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Study Session on the Future Development of the Enterprise District Area in Alameda Point. (Base Reuse and Economic Development)
Body
To: Honorable Mayor and Members of the City Council
From: Jennifer Ott, City Manager
EXECUTIVE SUMMARY
The purpose of this study session is to discuss strategies to attract tenants and future development to the Enterprise District, a roughly 180-acre subarea of Alameda Point which has been envisioned primarily for future job-generating land uses. For over a decade, the City of Alameda (City) has undertaken various efforts to advance development in this area but has been challenged by the need for replacement of core infrastructure, environmental conditions, policy restrictions and market realities. Now that the City has addressed two key barriers which arose during its 2019 development efforts by securing a Surplus Land Act exemption for Alameda Point and forging a tentative path forward with Chevron to remediate the tarry refinery waste, it is time to contemplate the next step to reignite development interest in the Enterprise District.
BACKGROUND
The Enterprise District encompasses roughly 180 acres of land bounded by West Atlantic Avenue to the north, Main Street and Central Avenue to the east, and Seaplane Lagoon to the west, as shown in Exhibit 1. The Enterprise District is entitled for commercial development, and it is anticipated that over 2 million square feet of new development could be accommodated in this area.
From 2009-2014, the City, acting as “master developer”, undertook a number of initiatives at Alameda Point to add value and reduce uncertainty to maximize the success of redevelopment.
These efforts included:
• Preparing a number of planning documents, including a Town Center and Waterfront Specific Plan, General Plan Amendment, Zoning Amendment and Master Infrastructure Plan (MIP)
• Establishing a Community Facilities District (CFD) as part of ensuring fiscal neutrality
• Certifying an Environmental Impact Report (EIR)
• Obtaining a commitment from the Water Emergency Transportation Authority (WETA) to build a ferry terminal at the Seaplane Lagoon and securing grant funding for a portion of the project
• Adopting a Development Impact Fee (DIF) to help fund the required infrastructure improvements
• Receiving permits for key backbone infrastructure projects
Over the years following these major planning milestones, the City made several attempts to advance development in the Enterprise District:
• In 2014, City Council directed staff to issue two separate Requests for Qualifications (RFQs) from developers for both Site A and Site B (now the Enterprise District). The City received four qualified responses from developers to the Commercial Project Enterprise District RFQ. Following a lengthy period of unsuccessful negotiations with two finalists, City Council in 2015 directed staff to postpone decisions in the Enterprise District until there could be more certainty about the development of infrastructure surrounding Site A, which would also support future development to the south.
• In 2016, with the approval of the Disposition and Development Agreement for Site A, City Council approved a “new approach” for development at the Enterprise District that focused on attracting major commercial businesses or “end users,” instead of utilizing a master/commercial developer who then is responsible to solicit “end users.” This new approach offered flexibility in marketing and revenue-producing interim use of the site until an interested commercial end user is identified. City Council approved utilizing Cushman & Wakefield (Cushman) to market the Enterprise District in order to leverage its existing knowledge and experience of Alameda Point and Bay Area markets as a whole.
o Through this 2016 process, the City was able to attract Astra as a major tenant of the existing buildings in the northern area of the Enterprise District, and it was thought at the time that Astra and similar tenants could be the catalyst for future development.
• In 2019, City Council directed staff to market a 23.9-acre portion of the Enterprise District (Site B), shown as the first map in Exhibit 2, for redevelopment consistent with the City’s goals and objectives for commercial development at Alameda Point. Following a successful RFP process in which eight proposals were received, the City narrowed the pool to four finalists. At that point, however, the State of California modified the Surplus Land Act requiring that publicly owned land be offered first for affordable housing development (among other things), which caused the solicitation process to falter. Additionally, it was discovered during this time that a portion of the area being offered showed presence of tarry refinery waste which was left from the area’s pre-Navy use as an oil refinery, and the City did not have a strategy at that point to remediate the area.
Since the City’s efforts to develop the Enterprise District in 2014, 2016, and 2019 collectively, a number of conditions have changed, and some have not.
• Infrastructure: the need to replace core infrastructure throughout the Enterprise District (and the rest of Alameda Point) continues to be a driving factor in the City’s development strategies. Any property offered for development must have two points of connection with East Bay Municipal Utility District (EBMUD) water lines on Main Street, Central Avenue, or West Atlantic Avenue. It must connect new sewer lines to a sewer pump station on West Atlantic Avenue, and must connect new stormwater lines to a replaced outfall on the bay. The total cost of these improvements will range from $27 million to $45 million. This is unchanged, and as a result, the 23.9 acre offering from 2019 - or a subsection therein - is the appropriate location to advance the first phase of development as it can most efficiently fit this infrastructure logic puzzle.
• Environmental Contamination: There are a number of areas throughout the Enterprise District that are in need of remediation, including areas aligning West Atlantic Avenue to Seaplane Lagoon which are still owned by the Navy; an area along Main Street which is still owned by the Navy; and an area near West Oriskany Avenue and Skyhawk Street, which is owned by the City. Since 2019, the City has worked with Chevron, the site’s former owner, and now believes there is potential for a remediation strategy for the tarry refinery waste to be in place by the end of 2024.
• Surplus Land Act: The 2019 amendments to the State Surplus Land Act halted all development and leasing activity in Alameda Point. In 2022, Assemblymember Mia Bonta introduced Assembly Bill 2319, which was passed and signed by Governor Newsom. This bill amended the Surplus Land Act to allow for exemptions within Alameda Point specifically, provided that the City meets certain development conditions throughout the former Naval Air Station property.
• Market Conditions: Post-pandemic commercial market conditions are much more challenging than the 2019 climate, and effectively render all efforts from 2019 to be irrelevant today. With high office and life science vacancy rates, there is a very limited market for the type of job generating development that the City would like to see. Moreover, current high interest rates hinder the ability of developers to generate the capital needed to provide the up-front infrastructure improvements that the City will require. As a result, staff believes the best opportunity for development in the area will be to attract a specific tenant with unique, large-scale needs that can only be fulfilled by new development.
Now that the City has a path to overcome the hurdles imposed by the Surplus Land Act and has a tentative approach to the tarry refinery waste issues, staff have begun to reinvigorate efforts to develop the Enterprise District.
On June 1, 2024 staff hosted an Alameda Point open house which provided the community with much of the information presented in this staff report. Staff asked the community for feedback on the types of uses participants would be interested in seeing in the Enterprise District. Responses included: a desire to develop a technology campus to attract clean, green and blue tech firms, the film and entertainment industry, artificial intelligence and other big technology. Respondents also expressed interest in a commercial commissary kitchen or bakery for small businesses, new housing, parks and recreational uses like a rock-climbing gym, archery range, skating rink or waterpark, as well as new retail and restaurants. There was a particular focus on creating opportunities for community maker spaces for art, music, cultural and performing arts.
On August 26, 2024 the Mayor’s Economic Development Advisory Panel (“EDAP) conducted a study session on future development of the Enterprise District. Staff summarized the following recommendations from the discussion of the nine panelists who attended the meeting, distributed these recommendations as shown in Exhibit 3, and did not receive any objections or corrections.
EDAP’s recommendations centered around three themes:
1. Market aggressively: EDAP agrees with staff that there is not a robust market for prospective tenants or developers, and the City is not in the “driver’s seat” to pick and choose partners. Moreover, EDAP asserted that a strong marketing campaign could increase the transparency and competitiveness of future development without necessarily conducting a formal request for proposals process. Lastly, EDAP recommended that staff outline a Marketing Strategy for City Council.
2. Send a clear message about the City’s parameters for development: EDAP expressed concern that the City has recently sent mixed messages about its interest in development, and recommended that City Council review more detailed parameters for future development to reduce the opposition risk to developers.
3. Be flexible: EDAP recommended that the City ensure maximum flexibility in the location and property sizes to be offered for development, understanding the limitations imposed by the need for core infrastructure and the environmental constraints. To that end, staff worked with its consultant, Carlson, Barbee, and Gibson, Inc., to identify a smaller property that could be considered for development, shown as the second map in Exhibit 2. EDAP did not have strong recommendations on conducting a competitive process, but suggested that the main benefit of an RFP would be increased visibility, and suggested accepting an unsolicited proposal might make sense for the “first developer in” as an incentive to catalyze a project.
DISCUSSION
Based on staff’s analysis of the history of the City’s development efforts for the Enterprise District, the current market for both potential development and prospective residential tenants requiring a “build-to-suit” building, and the discussion with EDAP, staff recommend the following approach to development of the site for consideration by Council in this study session:
1. Marketing Strategy:
At the recommendation of EDAP, the City’s broker, Cushman & Wakefield, reached out to the four developer teams that submitted a successful proposal in the 2019 RFP process. Some of the developers indicated an interest in pursuing development of the site, but those who expressed an interest confirmed that the economic realities of the project had changed, and they would need to revisit the financial proposals that were made and would need to renegotiate the deal terms to ensure project delivery was contingent on successfully securing a tenant first. This is consistent with staff’s finding that there is no longer a market for development of a “speculative” office campus, and that securing a tenant is critical to advancing development.
Based on this finding, staff, in partnership with the City’s broker, will engage in an aggressive marketing campaign that includes direct outreach to businesses and creating widespread visibility of the site, rather than focusing solely on engaging the developer community. Specifically, marketing will include:
- Outreach to general media outlets, business media, and the Alameda community to increase understanding of the specific opportunities available and word of mouth, including community and business association presentations.
- Targeted outreach to key business clusters that may have greater need for a build-to-suit building or campus, such as certain research and development uses (clean/green energy, life sciences), maritime/blue tech, institutional users (medical, educational), industries with known specific needs and local expansion or investment.
o Direct business calls and mailers from both the brokerage and City of Alameda.
o City attendance and increased visibility at industry meetings.
- Engagement and tours with the brokerage community and standard posting in online databases such as CoStar.
- Preparation of a transparent development marketing package showing all information available on current conditions, core infrastructure needs and costs, environmental conditions and remediation plans, and other due diligence readily available to potential tenants and developers.
2. Parameters for Development:
As noted above, EDAP recommends establishing more detailed information about the City’s expectations for, and restrictions on future development. Staff recommend the following parameters for consideration by City Council:
- Infrastructure Replacement: Development must pay for and build the replacement core infrastructure needed to support the project. The goal is for the first development in the Enterprise District to be large enough to provide a meaningful core infrastructure package that can help catalyze subsequent projects.
- Zoning: The current zoning for the site will continue to be the primary guardrails enabling and restricting development. The City will summarize its zoning and EIR succinctly in its marketing package.
- Timing: The City is not interested in entertaining speculative development deals at this time. Development proposals must have a timeline for construction and a viable financing and business plan to deliver on this timeline and to avoid land banking.
- Preferred Uses:
o While the City is willing to entertain proposals in all sectors, the City’s preferred sectors are identified in its 2018 Economic Development Strategy: life sciences, clean/green/high tech, blue tech and maritime, retail and restaurants, tourism and hospitality, artists and small manufacturers.
o The City is interested in pursuing uses that include a moderate to high density of people (employees and visitors) to increase activity in the area. The current job density in Alameda Point is roughly 1,000 square feet per employee, which will be a minimum density target for future users (fewer square feet per employee is preferred).
o The City is not interested in storage, data centers, or other uses with few to no employees or visitors.
3. Solicitation / Disposition Process:
Given the limited pool of prospective businesses who are interested in funding a new facility, and the limited pool of developers with the capital to build a speculative campus, staff does not recommend pursuing a formal competitive RFP process today. In lieu of this, staff recommends pursing the aggressive marketing campaign outlined above, and conducting a process more similar to the private market where offers can be entertained after a specified period and beyond.
Staff is seeking feedback in this study session on the recommendations outlined above. Following this study session, staff will finalize a more robust set of parameters that explains the zoning, and commence with the steps needed to refine and advance the marketing campaign.
ALTERNATIVES
• As a study session, provide feedback and direction to staff.
FINANCIAL IMPACT
This is a study session and there is no decision being made that would have a fiscal impact.
MUNICIPAL CODE/POLICY DOCUMENT CROSS REFERENCE
This action is consistent with the Alameda Municipal Code. This action is subject to the Levine Act. Relevant documents include:
- NAS Alameda Community Reuse Plan (1996)
- Alameda Point General Plan Amendment Chapter 9 (2003)
- Alameda Point Zoning and Municipal Code Amendments and EIR (2014)
- Master Infrastructure Plan (MIP) (2014)
- Town Center and Waterfront Specific Plan (2014)
- Transportation Demand Management Plan (2018)
- Economic Development Strategic Plan (2018)
- Climate Action and Resiliency Plan (2019)
- MIP Amendment (2020)
- City Strategic Plan (2023)
ENVIRONMENTAL REVIEW
This presentation and discussion regarding a proposed disposition strategy to guide development at Alameda Point, which does not commit the City to any definite course of action, does not constitute a “project” as defined in California Environmental Quality Act (CEQA) Guidelines Section 15378 and therefore no further CEQA analysis is required.
CLIMATE IMPACTS
Development of the Enterprise District would include climate adaptation requirements, such as increased grade elevation and implementation of other infrastructure identified in the MIP.
RECOMMENDATION
Hold a study session to provide staff with feedback on development strategies for the Enterprise District of Alameda Point.
Respectfully submitted,
Abigail Thorne- Lyman, Base Reuse and Economic Development Director
Exhibits:
1. Map of Existing Constraints in the Enterprise District
2. Map of Proposed Development Footprints
3. Summary of Mayor’s Economic Development Advisory Panel Feedback