Title
Recommendation to Approve a Term Sheet for Development of the West Midway Project; Direct Staff to Negotiate a Disposition and Development Agreement with Brookfield Homes and Catellus for Construction of the West Midway Project at Alameda Point; and Authorize the Interim City Manager to Execute the Fourth Amendment to the Exclusive Negotiating Agreement to Extend the Term. (Community Development 29061822)
Body
To: Honorable Mayor and Members of the City Council
EXECUTIVE SUMMARY
On March 9, 2020, the City of Alameda (City) issued a Request for Qualifications (RFQ) for the development of the West Midway Project (Project), a 33-acre mixed-use development project. On March 30, 2020, a joint venture including Brookfield Homes and Catellus (collectively, Developer) submitted a Statement of Qualifications in response to the RFQ. On May 19, 2020, the City Council selected Developer to develop the Project and authorized the City Manager to negotiate an Exclusive Negotiation Agreement (ENA) with Developer. With authorization from the City Council, over the last several months, staff has been negotiating a Term Sheet (Exhibit 1) with Developer. The Term Sheet is designed to identify the key business and financial terms, which staff would use to prepare a Disposition and Development Agreement (DDA). As drafted, the Term Sheet proposes the development of the following items: 362 residential market rate units, up to 67 affordable by design units, 51 moderate-income units, and approximately 10,000 square feet of commercial space. Additional community benefits include: (i) completion of a development pad with the infrastructure to support the RESHAP Project (as defined below), which contains 309 affordable units, and (ii) cash contributions for the Central Gardens Park and for the Main Street Improvements.
By giving direction to staff to negotiate a DDA with Developer consistent with the Term Sheet, the City will have the opportunity to meet a significant portion (approximately 14.7%) of the Housing Element goal of 5,353 units of which 1,482 units are planned on City-owned land at Alameda Point.
BACKGROUND
On March 9, 2020, the City issued an RFQ for the development of the Project. The Project is collectively a 33-acre mixed-use development project initially contemplated by the City’s RFQ to include: (a) approximately 23 acres entitled for up to 291 residential units (Market Rate Project) to be developed by Developer, and (b) approximately 10 acres entitled for 267 units of supportive affordable housing (RESHAP Project) to be developed by an entity consisting of the Alameda Point Collaborative, Building Futures with Women and Children, Operation Dignity and Mid Pen Housing (collectively, the Collaborating Partners). The initial 291 units in the Market Rate Project were to include 260 market rate units and 31 moderate-income units. The market rate units were to include 26 (10% x 260) “affordable by design” units intended to be affordable to households with incomes in the range of 120% to 180% of AMI. Commercial and light industrial development was also permitted in the Market Rate Project.
On March 30, 2020, Developer submitted a Statement of Qualifications in response to the RFQ. On May 19, 2020, the City Council selected Developer to develop the Project and authorized the City Manager to negotiate an ENA with Developer. The City and Developer entered into the ENA effective as of October 6, 2020 (as subsequently amended), pursuant to which City granted Developer exclusive negotiating rights for the Project.
Subsequent to the RFQ, in an effort to meet ABAG/MTC Regional Housing Needs requirements, the City encouraged Developer to add additional housing units to the Market Rate Project increasing the number of market rate units to 429. The additional market rate units require additional affordable units, which are to be provided through a combination of an increase in the number of Moderate-Income units within the Market Rate Project to a total of 51 and an increase in the size of the RESHAP Project to a total of 309 affordable units.
During Developer’s preliminary planning processes, the City requested that the Collaborating Partners and Developer consider moving the RESHAP Project site from the east side of the Project to the west side of the Project, adjacent to Pan Am Way. This adjustment was thought by planning staff to create more synergy between the Project and the Bayport community across Main Street. The City, the Collaborating Partners, and Developer are finalizing an agreement on a new Market Rate Project and RESHAP Project boundaries within the Project.
Developer will provide the infrastructure required to develop the RESHAP Project. The City has deemed development of the West Midway Project a critical piece of the initial phase of Alameda Point’s Main Street Neighborhood.
The State of California has determined that the state is in a housing crisis due to low housing production and the growing homeless population. The RESHAP Project is a critical component of the Alameda Point development and provides meaningful progress towards mitigating the homelessness crisis. The Project will allow the City to continue to meet its obligations as the Local Reuse Authority to provide housing for formerly homeless households as defined by the Legally Binding Agreements in connection with the closure of the Alameda Naval Air Station.
The “Term Sheet” attached as Exhibit 1 demonstrates meaningful progress towards a development deal between the City and Developer and will be used as a guide to address key issues in the DDA to be negotiated by the parties, concurrently with the review and approval of the Development Plan through the City’s planning process.
DISCUSSION
Over the last several months, the City has negotiated a Term Sheet with Developer, which outlines the key business and financial terms of a DDA to be negotiated between the City and Developer. If City Council approves staff moving forward with further work on the Project, the Project will be scheduled to come before the Commission on Persons with Disabilities and the Planning Board to allow both of these bodies, as well as the public, to provide input on planning concepts relative to the Project.
Term Sheet Overview
A summary of the key terms within the Term Sheet and a description of key next steps are provided below:
a. Project Description: The Market Rate Project is proposed to consist of 480 units of which ten percent (10%) shall be affordable by design units and attainable for purchase by households with incomes in the range of 120% to 180% AMI and an additional 10% are for moderate income households with incomes under 120% AMI. The RESHAP Project will provide the 309 units for very low- and low-income households. The table below describes the proposed unit types and counts:
|
Market Rate Project by Income Type |
No. of Units |
|
Market Rate |
362 |
|
Affordable by Design |
67 |
|
|
Moderate Income |
51 |
|
Total Units Proposed by Developer |
480 |
|
|
|
|
RESHAP (Very Low and Low) |
309 |
|
|
|
|
West Midway Project Total Units |
789 |
b. Developer Responsibilities: Developer will be responsible for planning, entitling, financing, developing, and constructing the infrastructure for the Market Rate Project and the RESHAP Project. Developer will convey infrastructure-served building sites to residential and commercial vertical developers who will assume the vertical construction obligations set forth in the DDA for the Market Rate Project.
c. Site A Infrastructure: The Term Sheet provides for a remedy if the Site A developer fails to timely construct a portion of the infrastructure that also serves the Project. If that circumstance occurs, the City can pay Developer to construct the portion of the infrastructure the Site A developer was to construct and if the City does not have the funds to pay Developer, Developer may terminate the DDA or loan the City the required funds with the loan secured by a lien on the future funds the City will receive from the Site A developer or a replacement developer.
d. City Responsibilities: The City will make reasonable efforts to assist Developer in navigating the required entitlement, permitting, and review processes applicable to the Market Rate Project.
e. Term: The term is ten (10) years with an automatic extension for an additional five (5) years, if Developer has timely completed the RESHAP development pad.
f. Phasing: The Project will be developed in three (3) phases, as shown on Exhibit D of the Term Sheet.
g. Infrastructure: Developer shall be responsible for the design, construction and cost of the infrastructure described on Exhibit A of the Term Sheet in accordance with the Master Infrastructure Plan, as amended (MIP). The Project infrastructure include the backbone infrastructure improvements identified in the RFQ, as well as infrastructure improvements subsequently identified by the City and Developer as necessary for the Project.
h. Conveyance: The City will convey the Market Rate Project in phases to Developer or, upon Developer’s request, will directly convey such phases to the applicable vertical builder of such land.
i. Fiscal Impact Study: The City is completing a fiscal impact study of the Project. Developer recognizes that the Project must be fiscally neutral to the City.
j. Community Facilities District (CFD) - Services: The Project will be annexed into CFD 17-1, which is a services CFD to fund transportation demand management (TDM), flood control maintenance and reserves, park maintenance, administrative costs of the CFD, and/or other expenses to ensure that the Project is fiscally neutral to the City.
k. Community Facilities District - Infrastructure Financing: Developer intends to form a community facilities district (West Midway CFD) to fund a portion of the costs of the Project infrastructure. The City and the Developer agree to cooperate in the formation of such a West Midway CFD; the parties prefer that the maximum tax rate shall not exceed 1.8 percent.
l. Predevelopment Funding and Reimbursement: The City has advanced a total of $305,000 to Developer for design, planning, site investigation and testing related to the infrastructure requirements for the Project (Pre-Development Funding). Developer will reimburse the City for the Pre-Development Funding at conveyance of the initial phase of the Market Rate Project property, plus interest, from the date of expenditure.
m. Park Cash Contribution: Developer will make cash contributions totaling approximately $2.5 million for construction of the new Central Gardens Park planned for the Main Street Specific Plan Area and / or other park improvements at Alameda Point. Proportional payments will be made concurrent with conveyance of each phase of Market Rate Project property.
n. Project Labor Agreement (PLA): Developer agrees to use good faith efforts to negotiate a PLA with the building trades in compliance with the City’s policy, though the City acknowledges that the Market Rate Project is exempt from the City's PLA requirements because the Market Rate Project was subject to an existing exclusive negotiating agreement at the time the City's PLA resolution went into effect. Developer is actively and currently negotiating with the trades.
Community Goals and Benefits
The following is a description of important community goals and benefits the City will realize through this Term Sheet and a potential DDA:
Significant Contribution to Address Regional Housing Needs Allocation (RHNA): By giving direction to staff to negotiate a DDA with Developer consistent with the Term Sheet, the City will have the opportunity to meet a significant portion (approximately 14.7%) of the Housing Element goal of 5,353 units of which 1,482 units are planned on City-owned land at Alameda Point.
Continued Development of Alameda Point/Infrastructure/Affordable Housing: Moving forward with the Project will allow Alameda Point to continue to become a vibrant and attractive destination, as envisioned by the City. Continued development also delivers more critical infrastructure and affordable housing to the City.
Financial Contribution for Infrastructure and Parks: In accordance with the MIP, Developer shall pay $45,500 per acre to the City towards the future Main Street improvements. In addition, Developer shall contribute approximately $2.5 million towards the development of parks or other park improvements at Alameda Point.
RESHAP: The Project will include completion of a development pad for the RESHAP Project allowing the Collaborating Partners to construct and deliver 309 very low- and low-income housing units.
Universal Design. The West Midway Project is currently planned such that 49% of the units meet the universal design requirements and 80% of the units are visitable. Pending City Council approval of the Term Sheet, the Developer will present its plans to the Commission on Persons with Disabilities and the Planning Board. The City’s Universal Design Ordinance requires that 30% of the units be universal design units and 100% of the units be visitable units, so the Project will require a waiver for the visitable units.
Parking Ratio. The Project shall provide a parking ratio not to exceed 1.5 spaces per unit. This ratio is in compliance with the City’s parking requirements.
Key Milestones
The proposed West Midway “Milestone Schedule” is attached as Exhibit 2. Some of the key dates are highlighted below:
|
City Council DDA Approval |
December 2022 |
|
Commission on Persons with Disabilities Planning Board Development Plan Review and Decision Permits Issued for Demolition |
Sept./Oct. 2022 November 2022 February 2023 |
|
Demolition, Site Preparation & RESHAP Pad Delivery |
July 2023 |
|
Permits Issued for Backbone Infrastructure |
December 2023 |
ENA Extension
The City and Developer entered into the ENA as of October 6, 2020. Since that date, the City and Developer have been negotiating in good faith; however, more time is needed to negotiate the DDA. The parties desire to amend the ENA to extend the term to provide for a period to negotiate the DDA. If approved by City Council, the term for negotiating the DDA will be extended for six months to January 6, 2023 with the option to extend up to two (2) additional periods for up to three (3) months each at the discretion of the Interim City Manager.
Significant Next Steps
If the City Council approves staff’s recommendation, City staff and Developer, will immediately commence working together on the following key tasks:
• Negotiation of a DDA that builds upon the key terms contained in the Term Sheet.
• Seek input from the Commission on Persons with Disabilities on the Project’s progress towards complying with the City’s Universal Design Ordinance.
• Preparation of a Development Plan and any other relevant entitlements for review and approval by the Planning Board.
• Return to City Council for approval of the DDA.
The Term Sheet does not obligate the City to the terms described in this report or to ultimately execute a DDA. Instead, City Council retains full discretion to direct staff to negotiate different or additional terms or to elect not to proceed with the Project. Prior to staff seeking City Council approval of the DDA, we will return with an update on the progress of the DDA negotiations and to get feedback on the negotiated terms at that time.
ALTERNATIVES
• Approve the proposed Term Sheet with Developer, with such changes as City Council may direct, and direct staff to negotiate/prepare the DDA, Development Plan and related planning documents.
• Terminate negotiations with Developer.
FINANCIAL IMPACT
The proposed action of approving the proposed terms and directing staff to negotiate a DDA based on the Term Sheet has no fiscal impact. Should a project be developed that is consistent with the terms, staff will comply with the City’s overall policy of fiscally neutral redevelopment at Alameda Point (Resolution No. 13643, November 5, 2003).
MUNICIPAL CODE/POLICY DOCUMENT CROSS REFERENCE
This action does not affect the Alameda Municipal Code and does not entail a binding project approval. Further approvals will be evaluated against planning and policy documents such as the Main Street Neighborhood Specific Plan, and the RESHAP Development Plan.
ENVIRONMENTAL REVIEW
On February 4, 2014, per City Resolution No. 14891, the City Council certified a Final Environmental Impact Report (FEIR) under the California Environmental Quality Act (CEQA), California Public Resources Code Section 21000 et seq., and adopted written findings, a Statement of Overriding Considerations, mitigation measures, and a Mitigation Monitoring and Reporting Program (MMRP) for the Alameda Point Project, including the Town Center Plan area, which contains Site A (Alameda Point EIR) (State Clearinghouse No. 201312043).
Additionally, on December 1, 2021, per City Resolution No. 15841, the City Council certified a FEIR under CEQA, and adopted written findings, a Statement of Overriding Considerations, and a MMRP for the General Plan Amendment to Update the Alameda General Plan (General Plan Amendment EIR) (State Clearinghouse No. 2021030563).
Pursuant to CEQA Guidelines sections 15162 and 15163, none of the circumstances necessitating further CEQA review are present with respect to either the Alameda Point EIR or the General Plan Amendment EIR. The proposed project likely would not require major revisions to the Alameda Point EIR or the General Plan Amendment EIR due to new significant impacts or due to a substantial increase in the severity of the significant environmental effects. There have been no substantial changes with respect to the circumstances under which the project would be undertaken that would require major revisions of the Alameda Point EIR or the General Plan Amendment EIR due to new or substantially increased significant environmental effects. Further, there has been no discovery of new information of substantial importance that would trigger or require major revisions to the Alameda Point EIR or the General Plan Amendment EIR due to new or substantially increased significant environmental effects. For these reasons, no further environmental review with respect to either the Alameda Point EIR or the General Plan Amendment EIR is likely required. As project deal terms become more crystalized, staff will continue to evaluate potential environmental impacts and may undertake focused analysis as appropriate, prior to final City Council approval.
SURPLUS LANDS ACT
The negotiations with Developer are permitted because the Project-related properties are “exempt surplus land” under the Surplus Lands Act (SLA). In February 2020, the City put the Project-related properties out to an open, competitive bid pursuant to the procedural and affordability requirements of Government Code Section 54221(f)(1)(F)(i). No entities other than the Developer responded to the bid. Accordingly, the City may dispose of the Project-related properties because the disposition of the Project-related properties is not subject to the SLA.
CLIMATE IMPACT
This action has no anticipated climate impacts. As part of the DDA and other discussions with the selected development team, the City’s Climate Action and Resiliency Plan goals will be explored.
RECOMMENDATION
Staff recommends that the City Council:
1. Approve a Term Sheet for development of the West Midway Project;
2. Direct staff to negotiate a Disposition and Development Agreement with Brookfield Homes and Catellus for construction of the West Midway Project; and
3. Authorize the Interim City Manager to execute the Fourth Amendment to the ENA to extend the term.
Respectfully submitted,
Lisa Nelson Maxwell, Community Development Director
By,
Lisa Fitts, Interim Base Reuse Manager
Financial Impact section reviewed,
Margaret O’Brien, Finance Director
Exhibits:
1. West Midway Term Sheet with exhibits
2. West Midway Milestone Schedule
3. Fourth Amendment to the Exclusive Negotiating Agreement
4. ENA and Amendments 1-3
cc: Dirk Brazil, Interim City Manager