in June 2008, SunCal Companies, Alameda Point's master developer, requested authorization from the ARRA to secure a financial partner to assist in carrying out their obligations under the ENA. Pursuant to the ENA, a transfer requires approval of CIC, CC, ARRA. On Aug. 19th, the ARRA considered the transfer to the new entity: Cal Land Ventures, a joint partnership between D.E. Shaw Real Estate Portfolio Twenty, LLC and WM Development Group, a wholly -owned affiliate of SunCal. Discussion of the transfer was based on the following core principles - 1) any new entity must retain SunCal as the day -to -day manager of the project, 2) SunCal should retain equity interest in the new venture, and 3) new entity should commit to invest funds necessary to meet obligations under the ENA. The City /ARRA /CIC felt it was critical to amend the ENA to address these core principles, because City entities are not parties to an operating agreement between joint venture partners. The 2nd amendment to the ENA provides: Approval of ownership transfer, establishes new termination date of July 20, 2010 - this date reflects SunCal's intention to seek voter approval of its proposed land plan in Nov. 2009 and anticipates concluding DDA negotiations by July 20, 2010. The termination date can only be extended if Alameda hasn't acted on SunCal's land use approvals by that date. Special Joint Meeting Alameda City Council, Alameda Reuse and 5 Redevelopment Authority, and Community Improvement Commission Meeting October 7, 2008 The 2nd amendment also establishes several new mandatory milestones: - SunCal's obligation to elect to pursue, or not, a ballot initiative by April 30, 2009 - Complete a final Navy Conveyance Term Sheet by July 31, 2009 - Complete a negotiated DDA by July 20, 2010. 2nd amendment provides Alameda with performance standards it needs to ensure timely progress on the redevelopment of Alameda Point. Failure to meet any mandatory milestone is a default of the ENA. In addition, SunCal will now be required to deposit $250,000 with the City to commence CEQA work by April 20, 2009. Failure to make the initial deposit or subsequent deposits for this work is a default under the ENA. The cure periods for all the defaults under the ENA have been shortened, so the ENA can be terminated more quickly as necessary. The city may request once every six months that the developer prove in writing that they are consistent with the obligations of the ENA regarding any transfer. These modifications protect Alameda's core interests and allows an addition of a new financial partner with the wherewithal to fund the necessary predevelopment activities to entitle a mixed -use project at Alameda Point. Member deHaan asked for clarification on the change of the ballot initiative. Ms. Potter explained that the only change would be whether SunCal elects to put their land plan on the ballot or not. They are not required to place it on the ballot, the mandatory milestone requires only that SunCal to inform us whether they will go on the ballot or not. Member deHaan asked Suncal if they would "stay the course" if modifications to the Measure A ordinance would not pass. Pat Keliher, Alameda Point Project Manager for SunCal, replied that, per the agreement, SunCal would like to continue to have an opportunity to stay the course. To date, they do not believe that there is any non - Measure A plan that would work. Their plan developed with community effort is a plan they will take to the ballot. Mr. Keliher further explained the process it would take to bring their plan to the ballot. Boardmember deHaan asked if SunCal would stay in the project, even if the initiative (to change Measure A) did not pass. Mr. Keliher replied affirmatively. Member Matarrese asked staff about his earlier request for a business plan from SunCal. He expressed his concerns about calling the pile of data a business plan because there was no proposal, nor any conclusions drawn. Ms. Potter explained that SunCal did submit a draft business plan on September 19th which was submitted in Special Joint Meeting Alameda City Council, Alameda Reuse and 6 Redevelopment Authority, and Community Improvement Commission Meeting October 7, 2008 multiple parts, and do not exist together as one document. SunCal understands the Board's expectation of what the Business Plan document should entail and has promised that when they submit the final plan on November 19th, it will be bound in one single document with a narrative tying all the disparate pieces together as the Business Plan. Member Gilmore asked who gets to decide which party decides or determines when DE Shaw can remove SunCal as partner. Amy Freilich, Senior VP of SunCal, stated that as it's drafted currently, the Board would get notice from DE Shaw that would indicate that they have removed, for cause, SunCal as a partner. At that point, under the standard default provisions of the document, the ARRA would be entitled to declare default and specify the reasons for concerns and ask for a demonstration for what the cause was. If DE Shaw is unable to satisfy the ARRA with respect to that, it would be a default of the developer, and the ARRA would be entitled to terminate. DE Shaw would present their evidence that they were appropriately removing SunCal as partner. Member Gilmore further asked, under the operating agreement, SunCal can be removed for "member issues ", would the process for determining default be the same? Ms. Freilich affirmed. Chair Johnson added that the only remedy would be to declare default and then terminate. Member Matarrese stated that the layman's terms, it puts us back have any money without DE Shaw. nothing about developing Alameda we're at the end of the line agreement and no developer, and again. problem with this situation is, in to square one where SunCal doesn't He was concerned that DE Shaw knows Point, and that if we lose SunCal, -- we're stuck with a terminated have to start the process all over Member Gilmore discussed that this scenario could happen at any point in the process, whether it' s SunCal or DE Shaw; as you go forward, you always run the risk that something unforeseen could happen, and the project could not be completed and then you're back to square one. Alameda Point is a risk - inherent project. Chair Johnson agreed, stating that there's not 100% assurance to ourselves that something could happen; it's a very risky project and there's not way to prevent the risk. Chair Johnson requested that language be added that if DE Shaw terminates SunCal for reasons insufficient for our ENA, it doesn't affect the relationship between the ARRA and SunCal. Ms. Potter explained that if SunCal is terminated for cause, the ARRA has the opportunity to approve a replacement. The path forward under Special Joint Meeting Alameda City Council, Alameda Reuse and 7 Redevelopment Authority, and Community Improvement Commission Meeting October 7, 2008 either scenario would be approval of replacement, or termination if DE Shaw did something contrary to ENA. Member deHaan expressed deep concern with this issue in general. He discussed that SunCal was selected because they had multimillion dollar background. He was uncomfortable that SunCal had to get a hedge fund partner to tie them over to get through the ENA. Because he has no in -depth knowledge of the company, Member deHaan requested a financial consultant prepare a fiscal evaluation of DE Shaw and their capability to weather the storm for this project. Member Tam stated that it is clear that there have been extraordinary events in financial market, and a solvent financial partner is difficult to find. Comparing Alameda to Mare Island (Lennar), she said we have the safeguards in place, and if DE Shaw jettisons SunCal, the deal would be off and we're not absorbing any fallout or cost. In response to Member deHaan's request, Ms. Potter explained that DE Shaw had submitted their financial information to our consultant, EPS, who analyzed the data and determined that DE Shaw could take on the financial obligations of ENA. Ms. Freilich further discussed DE Shaw, stating that they have $36 billion under management and $1.8 billion in real estate. They began 20 years ago as hedgefund in global and technology, with 10 different asset classes, and have hired an experienced team to do real estate acquisitions. DE Shaw acknowledges that it is a difficult real estate market, but that they've done extensive due diligence at Alameda Point, which they view as a unique and irreplaceable opportunity. SunCal is thrilled to have a partner with the capacity and ability that DE Shaw has, and they understand the goal of tightening up the milestones, and remain a committed partner in producing the DDA. Member deHaan asked if SunCal was in such dire straits that $10m was difficult for them to invest without a financial partner. Ms. Freilich explained that because the markets have changed, lines of credit are not available under the same terms. From SunCal's standpoint, partnering with DE Shaw provides stability to the project rather than the opposite. Chair Johnson asked for a fundamental explanation of the ENA and DDA, for the benefit of the public. Ms. Potter explained that the Exclusive Negotiation Agreement (ENA) is a predevelopment period with SunCal, with a term that runs through July 20, 2010. During this period, the City works in partnership with SunCal to get to the Disposition and Development Agreement (DDA) stage. The DDA is Special Joint Meeting Alameda City Council, Alameda Reuse and 8 Redevelopment Authority, and Community Improvement Commission Meeting October 7, 2008 a critical document negotiated during the ENA period and is an acquisition agreement - what you're paying for the land, what you'll be developing on the property, etc. If we don't have a negotiated DDA by July 20, 2010, then we go our separate ways. Member Gilmore asked for an explanation of the Navy still owning the property, and the clause regarding Navy negotiations. Ms. Potter stated that it is true that one of the riskiest issues about the Alameda Point property is that any developer we work with is not negotiating with the Property owner, which is the Navy. One of the key milestones being converted to a mandatory milestone under the 2nd amendment is the conveyance term sheet, our agreement with the Navy on the land purchase price, how the property will be conveyed to the ARRA, and ultimately to the developer. This term sheet is due July 31, 2009. If we don't come to an agreement with the Navy, SunCal is in default under the agreement of the ENA and we move to plan B. Chair Johnson asked whether the July 31, 2009 deadline is that a realistic time frame for the Navy. David Brandt, Deputy Executive Director, stated that the date was what the Navy indicated they're willing to entertain in terms of negotiating with us on a deal with SunCal, and that they're not moving further past July 2009. Chair Johnson asked if we are expecting any changes in the Navy's approach on the project after election. She hopes for a new outlook on base reuse from Federal Government and recommended we have flexibility in that milestone. Mr. Brandt explained that certainly, if we're making great progress, and if the Navy wants to extend beyond July 09, we'll come back and see if all parties want to go beyond; but doesn't want to be caught in the position where there are no changes after the election, and we're unable to move forward. The Navy would not officially negotiate directly with developer, but will negotiate with ARRA. Member Gilmore asked staff to inform the public of the upcoming community meetings where SunCal will present their Development Concept to eight boards and commissions. Ms. Potter summarized the meeting schedule and discussed that public comments from each of these meetings will be compiled into one document and presented to the ARRA Board at its Nov. 5th regular meeting. ARRA will also provide their comments, all of which will feed into the Draft Master Plan due on Nov 19th. Member Gilmore asked if the Nov. 19th deadline was enough time. Ms. Potter acknowledged it is aggressive time frame. Mr. Keliher said that the purpose of the public meetings was to listen and receive, and SunCal hopes to receive a number of different comments Special Joint Meeting Alameda City Council, Alameda Reuse and 9 Redevelopment Authority, and Community Improvement Commission Meeting October 7, 2008 from all of the different groups, and needs to time to analyze, make changes so that these comments can be considered in developing the draft master plan. He said they are committed to 11/19 date. Member Gilmore was concerned that it's not enough time and asked if the Board and staff was opposed to an extension? Mr. Brandt supported the extension because it would mean receiving a better product. Ms. Potter agreed and requested that the mandatory milestone be modified to extend the submission of the draft master plan to Dec. 19th, 2008. Ms. Freilich requested that language should be added to protect their interest; that as long as negotiations with the Navy continue and are fruitful, SunCal would not be in default. Mr. Brandt, and stated that the City should be included as a party in the same language. Ms. Potter wanted to note that there will be a correction made to an oversight in a sentence included in the ENA, per Senior Assistant City Attorney, Donna Mooney. Chair Johnson acknowledged the notation. There were several speakers on this item: Philip Tribuzio, Alameda, spoke regarding cleanup of Alameda Point scheduled for completion in 2011, which is beyond the deadline for conveyance of the property. Arthur Lipow, Alameda, was concerned about, and against the partnership between DE Shaw and SunCal. He discussed an alternative and would like to see a public trust situation like at the Presidio. Gretchen Lipow, Alameda, discussed health and safety codes, traffic issues, and clean -up of the Alameda Point and would like more transparency in General Plan and Business Plan. Joel Ramland, Alameda, was not in favor of the agreement between SunCal & DE Shaw and discussed its financial status. Bill Smith, Alameda, spoke about light industry. Member Matarrese asked how much SunCal has spent to date. Ms. Potter replied that SunCal has spent approximately $3M to date with a non - refundable $1M deposit. Member Matarrese asked if we own the materials produced by SunCal and its consultants pertaining to geotechnical and environmental information. Ms Potter said that it is a provision that we do own any and all materials prepared or commissioned by the developer. Member Tam motioned approval of the 2nd Amendment to the ENA, including approving a transfer of the ownership interest in SCC Alameda Point LLC to Cal Land Venture, LLC, subject to the following modifications: Special Joint Meeting Alameda City Council, Alameda Reuse and 10 Redevelopment Authority, and Community Improvement Commission Meeting October 7, 2008 1. modify mandatory milestone for submittal of Final Business Plan and draft Master Plan by December 19, 2008, in order to incorporate public comment and to have a meaningful work product 2. get a status report at least 30 days in advance whether or not we need an extension on the mandatory milestone regarding finalization of the Navy term sheet on July 31, 2009. The motion was seconded by Member Gilmore and passed by the following voice votes: Ayes: 5, Noes: 0, Abstentions: 0. Member Gilmore requested an update of the financial analysis of DE Shaw given the tremendous change in market. The Board directed staff to provide this update and staff affirmed. ADJOURNMENT There being no further business, Mayor /Chair Johnson adjourned the Special Meeting at 10:59 p.m. Respectfully submitted, Lara Weisiger, City Clerk Secretary, CIC and Irma Glidden, Secretary ARRA The agenda for this meeting was posted in accordance with the Brown Act. Special Joint Meeting Alameda City Council, Alameda Reuse and 1 1 Redevelopment Authority, and Community Improvement Commission Meeting October 7, 2008