No cost? No way!

Buried under the ARRA agenda for the October 5th meeting and — amazingly enough — has not been headline news yet is the news that the Department of Defense has agreed to a no-cost conveyance of Alameda Point to the City of Alameda.

Let me let that sink in a bit.

Remember, Alameda Point has previously come with a price tag of $108 million for the land.  Plus an additional $75K for housing units above the 1,800 unit cap.

Now, the cost is $0.  As long as the City stays below the housing cap.

According to the staff report, this summer City staff met with the Navy to discuss a no-cost conveyance for the parcel that is currently reserved for Lawrence Berkeley Lab if they select Alameda for its second campus.  Shortly after that the Navy agreed to negotiate a no-cost conveyance for all the property, not just the proposed LBL site and here we are today with a projected date of June 2012 for the first land transfer if everything goes through.

For those confused about the history and timeline, as I was, I found this excellent summary here which describes previous efforts to get a no-cost conveyance, you can scroll through if you don’t want to read, it’s kinda long:

…Congress, with the active support of the Clinton Administration and the Defense Department enacted legislation that created the Local Redevelopment Agency concept to comprehensively guide the disposal process. At the same time, they authorized the disposal of bases as a comprehensive single unit for job generating purposes the so-called “Economic Development Conveyance (EDC).

The early EDC negotiations between the Defense Department and the LRA’s, including those between the ARRA and the Navy, were very slow and complicated due to the need to “value jobs against the fair market value of the surplus property, (i. e. each job is worth $2 500 as in the case of the first Air Force EDC). To speed up the process, in 1999 Congress amended the EDC authority to mandate that all EDC’s would be at no cost , the “no-cost EDC. ” Not all disposals were by EDC, but all EDCs were now at no cost. The AR’ s renewed EDC negotiations were conducted under this new regimen. And because job generation was the motivation for the EDC process, it was incumbent on all LRA’s seeking a no-cost EDC to demonstrate that the reuse plan
would generate jobs to replace those 10st due to the closure. Housing was not thought to generate permanent jobs (only temporary construction jobs) and residential uses were therefore deemed ineligible for inclusion in an EDC, other than those necessary to support the job generating activities.

In June 2000, the Navy and ARRA executed a No-Cost Economic Development Conveyance Memorandum of Agreement (EDC MOA) in accordance with amendments to the Federal Base Closure Act. Those amendments were designed to aid communities adjacent to closing military installations recover from the closure by allowing the local redevelopment authority to acquire the surplus federal property at “no-cost” in exchange for generating jobs at the closed installation. In order to qualify for such a “no-cost” conveyance, the LRA was required to prepare and support a reuse plan that favored job-generating activities over other land uses such as residential development. In order to recover from the closure of NAS Alameda, and to qualify for the “no-cost” Economic Development Conveyance, the ARRA’s 1998 EDC application made certain development assumptions that favored job-generating activities (such as commercial development) over residential uses. In the 2002 National Defense Authorization Act, the no-cost EDCs were again made pennissive, and in subsequent legislation, Congress required the Defense Department to seek fair market value for all closed military property closed after January 2005.

In 2002, as the City began work on a General Plan amendment to incorporate the Community Reuse Plan policies and land uses into the General Plan, the Navy expressed concern over what it perceived as a discrepancy between the ratio of commercial and residential development identified in the 1998 EDC Application as compared to the 2002 General Plan Amendment. (i.e. more residential construction and less commercial construction). As a result of analyzing the 2002 General Plan Amendment, the Navy questioned whether ARRA remained eligible for a “No-Cost” EDC conveyance.

The ARRA asserted its continued eligibility to receive the property at no cost. However, in January, 2004, the Deputy Undersecretary of the Navy sent the AR a letter asking it to formally submit an amendment to its EDC application based on the newly amended General Plan. The letter did not indicate a timeframe for reviewing and acting upon the amended application. The letter further stated that without such an amendment, the Navy could not continue to work with the AR. In lieu of ARRA submitting an amendment to its EDC application, the Navy expressed a willingness to convert the transaction to a “for cost” conveyance and to negotiate a purchase price for the property. The Navy assured the ARRA that the negotiations would be streamlined, consistent with its current practice of conveying property based on fair market value, and focused on an early transfer.

The ARRA, working with its master developer, detennined that negotiating a land price with the Navy would provide a quicker resolution to property conveyance than protracted efforts to convince the Navy that the ARRA was still eligible for a no-cost conveyance when the Navy would be the final decision maker regarding the ARRA’s eligibility for a program it no longer embraced. The ARRA’s goal was to expeditiously receive property that could be cleaned up 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. This goal could be jeopardized ifthe Navy did not act timely on an amended EDC application.

The Navy’s desire to obtain economic value for the property was consistent with changes in national policy relating to developing closed military installations. While the Congress and Department of Defense supported a subsidy to communities surrounding closed military installations previously, by 2003 , it was clear that the Federal Governent would seek “fair market value” for all base closure property. In fact, by 2004, the Defense Base Closure Act was modified to eliminate all “no-cost” economic development conveyance for 2005 closures. In March 2004, the ARRA and Navy announced a “new beginning” to develop a term sheet for property conveyance and prepare a conceptual land pIan that supported a negotiated land price for the property.

I think it’s key to note that the current no-cost conveyance, although will need to conform the 2000 EDC MOA is not specifically called a “no cost economic development conveyance.”   While there are caps on the number of housing units, as well as $50K per unit “penalty,” in the grand scheme of things, if a developer is motivated enough, they’ll gladly eat that cost per unit.

And certainly this is a much different outlook than a year ago when no cost conveyances appeared to be heading the way of the dinosaurs.   Big stroke of luck for the City of Alameda and definitely a great big notch on the belt of staff who worked on these negotiations with the Navy.  Of course, now all Alameda needs to do is to execute, but that seems to be the place where we tend to stall out.