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Submitted by on 1, October 20, 2009 – 4:53 pm11 Comments

Developer SunCal has said they will address fiscal concerns city officials have raised over the developer’s ballot initiative for developing Alameda Point.

In a letter to Interim City Manager Ann Marie Gallant, SunCal’s Pat Keliher promised legally binding agreements that would commit the developer to ensuring funding is available for public benefits beyond a $200 million cap set in the initiative and to consent to an increase in the area’s tax rate if more money is needed to build, operate and maintain the project.

The company would also allow redevelopment funds to be spent outside the Point project area if needed and would confirm their commitment to mitigate a host of potential issues that could be identified in an environmental impact report.

The letter comes on the heels of Mayor Beverly Johnson’s announcement last week that she has concerns about the impacts of the initiative and similar announcements from the Alameda Chamber of Commerce and Renewed Hope, the nonprofit that sued for affordable housing at the Point. It also follows months of negotiations aimed at addressing the concerns.

Keliher also submitted a 12-page rebuttal to a city-authored analysis released in May that listed a host of potential problems with the initiative – the same analysis Johnson said led her to change her position on the initiative.

More to come.


  • David Howard says:

    I don't buy it. SunCal told City Council in 2007 that they had a "fully discretionary" $600 million fund with Lehman Brother's money. Recently, SunCal's CEO Bruce Elieff filed a statement in court, under penalty of perjury, that Lehman never came close to funding the $600 million. There's scant evidence that SunCal committed our put in the $66 million that THEY were supposed to kick into the fund, raising the total to $666 million.

    SunCal can't be trusted.

  • Barbara Thomas says:

    What about increasing the time from 4 minutes to get to 880 through the tube to 22 minutes? What about Measure A? And they can sit on their butts for 25 years holding the City by the b-lls.

    In answer to your question Michele: Humans are a very arrogant species. Earth has existed for millions of years. Humans can live for 60-80 years yet claim the right to subjugate the land for generations to come. I am content to take a bit of earth time to decide what to do at Alameda Point. Building the marina which would generate much profit with little permanance or down side would be fine. Alamedans can take the next years or decades to decide what fits. I have all the EIR's from the Fernside Extension on. There are many projections, based on statistical speculations. Few have come true. The ultimate controls are (1) the market – if SUNCAL can't rent or sell whatever it builds, it won't build more – and (2) the traffic equilibrium that people create in their own minds about how much time they are willing to pay for commute. If it takes 22 minutes to leave town, people who have to do that every day won't pay the prices for the homes that SUNCAL wants. Who will buy them? This is not Florida and a retirement community. Alameda has always been a bedroom community. Rent them? But that won't generate the profits needed by SUNCAL. SUNCAL will undergo what HBI underwent. Years of promises, changed plans, near bankruptcy, halts in construction, the City having to threaten litigation and a moritorium to get the land for the public improvments including the second school and fire station.

    There are no controls in SUNCAL's intitiative, no time tables, no remedies for failure of SUNCAL to comply. No money if there were recourse for such failures. We don't even know if SUNCAL is still here now. The City has no recourse. SUNCAL has it all. We are the City. Not SUNCAL.

    • Hey Barbara,

      Thanks for your answer, and sorry if you're feeling at all picked on. I feel like I have heard from a lot of folks who don't like SunCal's plan, and I am genuinely interested in hearing what you all feel the city should do out there instead. I think it's important for us to take a critical look at anything that might happen at the Point. But I'm hopeful that we all can do that with an eye toward creating a solution there.

  • AD says:

    The language of the initiative cannot be changed.There will be conflict between the agreement adopted in the initiative and the later "legally binding" agreements, whatever that is. any developer will fall back on the clause that suits them at any particular moment in time and let the city legally challenge them to prove otherwise. Sounds like a recipe for disaster. What is the city's benefit in accepting this myth of the "fixable initiative"? Sounds like a PR campaign, more than a real attempt to protect the city's resources and develop the Point right.

  • Miriam says:

    Since the initiative gives the developer the power to assign development rights to whoever it wishes without city approval, would the agreement between SunCal and the city in 2009 apply to the new developer in 2019? Or would this end up in court until 2029? The city is creating a Frankensteinish ballot measure. It would be impossible to know what it all means until the courts rule on it.



  • Detailer says:

    Legally binding commitments from SunCal or D.E. Shaw? What a joke.

    SunCal and its owners the Elieff brothers, more so that just about any other developers in California know that “There ain’t no such animal”.

    There are currently pending in the Central District of California Bankruptcy Court 30 different Chapter 11 bankruptcy cases for Lehman/SunCal entities. For administrative purposes, they are rolled into two separate cases with two separate trustees.

    Part of the Chapter 11 process is that the debtor gets to reject (i.e. cancel) any contract it pleases, and the other party to the contract is simply left with a damage claim for which that other party is an unsecured creditor. In Chapter 11 bankruptcies, unsecured creditors get just pennies on the dollar of what they are owed.

    At the end of a Chapter 11 case, whatever contracts have not been expressly assumed by the debtor company or by the party who will end up owning the real estate when the Chapter 11 Plan goes into effect are automatically terminated.

    All of that is true of private contracts as well as all sorts of agreements with public agencies.

    In fact, that is exactly what is happening under the Chapter 11 Plan for approximately 20 Lehman/SunCal projects, in the Chapter 11 Plan proposed by Lehman Brothers. The Chapter 11 Plan specifically says that not only are all public agency contracts rejected, all damage claims of all public agencies are released, all public agencies are to be forever enjoined from suing the Lehman/SunCal entities, the Lehman entity which ends up owning the property and their successor owners, and that no public agency can sue any of them at a later date on any claim or issue which existed on the date the Chapter 11 Plan is approved. To top it off, the Lehman Chapter 11 Plan also provides for punitive damages against any public agency and its officials which even tries to sue the Lehman/SunCal entities, the Lehman entity which ends up owning the properties, or their successor owners.

    The people in San Clemente, San Juan Capistrano, Riverside County and Bakersfield, and their local government agencies, are screaming bloody murder because of all of the breaches of contracts and agreements for on-site and off-site improvements promised by Lehman/SunCal.

    Frankly, given the reality of what is going on in the Lehman/SunCal bankruptcies, Pat Keliher’s promise of “legally binding agreements” is complete baloney. There are no such things because Chapter 11 exists so that developers can get out of all sorts of obligations and promises. The only hope anyone has for a “legally binding agreement” is if a developer posts surety bonds in the nature required under the Subdivision Map Act and Subdivided Lands Act, in the full amount of the developer’s obligations required by local ordinance (whether or not state law requires them to be bonded) and in the full amount of the developer’s promises which go beyond what local ordinances require.

    Even with those sorts of bonds, smart ash lawyers like Lehman Brothers’ still try to wriggle out of all contractual and statutory obligations, even the bonded ones. There is no reason to believe that D. E. Shaw would operate in a manner any different than the way Lehman’s lawyers are operating in the 30 Lehman/SunCal bankruptcy cases.

    And, by the way, what is SunCal’s “big issue” in terms of the 30 bankruptcy cases? Getting Mr. & Mrs. Bruce Elieff out of their personal liability to pay $230 Million to reimburse the bonding companies who issued the bonds on the Lehman/SunCal projects. That facts is disclosed, repeatedly, in the Lehman/SunCal bankruptcy court documents filed by SunCal and by Lehman.

    If the Elieffs end up stiffing the bonding company on the 30 Lehman/SunCal bankruptcies, what chance does anyone think the SunCal/D.E. Shaw entity will have to sucker some bonding company into issuing mega million dollars worth of bonds to make Pat Keliher’s offer of “legally binding agreements that would commit the developer to ensuring funding is available for public benefits beyond a $200 million cap set in the initiative and to consent to an increase in the area’s tax rate if more money is needed to build, operate and maintain the project”????? Zero, zip, nada.

    Pat Keliher is shameless in his bs’ing people in Alameda, concerning SunCal’s intentions. Keliher also manages the Lehman/SunCal Oak Knoll project, yet his name never appears on any important documents filed with the bankruptcy court in that case. He is simply a talking head hand puppet, and nothing more.

    SunCal is equally shameless in bs’ing the people of Oakland. Remember that $500,000 that SunCal told the City of Oakland, and the public by way of press releases, that the “bankruptcy trustee” would release to begin clearing the brush at Oak Knoll, removing the asbestos debris and providing security guards? As late as October 20, 2009 that bankruptcy trustee had filed no such agreement or stipulation, nor had SunCal. The judge had not signed any order having anything, whatsoever, to do with fire hazard abatement at Oak Knoll. It’s all just complete b.s. and fabrication by SunCal’s employees Keliher and Aguirre.

    And by the way, D.E. Shaw’s refinancing “offer” for Oak Knoll is in that bankruptcy court file. It’s so full of loopholes, conditions, and other “outs” it looks like Swiss Cheese after a mouse has gnawed away at it.

    I can just imagine what D.E. Shaw’s financing commitmant for Alamenda Point looks like. Probably more of the same. Since there is no one at the City of Alameda with the intellectual background sufficient to negotiate with D.E. Shaw’s Wall Street lawyers to protect the City of Alameda’s interests in a bankruptcy, I am sure that “financing commitment” is worth less than the paper it is written on.

    By the way, the head of D.E. Shaw’s real estate division is Mr. George Rizk aka Mr. Risk. He apparently got his MBA at Wharton School of Finance. Until Mr. Risk shows up in Alameda, with all of the documents his company has signed with SunCal in hand, and until he makes those documents available for public inspection by everyone in Alameda and their lawyers, it seems pretty clear that this whole SunCal/D.E. Shaw operation is nothing but an elaborate shuck and jive.

  • Jon Spangler says:

    The initiative–which cannot be altered, of course–is only one of many legally binding aspects and steps in the development process. There are also the Exclusive Negotiating Agreement, the CEQA-mandated EIR and its legally-binding mitigations, the Disposition & Development Agreement (which the ENA specifies is the document in which all matters financial are resolved and specified), and the design review process before the Planning Board.

    All of these steps and legally binding authorities/contracts have weight, and there is clearly room to negotiate (or renegotiate) many aspects of the redevelopment along the way. This could include adding an inflation index to the $200 million in "public benefits" specified in the initiative. (Apparently the developer can surrender or give up additional benefits to the City in cases like this but the City cannot give up more than is specified in an initiative, for instance.)

    If we are going to address believability here, let's consider the ambiguity and/or inconsistency in negotiating that has characterized the City and the US Navy in their dealings with SunCal. Not to mention the lack of veracity in some blogs regarding what has actually been going on (or not) re: AP….

    • Everybody,

      I think the issue here, in my feeble little mind at least, is that it is not clear whether items that would be approved by voters if the initiative passes could be superceded by a subsequent agreement. So far, we've got:

      Initiative language that appears to allow a developer to make changes.

      Letters from SunCal – the folks who wrote the initiative – that indicate a willingness to ink agreements that would alter items of concern in the development agreement it contains.

      Statements from city officials that indicate some uncertainty about whether the agreements SunCal is talking about would be legally binding over items in the initiative, which everyone appears to agree, cannot be changed.

      If anyone has a legal opinion on this or caselaw they can share that would bring some clarity to this, I'm begging you to put it out there or send it along.

  • Barbara Thomas says:

    Jon – Since when has an EIR under CEQA or NEPA required "legally binding mitigations?" When I have litigated under CEQA, my recollection is that the impacts must be identified, mitigations proposed, then the agency decides what to do which includes going forward with the project without adopting any mitigations.

    It sounds like the City chould and should demand surety performance bonds. The City should require, not merely identify, required mitigations under CEQA which would be tied to Levels of Service of traffic at intersections. Particularly Webster, Constitution, and the East end connections. Exactly what was done at the citizens at HBI decades ago. If Levels of Service reach D or E/F for any point during the day except for unplanned accidents, repairs etc., no futher permits to develop anything should be issued.

  • ct says:

    Thank you, Michelle, for boiling the issues down to a clear, concise, and balanced presentation of facts. There's a fair amount of verbal shrapnel flying around this very hot topic; in the midst of such noise, your reporting provides a great service to our community.

  • William Smith says:

    Now that all sides have recognized that the Alameda Point Initiative (the Initiative) poses significant risks to City finances and local control, the discussion is turning in the more productive direction of how to mitigate those concerns.

    If you are a supporter of the Community Vision (http://www.alamedapointvision.org/) signed on to by hundreds of Alamedans, even if the shortcomings of this Initiative cannot be mitigated, this discussion will at least provide a better basis for a follow-on redevelopment alternative to realize that vision. Regarding the current Initiative, the most promising, and perhaps only mitigation, is to use the change process outlined in Section 14 of that Initiative.

    Except for changes in state and federal laws, nearly any change not initiated by the developer requires a city-wide vote. Thus those who support the Vision but oppose the Initiative have to rely on the developer to propose mitigations, most of which will either increase the developer’s risk or increase the developer’s costs.

    The Initiative, though, does not specify who the developer is. The developer is widely assumed to be the SunCal led team – and given the large investments of money and time that SunCal and the City have already made working together under the Exclusive Negotiating Agreement, the selection of any other developer would be difficult.

    Thus it would appear that SunCal could enter into a binding contract with the City to modify the terms of the Initiative after it passed, as long as that agreement was consistent with the Initiative terms. D.E. Shaw signing onto the agreement would be reassuring if D.E. Shaw really does have the right to replace SunCal as the developer.

    Legally, though, the developer need not be SunCal, as several City officials have hinted. One concern, then, is that another developer could step in that would not be bound by any commitments made prior to the election, perhaps even another separate legal corporation or other legal entity formed after the election by SunCal.

    Thus, should this Initiative pass, the only real protection that this City will have is a City Council majority that is willing to deny SunCal a DDA and start from fresh with another developer, or even an alternative development approach such as those suggested at the end of Renewed Hope’s Report “Doubtful Promises” (http://www.alamedapointinfo.com/documents/doubtful-promises-report-alameda-community-suncalshaw-hedge-fund-initiative-renewed-hope-s), and communicates this willingness clearly and forcefully to any and all developers. Two council members are clearly willing to start over, Mayor Beverly Johnson and Councilmember Doug deHaan.

    The positions of the three other council members are unknown, but of concern. The remaining three appear desperate for a deal with any developer, even if it is on the developer’s terms. At least one has cited the increasing liability and cleanup costs the City faces as the infrastructure at Alameda Point continues to deteriorate. This concern has merit, as these increased costs could potentially bankrupt the City given its already shaky financial condition.

    The City voluntarily assumed these liabilities when it signed up for a long-term lease of Alameda Point with the Navy, perhaps before any of the current council members were elected. There are, however, possibly viable alternatives to developing Alameda Point which the City has not yet explored. All of the other alternatives, though, require more active involvement of City officials in the management of the redevelopment project, including that of City Council members.

    If at least one of the three undecided council members is willing to go to the mat (e.g. stating that no deal may be a preferable outcome for the City unless certain minimal conditions are met) during negotiations with any developer, legally enforceable mitigations agreed to prior to the passage of the Initiative may work. The City Council would have to insist that SunCal or any other developer agree to these mitigations before the DDA (Disposition and Development Agreement) is signed.

    Thus the City Council, not SunCal, will have to convince voters first of the sufficiency of proposed legally binding mitigations to the Initiative, and second, of their willingness and ability to require that those mitigations be made a part of the DDA.

    Council Member Lena Tam’s talk in her post on Blogging Bayport Alameda of a partnership with SunCal, is not reassuring. SunCal in their Initiative proposed the emaciation of local government controls without consulting either citizens or government officials and only acknowledged community concerns after several community organizations formally announced that they opposed the Initiative. These organizations include the Alameda Chamber of Commerce, Renewed Hope Housing Advocates, and the Alameda Architectural Preservation Society. Brass knuckle negotiations, not a partnership with the City in a junior role, are called for here.

    If one supports the Community Vision, the discussion of how to mitigate the failings of the current Initiative is a welcome development. At the very least, even if this Initiative fails, the discussion will move those who support the Community Vision closer to developing an acceptable alternative for guiding the redevelopment of Alameda Point.


    Alan Shaw’s points about bankruptcy are valid for any Development Agreement or for any Disposition and Development Agreement, or for any contract with a developer. Thus his points on bankruptcy are not relevant to those who support the approach of selecting a master developer for developing Alameda Point. Bankruptcy is a risk for all agreements with a developer. Universal risks are not a special consideration for evaluating whether or not legal agreements to propose and accept changes permitted by the Initiative will be enforceable.

    Instead bankruptcy risk is a consideration when deciding whom to select for the master developer, or whether or not to select a master developer at all. Citizens might assist all council members to seriously consider, given the constraints on and extended timeline for development at the Point, whether a master development agreement with any legal entity is an appropriate redevelopment mechanism.

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