On Point: Penciling out
On Point: Penciling out
The city’s commitment to proceed with a less-intensive development plan than the one proposed by former Alameda Point developer SunCal could face a major hurdle: The amount of development now being contemplated for the former Naval Air Station may not pencil out financially.
A financial feasibility analysis conducted for the city by Keyser Marston Associates shows that the amount of money the city could raise in land sales and public funding doesn’t even come close to the amount they would need to pay for roads, water pipes and other infrastructure that needs to be built to support development at the defunct base.
“Given the magnitude of infrastructure costs, it is difficult to estimate a development program that is feasible under current market conditions,” Alameda Point Chief Operating Officer Jennifer Ott wrote in a report to be presented to the City Council on May 8.
The numbers have prompted the city to consider other approaches to getting portions of the Point redeveloped, and also to warn that city leaders will be forced to confront trade-offs when considering how many public amenities and transportation improvements and how much historic preservation they can afford.
The analysis estimates infrastructure costs at nearly $593 million, and affordable housing costs at $22.8 million. The $797 million in total costs it outlines include nearly $165 million in developer profits, or a return of 30 percent.
Those costs would be defrayed by land sales estimated at $246 million, the bulk of which would come from sales to developers seeking to build single family housing, along with $89.7 million in new taxes and tax increment financing and another $43 million in transportation funding if an extension and expansion of the Measure B regional sales tax for transportation is approved by voters in November. That all adds up to less than half the cost of developing the 1,425 homes and 2 million square feet of commercial space envisioned for the Point, an approach advocated by the city’s 1996 reuse plan for the base.
Developing a purely residential community of 231 homes on 20 acres north of Ralph Appezzato Memorial Parkway would cost $37.5 million and earn a developer an $8.3 million return – assuming the city can come up with $12.9 million to help prepare the land for development, much of which is predicated on legislation allowing the city to set up a special financing district on the base that will allow it to use future property tax dollars to pay infrastructure costs. An estimate laying out costs and returns for commercial development wasn’t provided.
SunCal had proposed building about 4,500 homes and 3 million square feet of commercial space at the Point.
City leaders, who have said that most of Alameda Point should be in the city’s hands by the end of this year, have asked the council to allow them to seek $5 million in bond funding to pay for predevelopment costs at Alameda Point. The bonds would be repaid using Point lease revenues, with their $475,000 annual cost representing between 46 percent and 79 percent of net lease revenues generated annually at the Point.
City leaders wish to push forward a development strategy that they believe would ensure the Point is ready to be developed when the economy improves, and to hire a development advisor who can guide them through the predevelopment process, which they expect to take between 18 and 24 months. They wish to divide the Point into three distinct areas that would contain residential neighborhoods, commercial and maritime development and an historic district where buildings would continue to be leased and reused.
Developers who the city has talked to during the six months it worked to develop the proposed strategy have encouraged the city to move forward with the reuse plan in order to “get something started,” the staff report for Wednesday’s meeting said, with the idea that development at the base would unfold over the next two to three decades.
Separately, city staff will be asking the council’s permission to forward a proposed agreement to the state lands commission that would shift up the configuration of state public trust lands and settle boundaries, which city staffers are calling an essential step toward redeveloping the Point. If the council signs off on the proposed exchange deal, the state commission could consider it as soon as this month.
The agreement would subject the Point’s entire waterfront to trust restrictions, and would give the city land that is now part of the state’s public trust lands but was cut off from the water when the Navy filled the Bay and built on it. The state would gain control of land along the Oakland Inner Harbor another waterfront property in exchange for land in the Northwest Territories and other areas that include the Alameda Point Gymnasium and swimming pool, the sentry house and main gate, ARMCO huts and other buildings.
Activities on public trust lands are limited to water-dependent or water-related uses, and the lands are owned by the state and managed by the city. An appraisal of the lands to be exchanged as they are cleaned of toxins, an exchange that is expected to take place in four phases through 2019, wasn’t available.