The Pension and OPEB Task Force report released Tuesday identifies a host of potential solutions to the problem of the City’s unfunded liabilities for pension and retiree medical benefits for public employees. Most of these proposals are worth further study. One is not.

Remarkably, three members of the task force – which included the police and fire chiefs and the heads of their respective unions as well as four City staff members and six community members – recommended that the City pay off its unfunded pension and retiree health benefit liabilities by selling Alameda Point. Indeed, this was the top-ranked “solution” to the OPEB problem by two task force members.

As the task force report demonstrates, reducing unfunded liabilities may require changes to the current levels of pension and retiree health benefits for public employees. Some may find this objectionable. But selling the Point to be able to maintain the status quo is a profoundly bad idea for a number of reasons.

First, selling Alameda Point would deprive the City of a long-term, ongoing source of revenue for the General Fund. At present, the lease revenues generated at Alameda Point only cover costs. But once the City takes title to the property and is able to offer long-term leases, cash flow should improve dramatically, especially if the City takes the aggressive approach to marketing the historic area I (and others) recommend. And commercial leases are just one of the potential sources of revenue from the Point.

Second, if Alameda Point is put on the market, who’s going to buy the property, and for how much? As recently as May, Council was told that “the amount of development projected in the Reuse Plan is not feasible under current market conditions (i.e., project revenues do not exceed costs).” According to the City’s economic consultant, estimated infrastructure costs for building out the Point as envisioned in the Reuse Plan would be $592,373,000. Unless a developer could expect to cover these costs and make a profit –which the consultants found unlikely – the price a rational private developer would pay for the Point is: Nothing.

Finally, there is simple equity. If properly redeveloped, Alameda Point will provide benefits for generations of Alamedans to come. Not just buildings and houses but open space and parks. Selling the Point will mean forfeiting these benefits – forever. And to what end? To limit the extent to which public employees must share in the sacrifices necessary to get the City’s financial house in order? If this alternative is adopted, seldom will so many have given so much for so few.

Let’s put aside parochial interests and focus on solutions that are best for all Alameda.

The following two questions concerned Alameda Point: the first asked if an effort should be made to preserve all 86 historic buildings at the Point, and what strategies could be used.

This was not a question that provoked much dissent: all the candidates support preserving the historic buildings via adaptive reuse and rent credits for tenants in exchange for building improvements.... Sullwold highlighted her recent experience at a Restoration Advisory Board meeting where she learned how the Point has the largest collection of Art Deco buildings on the west coast, and suggested that, despite the infrastructure improvements needed, that the buildings were a great opportunity for the City.... Sullwold expressed concerns about the cost of infrastructure, with estimates ranging from $100 to $600 million.

Next the candidates were tasked with the problem of vacant, deteriorating buildings being vandalized, and what should be done to prevent further damage to the structures.

All six again agreed the solution was getting tenants for the buildings. Sullwold continued to express financial concerns over the City’s budget and inability to allocate funds for necessary repairs to infrastructure.

4. Explain how you, as a member of the City Council, would address these issues facing Alameda: falling revenues, increasing costs, deferred expenses and Alameda Point redevelopment.

Revenues. The recession hasn’t had the same impact in Alameda that it has had in other cities, and, indeed, City staff projects that revenues will remain relatively stable through fiscal year 2016-17. The City’s revenues come from taxes, and there are only two ways to increase tax revenues: increase tax rates or expand the tax base. The voters’ recent rejection of Measure C suggests the electorate doesn’t favor the former option. But exploiting the latter option is more complicated than simply proclaiming support for a “vibrant” business community. Different businesses offer different opportunities. Retail stores generate sales taxes. Office buildings generate property taxes. We’ve got to go after both. And we shouldn’t kid ourselves by touting “out-of-the-box” – some would say, off-the-wall – notions of minting money by making
Alameda a tourist destination.

Renewing Alameda Point potentially would have the most dramatic impact on revenues. Currently, the revenue from commercial leases barely covers the City’s costs. Once the City takes title to the developable area of the Point, we should undertake an aggressive program to market commercial buildings for sale or long-term lease. In exchange, we would want the buyer or lessee to invest in infrastructure and capital improvements. This is the approach that we chose for the Golf Complex – and it can work at the base, too.

Costs. The familiar refrain is that the City has “cut costs to the bone,” and there is simply nothing more that can be done. I don’t buy it. My approach would be to identify the core services demanded by Alameda residents of their government and then determine the most cost effective ways of providing them. If the conclusion is that Alamedans already are getting only essential services at the lowest possible cost, so be it. But let’s be sure.

Here’s an example of what I mean: Fire protection obviously is a core service provided by the City. Back in 2009, the City engaged a consulting firm – the International City/County Management Association (“ICMA”) – to analyze whether it was doing so in a cost-effective way. ICMA came up with a report contending that the City could reduce costs yet maintain acceptable service levels with fewer fire stations and fewer personnel. The Acting City Manager shelved the report, and it was never publicly discussed until it surfaced during the Measure C debate. At that time, both City staff and the firefighters’ union ridiculed the report as full of flaws. They may well be right. But – this time – let’s open up the topic for discussion. If I were on the Council, I’d invite the proponents and opponents of the report’s recommendations to make their case publicly and take questions from not just the Councilmembers but also the public. Who knows? We might learn something. Maybe it will turn out that those who see nowhere to cut expenses are right. Then we’ll have to explore the options of saving costs by out-sourcing services in whole or in part; entering into “public/private partnerships” in which we rely on the generosity of contributors to pay the costs of offering services once provided by the City, or charging citizens “user fees” for services they once got for free.

Deferred expenses. Like unfunded liabilities, deferred expenses are another elephant in the room. When the Fiscal Sustainability Committee was doing its work, the Public Works director estimated that the total cost of improving the City’s infrastructure – e.g., streets, sewers, storm drains, parks and the like – was a whopping $662 million. Nevertheless, the fiscal year 2012-13 budget included only $17.8 million (of which only $1.2 million came from the general fund) for capital projects. Obviously, spending at that level leaves a lot of work left undone. As with the unfunded liabilities for pension and retiree medical benefits, we’re not going to be able to tap the general fund to fill the gap all at once. Bringing the operating budget under control is a necessary but not sufficient first step. We’ll still face a series of hard choices requiring trade-offs between maintaining the current level of services and ensuring that the infrastructure doesn’t disintegrate in the meantime.

Alameda Point. A number of the issues involving the Point bear a striking resemblance to the issues I confronted involving the Chuck Corica Golf Complex: deteriorating infrastructure, unrealistic “master plans,” years of inaction. And my approach to the Point will be similar to the one I took for the Golf Complex: gather and analyze the data; find out what the public wants and what economic reality will permit; seek creative solutions – and get going. Based on what I know now, I would concentrate on three areas:

Ensuring that the western portion of the Point is made clean enough to permit its intended use for a wildlife refuge, open space, and parks;
Proceeding with the planning such as a master infrastructure plan and a base wide environmental impact report that will allow the City to act quickly on proposals for developing sections of the 918-acre eastern portion of the Point; and
Developing the Point in phases but emphasizing, in the first instance, commercial reuse and redevelopment of the Historic District, including, as I discussed above, marketing cleaned-up buildings for sale or long-term lease.

I recently attended a meeting of the Restoration Advisory Board (“RAB”) and came away more convinced than ever that this City has a lot of smart people who think analytically and creatively in identifying problems and proposing solutions. The RAB, of course, focuses on environmental issues, but I’ll bet there are other Alameda citizens with business expertise and no axe to grind who can be enlisted in the effort to renew the Point.

Oddie first asked the candidates to share their plans for redevelopment of Alameda Point “given the lack of redevelopment funding and infrastructure costs estimated to be in excess of $600 million.”

...

Sullwold favors a phased approach in which the Point’s adaptive reuse area is developed first. All of candidates expressed a commitment to build affordable housing at the Point, but left specifics for another day.

“What will (the affordable housing units) look like and where will they go? I don’t know. We need to make it an attractive package to a developer and go from there,” Sullwold said.

...

Sullwold called the city’s unfunded liability “scary,” and offered redevelopment of the Point as one way to kickstart revenue.

Sullwold endorsed the recent City staff proposal, which was voted down by the current City Council. It suggests partitioning the Point into three zones, two commercial and one residential, and entitlements for 1400-1500 houses. But she said that number of houses required further investigation, and she “was not personally wedded to those numbers.” Her vision includes a mix of commercial, residential and open space, and regardless of which part of economy turns around faster, allows for a greater chance of success.

In fact, the bad taste from the city's recent experience with master developer SunCal still lingers on the island. The episode prompted a substantial amount of disharmony, and resulted in criticism that the current council majority owes its political good fortune to the developer. For this reason, some candidates, like Stewart Chen, a member of the Alameda Healthcare District Board of Directors, believes the next council needs a greater sense of self-determination when it comes to Alameda Point. "The citizens should have control," he said. "We need to make sure it's our plan."

What do you see as the most effective way to redevelop Alameda Point?

“This world economy should not be a one way street. It should be a two way street. And I’d like to foster that,” said Stewart Chen, a council candidate who says Alameda should consider talking to foreign investors.

If elected, Chen said he’d be willing to consider potential Point investors from a variety of other countries, though a likely starting point in his and others’ minds is China (Chen said he isn’t at this point talking to any prospective developers or investors about specific Point proposals).

“I welcome anybody who wants to invest in Alameda and to create jobs in Alameda. Right now, the money is in Asia,” Chen said, noting China’s world-leading $1 trillion-plus investment in United States Treasury bills.

...

While Chen, Daysog and Russo all said they’d welcome foreign investment at the Point, they offered a major caveat: They’d seek to ensure that any development that’s proposed is done on the city’s terms. Chen, who co-founded Alameda’s Sister City Association, said he’d be willing to travel to China to assess potential investors.

“We will retain control. The city and the citizens will retain control,” said Chen, who said any prospective Point developers would be expected to hire union contractors and pay prevailing wages, and to address things like the traffic impacts new development would impose.

Alameda Point, a former US naval air station in northern California, is looking to lure Chinese investors and developers to kickstart its seemingly stagnant economy, according to Stewart Chen, a chiropractor who will run for a spot on the Alameda City Council in November's elections.

"If China is willing to work with us, this is probably the last major piece of property in northern California that can be developed," he said.

Chen was born in the Philippines and migrated to the US when he was a teenager. As he is a third-generation descendant of a Chinese family from Xiamen, a major city on the southeast coast of China, he is fluent in Mandarin, Cantonese and Hokkien.

"In the past 10 years, China has focused a lot on solar power, high-tech industries and environmentally friendly technology, so we can do exchanges in trade, technology and business development," he told China Daily.

...

The latest developer to tackle Alameda Point was SunCal, based in Irvine, which submitted plans to the city in 2008 calling for 4,500 units of housing, two schools, a library, 145 acres of open space, a 58-acre sports field complex, 15 miles of bike paths, a ferry terminal and other amenities, according to local media. But the company pulled out due to conflicts with the city over how the housing units could be built, according to Chen.

Despite the previous failures, he believes that if China comes in and helps to develop Alameda Point, "it can be another Silicon Valley and a free-trade zone".

...

"If I win the campaign in November, I would have a better position and platform to get to China for a potential partnership for the development of Alameda Point," Chen said.

He has visited Alameda's sister cities Shanghai, Wuxi and Dalian several times over the past 10 years, and learned how to communicate with Chinese officials and businesspeople.

"You can have all the talent in the world, you can be distinguished in business, but you cannot bridge the gap if you don't have guanxi (social connections)," he said.

"Guanxi is basically the driving force for China. You have to have that connection. It's a tool that officials can use when we come back from China and bring in potential partners."

Alameda will work with China to streamline cultural differences and business practices, Chen said. He also noted Chinese developers have to understand they need to work with the Environmental Protection Agency (EPA) as well as the US Navy to clean up some of the waste left in Alameda Point.

"The bulk of the responsibility is with the US Navy and EPA, but we expect certain responsibilities from the developer," he said.

Explain how you, as a member of the City Council, would address these issues facing Alameda; falling revenues, increasing costs, deferred expenses and Alameda Point redevelopment.

Falling Revenues: Alameda’s major source of General Fund revenue is property taxes; the second largest revenue source is a combination of other taxes — utility users, franchise, transfer, vehicle and hotel taxes. These tax revenues represent 75% of the 2012-2013 General Fund Budget. Sales tax contributes another 7%. To increase these major revenue sources, we need to assure that Alameda’s property values remain strong by supporting our schools because good schools are a major reason new families come to Alameda and the reason families with children stay here. By attracting new businesses and retail establishments to Alameda, we will create jobs and also increase revenue from utility user, franchise and sales taxes.

Increasing Costs: See responses to Questions 2 & 3.

Deferred Expenses: For some deferred expenses, such as road repair, we should be able to obtain Metropolitan Transportation Commission (MTC) grants now that Alameda has adopted a Housing Element. It is essential to address deferred maintenance expenses for City infrastructure such as roads and sewer lines because these items often cost more to repair or replace when regular maintenance has been deferred. It can also leave the City vulnerable in emergency situations such as a bad storm or an earthquake.

Alameda Point Redevelopment: My vision for the future of Alameda Point aligns with the City of Alameda General Plan, the 1996 NAS Alameda Community Reuse Plan, and community input from subsequent Alameda Point workshops. That is, that Alameda Point would contain a mix of employment, open space, recreational, residential and retail uses, and would be transit-oriented, walkable and environmentally sustainable. The three steps I would advocate to implement that vision are:

1. Completion of negotiations with the Navy regarding transfer of Alameda Point to the City, including any outstanding issues such as level and extent of clean-up still to be completed by the Navy.

2. Amendment of the existing zoning for Alameda Point which is still zoned M-2/G (General Industry/Government Overlay) from its years as a Navy base. The Planning Board will soon consider recommending that the City Council approve amending Alameda Point zoning to include six sub-districts and a variety of land uses. This rezoning will ensure that redevelopment of Alameda Point is consistent with community goals set forth in the Reuse Plan and subsequent workshops, and also informs prospective Alameda Point businesses and development partners of what type of development will be allowed in particular areas.

3. The City should begin actively marketing and promoting new business and employment opportunities at Alameda Point, to add to the growing collection of businesses currently located there and increase revenues generated at Alameda Point.

What do you see as the most effective way to redevelop Alameda Point?

Oddie first asked the candidates to share their plans for redevelopment of Alameda Point “given the lack of redevelopment funding and infrastructure costs estimated to be in excess of $600 million.”

Ezzy Ashcraft wants to wrap up negotiations with the Navy before pursuing a combination of open space, residential and retail uses at the Point. She thinks that zoning flexibility will allow the city to avoid “being at the mercy of a master developer.”

[C]andidates were asked what changes, if any, should be made to Measure A, which limits residential development to two units per building, and 2,000 sq. ft. of lot area per unit.

Daysog suggested that Measure A may need to be modified for Alameda Point, and said he was open to further modification for the areas of Webster and Park Streets, north of Buena Vista. But, he cautioned, only if it was supported by a public vote.

The following two questions concerned Alameda Point: the first asked if an effort should be made to preserve all 86 historic buildings at the Point, and what strategies could be used. This was not a question that provoked much dissent: all the candidates support preserving the historic buildings via adaptive reuse and rent credits for tenants in exchange for building improvements.

Private partnership is key, according to Daysog, to enabling a historic preservation tax credit.

Next the candidates were tasked with the problem of vacant, deteriorating buildings being vandalized, and what should be done to prevent further damage to the structures.

All six again agreed the solution was getting tenants for the buildings.... Daysog took a stronger tone, calling the current state of the vacant buildings “Demolition by neglect.”

Chen isn’t the only council candidate who would back foreign investment at the Point. Former City Councilman Tony Daysog, who is also in the running for a council seat this fall, said in a recent candidate forum that the city should look at drawing foreign investors through the federal government’s EB-5 immigrant investor program, which offers visas in exchange for job-creating investments in new firms. In 2010, some 46 percent of the EB-5 visas – which require an investment of between $500,000 and $1 million – were issued to natives of mainland China and Taiwan, according to a U.S. Citizenship and Immigration Services slideshow.

“I can envision investors from any part of the world, but certainly in California at least, people from Taiwan or mainland China have been very active program,” said Daysog, who said he became aware of the program through a project he worked on for a former employer.

...

“Whatever builder or series of builders we’re working with, if they’re scouring the globe for capital – all power to them,” Daysog said. “They’re helping us meet our vision for Alameda Point. We should welcome this.”

Oddie first asked the candidates to share their plans for redevelopment of Alameda Point “given the lack of redevelopment funding and infrastructure costs estimated to be in excess of $600 million.”

...

Daysog, who served on the City Council from 1996 to 2006, suggested that federal funding be used to support Point development. In particular, he suggesting the city pursue the federal historic preservation tax credit and the EB-5 immigrant investor program, through which foreign national investors can obtain United States residency by creating jobs for U.S. citizens.

[C]andidates were asked what changes, if any, should be made to Measure A, which limits residential development to two units per building, and 2,000 sq. ft. of lot area per unit.

Cambra called Measure A a remedy put in place by the people because City staff didn’t act. “When I look at the island as it’s developed now, I think it’s fine right where it is, and I would support anything that would keep it there.” He went on to elaborate that a broad based remedy like measure A might not be best for Alameda Point, where he envisions a transit village supported by a ferry system.

The following two questions concerned Alameda Point: the first asked if an effort should be made to preserve all 86 historic buildings at the Point, and what strategies could be used.

This was not a question that provoked much dissent: all the candidates support preserving the historic buildings via adaptive reuse and rent credits for tenants in exchange for building improvements.... Cambra lauded the City’s current active role in marketing the Point to potential commercial tenants. [H]e ... expressed concerns about the cost of infrastructure, with estimates ranging from $100 to $600 million.

Next the candidates were tasked with the problem of vacant, deteriorating buildings being vandalized, and what should be done to prevent further damage to the structures.

All six again agreed the solution was getting tenants for the buildings. ... Cambra proposed adjusting permit fees to encourage tenants’ improvements.

What is your vision for the future of Alameda Point, and what are three steps you would take to implement that vision?

We should be guided by the 1997 Vision and the recently passed Housing Element when building a variety of housing types but remain flexible to respond to regional economic trends when designating areas for commercial, office, light manufacturing, open space, recreation, etc.

Step One: Complete the no cost conveyance process
Step Two: Adopt flexible zoning ordinances consistent with the 1997 Vision
Step Three: Create a ferry based transit village featuring multifamily housing, senior co-housing, single family homes, and live work space. Establish an infrastructure assessment district to assist in financing the construction of roads and running utility lines.

[Additional Comment on Alameda Point]

Do you think there are unmet housing needs in Alameda? If so, what are they and how would you address them?
There are unmet housing needs in the City. We need a variety of housing types including multifamily, affordable senior co-housing, live work, and single family in order accommodate the needs of residents. At Alameda Point, a ferry based transit village housing project with a shuttle connection to 12th Street BART could fulfill a portion of our housing needs and not significantly contribute to the traffic through the Posey Tube.

Long term leases are key, declared Cambra. With the City in charge of leasing, rent credits can be issued to allow tenants to retrofit and upgrade the properties. He cited the success of Michaan’s Auctions and how their expansion is benefiting the City both in increased rent and sales tax collected. He explained how keeping a reserve fund to address infrastructure repairs is necessary, “We do have old infrastructure out there, and that infrastructure is going to break.” To determine the number of houses to build, the City has to recognize its legal obligations, has to know what it can afford, and what the traffic impact will be.