Title
Recommendation to Accept Status Report on Tidal Canal Project Phase I and Provide Direction to Staff on Moving Forward with Phase II and Phase III. (City Attorney 91624)
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To: Honorable Mayor and Members of the City Council
From: Jill Keimach, City Manager
Re: Recommendation to Accept Status Report on Tidal Canal Project Phase I and Provide Direction to Staff on Moving Forward with Phase II and Phase III
BACKGROUND
Phase I Status Report: The Oakland Inner Harbor Tidal Canal ("Tidal Canal") is a 1.8 mile long, 400 feet wide portion of the waterway between Oakland and Alameda that was dredged between 1882 - 1904 by the US Army Corps of Engineers ("Army Corps") to create a tidal effect throughout the Oakland Estuary. The Tidal Canal covers 85 acres and until recently was owned by the Army Corps. The United States of America, through the Army Corps offered to convey half of the Tidal Canal (split down the middle) to the City of Oakland and the other half to the City of Alameda.
On September 15, 2015, the City Council unanimously directed the City Attorney to pursue a real estate transaction whereby the Army Corps would transfer, at no cost (except transaction costs), the Alameda side of the Tidal Canal to the City (the “Project”). In order to minimize the City’s potential liability and costs, the City Attorney determined that the best way to fulfill the conditions set by the City Council was to: (i) structure the transaction so that the City is in the chain of title for the shortest period possible; and (ii) require 100% participation of the residential lots in the subsequent transfer. The City Attorney gathered a multi-discipline team consisting of City staff and outside consultants to begin negotiations with the Army Corps and to reach out to the regulating agencies with jurisdiction over the area, including Bay Conservation and Development Commission (“BCDC”), the SF Regional Water Quality Control Board (“RWQCB”) and State Lands. The major tasks associated with Phase I of the Project included:
• An amendment to the Estuary Zoning District;
• Environmental review under both the California Environmental Quality Act (“CEQA”) by the City and National Environmental Policy Act (“NEPA”) by the Army Corps;
• Negotiating a Memorandum of Understanding with the Army Corps and lifting of the Army Corps’ permitting moratorium which had been in effect since 2000;
• Negotiating a Quitclaim Deed from the Army Corps to the City acceptable to both parties;
• Preparing a Tentative and Final Map to subdivide the Tidal Canal;
• Preparing Purchase and Sale Agreements and Quitclaim Deeds for ninety (90) individual buyers; and
• Coordinating the simultaneous closing of 91 transactions with the title company, Alameda County Recorder and Alameda County Assessor.
The City Attorney staff provided a status update on negotiations to the City Council in open sessions on April 7, 2015, September 15, 2015, September 20, 2016 and December 6, 2016. At those meetings, the City Council gave further direction to staff and heard public comment regarding the Project. Throughout the course of Phase I, the City Council expressed its full support and provided needed additional funding for the Project.
The Final Map #8337 approved by the City Council on December 6, 2016 subdivided the Army Corps land into ninety-nine (99) individual lots. The Army Corps retained five (5) lots: the Oakland side of the Tidal Canal (Unsurveyed Remainder Area 1), property adjacent to the federally owned Navy Operational Support Center (Lot 3) bridge footings for the High Street Bridge (Lot 97), the Miller-Sweeney Bridge and the Fruitvale Rail Bridge (Lot 98), and the Park Street Bridge (Lot 99). The City retained the open water on the Alameda side (Lots 2 and 96) which will be preserved for open navigation though the Tidal Canal. The City offered at fair market value, as determined by independent appraisal, the remaining 92 lots (Lots 4 through 96) consisting of eight (8) commercial lots and eighty-four (84) residential lots to the adjacent property owners. (As explained in the Discussion Section below, the eighty-four (84) residential lots do not include six (6) additional residential lots which were removed from the Final Map at the direction of the City Council to be addressed at a later date under Phase II.)
Phase I of the Project closed escrow on February 15, 2017. Six (6) of the eight (8) commercial lots and all eighty-four (84) residential lots sold. The purchase price for the residential lots was $10,000 per lot plus normal closing costs up to $1,000, with the City covering normal closing costs in excess of $1,000. The purchase price for the commercial lots were based on their fair market value and ranged from $20,000 - $280,000, with the commercial buyers paying all closing costs. Overall, the City incurred and paid third-party out of pockets expenses of approximately $530,000 and received gross revenue of approximately $1,500,000. The net revenue to the City is just under one million dollars. (This figure does not include internal staff time costs.)
This is a significant accomplishment. The federal government offered this property to the City 26 years ago. It fell to the City Attorney’s Office to untangle this Gordian Knot. Thanks to the strong support from the City Council and the community (especially the Waterfront Homeowners Association), we were able to complete this phase of the Project. Together we can do great things.
discussion
The City Council is now being asked to provide direction to staff on the plan to move forward with Phases II and III of the Project. Phase II of the Project attempts to address a number of long standing issues: (i) cleaning up the encroachments on the three (3) public access points; (ii) disposition of the submerged property (now owned by the City) adjacent to those public access points; (iii) keeping open reasonable and feasible options for increasing public access into the water at one or more of these points; and (iv) clearing title to the docks and piers that have been built and used by the adjacent property owners, consistent with the previously stated goals.
Phase II Proposed Plan: The City of Alameda currently owns three small public properties along Fernside Boulevard between High Street and Fairview Avenue that are designed to provide public access from Fernside Boulevard to the water’s edge. The public access points (dry land) are 10 feet wide at Fernside Boulevard, run approximately 100 feet from the sidewalk to the bulkhead and “bulb out” to approximately 60 feet at the water’s edge. (See the Tentative Map attached as Exhibit A for an aerial view of the public access points.) The portions of Lot 2 at issue (submerged land) include:
• A 108-foot long segment behind the existing City owned public access point extending behind 3227 and 3229 Fernside. This area is between Parcels 64 and 65 on the Tentative Map.
• A 100-foot long segment behind the existing City owned public access point extending between 3267 and 3301 Fernside. This area is between Parcels 75 and 76 on the Tentative Map.
• An 89-foot long segment behind the existing City owned public access point extending behind 3335 and 3341 Fernside. This area is between Parcels 85 and 86 on the Tentative Map.
On July 11, 2016, the Planning Board held a noticed public hearing and unanimously recommended that the City Council approve the Army Corps transfer of the Alameda side of the Tidal Canal to the City. However at that same meeting, community members and the Planning Board raised questions about how the Project would affect the existing public access points and the potential to increase public access into the Tidal Canal such as by building a new public floating dock and pier (or other public access into the water). In light of these concerns, the Planning Board recommended that the Tentative Map be amended to reflect a 35-foot wide public access easement (17.5 feet on either side of the property line) over the submerged lands adjacent to each of the three (3) public access points in order to preserve the opportunity for increased public access into the water in the future.
Staff agreed that preserving the City’s options for future expansion of public access into the Tidal Canal was a good idea. However, at that time, City staff suggested to the Planning Board and recommended to the City Council (at its September 20, 2016 meeting) that an 18-foot wide public access easement (9 feet on either side of the property line) was more than sufficient for this purpose given that the path to the water’s edge is only 10 feet wide. It became evident to the City Council that this Project had renewed community interest in resolving the long standing encroachment issues along the public access points and generated new interest in increased public access into the water. City Council determined that staff needed more time to research the issue of cleaning up the encroachments and preserving options for increasing public access into the Tidal Canal at some future date. Thus, at City Council’s direction, the six (6) lots adjacent to the public access points were removed from the Tentative Map and this aspect of the Project was deferred to Phase II.
Now staff is proposing a 35 foot wide easement (17.5 feet on either side of the property line) over the submerged lots which is what the Planning Board and the community originally recommended. Upon further investigation staff determined that the public access opening is approximately 60 feet wide. This has not changed staff’s recommendation to open all of the public access points, with the exception of the area that currently contains a private pool (see discussion below for more details) and to propose a disposition of the submerged lots with the 35 foot wide easement. As part of the plan to reopen the public access points, the repaving and fencing would be installed concurrent with the close of escrow of the submerged lots. Obviously this cannot occur simultaneously. However, staff wants the City Council to be in a position to consider and approve the Final Map, the real estate transaction and the construction work at the same City Council meeting. In this way, both the buyers and the public can see that the encroachments on the public access points are being resolved at the same time as the real estate transaction.
Staff is now presenting the following recommendations and seeking the City Council direction on Phase II:
• Proceed with the mapping process to add back onto the Final Map the six (6) submerged residential lots that are adjacent to the public access points. (This would entail going back to the Planning Board and the City Council and would occur at public meetings.)
• The six (6) submerged residential lots would be subject to a 35-foot wide public access easement (that is 17.5 feet on either side of the new property line) which would remain on each lot in perpetuity, except that the City would allow private docks and piers owned by the subsequent buyer to remain (including routine maintenance and repair) until such time as the City has accepted a bid for the construction of a new public floating dock and pier (or other public access into the water) at that location, at which time the owner would have to remove their encroaching private dock at no cost to the City.
• The City, at its expense would commence construction to put up fencing concurrently with the close of escrow on the submerged lots to clearly separate the City-owned public access point property from private property. The City would also repave or patch the pathway, as determined by City staff, to improve safety and to help identify the area as a public path. City staff would gather cost estimates for this work.
• Negotiate with the six (6) affected adjacent property owners to explain the terms of the City’s proposal which would tie the disposition of the submerged land to the clearing of the encroachments on the public access points.
• One of the six homeowners has significant physical improvements that encroach into the public access point, as well as significant improvements that extend into the water. Thus, City staff is also prepared to discuss a leasing option for the area encroaching on the public access point given the high cost of demolishing the pool.
• Another one of the six homeowners has added landscaping to the public path which is a significant improvement over the bare concrete. Staff proposes a license agreement wherein the homeowner would continue to maintain the landscaping as opposed to removing it.
• Hold the two (2) remaining commercial lots (Lots 5 and 6) until a suitable buyer comes along (either the current or a future adjacent property owner).
At its March 21, 2017 meeting, the City Council considered and approved a request from the Finance Director to allocate net proceeds of approximately $1.1 million to Phase II and Phase III of the Project. Staff’s goal for Phase II is to craft a fair and equitable transaction where the interests and concerns on both sides are fairly addressed. On the one hand, the public rightfully regains its access to the public access points and retains the option to build a new public floating dock and pier (or other public access into the water). On the other hand, the adjacent property owners who either built their docks and piers on federal property (or bought their homes with existing docks and piers) have the ability to clear title to at least a part of their docks (similar to their neighbors in Phase I) and have a promise that the City will allow them to continue to use their docks until such time as the City actually needs their dock space for a public dock.
It is not a perfect solution but we are not starting from a blank slate. The adjacent property owners are still left with some uncertainty at least as to that part of their dock that will be within the public access easement, while that portion which is outside the easement is clear. However this risk is similar to what they have been living with when the Army Corps had the right to order them to remove their docks at any time. It also acknowledges that although the City could have asked the Army Corps for access into the water at any time in the past in order to build a new public floating dock and pier, it never did so. In this instance, the City can accomplish the goals of the community without completely taking away the historic uses by the adjacent property owners that do not interfere with those goals.
As was true with Phase I, there are also long term code enforcement issues all along the Tidal Canal. The proposed real estate transaction under Phase II does not waive, forgive, approve or condone unlawful activity including code violations. The property owners will be responsible for ensuring that they have or will obtain permits necessary for their waterfront structures.
BCDC approval will likely be required in order to make the improvements contemplated under Phase II. Some in the community have suggested that the City sell the public access points to the adjacent property owners and use the money to build a public dock in a more suitable location. This proposal would be viewed by BCDC (and others) as a reduction in public access and BCDC would surely object.
Phase III Proposed Plan: While Phases I and II are real estate transactions, where the City Attorney’s Office has taken the lead, staff envisions Phase III as a community driven planning process, to be facilitated by the Recreation and Parks and Community Development Departments through public meetings to best determine locations and amenity improvements for public access into the water. Once everyone in the community has had an opportunity to express their views and we have community consensus, staff can bring the matter before the City Council for their consideration and further direction.
FINANCIAL IMPACT
Phase I: Between 2013 and September 2015, the City Attorney’s Office spent approximately $150,000 on outside legal and consultant fees related to this Project, out of the General Fund allocated to the City Attorney’s budget. In September 2015, the City Council authorized $350,000 General Fund funding allocation for the Project going forward. In December 2016, the City Council authorized an additional $75,000 General Fund funding allocation for the Project. The City will be responsible for the maintenance of the open water lots (Lots 2 and 96). As these are submerged lands and the responsibility of dredging the open water remains with the Army Corps, it is anticipated that the maintenance costs for Lots 2 and 96 will be minimal. The City received gross revenue from Phase I of the Project of approximately $1,500,000. The net revenue to the City is just under one million dollars. Thus, Phase I had no net impact on the General Fund.
Phase II: It is difficult to estimate the fiscal impact of Phase II of the Project to the General Fund at this time. The costs of fencing and paving to clean up the encroachments on the public access points are currently unknown. If the City Council approves the disposition of the submerged property to the six (6) adjacent property owners, in conjunction with the clearing of the encroachments, then up to $60,000 in gross sales proceeds may be available to help offset the costs of the transaction and proposed improvements.
In addition, staff plans to pursue disposition of the remaining two (2) commercial lots (Lots 5 and 6). However, the timing of when those sales may occur is unknown. In the meanwhile, the City will incur the carrying costs and liability risk for those two (2) lots until sold. As mostly submerged land, it is anticipated that the maintenance costs for Lots 5 and 6 will be minimal.
Phase III. It is difficult to estimate the fiscal impact of Phase III of the Project to the General Fund at this time. The costs of providing public access into the water is highly dependent on size and location of structures, materials, soils conditions (which may include hazardous materials remediation), timing of construction and costs associated with design and permitting, among other factors. However, it is anticipated that the net proceeds from the sale of the Tidal Canal properties will be used to pay for public access improvements.
MUNICIPAL CODE/POLICY DOCUMENT CROSS REFERENCE
The proposed plan to move forward with Phase II and Phase III of the Project is consistent with the City of Alameda General Plan Open Space and Land Use Policies, as well as the Alameda Municipal Code.
ENVIRONMENTAL REVIEW
A draft Initial Study/Negative Declaration (“IS/ND”) for the project was published on June 1, 2016, in accordance with the California Environmental Quality Act (CEQA), which addresses all potential environmental impacts associated with the proposed dispositions under Phase I and Phase II. The IS/ND concludes that the proposed project would not cause any potentially significant environmental impacts, and accordingly, no mitigation measures would be required as part of the project. On July 11, 2016, at a noticed public hearing, the Planning Board unanimously recommended that the City Council adopt a Final Negative Declaration. On September 20, 2016, at a noticed public hearing, the City Council unanimously approved the Negative Declaration for the Project.
The fencing and paving work along the public access points as part of Phase II and any proposed new floating dock and pier along the Tidal Canal as may be contemplated under Phase III will be subject to separate environmental review and discretionary approval by the City and the appropriate regulatory agencies with jurisdiction.
RECOMMENDATION
A) Accept Status Report on Tidal Canal Project Phase I,
B) Provide Direction to Staff on Moving Forward with Phase II, and
C) Provide Direction to Staff on Moving Forward with Phase III.
Respectfully submitted,
Janet C. Kern, City Attorney
By,
Andrico Q. Penick, Chief Real Estate Counsel
Financial Impact section reviewed,
Elena Adair, Finance Director
Exhibit:
1. Tentative Map dated September 7, 2016