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File #: 2017-4363   
Type: Regular Agenda Item
Body: Planning Board
On agenda: 5/22/2017
Title: Public Hearing to Consider a Development Plan Amendment for Alameda Point Site A.
Attachments: 1. Exhibit 1 - Summary of Progress Made on Site A Project since Execution of the DDA in June 16, 2015, 2. Exhibit 2 - Alameda Point Partners’ Response to City’s Notice of Default, dated April 12, 2017, 3. Exhibit 3 - Draft Site A Development Plan Amendment, 4. Exhibit 4 - Planning Board Resolution Amending the Site A Development Plan

Title

 

Public Hearing to Consider a Development Plan Amendment for Alameda Point Site A.

 

Body

 

To: Honorable President and Members of the Planning Board

 

From:                     Jennifer Ott, Base Reuse and Transportation Planning Director

Andrew Thomas, Assistant Community Development Director
                     

 

Re: Public Hearing to Consider a Development Plan Amendment for Alameda Point Site A.  The 2014 Final EIR evaluated the environmental impacts of redevelopment and reuse of the lands at Alameda Point consistent with the Town Center Plan, which included Site A. None of the changes proposed by the Plan Amendment change the overall amount or intensity of development and no further review is required for these amendments.

 

BACKGROUND

In June 2015, the City Council unanimously approved the Site A Development Plan and a Disposition and Development Agreement (DDA) with the private developer, Alameda Point Partners (APP), for a 68-acre area within Alameda Point that extends generally from the Main Street entrance of Alameda Point to the eastern edge of the Seaplane Lagoon.  Site A includes 800 housing units (200 affordable), 600,000 square feet of commercial development, and extensive parks and utility infrastructure (Site A Project).  The Site A Project represents the first major public/private development at Alameda Point since the base closed and lost 18,000 jobs in 1997.  The DDA contemplates that the Site A Project will be constructed in three phases over the next 15 years. 

Since the approval of the Site A Development Plan and DDA, APP and its team of architects, engineers, and design professionals, in coordination with City staff, have expended significant staff and financial resources making extensive progress on implementing the Site A Project over an 24-month period. APP has expended $15 million to date in equity funds on all of these predevelopment efforts that have occurred over the last 24-month period.  A summary of the progress made on the Site A Project is provided in Exhibit 1.

On January 17, 2017, the City Council approved an amendment to the DDA to extend the closing on the Phase 1 property (Phase 1 Property) closing by four additional months from December 12, 2016 to April 11, 2017 (Phase 1 Closing Date) due to the rising cost and complexity of the project requiring more time to complete property due diligence items and to finalize financial commitments.  Although significant efforts were made by APP to finalize these commitments, APP did not meet the requirements of the DDA necessary to accept conveyance of the Phase 1 Property by the Phase 1 Closing Date of April 11, 2017 and did not opt to make the payment to extend the date, which is allowed under the DDA.  APP stated that they could not close on the Phase 1 Property because APP could not underwrite a financially feasible project due primarily to the extraordinary escalation and volatility in construction costs since execution of the DDA without commensurate revenue appreciation.   In other words, the projected proceeds from land sales (the difference between development revenues and costs), especially for the apartment rental blocks (Blocks 9 and 11), are fluctuating so greatly that there is significant risk that these revenues may not sufficiently cover the cost of infrastructure. 

 

As a result of the uncertainty and APP’s inability to meet the requirements of the DDA, the City did not transfer the Phase 1 Property to APP, and APP is in default under the DDA. The City issued a Notice of Default to APP on April 12, 2017.  In response to the City’s Notice of Default, APP sent a letter to the City outlining an explanation for the default and a detailed plan for improving the feasibility of the Site A Project and curing their default under the DDA (Exhibit 2).  Consistent with the DDA and APP’s letter, APP committed to commencing the cure to their default within the required 30 days and curing the default within the maximum 120 days allowed under the DDA, which essentially results in a new Phase 1 Closing Date of August 9, 2017.  If APP does not close on the Phase 1 Property by August 9, 2017, the DDA terminates. 

 

If the DDA terminates, the Site A Project does not move forward and the City would most likely seek interest from new developers.  If the City Council decided to move forward with a new developer selection process, it would take 3-4 years to reach the point the City is with APP today assuming no delay related to an economic downturn over that time period, which would be an optimistic assumption.  During this time, the existing substandard wastewater (sewer), storm drainage, and drinking water, and transportation facilities would continue to deteriorate. The delay would also represent a major setback for the funding of the Alameda Point Ferry Terminal, since $10 million of the funds are being supplied by APP upon closing of the first phase.   Additionally, staff would expect that a new developer will likely experience similar cost challenges and would require  changes to the design, uses, amenities and type of housing currently planned as part of the Site A Project. Staff would anticipate that a new developer would likely propose more townhomes and/or single family homes, fewer apartments, less rehabilitation and reuse of existing structures, and/or less waterfront amenities.

 

Since sending their letter, APP has commenced the cure within the 30-day timeframe by submitting proposed changes to the Site A Development Plan and DDA to the City that significantly enhances the financial underwriting of the project and improve the potential that APP will meet the financing requirements in the DDA and be able to close on the Phase 1 Property by August 9, 2017.  These changes require that the Planning Board approve an amendment to the Site A Development Plan (Plan Amendment) (Exhibits 3) and that the City Council approve an amendment to the DDA, which is currently under discussion with City staff and slated for City Council action in July. 

 

DISCUSSION

 

The following staff report provides a summary of the proposed changes to the Development Plan and DDA requested by APP and staff’s assessment of the benefits and risks to the City regarding these changes.  Although, the Planning Board is responsible for making a decision about the proposed Development Plan amendment and the City Council is solely responsible for the DDA amendment; this report summarizes both of the proposed amendments so that the Board and the public understand the full scope of the proposed amendments. 

 

Summary of Development Plan and DDA Amendments

 

Amount of Development. The amendments do not propose any change to the overall amount of development and amenities included in the Site A Project, which will still include 800 housing units (200 affordable), 600,000 square feet of commercial development, and approximately 15 acres of publicly accessible parks and open space.

 

Transportation Services and Improvements. The amendments do not propose any change to the amount or timing of the transportation services and improvements proposed as part of the Site A Project.  As a result, if APP closes on the Phase 1 Property, APP will continue to provide the City with $10 million for construction of the Seaplane Lagoon Ferry Terminal, which completes the capital funding for the terminal with the $8.2 million grant the City recently received from the Alameda County Transportation Commission.  Construction could commence as early as 2018 and operations as early as 2019.  Additionally, there is no change in the projected amount of approximately $600,000 per year in special tax revenue from the Site A Project to support transportation services, such as 15-minute bus service in the peak hours.

 

Phasing Plan. The amendments do propose a change to the phasing of the Site A Project by switching Phases 2 and 3 so that the land south of West Atlantic Avenue that the City does not currently own and contains environmental restrictions on ground floor residential use becomes Phase 3 and the land north of Phase 1 that the City does currently own becomes Phase 2, as depicted on Exhibit 3.  This change allows APP to accelerate a Phase 2 development so that they do not have to wait for the Navy to transfer the land to the City and they are able to spread the cost of the Phase 1 infrastructure over a larger development program, which helps improve the feasibility of the Site A Project.  All of the Phase 3 streets and parks would be moved to Phase 2 and all of the Phase 2 streets and parks would be moved to Phase 3, as presented on Exhibit 3.  Completion of Phase 2 infrastructure would be accelerated by nearly four years.

 

Relocation of Housing Units. The amendments propose a relocation of the housing units currently planned for Blocks 1a, 1b and 3 on land south of West Atlantic Avenue with ground floor environmental restrictions primarily to Block 15; and a relocation of approximately 160,000 square feet of commercial space from Block 15 to Blocks 1a, 1b, and 3, as shown on Exhibit 3.  This relocation moves housing units off of land with environmental restrictions onto land that the City currently owns with no ground floor environmental restrictions so that the revised Phase 2 can be accelerated, which improves the feasibility of the Site A Project. 

 

Moderate Income Housing Units. The amendments propose to move 70 of the 72 moderate income units will be moved to Block 15 in Phase 2, as shown on Exhibit 3.  Two of the moderate income units are planned for Block 8 in Phase 1, along with all of the 128 very-low and low-income affordable units.  The current Site A Development Plan allows the moderate income units to be interspersed among blocks in both Phases 1 and 2 without assigning a specific number of moderate units to particular blocks, including Blocks 1, 3, 6, 7, 9 or 11.  The DDA allows APP to assign the moderate units to specific blocks prior to the sale of the first parcel to a vertical developer.  APP now contemplates constructing a 70-unit housing project on Block 15 in Phase 2 in partnership with the Alameda Unified School District (AUSD) targeted towards AUSD employees (i.e., teachers and maintenance and service staff) that meet moderate income affordability requirements (AUSD Project).  AUSD recently issued a Request for Proposals from developers for employee housing, which APP submitted a response to for Block 15 in Site A.  The AUSD Project also improves the feasibility of the Site A Project by leveraging public financing mechanisms through AUSD to help pay for the moderate units without any financial impact to AUSD, which increases the land value associated with Blocks 9 and 11 that are no longer responsible for supporting moderate income units.

 

Timing of Sports Complex Payment.  The proposed amendments do include a change to the timing for the $5 million Sports Complex payment. The Phase 1 project is not feasible with the full $5 million payment for the Sports Complex currently required by the DDA to be fully paid by the Phase 1 Closing Date.  As a result, APP proposes to pay $1 million of the Sports Complex Payment in Phase 1 and the remaining $4 million by the outside closing date for Phase 3, which is currently projected for March 2023 in the DDA.  As the Recreation and Park Director is planning and constructing 35 acres of new parks and open space elsewhere in the City, there is not an immediate need for the $4 million payment for construction of an initial phase of the Sports Complex, and the $1 million is sufficient to start any planning and design process for the Sports Complex in the next several years.

 

Assessment of Benefits and Risks

 

Benefits The following provides a summary of the benefits to the City of the proposed amendments:

 

                     Phase 1 Infrastructure and Amenities. If these changes are not made and Phase 1 of Site A does not move forward, all of the benefits and amenities included in Phase 1 will not be realized or at least delayed, including the 130-unit affordable project for low- and very-low income households, 8 acres of parks and open spaces, the $10 million funding for the Seaplane Lagoon Ferry Terminal, and major gateway and backbone utility improvements.  The delay of these improvements jeopardizes the development of the Enterprise District, Adaptive Reuse area and the Main Street Neighborhood, including the reconstruction of the supportive housing units, which are all dependent on the significant infrastructure efficiencies and benefits provided by Phase 1 of the Site A Project.

 

                     Expediting Street Improvements Benefiting Main Street and Adaptive Reuse Area. As shown in Exhibit 3, Street Phasing, expediting the development of Block 15, expedites the construction of streets to support Phase 2 in Site A, the first phase of the Main Street Neighborhood, and the Adaptive Reuse area to the west, which includes all of Main Street and West Tower Street adjacent to Site A and the extension of Pan Am Way between Site A and the Historic District in addition to the streets internal to Site A north of West Atlantic (Coronado, Ardent, Orion, and Skylark)

 

                     Placing Housing on Cleaner Property. The changes to the Phasing Plan and the relocation of housing units to Block 15 removes  planned housing from land that is environmentally contaminated and will have  ground floor environmental restrictions and moves it  to land currently owned by the City and  without environmental restrictions.  This allows the housing proposed for Phase 2 to be developed on cleaner property and on an accelerated timeline.

 

                     Alameda Point Land Use Planning. Residential development on Block 15 is compatible with the residential development immediately adjacent to the south on Blocks 6, 7, and 8 and the residential zoning to the north in the Main Street Neighborhood.  Commercial development on Blocks 1 and 3 is compatible with the commercial zoning in the Enterprise District (Site B) directly to the south of Blocks 1 and 3.

 

Risks The following provides a summary of the risks to the City of the proposed amendments:

 

                     Feasibility of Phase 2 and Moderate Income Units. The financial feasibility of the revised Phase 2 development depends on the AUSD Project financing the 70 moderate income units on Block 15.  If the AUSD Project is not successful, there are an insufficient number of market rate units on Block 15 in Phase 2 to subsidize the construction of the 70 moderate income units and Phase 1 cannot financially support subsidizing the moderate income units.  As a result, there is a risk to the City that Phase 2 cannot meet its financing requirements prior to transfer of the Phase 2 land, the land is not transferred to APP, and the moderate income units are not constructed on the anticipated time line.  While APP is exploring contingencies if the AUSD Project does not occur, there is not a straightforward solution to this issue at this point. 

 

                     Feasibility of Phase 3 and Sports Complex Payment.  As described above, $4 million of the Sports Complex payment is being postponed to the Phase 3 commercial phase.  While APP has not yet provided a detailed proforma of the revised Phase 3 in time for the release of this staff report, the financial feasibility of Phase 3 depends on the market for new commercial development, which is less certain than the residential market. . As a result, there is a risk that there  will not be sufficient commercial land value to cover the cost of the Phase 3 new commercial construction, infrastructure and the $4 million Sports Complex payment.

 

 

After weighing the above benefits and risks to the City of APP’s proposed changes and the likely alternative if the Site A Project fails, staff recommends approving the proposed Plan Amendment.  In sum, the benefits of the infrastructure, affordable housing and parks provided in Phase 1 outweigh the risks of Phases 2 and 3 not being realized, as currently envisioned.

 

ENVIRONMENTAL REVIEW

 

On February 4, 2014, the City of Alameda certified the Alameda Point Final EIR in compliance with the California Environmental Quality Act (CEQA).  The Final EIR evaluated the environmental impacts of redevelopment and reuse of the lands at Alameda Point consistent with the Town Center Plan, which included Site A. None of the changes proposed by the Plan Amendment or DDA Amendment change the overall amount of development and therefore, no further review is required for these amendments. 

 

MUNICIPAL CODE/POLICY DOCUMENT CROSS REFERENCE

 

These actions are consistent with the approved General Plan, Zoning Ordinance, Town Center Plan, and MIP.

 

RECOMMENDATION

 

Hold a Public Hearing and approve the attached resolution approving the recommended amendments to the Site A Development Plan.

 

 

Respectfully submitted,

 

 

 

Andrew Thomas, Assistant Community Development Director

 

Jennifer Ott, Base Reuse and Transportation Planning Director

 

Exhibits:

1.                     Summary of Progress Made on Site A Project since Execution of the DDA in June 16, 2015

 

2.                     Alameda Point Partners’ Response to City’s Notice of Default, dated April 12, 2017

 

3.                     Draft Site A Development Plan Amendment

 

4.                     Planning Board Resolution Amending the Site A Development Plan