Blogging Bayport Alameda

January 11, 2010

Gentlemen’s agreement

I found this post by Eve Pearlman on The Island to be very thought-provoking, but it was this comment that sparked the need for more clarification.   The commenter writes:

I think there are four questions underlying this whole confusing issue:
1. What kind of development do we want to have on Alameda Point?
2. Does SunCal’s plan meet those standards?
3. Is SunCal the right company to implement the plan?
4. Is a ballot initiative the right way to answer these questions?

So far, most of the debate has been about questions 1 to 3, with compelling arguments on both sides. However, I’ve recently concluded that question 4 is the essential one. I agree with Eve that this is no way to create a development agreement. These kinds of agreements need to be carefully negotiated by professionals on city staff and vetted by our elected officials to whom we’ve given this responsibility. Putting it on the ballot has created more heat than light, generating more self-serving and emotional opinions than logical arguments. I’m inclined to vote “no” and force city government and SunCal to either come to some kind of agreement or find a new master developer. This has dragged on a long time, but that’s not a reason to compromise.

I think the whole “Development Agreement” issue has been made more complex than it actually is and been monopolized by opponents to Measure B to raise doubts for folks who haven’t necessarily been following the conversation too closely.

Or maybe it’s a case of our City leaders not understanding the purpose of the Development Agreement either.  Less likely, but quite probable.

Backing up this whole conversation, the main purpose of a Development Agreement, as codified by the California legislature is to provide certainty to a developer in an uncertain world:

65864. The Legislature finds and declares that:
(a) The lack of certainty in the approval of development projects can result in a waste of resources, escalate the cost of housing and other development to the consumer, and discourage investment in and commitment to comprehensive planning which would make maximum efficient utilization of resources at the least economic cost to the public.

(b) Assurance to the applicant for a development project that upon approval of the project, the applicant may proceed with the project in accordance with existing policies, rules and regulations, and subject to conditions of approval, will strengthen the public planning process, encourage private participation in comprehensive planning, and reduce the economic costs of development.

(c) The lack of public facilities, including, but not limited to, streets, sewerage, transportation, drinking water, school, and utility facilities, is a serious impediment to the development of new housing. Whenever possible, applicants and local governments may include provisions in agreements whereby applicants are reimbursed over time for financing public facilities.

Essentially a Development Agreement serves to freeze a point in time, the point when the developer agrees to get involved in a project, and lock in “existing policies, rules, regulations” so that a year, two years or even ten years later down the line the City cannot change the rules on them and thereby change the entire game.

Let’s take Catellus’s Alameda Landing Development Agreement for example.   Because certain rules were frozen into place, new ordinances such as the recently passed big box store limiting ordinance doesn’t apply to Alameda Landing.  Because at the time that the Development Agreement was signed, Big Box stores weren’t limited by any ordinance and the expectation by the developer was that Big Box stores were okay.   And let’s not forget the exemption from the Citywide Development Fee, which some opponents have been handwringing about in the Alameda Point Development Agreement and talking about how the City will lose $51 million in these exempted fees from Alameda Point.

Opponents to Measure B have been attempting to place more weight on the Development Agreement than it actually has in reality, proclaiming that items are both missing from the Development Agreement, but then that SunCal also overreached in the creation of this document.

The Disposition and Development Agreement (DDA) to be negotiated by the City and SunCal (in the case that the Initiative is successful) is where the bulk of the nitty gritty gets resolved and codified into writing.   Financials, timelines, who pays for what, what gets built where and when.   That’s all in the DDA, not the DA.   That the City and opponents are minimizing the importance of the DDA in favor of building the hype around the Development Agreement and the perception that the Development Agreement is the be all end all of all contracts between the City and SunCal to further confuse an already confused and frustrated voting populace speaks volumes to their stated intent for transparency and education of the majority of Alamedans who have neither the time or inclination to become experts of the complexities of state law, land use, and contracts.

But going back to the initial question of “Is a ballot initiative the right way to answer these questions?”  The answer — as suggested by Eve Pearlman’s initial post — is:  it’s complicated.    Had the City Council taken a leadership position and placed just the bare minimum of the ballot themselves in order to move the SunCal plan to the next step ,we would probably be having debates on the fact that we should be voting on the whole plan and not just this one issue.   There is no way to make everyone happy, but as mentioned by the Interim City Manager when discussing the Chuck Corica Golf Course, but resonates to this issue:

To continue to do this and to think that we’re not going to be able to make a decision and that we can continue to operate so many things here in the city the same way we’ve been operating them before is just not today’s government reality.


  1. “Had the City Council taken a leadership position and placed just the bare minimum of the ballot themselves in order to move the SunCal plan to the next step ,we would probably be having debates on the fact that we should be voting on the whole plan and not just this one issue.”

    That’s it in a nutshell. A leadership position would have been to place an MA exception for the base on the ballot. Instead it was left to the developer to bite the demagogic MA bullet and suffer the consequences. Point is, the developer determined it was useless from a financial standpoint to go forward without the exception. Ergo, B.

    Comment by Jack Richard — January 11, 2010 @ 8:51 am

  2. Sec 65865 clearly states that it is the city, the county, or city and county that may enter into a development agreement with the developer or anyone who has a equitable interest in the real property.

    Many of us who oppose Measure B oppose it on these grounds — the initiative is asking the voters to approve the development agreement.

    My understanding is that the development agreement (DA) grants vested rights to a development and is approved by a city or county or a city and county – NOT the voters.

    The Disposition and Development Agreement (DDA) relates to a specific property owned by the Redevelopment Agency within a redevelopment project area and is approved by the redevelopment agency — but it is the DA that governs the DDA.

    One disadvantage of the DA is that it is difficult to amend once adopted. Which is why you need qualified individuals to negotiate this agreement.

    Comment by Karen Bey — January 11, 2010 @ 10:34 am

  3. Anyone agreeing with SunCal/DE Shaw seems to be agreeing to many years in litigation…over B.

    NO on B is the way to go.

    Comment by RM — January 11, 2010 @ 10:41 am

  4. 3. I assume you are saying that if B wins opponents will sue?

    My leaning no is based on a conservative attitude about the cost of infrastructure and concerns about long term mitigation of sea level being another layer of infrastructure which will be difficult to pay for.

    I find many of the concerns of opponents to be blown out of proportion. An employee at an office where I do business in Berkeley who is an Alameda resident told me her understanding, and reasons for opposition, are that SunCal could sell the land to whomever it wished and could do nothing for 25 years. I can’t get excited about that. What motive would ANY developer have to do nothing other than waiting on the market, so why would SunCal differ from any developer, plus they aren’t even named in the initiative.

    As to selling to whomever they want, read opponent Len Grzanka’s letter in the Journal extolling the virtues of the Navy auctioning the land to the highest bidder, i.e. entities which we would have no hand in selecting.

    Over all you can take issue with the conclusions of supporters of B, but when it comes to inconsistencies, I find most among no on B arguments. plus that I am certain many of these people are opposed simply on the charter change for Measure A and feel they can have a field day with all the hand ringing over hedge funds.

    At the end of the day we will simply vote yea or nay so at the ballot it doesn’t matter why we vote, but in terms of an intellectually honest discussion, there isn’t enough of it.

    Comment by M.I. — January 11, 2010 @ 12:46 pm

  5. #4

    “SunCal could sell the land to whomever it wished and could do nothing for 25 years. I can’t get excited about that. What motive would ANY developer have to do nothing other than waiting on the market, so why would SunCal differ from any developer, plus they aren’t even named in the initiative.”

    Because the motivation isn’t to build; the motivation is to make money.

    “One partnership pursued by Mr. Walsh exemplified his newfound appetite for ever riskier deals: transactions with the SunCal Companies of Irvine, Calif., an operation with an intriguing business model. It bought land, primarily in its home state, and sought government approval for residential development. If it got the green light, it sold the land to builders for an enormous profit. Mr. Walsh lent SunCal more than $2 billion and formed a close relationship with its founder, Boris Elieff. Mr. Elieff did not return calls seeking comment.”

    How Lehman Got Its Real Estate Fix
    New York Times
    May 2, 2009

    This is why SunCal is pouring so much money into the campaign. Once it gets the government entitlements, it can flip the land when the time is right. Will the new buyers actually develop the old base or will they too use it for speculation? Who knows? The measure gives the developer complete control over the timing and that makes the entitlement even more valuable. Whether something gets built at some time is irrelevant — what counts is making money and preferably making it fast.

    Comment by AlamedaNayTiff — January 11, 2010 @ 1:18 pm

  6. 5. and the people the Navy auctions the land to could be SunCal for all we know, or some other entity in it just to buy and sell for profit. As for timing, doesn’t it cost a lot to just sit on land and do nothing with it? It seems the scenario you are afraid of involves SunCal sitting on the land for years biding it’s time until it calculates a maximum gain. Seems to me the value of the land is effected in part by whether redevelopment is actually taking place or if it’s fallow. Before SunCal sells to a vertical developers they must remediate and put in the new infrastructure. All in all, I’m still not clear how they are supposed to use the timing to screw us.

    Comment by M.I. — January 11, 2010 @ 3:12 pm

  7. You’re right, Mark, that is not their goal. The whole 25 years thing is more emblamatic than an actual problem; it highlights the undue level of control the initiative gives them.

    Comment by David Hart — January 11, 2010 @ 5:44 pm

  8. Sorry LD. I have to disagree with you on this one. Catellus didn’t have to take their DA to popular vote. By putting the entire DA on the initiative, this sets a bad precedent going forward, that is that ALL major DA’s would have to be voted by public acclamation.
    This is simply a bad way to do business.

    Comment by Edmundo Delmundo — January 12, 2010 @ 1:27 am

  9. Morning Edmundo: The argument I was making was not that they had to place the DA on the ballot (although according to law, DA’s are subject to referendum), but that the DA’s purpose is limited in scope and that scope has been stretched by opponents to make their argument against the project.

    Comment by Lauren Do — January 12, 2010 @ 7:13 am

  10. 8:

    Catellus was not hung out to dry by a City Council unwilling to do the right thing–as it had done in the 1990s already–and place an amendment to Measure A/Charter sec. XXVI on the ballot.

    More cooperation and support from the City Council for the master developer it selected could have easily kept us all out of the current unusual situation. SunCal only developed its own initiative after being forced to do so by the Council’s prior inaction, and the results have been predictably less satisfactory than a cooperative approach by City government officials would have been with much more community input.

    SunCal certainly erred in writing a pro-developer initiative without community input, but they have also been stymied by further City actions (by staff and elected officials) in their efforts to remedy those mistakes through legally binding negotiated agreements to the DA and the DDA.

    Don’t pin all the blame on SunCal for this failure of will, vision, courage, and action on the part of the City Council.

    Comment by Jon Spangler — January 12, 2010 @ 10:41 am

  11. Clarification to #10:

    “Catellus was not hung out to dry by a City Council unwilling to do the right thing–as it had done in the 1990s already–and place an amendment to Measure A/Charter sec. XXVI on the ballot.”

    Alameda Landing was developed within Measure A/sec. XXVI charter limitations and did not require a charter amendment to be successful.

    Every economically viable proposal for Alameda Point so far has of necessity been based on increasing Alameda’s current density restrictions for the former base area. Thus we have the necessity of Measure B or something like it. Otherwise no developer will be able to afford to clean up, restore, preserve, or create jobs at Alameda Point.

    Comment by Jon Spangler — January 12, 2010 @ 10:47 am

  12. 7. I feel like we are having an honest exchange.

    I also feel like the frantic emphasis on things like SunCal “doing nothing with AP for 25 years” is emblematic of a sort of shark feed frenzy over any ol’ bad rap that can be tagged on the “robber barons”, contrasted to a more sober and detailed discussion over something like the $175 million dollar gap in City Staff versus SunCal on projected infrastructure costs and a careful comparison of whether and when line items like soft costs narrow that delta.

    11. Jon, are you being a little premature about Alameda Landing being successful?

    Comment by M.I. — January 12, 2010 @ 12:08 pm

  13. For anyone thinking that SunCal and DE Shaw will provide what they show in their glossy ads, please refer to:

    I can’t believe anything they say.

    Comment by Bob — January 12, 2010 @ 1:45 pm

  14. 12:

    Mark, I was referring to the respective business plans and projections that both developers and the City used to determine the financial viability of the respective projects: the projections have to make sense or the developer will not proceed, as occurred when the Alameda Point Community Partners left town a few years ago.

    Catellus/Prologis has not given up on Alameda Landing, although they are proceeding more slowly in this difficult financial climate. Clearly they would give up on it if the numbers no longer made sense, but they remain committed to the project and are working to make it happen.

    Comment by Jon Spangler — January 12, 2010 @ 8:51 pm

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