Title
Summary Title: Various Actions Related to Potential Sale of 13 Acres of Land in Enterprise District for Pacific Fusion Research and Demonstration Facility.
Public Hearing to Consider Adoption of Resolution Declaring up to 21 Acres of City-Owned Property at Alameda Point Bounded by West Pacific Avenue, Central Avenue, West Ticonderoga Avenue and Current and Future Orion Street to be Exempt Surplus Land under the Surplus Land Act; and
Introduction of Ordinance Approving a Purchase Option Agreement in Furtherance of the Purchase and Sale of City-Owned Property for Use as the Pacific Fusion Research and Development Facility Site, and Authorizing the City Manager to Negotiate and Execute a Purchase and Sale Agreement and Deed Consistent with the Terms of the Purchase Option.
For purposes of the California Environmental Quality Act (CEQA), the project is subject to streamlined environmental review, and no further environmental review is necessary, pursuant to CEQA Guidelines Sections 15162 (Subsequent EIRs), 15168 (Program EIRs), and 15183 (Projects Consistent with a Community Plan or Zoning). (Base Reuse and Economic Development 29061822)
Body
To: Honorable Mayor and Members of the City Council
From: Jennifer Ott, City Manager
EXECUTIVE SUMMARY
Staff seeks approval by the City Council of multiple actions authorizing the sale of approximately 13 acres in the Enterprise District of Alameda Point to Pacific Fusion and Hines for the development of a next-generation fusion energy research and development (R&D) facility. These actions include:
• Adopt findings under CEQA related to the project’s streamlined environmental review based on consistency with prior certified Environmental Impact Reports (EIRs);
• Adopt a resolution declaring approximately 24 acres of property - including the site of this project and a potential future phase - exempt from the Surplus Land Act; and
• Approve an option for Pacific Fusion and Hines to purchase this site from the City of Alameda (City), including the terms that must be met to purchase the site.
The approval of the purchase option agreement will enable critical private investment in clean energy technology and high-paying jobs in Alameda. As compensation for the land, the developer will build a package of backbone infrastructure necessary to operate the project, but also greatly benefiting the development viability of surrounding land. The option agreement will provide the developer with rights to purchase the property from the City, provided the developer meets a range of conditions, including securing entitlements and a Development Agreement from the City. After Planning Board makes a recommendation, this Development Agreement will be brought to the City Council separately at a later date, to vest development rights and define long-term obligations.
The Project is subject to streamlined environmental review pursuant to CEQA Guidelines Sections 15162 (Subsequent EIRs), 15168 (Program EIRs), and 15183 (Projects Consistent with a Community Plan or Zoning), and a streamlining checklist and analysis has been prepared and is included for the City Council’s adoption with this item as Exhibit 2. As described in the Environmental Review section below, the Project would not result in any new or significantly more severe environmental effects than have been previously analyzed, and no further environmental review is required.
BACKGROUND
The Enterprise sub-area of Alameda Point encompasses approximately 107 acres that have been designated for high-quality research and development (R&D), industrial, manufacturing, and office uses in the 2014 Alameda Point Zoning and EIR. Located outside the Naval Air Station Alameda Historic District and well-buffered from the Nature Reserve, this area offers significant opportunities for new construction that can accommodate the evolving needs of modern industry. The City’s Master Infrastructure Plan and Disposition Strategy call for the replacement and improvement of core infrastructure in exchange for land conveyance, ensuring that this area can meet the demands of future growth.
In line with these objectives, Pacific Fusion, a leader in clean energy research, has proposed to build a R&D facility which will focus on ways to generate commercially viable energy through nuclear fusion reactions. The draft site plan is shown as Exhibit 1. It is not a power plant and would not generate electricity but would be the site of fusion reactions using tritium and deuterium, one of which (tritium) is a radioactive isotope of hydrogen. The facility would support research into fusion energy technologies, with the potential to create a new source of renewable clean energy for the world. The City has commissioned a third-party review of Pacific Fusion’s activities and the regulations at the State and Federal level that ensure the safety of the surrounding community. This is attached as Exhibit 3.
On February 18, 2025, City Council approved an Exclusive Negotiating Agreement (ENA) with Pacific Fusion, authorizing staff to negotiate to advance the sale of 12 to 17 acres of property in the block bordered by West Pacific Avenue, Orion Street, West Ticonderoga Avenue, and Central Avenue, with the understanding that the first phase of development would be oriented on the west side of this block toward Orion Street, and an option to purchase a second phase of property would be later negotiated for the eastern side of the block. Pacific Fusion has partnered with Hines, a global commercial real estate company, to advance the real estate and entitlement process involved in considering Alameda. Pacific Fusion and Hines have submitted a preliminary Development Plan to the City, which was reviewed in a Planning Board study session on May 12, 2025.
As part of the Pacific Fusion proposal, Planning staff completed streamlined environmental review pursuant to CEQA Guidelines Section 15183, using the CEQA environmental review checklist to confirm consistency with two previously certified EIRs: the Alameda Point Project EIR (2014 SCH # 2013012043) and the Alameda General Plan 2040 EIR (2021 SCH # 2021030563). These prior EIRs already evaluated the broader impacts of development in the Alameda Point area, covering the subject project site. The checklist determined that the proposed Pacific Fusion development project falls within the scope of those earlier reviews and would not result in new or more severe environmental impacts than already disclosed. Therefore, no additional environmental review is required, such as a new or subsequent EIR, pursuant to CEQA Guidelines Sections 15162 (Subsequent EIRs), 15168 (Program EIRs), and 15183 (Projects Consistent with a Community Plan or Zoning).
Staff negotiated a Purchase Option Agreement which is attached as Exhibit 4 The Purchase Option Agreement would allow Pacific Fusion and Hines to purchase 13.033 acres of property from the City, once they have met a variety of conditions, including securing entitlements for the Project and a Development Agreement. It is anticipated that these actions would be sought from the Planning Board and City Council toward the end of 2025.
The City also secured confirmation from the State Housing and Community Development Department that this property is exempt from the Surplus Land Act under California Government Code Section 54221(f)(1)(M).
DISCUSSION
The Project will involve the development of a 220,000-square-foot R&D facility and related infrastructure at Alameda Point. Specific elements of the development will include a number of on- and off-site improvements and infrastructure upgrades. On-site improvements will be established through the Development Plan, Design Review, and Development Agreement.
Purchase Option Agreement Overview
The Purchase Option Agreement allows Pacific Fusion and Hines to purchase 13. 033 acres from the City for a purchase price of $28,878,956, or $2,215,833.33 per acre. In lieu of a cash payment, the development team will deliver a package of off-site improvements equivalent to this value, net of the City’s share of closing costs and commission. Staff and the development team have generally agreed to the following scope of off-site improvements:
• New backbone streets including underground wet and dry utilities from Orion Street from West Pacific Avenue to West Ticonderoga Avenue, and improvements to West Ticonderoga from Orion Street to Skyhawk Street;
• Sewer and stormwater improvements as needed to serve the project, likely including a new sewer pump station, repairs to existing sewer and stormwater lines to connect the site;
• New power lines connecting from the Cartwright Substation;
• Stormwater outfall improvements depending on availability of funds.
Due to the current volatility of construction costs, the agreement states that the parties may modify the exact scope of improvements in order to stay close to the target purchase price listed above.
However, the project must construct a minimum scope of work needed for the development to function. For this reason, the Purchase Option states that if there are cost overruns associated with the project, the City and developer will share these cost overruns 50/50 up to a total City maximum of $2.5 million.
The Purchase Option would allow the developer team to purchase the site between the time of its execution and February 28, 2027, provided the developer has met a series of conditions including entitling the site and securing a Development Agreement from the City. In other words, the City will still have the ability to ensure the project meets necessary requirements under its regulatory authority, culminating in a vote from the City Council approving the Development Agreement. The City Manager will be authorized to extend the term of the agreement three times, for up to three months each time.
Additionally, the Purchase Option includes several terms assuring the City that the developer will make steady progress on development of the site during the option period and after the purchase of property, including:
• A binding milestone schedule;
• A right for the City to repurchase the property if the developer is not making progress on vertical construction;
• A completion guaranty for the off-site infrastructure.
The Development Agreement will include additional mechanisms assuring that the improvements will be built timely.
Project Benefits
The Enterprise District has been envisioned for over a decade to be the area where new, job-generating development could occur. However, the COVID-19 pandemic caused a major decline in the demand for new office space, and new life sciences space has been over-built in the East Bay, with vacancy rates exceeding 30%. As a result, the market for new, job-generating land uses is very soft. This project presents a unique opportunity to catalyze development and deliver permanent infrastructure that both benefits this project and supports future development in the area.
The Project is expected to accommodate approximately 150 full-time personnel working a traditional 8 AM to 5 PM schedule, Monday through Friday. In addition to these full-time employees, there will be two additional non-overlapping shifts of 50 operations and technician-type personnel, totaling 100 additional workers, for the other 16 hours of the day for a total of 250 employees. These shifts will ensure the facility operates around the clock, with a significant workforce presence on-site 24 hours per day.
This project also contributes to the City’s Economic Development Strategic Plan and its climate adaptation and resiliency goals by building a clean technology use. The City has the opportunity through this project to be a part of the global effort to deliver fusion energy, which is a renewable, clean source of power.
Lastly, this project could generate an estimated $1.1 million per year in new General Fund revenues from a variety of sources including property tax and business license tax, as well as one time property transfer taxes of approximately $375,000 upon sale of the property.
Next Steps
If City Council adopts the CEQA Findings, the Surplus Land Act Resolution, and approves the Purchase Option Agreement, the City, Pacific Fusion, and Hines would continue in the planning approvals process with additional public hearings at the Planning Board and the Development Agreement would be brought to City Council for consideration.
However, Pacific Fusion has been advancing this development proposal on two sites, given its aggressive project delivery schedule. Accordingly, Pacific Fusion is expected to decide whether to pursue this project in Alameda, Livermore or another location, later this year. If it pursues the project elsewhere, the entitlement process will halt and the purchase option cannot be exercised.
Lastly, per the terms of the ENA and as memorialized in the Purchase Option, the City and Pacific Fusion will commence negotiations of an additional purchase option for the City-owned property to the east of Skyhawk Street as a possible phase two development. This additional purchase option must be negotiated no later than February 2027.
ALTERNATIVES
• Adopt the CEQA findings, approve the Surplus Land Resolution and introduce an Ordinance approving the Option for the Purchase and Sale Agreement (PSA) with Pacific Fusion, and authorize staff to proceed with negotiating the Development Agreement. This will expedite Pacific Fusion’s delivery of a major R&D facility and support broader redevelopment goals at Alameda Point.
• Adopt the CEQA findings and approve the Surplus Land Resolution, but defer action on the purchase agreement or recommend changes. This allows the 30-day HCD review process to begin, while postponing decision-making on terms of the sale or development. However, this would affect Pacific Fusion’s aggressive timeline for development and would likely compromise their decision to move forward with development in Alameda.
• Reject the CEQA findings, Surplus Land Resolution and Ordinance to authorize the Purchase Agreement. If City Council does not support the sale or the proposed development approach, the project would not proceed. This would likely significantly delay the City’s ability to advance any development in the Enterprise District given the soft real estate market for nonresidential uses.
FINANCIAL IMPACT
The sale of the property to Pacific Fusion would result in a nearly $29 million package of infrastructure improvements in the Enterprise District, as well as an estimated $1.1 million annually in General Fund revenues by 2030 when the facility is operational. The City could be responsible for up to $2.5 million in off-site infrastructure costs if the infrastructure improvements exceed the price of the land, as stipulated in the terms of the agreement. These funds would be sourced from the Fund 290 balance, which is currently approximately $12 million. This could compromise the timeline of future infrastructure projects, potentially including the two Alameda Point projects in the proposed Fiscal Year 2025-27 Capital Improvement Plan which would be sourced from these funds, as well as the Phase 2 Backbone Infrastructure planned for the Reuse Area.
MUNICIPAL CODE/POLICY DOCUMENT CROSS REFERENCE
This action is consistent with the following adopted plans and policies:
• Alameda Point Master Infrastructure Plan (MIP)
• City of Alameda General Plan and EIR
• City of Alameda Zoning Ordinance
• Alameda Point Environmental Impact Report (EIR)
• State of California Surplus Lands Act
The property is located in the Alameda Point Enterprise-1 Zoning District (AMC 30-4.24), which supports employment-generating uses such as office, research and development, light industrial, and high-tech manufacturing. The proposed facility complies with the City’s land use and development policies for this district.
This action supports the following initiatives in the City of Alameda Strategic Plan:
• ED1 - Advance economic development opportunities on underutilized properties.
• HH6 - Support implementation of mixed-use and supportive housing projects at Alameda Point.
• CI2 - Fund and construct infrastructure needed to support Alameda Point redevelopment.
This action is subject to the Levine Act.
ENVIRONMENTAL REVIEW
The proposed Project is subject to review under CEQA. A streamlined CEQA analysis was conducted by Planning staff and environmental consultants using a checklist pursuant to CEQA Guidelines Section 15183 (Exhibit 2), which provides for streamlined review of projects consistent with an adopted General Plan and zoning for which an EIR has already been certified. The environmental review checklist finds that the Project is consistent with the previously certified Alameda Point Project EIR (2014 SCH # 2013012043) and the Alameda General Plan 2040 EIR (2021 SCH # 2021030563). These two EIRs collectively evaluated the environmental impacts of redevelopment in the Alameda Point area and the anticipated citywide growth under the Alameda 2040 General Plan. No new or more severe environmental impacts have been identified as a result of this Project. Accordingly, no further environmental review is necessary pursuant to Section 15183.
On separate and independent bases, the streamlined analysis also reviews compliance under CEQA Guidelines Sections 15162 (subsequent EIRs) and 15168 (program EIRS). Section 15162 establishes criteria for when a subsequent EIR is required. Under Section 15162, no subsequent EIR is required for the Project because it does not involve substantial changes or new information that would result in new or significantly more severe environmental effects than were previously analyzed under the earlier EIRs. Section 15168 allows the use of a Program EIR to evaluate subsequent activities within the scope of the original analysis. The Project is considered a subsequent activity covered under both the Alameda Point Project EIR and the Alameda General Plan EIR because those EIRs contemplated and analyzed the buildout of the Alameda Point Enterprise District with a strong emphasis on employment uses, such as the research and development facility proposed by the Project. As described above, the Alameda Point Project EIR was adopted for the long-range redevelopment of Alameda Point, and the Project is a consistent implementation of that program. The Project is also consistent with the applicable General Plan designation and policies and the zoning for the site, for which the two EIRs have already been certified.
The proposed Project will implement all applicable previously adopted mitigation measures and comply with applicable regulatory standards, and therefore, the Project is not expected to result in significant site-specific, off-site, or cumulative environmental impacts beyond those already disclosed and addressed in the prior EIRs. As a result, no additional CEQA environmental review documentation is required.
CLIMATE IMPACT
The Project aligns with the City's sustainability goals and Climate Action and Resiliency Plan by promoting clean energy research and development. Additionally, the Project will implement stormwater management practices in line with the Alameda County Clean Water Program and will incorporate water and energy-efficient designs, including provisions for electric vehicle charging.
RECOMMENDATION
Staff recommends that the City Council approve various actions related to the potential purchase of 13 Acres of land in Enterprise District for a Pacific Fusion R&D facility, including:
1. Finding that the project and related actions are subject to streamlined environmental review under CEQA, and that no further environmental review is required, as described in the streamlined CEQA analysis (Exhibit 2);
2. Adopting a resolution declaring up to 21 acres of land located at Alameda Point to be exempt Surplus Land under the Surplus Land Act; and
3. Introducing an ordinance to approve the Purchase Option in furtherance of the Purchase and Sale Agreement for the Pacific Fusion R&D Facility, and authorizing the City Manager to negotiate and execute a purchase and sale agreement and deed consistent with the terms of the Purchase Option.
Respectfully submitted,
Abigail Thorne-Lyman, Base Reuse and Economic Development Director
Financial Impact section reviewed,
Ross McCarthy, Finance Director
Exhibits:
1. Site Plan for Pacific Fusion R&D Facility
2. CEQA Findings
3. Third-Party Review of Activities and Regulations
4. Purchase Option Agreement