Title
Introduction of Ordinance Authorizing the Interim City Manager, or Designee, to Execute a Sixth Amendment to the Disposition and Development Agreement (DDA) between the City of Alameda and Alameda Point Partners, LLC for the Site A Project at Alameda Point; and
Introduction of Ordinance Authorizing the Interim City Manager, or Designee, to Execute a First Amendment to the Development Agreement (DA); and
Adoption of Resolution Approving Eden Housing, Inc. as the Qualified Affordable Housing Developer for Development of Block 10B of Site A at Alameda Point and Authorizing the Interim City Manager, or Designee, to Negotiate and Execute Agreements and All Other Necessary Documents to Effect Said Development. (Community Development 29061822)
Body
To: Honorable Mayor and Members of the City Council
EXECUTIVE SUMMARY
At the May 17, 2022 City Council meeting, City Council approved a “Term Sheet” staff had negotiated with Alameda Point Partners, LLC (APP) outlining the key business and financial terms of a Disposition and Development Agreement (DDA) amendment and directed staff to proceed with negotiating an amendment to the DDA (DDA Sixth Amendment). The DDA and Amendments 1-5 are attached to this staff report as Exhibit 1. The over-arching goal of the DDA Sixth Amendment is to revise the land use plan previously put in place for the balance of “Phase 1” of the Site A project that has not yet been developed, as well as revising the land use plan for all of “Phase 2” of Site A.
Staff has negotiated a DDA Sixth Amendment with APP that is consistent with the Term Sheet and is before City Council seeking approval of the DDA Sixth Amendment, so that the planning and development work on the balance of Phase 1 and all of Phase 2 may continue. The draft DDA Sixth Amendment is attached to this staff report as Exhibit 2.
Staff has also negotiated with APP an Amendment to the Development Agreement (DA First Amendment). The DA First Amendment is consistent with the Term Sheet and staff are also before City Council seeking approval of the DA First Amendment. The draft DA First Amendment is attached to this staff report as Exhibit 3 and the DA is included as Exhibit 4.
On July 25, 2022, the Planning Board approved an amendment to the Site A Development Plan. The Site A Development Plan amendments are consistent with and implement the recommended DDA Sixth Amendment and DA First Amendment.
BACKGROUND
On August 6, 2015, the City of Alameda (City) entered into a DDA with APP for the development of Site A, 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. Under the DDA, Site A was originally planned to include 800 housing units (200 affordable units), 600,000 square feet of commercial development, and extensive parks and utility infrastructure. Site A is comprised of three phases, Phase 1, Phase 2 and “Phase 3.”
The DDA has been amended five times since it was approved in 2015:
• First Amendment: Approved on January 17, 2017; extended the outside date for the acquisition of Phase 1 four months until April 11, 2017.
• Second Amendment: Approved on July 5, 2017; allowed APP to make a $1.4 million extension option payment to extend the date for the acquisition of Phase 1 to April 9, 2018; incorporated amendments to the development plan approved by the Planning Board that swapped Phases 2 and 3 and moved residential in the original Phase 2 to what is now Phase 2 and accelerated the outside conveyance date for Phase 2 by four years from August 24, 2022 to October 1, 2018.
• Third Amendment: Approved on March 7, 2018; de-linked the obligation to secure tax credit reservations for the affordable housing projects from the construction of market rate housing for Phase 1 only [prior to the Third Amendment, the DDA allowed the City to withhold building permits for any market rate units in excess of 395 (the metering requirement) if the affordable housing developer had not received tax credit reservation for the affordable housing units]; and stipulated that the Phase 2 and 3 conveyances could not go forward without tax credit reservations for both affordable housing projects.
• Fourth Amendment: Approved October 10, 2018; allowed APP’s extension payment for the Phase 2 Outside Closing Date to be applied to the Ferry Terminal Payment; revised milestone schedule; and revised the language in the Third Amendment to remove the receipt of a tax credit reservation for the affordable units as a condition of conveyance for Phase 2.
• Fifth Amendment: Approved October 10, 2018; applied solely to the Block 8 affordable housing site; revised milestone schedule for the affordable housing development; and required the affordable housing developer to provide alternative sources of financing for the affordable housing if certain public funds are not allocated to the affordable housing developments.
On May 17, 2022, the City Council approved the Term Sheet and directed staff to proceed with negotiating the DDA Sixth Amendment with APP.
On June 16, 2022, the Commission on Persons with Disabilities (Commission) held a public meeting to review the proposed waiver for Site A to allow the 100% visitability requirement to be reduced to 70% visitability. After a thorough conversation, the Commission stated their conditional support for the waiver, with the understanding that:
• APP will work with City staff to maximize opportunities for visitabilty in more units through improvements such as adaptable internal stairs, which make it easier for a future homeowner to modify the unit to accommodate a visitor with disabilities.
• City staff will work with the Commission and the Planning Board to develop amendments to the Universal Design Ordinance to reduce the number of waivers required for future City projects.
On July 25, 2022, the Planning Board held a public hearing and approved the necessary amendments to the Site A Development Plan for the revised land use plan and recommended approval of the DA First Amendment. As amended by the Planning Board, the Site A Development Plan ensures that a minimum of 610 additional residential units will be constructed in Phase 1 and Phase 2, that a minimum of 25% of the units will be deed restricted for very low, low or moderate income households, and that a minimum of 300,000 square feet of commercial floor area will be provided between Phase 2 and Phase 3.
DISCUSSION
On May 17, 2022, City Council approved the Term Sheet staff had negotiated with APP outlining the key business and financial terms of a DDA amendment and directed staff to proceed with the DDA Sixth Amendment negotiations. The Term Sheet indicated that the project to be constructed on the balance of Phase 1 (Phase 1B) and on Phase 2 would include (i) a total of 416 new residential market-rate units and 194 affordable units at very low-, low- and possibly some moderate-income levels, and (ii) that the phasing plan for the infrastructure would be modified as described below, and that Phase 2 will be developed in three subphases referred to as “Subphase 2.1”, “Subphase 2.2” and “Subphase 2.3” (collectively, the Revised Project).
|
Phase/Subphase |
Blocks |
Product |
Developer Contribution |
|
Phase 1B |
1A & 10A |
108 market rate townhomes |
$50k per very low- and low-income unit (Infrastructure for Phase 1B is already constructed.) |
|
|
10B |
1 Retail space (10,000 sf) |
|
|
|
|
91 very low- and/or low-income units* |
|
|
Subphase 2.1 |
15 |
147 market rate townhomes |
West Tower Infrastructure |
|
Subphase 2.2 |
14, 16, 17A |
161 market rate townhomes |
Backbone Infrastructure for applicable blocks |
|
|
17B |
103 very low- and/or low-income units* |
|
|
Subphase 2.3 |
12, 13 |
Community serving facility, such as a performing arts center |
Backbone infrastructure for a community serving facility |
|
|
19 |
Waterfront park (second phase) |
Waterfront park constructed |
* APP reserved the right to convert a portion of the very low- or low-income units in each phase to moderate-income units provided that the number of converted units is consistent with the requirements of the Renewed Hope Settlement Agreement and the City's Inclusionary Housing Ordinance.
The Term Sheet also indicated that as part of the DDA Sixth Amendment, APP would select the Qualified Affordable Housing Developer. APP contacted five affordable housing developers about the opportunity to construct 90 affordable units on Block 10B. Of the five developers, three completed an initial underwriting exercise, where they provided early indications of unit mix, affordability thresholds and sources of funds. Based on the results of that review, APP shortlisted two of the prospective developers: Eden Housing and Omni America LLC. APP has elected to proceed with Eden Housing, the nonprofit, affordable housing developer that built Corsair Flats and The Starling, on Block 8 of Site A.
Lastly, since May 2022, when the Term Sheet was presented to Council, the real estate market has taken a dramatic downturn. Originally, APP anticipated marketing and selling Block 10B during early 2023, which is not currently realistic in light of market shifts. As a result, in the Milestone Schedule attached to the Sixth Amendment, this milestone date has been extended by a year, which will cause commensurate extensions in milestones that follow in sequence. These changes will not impact the redevelopment of Block 10B with affordable housing to be constructed by Eden Housing, Inc.
Community Goals and Benefits
If approved, the DDA Sixth Amendment and the DA First Amendment offers the City the following important benefits:
Significant Contribution to Address RHNA: The City will have the opportunity to meet a significant portion (approximately 25%) of its RHNA at Alameda Point. Not proceeding with a DDA amendment will end the negotiations with APP. Identifying a new developer for Site A Phase 2 and negotiating a new term sheet with the new developer will require at least two (2) years. An additional two (2) years will be necessary for the new developer to (i) negotiate and sign a new development agreement and disposition and development agreement with the City, (ii) complete construction drawings, and (iii) begin work on the Phase 2 infrastructure. The West Midway/RESHAP project to the immediate north of Site A Phase 2 may be required to wait for Site A Phase 2 infrastructure. As a result, this four (4) year delay will reduce the City’s ability to plan for and reasonably expect the construction of housing over the next 8 years from 1,482 units to approximately 700 (approximately half the units in half the time), and the draft Housing Element will need to be adjusted. The number of units at Alameda Point will be reduced by about 700 units and the number of housing units in the residential areas of Alameda will be increased by about 700 units.
Continued Development of Alameda Point: Alameda Point will to continue to become a vibrant and attractive destination, as envisioned by the City, while avoiding material delays in development. Continued development also delivers more critical infrastructure and affordable housing to the City.
Affordable Housing Units: The Revised Project will offer 194 new affordable housing units to local residents.
Community Facility: The DDA Sixth Amendment will obligate APP to complete a development pad and the infrastructure for a community facility, such as a performing arts center on Blocks 12 and 13, anchoring the W. Atlantic corridor and waterfront park.
Kayak Launch: APP will be required to construct a kayak launch as part of Phase 2 of the waterfront park.
$300,000 Contribution: A cash contribution of $300,000 will be made by APP for use in connection with future Site A improvements or other Recreation and Park Department facility, as elected by the City in its discretion.
Condominium Map: For all market-rate multifamily projects that are constructed in Phase 1B and Phase 2, APP will record against the property a condominium map, as approved by the Department of Real Estate, which will allow APP to sell or rent the units depending on market demand.
Key Provisions
The DDA Sixth Amendment includes the following key provisions designed to mitigate risk to the City and ensure that critical elements of the Revised Project and important community benefits are realized.
Ensuring Affordable Housing is Constructed: The proposed revised land plan for Phase 2 provides for 194 deed restricted affordable housing units (31% of the 610 units). In combination, Phase 1 and Phase 2 will meet the City’s 25% affordable housing commitments.
To ensure that these affordable units are constructed, APP will provide a subsidy of $50,000 for each low- and very-low income unit. As a further safeguard, this subsidy will be paid by APP prior to commencement of construction of the affordable housing project on a pro-rata basis each time APP pulls a market-rate building permit for a unit in Blocks 14, 16 and 17A. This subsidy will remain in escrow until APP has identified a qualified affordable housing developer and this affordable housing developer has secured necessary financing, at which time the subsidy will be paid to such developer.
Ensuring All Infrastructure and Phase 2 of the Waterfront Park are Constructed: Following conveyance to APP of Phase 2 and during 2023, APP will undertake all planning and engineering work for all of the infrastructure for Phase 2, including the balance of the waterfront park. This planning for all of Phase 2 infrastructure will occur immediately following conveyance even though, as described in the phasing/subphasing chart, the infrastructure will be constructed by APP in three subphases. This infrastructure planning work will require approximately one year to complete and will cost at a minimum approximately $12,000,000. The “Milestone Schedule” attached to the DDA Sixth Amendment identifies dates by which this Phase 2 planning work will be accomplished. The significance of this Phase 2 planning related milestone is that if APP defaults on its obligation to construct the infrastructure for any of Blocks 12, 13, 14, 15, 16 or 17 and/or to complete Phase 2 of the waterfront park, the DDA Sixth Amendment will provide for an assignment to the City all rights in and to the improvement plans and related construction contracts for Phase 2. This will allow the City to seamlessly bring in another developer to take on and complete these obligations if necessary.
Phase 1B/$1 Purchase Option: APP will grant the City a streamlined purchase option for Block 10B at a purchase price of $1. The City may exercise the purchase option if APP fails to meet any of the Milestone Schedule dates for Block 10B, plus the applicable cure period, or if the DDA is terminated for any reason. APP will not encumber Block 10B with any debt. The City’s purchase option will remain in effect until APP conveys Block 10B to the affordable housing developer. The purchase of Block 10B through this option will allow the City to quickly and efficiently take title to the property, identify an alternative developer for the affordable units, and efficiently proceed with development, particularly since the infrastructure for Block 10B is already complete. In addition to the land, the City will have collected the affordable housing subsidy of $50,000 for each low- and very-low income unit from APP, which can be used to assist an affordable housing developer to construct the affordable units.
Phase 2/$1 Purchase Option: APP will grant the City a streamlined purchase option for Phase 2 at a purchase price of $1, which option may be exercised by the City if APP is delayed in performance of any milestone, plus the applicable cure period. APP will not encumber Blocks 14, 16 or 17 with debt, but will encumber Block 15 to pay for the Phase 2 planning work, which as noted above, is anticipated to cost approximately $12,000,000. As a result, if the City exercises this purchase option, it would obtain Blocks 14, 16 and 17 for $1, but would need to repay to the lender the loan secured by Block 15. In exchange for this payment, the City would receive the ownership and benefit of all the planning work product and an assignment of any related contracts. The City’s purchase option will terminate with respect to any portion of Phase 2 that is transferred to an unaffiliated third party or that is subject to (i) a sub-phase final map and public improvement agreement, and (ii) vertical completion assurances. Staff notes that Blocks 12 and 13 and Phase 2 of the waterfront park have not been discussed in this provision, as ownership of these parcels will remain with the City and will not be transferred to APP.
Backbone Infrastructure Impacting West Midway/RESHAP Project - To avoid causing delay to the West Midway/RESHAP project, APP will prioritize completion of the infrastructure required for these projects. As part of Subphase 2.1, APP will complete the infrastructure for Block 15, which benefits the initial phase of the West Midway/RESHAP project. As part of Subphase 2.2, APP will complete the infrastructure for Blocks 14, 16 and 17, which benefits the later phase of the West Midway/RESHAP project. The prioritization of the Block 15 infrastructure, in particular, will allow the West Midway/RESHAP project to proceed according to its anticipated schedule.
Ensuring Phase 2 of Waterfront Park and Infrastructure for Community Space, Blocks 12 and 13, are Constructed - Subphase 2.3 of the Phase 2 infrastructure improvements will include the backbone infrastructure for Blocks 12 and 13 and Phase 2 of the waterfront park. As security for delivery of such items, APP will deposit cash with the City (to be held in escrow) equal to the estimated cost of construction on a pro rata basis ($71,082.79) for each market rate building permit pulled in Blocks 14, 16 and 17.
Indemnification - APP will fully defend/indemnify/hold harmless the City for all costs/fees/fines/damages (including attorney’s fees) relating to any legal challenge (administrative or judicial) against the approval of the proposed DDA and DA amendments and related project approvals regarding Phase 2. This includes challenges raising California Environmental Quality Act (CEQA) or Surplus Lands Act (SLA) claims. However, APP will not be required to reimburse the City for any SLA penalties, including any potential penalties imposed by the California Department of Housing and Community Development (HCD) regarding Phase 2. Additionally, if any administrative or judicial challenge to the Phase 2 transfer is filed or if HCD rejects the City’s assertion that the DDA Sixth Amendment is exempt from the SLA, the City retains sole and complete direction to not proceed with the transfer of Phase 2 or require APP to re-convey Phase 2 to the City in return for a payment for specified costs incurred by APP.
Existing Remedies - The City will retain all of its existing DDA remedies against APP for future DDA breaches.
Waivers - The DDA Sixth Amendment will include a mutual California Civil Code Section 1542 waiver of all claims related to breaches of the DDA that may have arisen prior to the effective date of the DDA Sixth Amendment, including, but not limited to claims that APP failed to comply with the Milestone Schedule with respect to the completion of the Phase 1 infrastructure and the conveyance of the Phase 2. Such waiver shall be effective upon the expiration of the judicial and administrative challenge period applicable to the City’s CEQA action for the DDA Sixth Amendment and related project approvals.
ALTERNATIVES
• Approve (i) the DDA Sixth Amendment to the DDA with the understanding that staff will return to City Council for approval of the Qualified Affordable Housing Developer, and (ii) the DA First Amendment both between the City and APP.
• Direct staff to renegotiate portions of the DDA Sixth Amendment and/or the DA First Amendment, as specifically directed by City Council.
• Direct staff to terminate negotiations with APP, which may result in some or all of issues described above in the staff report.
FINANCIAL IMPACT
The proposed action of approving the DDA Sixth Amendment and DA First Amendment has no fiscal impact. The Revised Project, if developed, will comply with the City’s overall policy of fiscally neutral redevelopment at Alameda Point.
MUNICIPAL CODE/POLICY DOCUMENT CROSS REFERENCE
This action is consistent with 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 Town Center and Waterfront Precise Plan.
ENVIRONMENTAL REVIEW
On February 4, 2014, by Resolution No. 14891, the City Council certified a Final Environmental Impact Report (FEIR) (State Clearinghouse No. 201312043) under the California Environmental Quality Act (CEQA), California Public Resources Code section 21000 et seq., and adopted written findings 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).
On November 30, 2021, by Resolution No. 15841, the City Council certified a FEIR (State Clearinghouse No. 2021030563) 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 EIR), which evaluated the environmental impacts of 12,000 additional housing units in Alameda over 20 years, including 5,353 housing units to accommodate the RHNA between 2023 through 2031.
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 EIR. As documented in Exhibit 4 Environmental Checklist, the proposed project would not require major revisions to the Alameda Point EIR or the General Plan 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 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 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 EIR is required.
SURPLUS LANDS ACT
The negotiations with APP are permitted under the SLA. The revisions to the SLA, contained in AB1486 (2019), do not apply to current negotiations with APP because the property is already subject to existing legally binding agreements to dispose of property. See Government Code Section 54234(a).
RECOMMENDATION
Introduce an Ordinance authorizing the Interim City Manager, or designee, to execute a Sixth Amendment to the Disposition and Development Agreement between the City of Alameda and Alameda Point Partners, LLC for the Site A Project at Alameda Point; Introduce an Ordinance authorizing the Interim City Manager, or designee, to execute a First Amendment to the Development Agreement; and Adopt a Resolution approving Eden Housing, Inc. as the Qualified Affordable Housing Developer for development of Block 10B of Site A at Alameda Point and authorizing the Interim City Manager, or designee, to negotiate and execute agreements and all other necessary documents to effect said development.
Respectfully submitted,
Lisa Maxwell, Community Development Director
By,
Lisa Fitts, Interim Base Reuse Manager
Financial Impact section reviewed,
Margaret O’Brien, Finance Director
Exhibits:
1. DDA and Amendments 1-5
2. DDA Sixth Amendment
3. DA
4. DA First Amendment