Blogging Bayport Alameda

January 14, 2010

The perfect is the enemy of the good

Adding to the discussion regarding Development Agreement and Disposition and Development Agreements and whether the City will be at a complete disadvantage when if Measure B is approved by voters.   John Knox White over at Stop, Drop and Roll contacted a source that, hopefully, folks will view as knowledgeable on the subject of DAs, DDAs, and how the City of Alameda has fared at the negotiating table over the years.

Former Assistant City Manager, David Brandt, now a City Manager in his own right in Oregon after an extensive search performed by Redmond, OR’s Interim City Manager clarified some issues that have proved to be confusing regarding this whole process.   Highlights:

…I checked in with an expert on redevelopment law, former Assistant City Manager David Brandt, who re-confirmed to me that it’s the DDA that controls what happens to the development and not the DA.

The DA allows for the transfer of the development rights, but the land transfer will be handled in the DDA, where the ARRA (aka City Council) can, as they have in other land agreements, make sure that they have oversight in what happens to the land, including approvals of transfers.

Look the dirty little secret of this initiative is that it does not cut the City out of the process moving forward. The only way that could happen, again confirmed with David Brandt, who knows this process inside and out, is if the city sends a cardboard box in to negotiate with SunCal…

And before someone else drags up the East Bay Express article quoting David Brandt, JKW in the comments section writes:

And yet, just last week, he said that while it’s not perfect, he feels that if the initiative passes, the city has all the protections it needs in the DDA process, including the ability to negotiate on the caps.

Would he have rather the caps not be in the DA? yep. Is it a deal killer I asked him? “no” was his response.

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17 Comments

  1. And here is what David Brandt said as reported in the East Bay Express:

    “It’s pretty one-sided,” said Assistant City Manager David Brandt. “They wrote it and it wasn’t negotiated. Typically, if there was no initiative, they might have submitted a draft and we would have sent it up marked-up six ways to Sunday.”

    Brandt characterizes the scope of the initiative differently. “If you’re going to do it, might as well grab everything you can,” he said.

    Of particular concern to Brandt are the financial provisions included in the development agreement, especially the $200 million cap on the developer’s obligation to pay for public benefits. That obligation is contingent upon the city providing funding through redevelopment mechanisms overseen by agencies not party to a development agreement. Brandt said the approach is novel. “I don’t know that the way that they’ve drafted it is per se illegal,” he said, “but I’ve never seen it done before.”

    In addition, the details of the public benefits that SunCal must provide are unusually vague, says Brandt. “Typically, in a negotiated agreement, you would have it much more buttoned-down on both sides so that everybody knew what the obligations were. And the money part wouldn’t necessarily be in the development agreement.” Instead, those financial details would be spelled out in a separate “disposition and development agreement” — a document that also would cover the nitty-gritty specifics of timeframe, funding, performance guarantees, and the actual land acquisition and is expected to be negotiated by SunCal and the city’s redevelopment agency after the election. But with such language up for a public vote, the financial details would become binding upon passage of the initiative, and Brandt said the city’s redevelopment agency would have to negotiate a disposition and development agreement “under the sort of shadow of this whole initiative.”

    http://www.eastbayexpress.com/gyrobase/changing-the-rules-at-alameda-point/Content?oid=1370234&showFullText=true

    Comment by AlamedaNayTiff — January 14, 2010 @ 7:03 am

  2. From JKW’s site:

    And yet, just last week, he said that while it’s not perfect, he feels that if the initiative passes, the city has all the protections it needs in the DDA process, including the ability to negotiate on the caps.

    Would he have rather the caps not be in the DA? yep. Is it a deal killer I asked him? “no” was his response.

    Comment by Lauren Do — January 14, 2010 @ 7:17 am

  3. Basically, SunCal and DE Shaw can’t be trusted. We’ve seen their behavior in so many cities.

    They thought they could fool us all from start to finish, and wrote 283 pages to dazzle us.

    Thinking Alamedans from all over the city have not been dazzled by their pretty photographs, expensive print advertising, and television ads.

    To paraphrase Brandt’s words, Measure B is a land grab. There’s just no getting around that conclusion.

    Comment by Bob — January 14, 2010 @ 8:15 am

  4. Contrary to what you may have heard, Measure B does not convey the land to SunCal or anyone else. How can it be called a “land grab”?

    Comment by Michael Krueger — January 14, 2010 @ 8:59 am

  5. I trust our City Attorney’s review and analysis on this issue and the words of then City Manager, David Brandt when he was working in the interest of the City of Alameda. It is the job of City staff to look out for the interest of Alameda, and it is the job of SunCal to look out for theirs.

    About the land grab — the Development Agreement will vest rights or control to the development. SunCal can sell those rights to anyone they chose without the approval of the City Council no matter who has title to the land.

    In the case of Alameda Landing for example, Catellus does not have title to the property but they control the asset via their development rights.

    Regarding the lease revenues, the lease revenues are obviously an asset to the project or SunCal would not be trying to get control of them. With 30 or so pending bankruptcies and their record on funding their current development projects, my concern here is that SunCal will use these lease revenues to fund their own operations denying the City the opportunity to fund important police and fire and other maintenance servicing costs.

    Comment by Karen Bey — January 14, 2010 @ 10:17 am

  6. #5: Thanks very much.

    I think it’s important to remember also that SunCal is only the public face of this deal. The hedge fund, DE Shaw, is in reality the driving force, tho they generally stay out of the spotlight.

    Shaw “has the gold and makes the rules” — they have the controlling interest in their partnership w/ SunCal and they can pull the plug on this project anytime that it suits their interests.

    So it makes sense to look at what their motives might be, and I think it’s probably some form of (relatively) short term profits, now that real estate bubble has burst — such as selling the development rights, long before any DDA is negotiated.

    Comment by dlm — January 14, 2010 @ 10:55 am

  7. Karen: Just checking — can you speculate at all about what the Alameda Point property wuold be worth (as is) if it had an exemption from Measure A? Sorry if this is an impossible question.

    Comment by dlm — January 14, 2010 @ 10:56 am

  8. Its not just the exemption from Measure A (which by the way I believe that Alameda Point should be exempt from Measure A), but it is the control of the lease revenues, the exemption from future ordinances, the $200m cap and the lack of committment to actually develop Alameda Point that serves to increase the value of SunCal’s “development rights”.

    Given this — what would SunCal/DE Shaw’s incentive be to give up any of these rights should Measure B be approved? Which is the point our City Attorney makes in her analysis.

    Bottom line, we should not be giving such enormous control
    to a hedge fund who shows no committment to a 25-30 year project.

    Comment by Karen Bey — January 14, 2010 @ 11:17 am

  9. Karen B.: The point of ANY Development Agreement is to exempt a large scale development from future ordinances. That is/was the legislative intent of things like Development Agreements.

    Additionally, there are technically no commitments in the Catellus DA with the City as well. This appears to be boilerplate language that is included in DAs, at least the ones that have been executed in Alameda. The commitments and timelines are outlined in the DDAs.

    As to the lease revenues, according to the City’s budgets, control of the lease revenues are projected to not cover expenditures in the next five years. If SunCal is banking on receiving $12 million just to turn around and have to spend $14 million on upkeep, that’s not very savvy business on their part.

    Comment by Lauren Do — January 14, 2010 @ 11:31 am

  10. Lauren,

    I’m not sure that we want to wave the Catellus agreement around as some great success. While I have great respect for Catellus, there are lessons learned in that agreement that we would not want to repeat at Alameda Point. I believe we can do better!

    Regarding the lease revenues — I believe these revenues are a great asset to the project and would not want to see us relinquish control of them to a hedge fund and a real estate developer with 30 pending bankruptcies.

    Finally, I am not convinced that SunCal has the financial capability or the desire to see this project through.

    Comment by Karen Bey — January 14, 2010 @ 12:03 pm

  11. 10. do you have suggestions for who would have the financial capability to see this project through?

    Comment by M.I. — January 14, 2010 @ 12:09 pm

  12. I love how people like Karen claim they can do better, but have done squat to move alameda point forward for the last 10 years. Doing nothing is not better.

    Comment by notadave — January 14, 2010 @ 12:44 pm

  13. #12

    Uh, oh. Is Karen the next one headed for the JKW whipping post after Darcy?

    Comment by AlamedaNayTiff — January 14, 2010 @ 12:54 pm

  14. http://www.youtube.com/group/pillory

    Comment by Susan — January 14, 2010 @ 1:17 pm

  15. #13: The experience so far is more like having my ankles gnawed at.

    Comment by dlm — January 14, 2010 @ 2:06 pm

  16. # 14

    Susan, that reminds me of the punishment stocks in Colonial Williamsburg VA. Wife, kids and I were doing the tour and I decided to have my picture taken in the punishment stock. Unfortunately, once you’re in the stock you can’t get out without help. So I was left in the stock while the others went off to complete the tour. I’d probably still be there hadn’t a colonist taken pity and released me.

    Comment by Jack Richard — January 14, 2010 @ 5:06 pm


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