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Recommendation to: 1) Direct Staff to Conduct a Four-Week Request For Qualifications (RFQ) Solicitation Process for the Development of the West Midway Project; 2) Approve Debbie Potter, Community Development Director; Michelle Giles, Base Reuse Manager; Lisa N. Maxwell, Assistant City Attorney; and Eric Levitt, City Manager, as Designated Real Property Negotiators for the West Midway Project; 3) Approve the Finding that the West Midway Project is not subject to the Surplus Lands Act as Amended; and 4) Direct Staff to Include a $350,000 Appropriation for the RESHAP Project Backbone Infrastructure Design in the Mid-Year Budget. (Community Development 819099)
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To: Honorable Mayor and Members of the City Council
EXECUTIVE SUMMARY
The West Midway Project is a 32.5-acre mixed use development site that consists of a market-rate opportunity site (Market Rate Site) and a 9.7-acre consolidated affordable housing site (RESHAP Site). The Market Rate Site is a 22.8-acre mixed-use project that includes 291 residential units and commercial uses, construction of all required backbone and in-tract infrastructure improvements for the property and all of the required backbone infrastructure for the adjacent RESHAP Site. The RESHAP project is a 267-unit, 100% affordable housing development being built by Alameda Point Collaborative, Operation Dignity, and Building Futures with Women and Children (collectively, the Collaborating Partners) and Mid-Penn, a non-profit affordable housing developer. This project is subject to the RESHAP Disposition and Development Agreement (DDA) with the City. The Market Rate Site and the RESHAP Site (the West Midway Project) collectively include 558 units, of which 48% are affordable to very low- and low-income households, commercial uses and backbone and in-tract infrastructure improvements.
Staff recommends that the City Council direct staff to conduct a four-week Request for Qualifications (RFQ) solicitation process for the development of the Market Rate Site portion of the West Midway Project; appoint certain staff to serve as real estate negotiators for the Market Rate Site; find that the West Midway Project is not subject to the Surplus Lands Act as amended; and additionally recommends that the City Council direct staff to include a $350,000 appropriation for the RESHAP Project backbone infrastructure design. The funding would be added in the mid-year budget request if approved to move forward. The draft 2020 RFQ is attached as Exhibit 1.
BACKGROUND
On July 10, 2018, City Council authorized staff to issue an RFQ for development of the Market Rate Site within the West Midway Project at Alameda Point, comprised of a 22.8-acre area within the Main Street Neighborhood sub-district, located south of West Midway and bounded by Main Street on the east, Pan Am Way on the west and West Tower to the south (Exhibit 2).
On September 24, 2018, the City of Alameda (City) received seven qualified responses to the RFQ. Staff and community partners evaluated the responses and interviewed the top four development teams. On February 2, 2019, City Council narrowed the field to two finalists: 1) APP (a partnership of Trammel Crow Residential (TCR) and srmErnst Development Partners (SRM)); and 2) Jamestown/Cypress Equity Investment (CEI).
On March 11, 2019, the two developer teams notified staff that they were having initial discussions about a development partnership and requested additional time to determine if this approach was a viable alternative. On May 6, 2019, the two developer teams submitted a combined response to the supplemental questions, a preliminary program description, and partnership organizational structure.
On May 21, 2019, staff was informed by Jamestown that it was withdrawing from the developer selection process due to uncertainty regarding the viability of commercial development, given the project phasing and increased costs of infrastructure.
On July 16, 2019, City Council selected APP as the developer for West Midway. On September 19, 2019, the City received a letter from APP withdrawing as developer of West Midway to focus on Site A.
DISCUSSION
West Midway Project - Market Rate Site and RESHAP Project
The West Midway Project is a 32.5-acre mixed use development opportunity that includes (a) a 22.8-acre parcel to be made available to a market-rate developer for up to 291 residential units and commercial development, and (b) a parcel that would consolidate the Collaborating Partners’ holdings on 9.7 acres and provide 267 affordable units (200 replacing the existing units that comprise the Homeless Accommodation and 67 additional affordable units). The market-rate developer would be responsible for providing the backbone infrastructure to the RESHAP Project. The collective West Midway Project would include 558 units, of which 48% are affordable to very low- and low-income households, commercial uses and backbone and in-tract infrastructure improvements. Staff previously moved forward with the RFQ to secure a master developer and negotiate a DDA with the Collaborating Partners and Mid-Penn for the RESHAP Project. The DDA with the Collaborating Partners requires the City to issue a RFQ to secure a developer to develop the Market Rate site and construct the required backbone infrastructure for the RESHAP project. The City pursued its obligations under the RESHAP DDA as described above. However, the selected developer withdrew from consideration.
While the City’s obligation under the RESHAP DDA remains to use best commercial efforts to secure a developer for the Market Rate site, since the withdrawal of APP as the selected master developer, the Collaborating Partners have explored potential options for jump-starting funding the backbone infrastructure for the RESHAP Project on their own. One option they looked at was the new State Infill Infrastructure Grant (IIG). After further research, it was determined that their preliminary self-score was too low to qualify to submit an application. Areas where points could not be maximized included public transit that comes at least every 15 minutes during peak commute times (this will happen in the next 8-10 months when “day one” service commences at Site A), lack of density, and the absence of pro-housing policies as defined by the State.
While the Collaborating Partners continue to research other public/private financing for large infrastructure projects, consistent with the terms of the DDA, they have asked the City to re-start the RFQ process for retaining a private sector development team as they do not believe it is feasible to move forward on their own with the RESHAP Project. Given the importance of the RESHAP Project and the Collaborating Partners’ conclusion that a private sector partner is needed to move the overall West Midway Project forward, staff recommends that City Council re-start the Market Rate West Midway Project and select a market rate developer who is capable of seeing the overall West Midway Project to its conclusion.
In the interest of jump starting the RESHAP Project, staff has also identified options that City Council could consider to facilitate advancement of the overall West Midway Project, as further discussed below.
Real Property Negotiators
Under Government Code Section 54956.8, Title 5, Division 2, Part 1, Chapter 9, City Council must identify its real property negotiators for the Market Rate Site, which are recommended to be Debbie Potter, Community Development Director; Michelle Giles, Base Reuse Manager; and Lisa N. Maxwell, Assistant City Attorney, and Eric Levitt, City Manager.
City Assistance for the RESHAP Project
While staff is recommending that City Council re-start the developer selection process for the Market Rate Site, there may also be an opportunity for the City to support and facilitate the advancement of the RESHAP Project by considering and potentially funding the following:
• Demolition of the Commissary. The largest building within the RESHAP site is the Navy Commissary building containing approximately 91,000 sq. ft. The City could fund demolition of this structure and foundation. This would include disconnecting any existing utilities from the building, abatement of any hazardous materials, demolition and disposal of the structure, the foundation, and leveling the site post- demolition. The demolition is estimated to take two to three months. The rough cost estimate of this work is $1.5 million.
• Site Preparation of the RESHAP Project. The City could fund removal of the other remaining structures, surface materials (pavement, concrete), removal or abandoning of existing utilities and leveling of the site post demolition. This would not include grading of the RESHAP site for their future building pads or corrective geotechnical measures. The site preparation is estimated to take three to four months. The rough cost estimate of this work is $1.75 million.
• Backbone Infrastructure Design for RESHAP Project Phase 1. The City could fund preparation of construction documents for the backbone infrastructure necessary to support the RESHAP Phase 1 area. The backbone improvements would include the southern half of Orion Street and future in-tract road. The construction documents would include street and utility improvement plans, dry utility plans, landscape and irrigation plans. This will also require agreements to be executed with Alameda Municipal Power and East Bay Municipal Utility District (EBMUD) to prepare electrical and water system designs, respectively. The construction document preparation is estimated to be one to one and one-half years, primarily due to the EBMUD design process. The rough cost estimate of construction document preparation for this package of backbone infrastructure is $350,000.
The first two items above, together or individually, are substantive costs to the General Fund and can be competed in a relatively short period of time. Due to this the City Manager recommends that this be a consideration only after the City Council completes the RFP process and determines whether there is a need to do either of these projects. The third option, Phase 1 backbone infrastructure design, is less costly ($350,000) but has a long lead time, up to 1 ½ years. If City Council wants to assist the RESHAP Project’s progress, it might consider the catalyst impact of advancing the design work. It could be argued that these initiatives are the responsibility of the market-rate developer, however, it will likely be 18 months before a developer is in a position to initiate this work given the need to solicit a developer, negotiate an agreement, and commence the infrastructure design work or bid required demolition work.
Any further advancement of backbone infrastructure, site improvements or design, would not be recommended in advance of a market-rate developer being selected. The costs associated with advancing development of the RESHAP Project, such as corrective grading measures and completion of the remainder of the backbone improvements, are significant and not recommended as these next steps are highly dependent on the design details of the Market Rate West Midway Project development and RESHAP’s need to secure funding to advance construction.
Lastly, it should be noted that City assistance for the RESHAP Project may be inconsistent with the City’s policy of fiscal neutrality at Alameda Point. However, the beneficiaries of the RESHAP Project extend beyond Alameda Point residents, as 67 new affordable units (in addition to 200 replacement units) will be available to very low- and low-income residents from throughout the City through this project.
ALTERNATIVES
Staff recommends that the City Council direct staff to initiate a four-week RFQ process. This approach ensures that any interested party has an opportunity to submit a proposal, while also encouraging those developers who continue to be engaged to participate in the process. Staff anticipates concluding the selection process and bringing a final recommendation to City Council in the first quarter of 2020.
There are several other options for moving forward with a developer selection process that City Council can consider:
• Select one of the two short-listed developer teams (Catellus or Brookfield) based on their 2018 RFQ submittal/or an updated submittal. Both Catellus and Brookfield and have expressed continued interest.
• If interested, select, on a sole source basis, a recent unsolicited proposal from CEI, co-owner of Site A, developer of Block 9 and co-developer of Block 11, who is interested in doing 500,000 square feet life sciences project in addition to the residential at West Midway.
• Reconsider the three other proposals submitted with the 2018 solicitation that were not short-listed and select one based on their original or updated submittal.
• While staff has found that the proposed West Midway disposition is not subject to the Surplus Lands Act as amended, the City Council could decide to notice the property disposition consistent with the Act, prior to issuing the RFQ.
FINANCIAL IMPACT
There is no financial impact to the City’s General Fund related to the recommendation to re-start the solicitation process for the development of the Market Rate Site. However, if the City Council would like to support and facilitate the RESAHP Project by funding the Phase 1 backbone infrastructure design work, it is estimated to cost $350,000. Those funds would need to be appropriated and will be included in the mid-year budget.
MUNICIPAL CODE/POLICY CODUMENT CROSS REFERENCE
The recommended actions are consistent with the General Plan, Zoning Ordinance, Main Street Specific Plan, Master Infrastructure Plan, and RESHAP DDA.
SURPLUS LANDS ACT
The Surplus Lands Act, as amended by AB1486 (2019), does not apply to the West Midway Project because the property is subject to legally binding agreements that were entered into prior to September 30, 2019. See Government Code Section 54234(a).
ENVIRONMENTAL REVIEW
No environmental review is required as recommending a RFQ process is not a project as defined under California Environmental Quality act (CEQA). CEQA Guidelines, section 15378(a).
CLIMATE IMPACTS
There are no climate impacts associated with the recommendation of a RFQ process. Climate impacts and associated mitigation measures will be addressed during the entitlement phase of the project.
RECOMMENDATION
It is recommended that City Council:
1) Direct staff to conduct a four-week RFQ solicitation process for the development of the Market Rate West Midway Project;
2) Approve Debbie Potter, Community Development Director, Michelle Giles, Base Reuse Manager, Lisa N. Maxwell, Assistant City Attorney, and Eric Levitt, City Manager, as designated real property negotiators for the West Midway project;
3) Approve the Finding that the West Midway Project is not subject to the Surplus Lands Act as amended; and
4) Include a $350,000 appropriation for the RESHAP project backbone infrastructure design as part of the mid-year budget which is being considered this evening.
CITY MANAGER RECOMMENDATION
The City Manager concurs with the staff recommendation due to the importance of this project in continuing the momentum of Alameda Point redevelopment plan.
Respectfully submitted,
Debbie Potter, Community Development Director
By,
Michelle Giles, Base Reuse Manager
Financial section reviewed by,
Elena Adair, Finance Director
Exhibits:
1. Draft 2020 RFQ
2. Project Map
cc: Eric Levitt, City Manager