Title
Introduction of Ordinance Authorizing the Interim City Manager, or Designee, to Negotiate and Execute a Lease with Astra Space, Inc., a Delaware Corporation, Substantially in the Form of Exhibit 2 attached to the Staff Report, for Fifty-Nine Months for Building 360 Comprised of Approximately 179,070 Square Feet, Located at 1900 Skyhawk Street at Alameda Point. (Community Development 29061822)
Body
To: Honorable Mayor and Members of the City Council
EXECUTIVE SUMMARY
Astra Space, Inc. (Astra) has been an Alameda Point tenant since 2016, and occupies several buildings at Alameda Point. Astra, an aerospace research and design firm in partnership with the National Aeronautics and Space Administration (NASA) with over a decade of experience, would like to expand their footprint at Alameda Point to meet its growing need for research, manufacturing, testing and related office space. The proposed lease for Building 360, consisting of 179,070 square feet of rentable space at 1900 Skyhawk Street (Premises [Exhibit 1]) has a 59-month term and would help accommodate Astra’s increasing staffing, product development and testing needs; Astra has paused hiring pending securing additional office space. The lease also addresses previously raised community and City Council concerns.
BACKGROUND
Astra is an aerospace research and design firm with more than a decade of experience developing aerospace technology in partnership with NASA. Astra designs, tests, manufactures, and operates next-generation launch services that will enable a new generation of global communications, earth observation, and precision weather monitoring, navigation and surveillance capabilities.
Astra has been an Alameda Point tenant since November 2016, and initially occupied Building 397. Astra now licenses several of the buildings near Building 397 in the Enterprise District, including Building 616 and Building 360, as well as the east end of Pier 3. Since its successful space launch in December 2020, Astra has experienced a rapid demand for its product resulting in its interest in securing a lease for Building 360 and using Building 360 more efficiently. By undertaking further improvements at Building 360 that allow Astra to use its space more efficiently, Astra will expand its operations within the Building 360 footprint. Through these new improvements, Astra anticipates adding a minimum of 150 new jobs of various levels, from administrative, manufacturing and skilled labor to engineers and scientists. Of note, Astra has been and remains willing to make investments in buildings at Alameda Point with leases under the five year term limit imposed by the Surplus Land Act (SLA) in order to meet its need for space. Astra also remains interested in expanding into additional Alameda Point buildings, and if Astra were able to carry out its expansion plan at Alameda Point, it anticipates employing approximately 350 to 600 people. Astra currently occupies buildings 360 and 397 and has a vision of establishing a corporate headquarters in the Enterprise District with the long term focus of job generation and commercial development in that area of Alameda Point. The expansion of Astra’s innovative operations could be a catalyst for other companies of a similar nature or in related industries.
DISCUSSION
On June 15, 2021, staff requested City Council’s direction regarding Astra’s interest in expanding at Alameda Point and discussed concerns raised by community members about noise, ground vibrations and emissions potentially emanating from Astra’s rocket engine testing at Alameda Point. At that time, preliminary analysis of each concern indicated that levels were all within regulatory standards, but additional testing and analysis was considered necessary to sufficiently address these important matters. The below discussion focuses on the following: (i) testing that has been done related to matters of community concern, (ii) other staff recommendations, and (iii) positive aspects of Astra’s potential growth at Alameda Point.
Community/Safety Concerns
Noise and Vibration. The City of Alameda (City) employed Bollard Acoustical Consultants, Inc. (Bollard) to assess noise and vibration levels during Astra’s engine testing. Monitoring occurred near Building 397, where indoor engine testing currently take place and on Main Street in the area between the commercial district and residential neighborhood closest to the testing facility. Bollard made the following findings:
• Noise from engine testing was barely audible at the nearest residences when no background or ambient noise was present, and was completely masked when automobile traffic on Main Street, air traffic overhead, and other typical extraneous noises were present.
• During engine testing, vibrations at all monitoring locations were below the threshold of perception.
Despite these positive findings and in light of Astra’s vision of expanding operations at Alameda Point, Astra agreed to implement additional voluntary measures to minimize the impact of testing on nearby residential neighborhoods and to ensure that acceptable levels are maintained. Besides complying with Alameda Municipal Code Section 4-10 Noise Control, Astra committed to:
• conducting all engine testing indoors,
• limiting total testing time within any 24-hour period to 120 minutes,
• restricting testing to the hours between 6:00 am and 10:00 pm,
• installing and maintaining a permanent noise monitor, which will be owned and operated by the City at Astra’s expense, and
• within seven (7) days of the City’s request, providing past testing information, including test dates, times, and durations.
Emissions. The City’s environmental consultant, Terraphase Engineering, Inc. (Terraphase), analyzed information provided by Astra for Building 397 testing operation and determined that emissions from its rocket engine testing are at a level that does not require regulatory permitting. Previously, Astra intended to expand testing to Building 372, which would have required additional regulatory oversight by the Bay Area Air Quality Management District (BAAQMD). Astra has since withdrawn its interest in the additional test cell facility, which eliminates this additional requirement.
Safety. Additional questions have arisen regarding safety/risks associated with rocket engine development and testing. It is important to note that Astra’s operations are subject to oversight and regulation by twelve Federal, State and County regulatory agencies and that Astra has a department dedicated to safety and risk management. However, as an additional precautionary measure and a lease condition that must be complied with within six (6) months’ of the effective date of the leases, staff has required Astra to prepare a safety and risk mitigation plan acceptable to Terraphase.
Recently, in response to further concerns about the safety of Astra’s operations at Alameda Point, the asset management team, in collaboration with Alameda Fire Department, engaged Hazmat DTC in July to undertake a further safety analysis (Exhibit 3). The report examined chemicals stored inside and outside the facility and analyzed release of the chemicals as well as damage to the storage tanks. The consultant walked the premises with the Alameda Fire Chief to better understand Astra’s operations and storage of these chemicals. The report concluded that Astra is storing the chemicals safely and their onsite presence is little to no hazard to the community. The potential for an explosion is little to nonexistent.
Project Labor Agreement
The proposed lease requires Astra to in good faith and enter into a mutually agreeable Project Stabilization Agreement (“PSA”) with the Building and Construction Trades Council of Alameda County (“BTC”), consistent with the criteria set forth in City’s existing Project Stabilization Agreement Policy, as set forth in Council Resolution 15740. The proposed lease states that Astra and the BTC must enter into the PSA within 180 days of the effective date of the lease. No construction work pursuant to this Lease may commence until Astra has successfully negotiated a project stabilization agreement with BTC. The lease does permit Astra, for a period of 150 days after the execution of the Lease, to continue construction work previously authorized under the License. Consistent with provisions of Council Resolution 15740, if Astra is unable to successfully negotiate a PSA with the BTC the proposed lease permits Astra to return to City Council to request approval of a waiver. Because Council would not be approving the lease, the decision to remove this requirement would be by a simple majority vote. City Council could also remove this option from the proposed lease. Any change to the PSA would then be a lease amendment requiring a supermajority vote.
Further Information
Staff provides the following additional information in response to City Council inquiries:
• Employment: Approximately one-fifth of Astra employees are Alameda residents (60).
• Testing Hours: Astra believes that its voluntary self-imposed restrictions should satisfy community concerns about testing.
• Regulatory Oversight: While Astra has numerous state and local agencies monitoring their activities, the agencies most involved at Alameda Point include the Department of Toxic Substances Control, California Environmental Protection Agency, Regional Water Quality Board, Bay Area Air Quality Management District and the Navy. In addition, the City has tasked its environmental consultant with working closely with all the regulatory agencies to ensure compliance of Astra with all applicable laws.
• Emissions Concerns: Staff made a public information request to the Bay Area Air Quality Management District regarding Astra’s compliance with regulations imposed by that agency and/or any violations. The district reported that there were no violations for Astra’s premises.
• Seismic Hazard: Tanks, similar to domestic water heaters, have been installed according to Standard California Building Code which considers seismic safety. In addition, Astra has included additional checks and contingencies in its Emergency Action Plan (EAP), which are written procedures detailing appropriate responses to various types of emergencies.
• Internal Explosion Risk: All engine testing is done in former Navy engine test cells, which are massively over designed concrete reinforced structures built precisely for engine testing. Astra engines are smaller and the company has installed a modern fire suppression system which would quickly address any problems within the cells.
• Outside Storage Tanks: Current permanent storage includes one (1) fuel tank (2,400 gallons), one (1) liquid nitrogen tank (6,000 gallons), one (1) liquid oxygen tank (6,000 gallons), and a set of smaller gas tanks.
The expansion plan unanimously approved by the Planning Board includes one (1) fuel tank (10,000 gallons), two (2) liquid oxygen tanks (15,000 gallons each), one (1) liquid nitrogen tank (~11,000 gallons), two (2) water tanks (15,000 gallons each), and some racks of nitrogen cylinders. All fuel tanks are regulated by the Aboveground Petroleum Storage Act. Fuel Storage is managed and inspected by Astra’s Spill Prevention, Control and Countermeasures Plan which is an EPA requirement. This plan is similar to what is required of adjacent neighbors MARAD and WETA.
Astra does not use or store organophosphates, explosives, unstable chemicals, water-reactive chemicals, combustible dusts/fibers, organic peroxides, or other types of hazardous materials. However, they do use and store certain types and quantities of combustible liquids, flammable liquids, inert gasses, flammable gasses, and oxidizing gasses at reportable quantities regulated by Alameda County Department of Environmental Health.
• Explosion Radius: As previously discussed, staff engaged Hazmat DTC to examine the chemicals used at the facility and the risk to the community. The report determined that there is little to no hazard to the community. If the chemicals were to ignite, the hazard is related to proximity to the fire and the heat created by the flames, not the chemicals. The report is attached for further review.
• Truck Trips/Tank Fills: Currently there are approximately 100-150 deliveries per year for the consumable chemicals. At build out, deliveries could grow to 400-600 deliveries per year.
• Path of Transport: Deliveries are transported via the Department of Transportation-rated vessels. Delivery drivers follow local ordinances on truck delivery routes for hazardous materials (e.g., they do not use the tunnels).
• Bay Area Rocket Launching: There is no plan for launching rockets from Alameda or the greater San Francisco Bay Area.
Commercial and Economic Growth and Employment
Since Naval Air Station (NAS) Alameda’s closure and City Council’s approval of the Community Reuse Plan in 1996, job production has been a primary goal of redevelopment at Alameda Point. When the Alameda Point Environmental Impact Report (EIR) was approved by City Council in 2014, the Enterprise District was highlighted as an area for creation of a thriving employment center for new high-quality research and development, industrial, manufacturing and offices uses. Its location outside of the NAS Historical District allows for new construction to accommodate modern uses and specialized industries and establishes approximately 111 acres of land at Alameda Point for commercial and economic development.
City Council’s support of Astra’s goal to develop its research and development headquarters in and around the Enterprise District at Alameda Point would be a major step toward actualizing the commercial and economic development envisioned for that area. Allowing Astra to lease Building 360 and potentially expand in the future will allow for continued job growth. Though the size of Astra’s workforce is currently capped at about 255 full-time employees due to Astra’s current space limitations, leasing Buildings 360 and undertaking further improvements will allow for the addition of approximately 150 new jobs of various levels, from administrative, manufacturing and skilled labor to engineers and scientists. Touting a diverse and local workforce, Astra currently employs 60 Alamedans, and within Astra’s approximately 255 employees, 1/3 are skilled laborers, 43% are persons of color, 20% identify as women and 13 are veterans. The median employee pay is $163,000, plus a generous benefits package. Astra projects that their workforce could grow to between 350 and 600 full-time employees.
Building 360
Under the US Navy, Building 360 was used for engine maintenance, which created the need for environmental cleanup before the building could be safely occupied. On December 31, 2018, Astra licensed one bay of Building 360, consisting of approximately 79,890 square feet of the building’s total 179,070 square feet, for the sole purpose of undertaking the environmental clean-up process and bringing that portion of the building into compliance with current building codes and regulations. On June 24, 2019, following completion of the environmental clean-up of Building 360, Astra entered a new license with the City allowing it to occupy that bay of Building 360 for aerospace development, manufacturing and related office use. On May 28, 2021, the building’s remaining 99,180 square foot bay was added to the license so that Astra could undertake and complete the environmental clean-up for that part of the building. Occupancy by Astra of the additional portion of the building was not allowed until the clean-up was done. Astra has completed the additional environmental clean-up and is now interested in signing a lease with the City for all of Building 360 and establishing with the city a more secure business and leasing relationship.
The following summarizes the major business terms of the proposed lease between Astra and the City for Building 360:
|
Terms |
Building 360 |
|
Square Footage |
±179,070 square feet |
|
Uses |
Rocket engine testing, research and development, related office use |
|
Length of Term |
59 months |
|
Renewals |
None |
|
Security Deposit |
$151,158.65 |
|
Monthly Base Rent |
.92 sf |
|
1-12 |
$ 164,744.40 |
|
13-24 |
$170,116.50 |
|
25-36 |
$ 177,279.30 |
|
37-48 |
$ 182,651.40 |
|
49-59 |
$ 188,023.50 |
|
Rent Credit |
$2.5 million rent credit applied over the life of the lease in consideration of millions of dollars spent bringing the bldg to code and the environmental monitoring/work done with the regulators to make the bldgable to be occupied and safe. |
|
Within Six (6) Months of Effective Date |
Tenant must: • Use good faith efforts to negotiate a PLA; and • Provide a safety and risk mitigation plan acceptable to Terraphase |
SURPLUS LAND ACT
The SLA requires that a lease term be less than five (5) years unless the leased property has been fully surplused pursuant to mandatory SLA procedures. The property on which Building 360 is located has not yet been surplused and therefore remains subject to the SLA. The proposed lease is exempt since it is under five years.
As further background information, in the coming weeks, staff will seek City Council approval of an SLA exemption determination for the Building 360 property. The applicable exemption, as set forth in Government Code Section 54221(f)(1)(G), authorizes exemption of a surplus property if it “is subject to valid legal restrictions that are not imposed by the local agency and that would make housing prohibited, unless there is a feasible method to satisfactorily mitigate or avoid the prohibition on the site.” While reliance upon this exemption is not necessary for the proposed lease due to the lease being less than 5 years in length, staff believes the property likely qualifies for this additional exemption because it is subject to certain covenants restricting its use due to underlying environmental issues. Staff will provide further information to the City Council on this proposed exemption determination at a later date.
ALTERNATIVES
• Approve the lease with Astra for Building 360, as described above.
• Direct staff to renegotiate the terms of the lease with Astra for Building 360 based on City Council direction.
• Direct staff to seek other prospective tenants by marketing Building 360.
FINANCIAL IMPACT
The revenue generated by from the lease with Astra will be deposited into the Base Reuse Fund lease revenue account and are limited to uses permitted under the Economic Development Conveyance Memorandum of Agreement with the United States Navy. . The current monthly rent, effective July 1, 2022, for Building 360 is $134,302.50. The proposed lease would increase the monthly rent by $30,441.90, or by 23%, to $164,744.40, resulting in an annual increase of lease revenue of approximately $365,000.
MUNICIPAL CODE/POLICY DOCUMENT CROSS REFERENCE
This action is consistent with the Alameda Municipal Code.
ENVIRONMENTAL REVIEW
This action is exempt from further review under the California Environmental Quality Act (“CEQA”) pursuant to CEQA Guidelines Section 15301 (Existing Facilities).
CLIMATE IMPACT
There are no identifiable climate impacts or climate action opportunities associated with the subject of this report.
RECOMMENDATION
Introduce an ordinance authorizing the Interim City Manager, or designee, to negotiate and execute a lease with Astra Space, Inc., a Delaware corporation, substantially in the form of Exhibit 2 attached to the staff report, for fifty-nine months for Building 360 comprised of approximately 179,070 square feet, located at 1900 Skyhawk Street, at Alameda Point.
Respectfully submitted,
Lisa Maxwell, Community Development Director
By,
Lorie Curtis, Management Analyst
Financial Impact section reviewed,
Margaret O’Brien, Finance Director
Exhibits:
1. Building 360 Premises
2. Building 360 Lease, Substantially in the Form
3. Hazmat DTC Report
cc: Nancy Bronstein, Interim City Manager