February 7, 2023
City Attorney's Office
DATE: February 7, 2023
TO: Mayor Martinez and Members of the City Council
FROM:
(List all relevant/responsive staff
persons)
Dave Aleshire, City Attorney
Anne Lanphar, Sr. Real Estate Deputy City Attorney
Subject:
(This will appear on the agenda)
Terminal One Disposition pursuant to Amended Land
Disposition Agreement
FINANCIAL IMPACT: None at this time. At Closing, the City received $10M in sale proceeds consisting of cash of $500,000 (less
escrow fees of $3,750) and 2 Promissory Notes totaling
$9M secured by the property. The City also received a
third shared appreciation promissory note whereby the
City will ultimately receive a portion of the net sales proceeds of the residential units up to $5M. In addition, Developer has paid $85,0000 to the City in
reimbursement of the City’s attorney fees
PREVIOUS COUNCIL
ACTION:
(List all dates items were heard or
council action took place)
November 22, 2022 whereby the City authorized the
amendment to the original LDA including the payment of
the purchase price over time.
STATEMENT OF THE
ISSUE:
Under the Amended LDA, the City Council has 75 days
to review the transaction and if it disapproves same, can elect to rescind the transaction, and have the Property conveyed back to the City, returning the initial $500,000 Deposit
AGENDA
REPORT
February 7, 2023
RECOMMENDED ACTION:
(This will appear on the agenda)
ADOPT a resolution reviewing the terms of Amendment to
Land Disposition Agreement for Terminal One Project and all outstanding objections by various Citizen Groups with respect to the Project and decide whether (i) to exercise the right to rescind the transaction and require the Property to be deeded back to the City and the Deposit returned to Developer; (ii) allow the sale and Project to continue forward; or (iii) direct staff to negotiate further revisions to the ALDA – City Attorney’s Office (Dave Aleshire 510-620-6509).
DISCUSSION:
SUMMARY: TWO PATHS BEFORE COUNCIL AND MAJOR DEAL POINTS There are two basic courses of action before the Council on this project, which is the most important remaining developable land in the Brickyard Cove area. The first is that the City can reaffirm the action it took on November 22 to continue with the sale of the Property to the Developer subject to the terms of the Amended Land Development Agreement (“ALDA”), or, alternatively, the Council can rescind the sale and get the land back with all of the obligations cancelled, and the Developer receiving back the $500,000 the Developer paid at Closing on December 30. The Council could also direct further changes to the ALDA.
The lengthy staff report which follows provides fully the information which weighs on these two choices, but here the intent is to give a broad overview. The reason you have been presented with these choices is not because of problems which could not be addressed in the agreement, or because the Developer has misgivings about going forward. All the original issues as directed by the Council on November 22 were addressed. Moreover, our notice was submitted to HCD to establish that this Project was exempt from the Surplus Land Act under the grandfather exemption, and on December 15 HCD confirmed we are exempt. Any alternative non-grandfathered project would need to be submitted through the HCD list of affordable housing developers and the City would have to consider any and all proposals sub mitted. Any such developer if selected would have to become familiar with all of the sites’ challenging issues, including the soil remediation, the abandoned warehouse and wharf, the seashore rise protection, the limited site access and roadway issues.
These issues have bedeviled the development of the current project, initially proposed in 2014 and in the intervening 8 years evolved from a midrise 316 -unit project to a less dense 184-unit project, and now may further evolve by eliminating the wharf, sheddi ng more units, and adding parking. The basic issue then is if this project is good enough with a developer sensitive to the community, or is the community better off rejecting the project or rejecting the project and testing an alternative affordable hous ing product? If this is rejected how long until another option crystalizes, and what will the state and local legal framework look like then?
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The basic reason that we are here tonight is that the project as it sat in November had been to the DRB and Plann ing Commission to mixed reviews, had a limited SLA grandfather window where it could be sold. As the Entitlements were not granted, it was unclear what could be built, so the original deal could not close. The question was how could a revised deal be formu lated in a 6 -week period to close by December 30? The City and Developer undertook that mission —outlining basic deal points on November
22. There would be a closing, but the purchase price could not be fully paid by December 30 because the Developer did not have the Entitlements and besides, we now wanted to eliminate the Wharf. So the transaction was set so that a minimum deposit was initially paid but as the Developer moved forward to receive the Entitlements, Notes for payment of the purchase price would be paid off—when entitlements were approved, when permits were issued, and even when the project was complete. In fact, up to $5M more in purchase price for a total of $15M was payable. This relation of purchase price payment to entitlement worked for both parties—and also would provide the extra time to go to the approving bodies and allow the evolution of the site plan and design to conform to community desires.
However, the Brickyard Community with good reason was concerned that the City has not had enough transparency and has not listened to the Brickyard Cove Community. Accordingly, litigation threats were made about not complying with the Brown Act and not having the agreement finalized. To resolve these issues, the City and Developer put into the agreement a provision allowing the City to walk away from the deal within 75 days of the Closing. Accordingly, the purpose of this second hearing is to remedy the lack of transparency of the November 22 meeting. As a result of tonight’s hearing the Council can affirm the deal, rescind it, or modify it. While a public hearing is not required, we are conducting it as a hearing and have given notice to all the Brickyard HOAs. We are providing you with the ALDA and with this very in-depth staff report.
As detailed below, during the month of December we had numerous meetings with the BCARD citizen group and with other citizens concerning all the issues raised at the hearings in November and December. An exhibit to the ALDA was developed, C-2 and is extensively discussed in this Staff Report (See Attachment 2 ). Probably the most important provisions impact the Brickyard Cove Road. This originally was a dead -end connection from Ferry Tunnel, and it was intended that when it was connected, the City would take it over. However, the roadway was not taken by the City and is now many decades old, was built on a military roadbed and does not meet City standards. Moreover, the truck traffic which it will experience as a part of constructing the developments will degrade it further. In honoring its long-term commitment, the City must act in a financially prudent manner. The future developers represent a funding source for paying for the necessary upgrades, including obligations to construct adjacent roadway, to pay development impact fees, to repair damaged road surfaces, and to pay a fair share of any necessary reconstruction. This makes it possible for the City to follow through on the commitment to accept the dedication of the roadway, as well as agree to actually perform the reconstruction within 5 years if for any reason the developers do not proceed with their projects after they receive their Entitlements.
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There are many other commitments made in Exhibit C -2 negotiated by the Citizens Group, but it seems that this commitment in particular would fix a problem that has faced the Brickyard Cove Community for decades. Often it is not that clear what benefit surrounding communities get from development, but here with the remediation of the property through to develo pment, eliminating the blighting effect of the abandoned warehouse, getting a bayside park and the Bayside Trail connection, along with resolution of the longstanding disagreement over the improvement and acceptance of the Brickyard Cove Roadway, the benefits to the Brickyard Cove Community seem clear. Nevertheless, through this public process, the Community will get the opportunity to weigh in on this question, and ask the Council to affirm the ALDA, or modify it, or to reject it. In that case we go back to the status of the property which existed as of November 22, 2022 and subject to the Surplus Land Act.
BACKGROUND OF ORIGINAL LDA
Terminal One Development, LLC (“Developer”) and City were parties to that certain Land Disposition Agreement dated August 6, 2014 (“Original LDA”) concerning the disposition of the project site located at 1500 Dornan Drive (“ Site” and/or “Property”). The Original LDA provided that the City would sell to Developer approximately 11.9 acres of the overall
13.8-acre site for cons truction of a medium density residential project and retain ownership of the remaining 1.9-acre portion for development of a public park.
Until the early 1990s, the project site had been a port terminal, used by the Port of Richmond for shipping, transpo rt, and related industrial activities. Most buildings and structures have been demolished and removed from the site, except for an approximately 94,000 square -foot former port operations warehouse (Terminal One Warehouse) building that is partially support ed by the existing pier along the southern portion of the site, and some building foundations, railroad tracks, and other concrete surfaces. From the previous industrial activity on the Site, there is contamination which any future developer must remediate pursuant to a Remedial Action Plan that was originally approved by the State Water Board in 2004, was revised in 2018 to reflect the design of the original mid -rise 316 -unit project, and will be further supplemented to reflect the design of the currently proposed low-rise single-family project.
In early 2022, Developer proposed revisions to the Terminal 1 Residential Project that was originally approved by City Council in July 2016 which included 323 units consisting of condominiums and townhomes, associa ted common areas, and site amenities on approximately 13.8 acres at the Property (“ Original Project ”). According to the Developer, the Original Project became financially infeasible and Developer requested that the LDA be revised to provide for a revised p roject (“Revised Project”). Land Econ Group (“ LEG”) was retained by the City to analyze the Developer’s proposals, as discussed below.
The extraordinary costs the capital project faced by Developer included the following:
Remediation of the hazardous seismic and environmental conditions at the site – The seismic cost was estimated at $5M, remediation at $3M, demolition of
February 7, 2023
warehouse (90,000 sq. ft.) at $1.5M, and mitigation of unengineered fill at $1M for a total of $10.5M.
Structural retrofit of the wharf to address hazardous seismic conditions – Developer estimated the cost at $3.5M plus $1.5M for mitigation to address sea level rise
Waterfront park development - Developer estimated cost at $5M Shoreline Drive retention – Project was to incorporate but Developer offered an alternative which increased park acreage and removed the Shoreline Drive extension
Community Benefits Contribution – Developer committed to contribute $500,000 and has already distributed $135,000
These costs totaled some $21M. The Developer’s contention was that these costs, in addition to the development costs related to parking podiums for the midrise buildings, in current market conditions, made the Original Project infeasible and they proposed the new Revised Project with 2-3 story buildings.
LAND ECON GROUP ANALYSIS
The City commissioned an independent economic analysis of the feasibility of the Original Project compared with the Revised Project from Land Econ Group (“ LEG”) which concurred with the Developer’s feasibility assessment. 1 LEG found that the high construction cost of parking podiums and midrise buildings with elevators push the cost well beyond the projected selling prices. LEG, therefore, deemed the Original Project unfeasible and likely unfeasible for years to come. LEG determined that the Developer’s proposed Revised Project would be marginally feasible, in that it would be able to carry its agreed to land cost and likely its site work for seismic stability, remediation and clean up. Staff, with the assistance of LEG and Developer engaged in ongoing discussions regarding the Revised Project scope for the Property that would be economically feasible.
The Revised Project, currently known as the Latitude Residential Subdivision (“ Revised Project” or “Project”), includes 154 detached single-family houses and duplexes with 30 Junior Accessory Dwelling Units (“ JADU”) incorporated into some of the single -family homes. The Council directed staff to orient the property sale negotiations towar d the Revised Project, but little progress was made for many months.
The Original LDA provided for the terms of the sale of the Property to Developer but (i) did not approve the project entitlements which remained subject to the City’s land use approval pr ocess; and (ii) described the Original Project and the public and private infrastructure improvements contemplated which were subject to the City’s land use process including the Design Review Board, Planning Commission and City Council, and would include the CEQA process. The LDA specifically stated, “Developer shall be solely responsible for processing and securing all of the Entitlements required to develop the
1 The Developer originally refused to provide its proforma analysis directly to City due to the possibility of disclosure through the Public Records Act. Agreement was reached to disclose it to third party LEG. Due to continued public demand, the City Attorney reached an agreement with Developer as a part of closing escrow and it has been provided to various citizen requesters.
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Project and construct the Offsite Improvements . . . Nothing shall be deemed to require City to grant any Local Approvals or otherwise to exercise its discretionary authority in any particular manner.” (4.1.3/4.1.5). The Original LDA also specifically conditioned Developer’s obligations to close the transaction upon Developer obtaining acceptable entitlements (“Entitlement Condition”).
SURPLUS LAND ACT.
Since the Original LDA was executed, the State of California materially amended the Surplus Land Act (“ SLA”) requiring an extensive new process for the sale of all real property owned by any governmental agency to make any such real property available for acquisition by affordable housing developers (“SLA Process”). However, the revised SLA included a “grandfather” exemption for any sales agreements entered into prior to the SLA amendment (201 9) BUT requiring that any such existing agreements be consummated by December 31, 2022.
The new SLA process allows developers wanting to build affordable housing to apply and be registered on a state list. There are over 500 developers now on the list. Any agency having surplus property must submit the property to the state to be circulated to the registered developers and must concurrently negotiate transactions with all those developers who indicate interest, though it is the agency’s choice who they sell to.
Accordingly if the transaction with Developer was not consummated by December 31, 2022, the City would have to comply with the SLA Process which could result in a new project with a new developer which would not have the extensive history with the Property including the extensive environmental conditions, seashore protection, rehabilitation of the historic wharf, land remediation, and so forth and which might not have the capacity to deal with the added costs of development created by these conditions especially for an affordable housing project. Staff was concerned that if required to comply with the SLA Process with a new developer and a new project, the result could leave the Site vacant and undeveloped for another decade.
NOVEMBER 22 COUNCIL RESOLUTION/APPROVAL
At a closed session on November 15, the Council was given the choice of authorizing a bold effort to resolve the outstanding issues with Developer or opting to process the Property under the SLA. The Council’s negotiating points were presented to and accepted by the Developer. Staff had less than a week to prepare a staff report and resolutions for the November 22 Council meeting. This was because HCD required a 30 -day notice of any transaction closing under the Grandfather Exemption (i.e ., by December 30). The actions on November 22 included:
Surplus Land Resolution. The City Council adopted Resolution 168-22 declaring the Property as surplus land subject to the provisions of the SLA but subject to the Original LDA and therefore exempt from the new SLA requirements provided the Property was transferred prior to Decembe r 31, 2023. Notice was to be given to HCD 30 days in advance of the closing.
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Deal Terms to LDA Amendment. At the November 22, 2022 City Council meeting, the City Council authorized the City Manager and City Attorney to negotiate an amendment to the LDA upon the following material deal points (“Approved Terms”):
Developer must waive the Entitlement Condition.
Purchase Price for the Site to be revised and paid as follows:
Original Purchase Price: The $10M purchase price (“ Original Purchase Price”) to be paid (i) the Original Deposit ($500K) to be nonrefundable; (ii) $500K paid at closing (“ Closing Deposit”); (iii) $2M paid when entitlements granted, and all appeal periods have expired without challenge; (iv) $2M paid when 1st building permits granted; and (v) $5M paid earlier to occur of 50th building permit or December 15, 2024.
Additional Purchase Price: As additional consideration for the deferral of payment of Original Purchase Price, Developer would pay additional compensation to the City, payable upon sale of the last unit, the lesser of $5M or 15% of gross unit sales revenue over $182M (“ Additional Purchase Price ”). [i.e., total purchase price could be as much as $15M]
Developer shall enter the Project Labor Agreement and the local hiring requirement remains.
Project shall construct all specified improvements with no impact fees contributed from other projects.
Required to close on or before December 31, 2022.
Right of reverter if nonperformance in normal RDA form.
Developer to provide Project Description and Schedule of Performance immediately.
Developer to contribute fair share for street maintenance caused by project development.
Parties will develop mechanism for maintenance of infrastructure.
Any legal challenge Developer pays the costs of defense.
All terms of the public infrastructure and the community benefit shall remain the same.
City’s requirements for inclusionary housing remain applicable.
Developer to commit to pay its fair share of the cost to improve the private road owned by the Brickyard Cove community with the
contemplation that roadway would ultimately be dedicated to the City as a public road.
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Developer to commit to contribute $500,000 to the City’s Community Benefits Fund ($135,000 already paid).
COUNCIL HEARINGS / ACTIONS
At the November 22 Council meeting, over 20 residents spoke against the Project, raising issues such as lack of disclosure of documents such as developer proforma and resolution of approval, density and layout of units, design issues, truck traffic, CE QA issues, access and safety, site remediation and other issues. On December 6 Project Entitlement recommendations were referred to the City Council from the Planning Commission recommending denial. Many objections were the same as on November 22.
The City Council on December 6 referred the Project Entitlements back to the Planning Commission and Design Review Board. However, in light of the one -time chance to proceed with the Project, the City Council, by a 6-1 vote with the then Mayor voting in the negative adopted Resolution 168 -22 directing the City Attorney and City Manager to proceed and finalize the ALDA pursuant to the terms above.
EXECUTED LAND DISPOSITION AMENDMENT AND CLOSING.
Surplus Land Act. In a letter dated December 15, 2022, HCD confirmed that the sale of the Property to Developer pursuant to the LDA as amended would be exempt provided the closing occurred on or before December 31, 2022.
A copy of the HCD letter is attached as Attachment 4. This letter turned out to be critical to obtaining title insurance and closing.
Executed LDA Amendment.
Negotiations. The City Attorney’s office prepared the initial draft of the First Amendment to Land Disposition Agreement (including the
attachments thereto) (“ALDA”) and submitted it to the Developer and Developer’s legal counsel on December 1, 2022. The parties extensively and continuously negotiated the ALDA until December 29th when it was executed and submitted to escrow to consummate the Closing. The ALDA is attached as Attachment 6).
Citizen Negotiations . Concurrently, the City Attorney began a dialogue with a rotating group of about six persons culminating in an Exhibit to the ALDA, Exhibit C-2. This is separately attached as Attachment
2. This document was also negotiated with Devel oper and went through 12 versions, more than any other part of the ALDA.
Closing. The transaction was closed, and title transferred to Developer on December 30, 2022 (“Closing”). The LDA Amendment complied with the Approved Terms with certain modifications and additional provisions.
Execution Dispute. The original intent was for the City Manager to execute the ALDA as the November 22 Resolution provides, but due to the holidays, she was unavailable and the Mayor also emailed he was
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on vacation, including a photo of a snow-covered house in his email and on social media indicating he was in the Sierras (see Attachment 5). On December 29, we learned the documents had to be delivered to the title company in the afternoon due to their early holiday closure. We then arranged execution by Vice Mayor and City Clerk.
The documents were executed at approximate 1:30 p.m. When Council was informed that evening, the Mayor responded saying he should have signed. The City Attorney contacted the Mayor and gave him two opportunities to re-sign the documents witnessed by the City Clerk for Friday afternoon, December 30 th and Saturday morning, December 31st. He declined the first appointment and did not show for the second appointment. He has now sued the City to invalidate the transaction due to execution by the Vice Mayor.
Grant Deed. The grant deed conveyed the Property to Developer subject to the terms of the LDA as amended.
Remaining Title Issues and Right to Rescind. Developer raised a number of issues regarding title issues. The City Attorney’s office resolved the majority of the most serious title issues although the Developer did continue to express issues with certain remaining title exceptions including, but not limited to, two (2) PG&E easements which were not r emoved prior to the Closing (“ Remaining Title Issues”). Developer was reluctant to close with resolution of the Remaining Title Issues. A compromise was reached where the LDA Section D(b)(ii) (amending LDA Section 3.3.1) provides that if the Remaining Title Issues are not resolved within 60 days after Closing, Developer has the option exercisable for up to 75 days after Closing, to deed the Property back to City subject to standard real estate requirements such as title insurance.
Purchase Price. The Purchase Price (the Original Purchase Price ($10M) and the Additional Purchase Price (contingent on sales up to $5M) was paid as follows:
Original Deposit: $500,000 was previously paid to City in 2014 and credited to the Original Purchase Price at Closing.
Additional Deposit: An additional $500,000 was paid to City through escrow at Closing (less $3,750 escrow fees).
First Note Secured by Trust Deed: Developer executed a purchase money note in the amount of $4,250,000* which bears interest at 4% per annum and provides for principal payments (a) $2,250,000 payable upon issuance of Entitlements and
expiration of the all appeal periods; and (b) $2,000,000 payable on first to occur of (i) issuance of first residential building permit; and (ii) December 15, 2028 (which is the outside date no matter what happens with building permits).
The note is secured by a deed of trust against the Property in
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first lien po sition insured by a loan title insurance policy.
There are no provisions for subordination.
* $250,000 represents amount of city transfer taxes which amount was disputed by Developer as to the calculation methodology. See discussion below regarding City Transfer Taxes.
Second Note Secured by Trust Deed: Developer executed a purchase money note in the amount of $5,000,000 which
bears interest at 4% per annum and provides for entire
principal payable on first to occur of (i) issuance of the 50 th residential building permit; and (ii) December 15, 2028 (which is the outside date no matter what happens with building permits). The note is secured by a deed of trust against the Property in second lien position which is insured by a loan title insurance policy. The trust deed contains (a) provision for the subordination of this trust deed to a construction loan under certain conditions; and (ii) partial release provisions to release the trust deed upon sale of homes but requires a partial principal payment of $100,000 for each home.
Shared Appreciation Note Secured by Trust Deed: Developer executed a purchase money note in the maximum amount of $5,000,000. The actual principal amount is to be the lesser of $5M or the amount of 15% of the difference bet ween the actual Residential Unit sales prices and the sales prices of the Residential Units as projected by Developer prior to the commencement of construction as reported to City and
approved by LEG as reasonable. Developer is to provide City with a month ly accounting report upon commencement of
sales of the Residential Units and City has the right to audit.
The note is secured by a deed of trust against the Property in third lien position which is insured by a loan title insurance policy. The trust deed c ontains (a) provision for the
subordination of this note to a construction loan under certain conditions; and (ii) partial release provisions to release the trust deed which provides that 15% of the actual sales price is to be deposited into escrow account until the final accounting.
Miscellaneous: All the Notes and Trust Deeds are cross -defaulted.
In addition, any default under the LDA as amended and the Grant Deed are defaults under the Notes and Trust Deeds.
City Transfer Taxes. Developer requested that the City transfer taxes be deferred and included in the First Note. Escrow calculated the transfer taxes on the $10M calculated at the single category of sales prices up to $10M which would be $25 per $1,000 with a total $250,000. Developer argued tha t the tax should be calculated at a graduated scale under the ordinance with a total amount due of $207,000. The First Note includes the additional amount of $250,000
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which is to be adjusted by endorsement on the Note upon final determination of the amoun t due. Scope of Development & New Site Plan. A revised scope of development is attached to the ALDA as Exhibit C. The revised Site Plan is attached to the ALDA as Exhibit B.
Developer - Entitlements & Construction Obligations. Developer is obligated to expeditiously apply for and shall exercise commercially diligent efforts to obtain all entitlements in accordance with the Schedule of Performance (attached as Exhibit C -1). Developer has 24 months to obtain the entitlements and the right to extend same for 12 additional months (“ Outside Entitlement Period ”). Upon commencement of construction, Developer shall diligently prosecute same and not cease construction for any period of 180 days except for force majeure events.
City’s Discretionary Right of Rever ter (75 days). City has the sole discretion to exercise a right of reverter if the City Council public reviews the ALDA within 75 days of Closing which thereafter disapproves same and thereafter elects to exercise this right of reverter within 135 days of the Closing (Section 6.1.9.2).
Developer’s Right to Deed Property Back to City. If Developer is not able to obtain all Entitlements by the Outside Entitlement Date despite its good faith diligent efforts, then for a period of 60 days after the Outside Ent itlement Date, Developer may elect to deed the Property back to City pursuant to standard real estate procedures including title insurance.
City’s Conditional Right of Reverter (To Reacquire Property). City shall have the right to require the Site to be conveyed back to the City and City to repay the Purchase Price to the extent actually paid by Developer upon the occurrence of a Triggering Event which are defined as:
Developer fails to obtain Entitlements by Entitlement Outside Date.
Developer fails t o commence construction pursuant to Schedule of Performance.
Developer ceases construction for more than 180 days.
The First and Second Note become due and payable.
If City reacquires the Property, it shall be sold and proceeds shall be paid first to City to reimburse its costs, then Developer to reimburse its costs incurred with respect to the Property and any remainder amount retained by City.
Attorney Fees Reimbursement. Developer agreed to reimburse the City Attorney fees up to $85,000 to be paid by January 31, 2023.
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$44,462.15 was receive at Closing and the balance is due by month end.
BRICKYARD COMMUNITY - BCARD/CITIZEN NEGOTIATIONS.
As previously stated, following hearings at the DRB and Planning Commission, and Council hearings on November 22 when the Council directed staff to proceed to finalize the ALDA, and on December 6 when the Planning Commission recommendation of denial of the Revised Project came to the City Council and was then referred back to the DRB and Planning Commission; the Council heard extensive testimony concerning community concerns with the Project. These objections were varied and included the failure to make documents like the project proforma and November 22 Resolution available; the density and lack of desig n creativity of the Project; lack of parking; the wharf; possibility of homeowners paying for infrastructure; the grading, fill, and truck trips; degradation of the BYC Road by the trucks; City take -over of the road; lack of access and emergency access; need to remediate the property; and similar issues.
Wanting to address insofar as possible these issues in the Amended LDA, the City Attorney reached out to various citizens who had voiced these objections by letter and at the hearing with several of them fr om the BCARD group (“ Citizen Group”). Therefore, concurrently with the Developer negotiations on the ALDA, an exhibit to the ALDA was drafted as Exhibit C -2 which is attached here as Attachment 2. These zoom meetings started on December 15 and continued to the day before closing on Dec ember 28, and this Exhibit actually went through 12 versions and was the most extensively rewritten part of the agreement.
Summarizing major points of Exhibit C-2:
BYC Road Design Standards. These were described in the Exhibit. A resident Coordinating Committee will be established to review roadway issues. The City Engineer will study the current roadway condition and by May of 2023 develop a Report for the future roadway reconstruction and improvement. This will also look at the phasing of future development, the survivability of the current improvements during development, and the best strategy for installing improvements so they are not damaged by future development.
Funding of Roadway Improvements . Funding is preli minarily estimated at $600,000 and up. Citizen Group suggested their maximum contribution to be $250,000 and that cap is in the Exhibit. Funding would also come from Developers paying for (i) 100% of the cost for the portion of the roadway in front of th eir project; (ii) pay all traffic impact fees; (iii) repair any improvements damaged by construction activity; and (iv) participate in an integrated program for the whole roadway based on fair share principles (this based on questions of the integrity of t he base roadway and the degradation which might arise from the development leading to a need for major reconstruction).
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City Roadway Commitments. City agrees that after Terminal 1 gets Entitlements, City will accept dedication of the roadway; City will pay for all costs not met by the HOAs and developers; and further agrees that if the Developer does not perform the improvement work within 5 years, City will make the improvements itself. The reason for this structure is that the new development projects w ill provide much of the needed funding, and it is desirable to get the projects to go first so that subsequent construction does not degrade the new improvements (including PG&E site), but the City provides backstop assurances so that the community can finally realize the transition of the roadway to City ownership.
Maintenance Expense. HOAs are responsible for maintenance of land -scaping adjacent to their projects but specifically excluded from any tax or assessment to pay for construction or maintenance of any park, wharf, Terminal I landscaping or lighting, or any Bay Trail section along the Terminal 1 Project.
Emergency Access Plan. Shall be developed as a condition of approval of the Project and included in the Mitigation Measures. City shall be involved and provide a long-range focus for the benefit of the BYC Communities.
Traffic Management Plan. Plan will be developed for all construction activity including dust control measures and including a complaint hotline. Overnight parking on BYC Road will not be permitted.
Rentals. No short -term rentals and limited long -term rentals to 25% of Project through CC&Rs.
Remediation. Developer is funding up to $50,000 for an independent consultant retained by BCARD to comment on the carrying out of the remediation activity during project construction.
Environmental Review . Project will go through legally required environmental review including reviewing cumulative impacts as a part of the Entitlement Process.
Yacht Club Retaining Wall. Developer will work with Yacht Club on the design, location and aesthetic of the retaining wall and fence along the common property lines, with the costs paid for by Developer.
Housing Siting. Agreements are reached to make the 3rd floors of the central units smaller and to generally put 2-story units on the perimeter with the Yacht Club, though there continued to be disagreements on a small number of units as to whether they be 2 or 3 stories. However, there was agreement that it is preferable to eliminate the wharf, reducing costs, and thereby allowing more units to be eliminated and parking areas to be increased. Developer still needs to determine what the process will be to eliminate the wharf, and the resulting cost savings, and has 60 days to
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assess the Alternate Project through the US Army Corp of Engineers. Developer also agreed to meet with a 3 -architect group selected by BCARD before meeting with DRB to see if the design features of the Project can be improved.
This is a reduced synopsis of the seven pages of conditions in Exhibit C-2. With only a couple exceptions, most of the requests of the Citizen Group were accommodated by the Developer. Of course, the Revised Project still needs to go through the full entitlement process and environmental, mitigations, and conditions will be added at those stages. Moreover, the elimination of the Wharf will have significant impacts on the rest of the Project, particularly in opening up the design and allowing more parking —both things the community was seeking.
Although much work remains, during the month of December through a collaboration of the Citizens Group and Developer, much progress was made, and more can be done.
LITIGATION THREATS.
Currently, there are three known litigation threats, one filed and two threatened. The one which has been filed is Butt v. City of Richmond, et al. This is a claim by Daniel Butt on behalf of former Mayor Tom Butt that the ALDA executed by Vice Mayor Eduardo Martinez should have been executed by the then Mayor (letter dated January 4). The second two claims are claims of Brown Act Violations by Brian Lewis, et al., (letter dated December 22)2 and Daniel Butt on behalf of Former Mayor Tom Butt (letter dated January 3) that the City’s actions approving the ALDA on November 22 violated the Brown Act.
With respect to the Butt claim that it was he who should have signed the agreement, it is true that under Article III -A, Sec. 2 (f) of the Charter, the Mayor signs all contracts on behalf of the City which are acted upon and approved by the City Council unless otherwise delegated by the City Council to a City official or employee. The Vice Mayor signs in the absence or disability of the Mayor. As related earlier, we learned on the morning of December 29 that to close on Friday, December 30, the documents actually had to be to title and escrow by 3 pm on Thursday December 29. Previously, we received an email from the Mayor stating he was on vacation and including a picture of a house in snow country—see Attachment 5. Accordingly, we quickly arranged for a s igning in City Hall at 1 pm by the Vice Mayor and witnessed by the City Clerk, and immediately after their signing, the documents were picked up and messengered to escrow. In the evening the Mayor objected to the execution as he was “available” though he didn’t say where he was and from social media it appears he was vacationing with family in the Sierras. We then tried to arrange for two opportunities for him to re-execute the documents - one on Friday afternoon, and the second on Saturday at 10 AM on De cember 31. For both occasions we arranged for the City Clerk to be available for the signing, documents were ready, and she was there with the Assistant City Manager on both occasions. However, the Mayor did not show and gave us no reason why, but it appears he was hundreds of miles away
2 In fact, a tolling agreement has been approved with the Lewis gro up so that their 30 -day period will run past January 22 and will extend past February 7.
February 7, 2023
in the Sierras even though he still pushed us to set up these execution events. Given the weather conditions that existed on those days, the Mayor did more than inconvenience the staff who served his whim. He has now su ed the City. Although we think the lawsuit is fully defensible, we might also re-execute a “Restated ALDA” by the Mayor who signed as the Vice Mayor previously, fully mooting the action.
With respect to the two Brown Act lawsuits, it is not the intent here to discuss the merits of these claims, but the City contends that the Brown Act was complied with. In the case of a Brown Act claim, under Government Code Section 54960, a claimant has to make their claim within 30 days of the event, and the City then has 30 days to correct the alleged violations before a judicial action can be commenced. 3 While we did not believe there had been a Brown Act violation, we certainly agreed that the hurried adoption of the November 22 resolution, without the public having the actual Amended LDA in front of them, did not provide the level of transparency that the City favors. We did two things to address this, first to start the Citizen Group collaboration, and secondly we decided to build into the Amended LDA an exit clau se. The idea was that we’d essentially redo the hearing held on November 22 with the full documents available to the public, and with the provisions intended to address all the objections raised on November 22 and December
6. This meets the corrective remedies provided in the Brown Act.
The intent of the hearing tonight is to address all the Brown Act concerns that were raised those nights and are raised in the Brown Act objection letters. The hearing now sets forth all the information along with a fully negotiated document which has the benefit of addressing all the objections originally made to the agreement. We think by these creative provisions the community will get to dig into this agreement in detail based on the substance of the deal, not any techn ical procedural questions which might have arisen from trying to get the transaction done without the State’s arbitrary deadlines.
It is our hope that this approach will resolve the Brown Act litigation threats. When people talk about how difficult it is to get things done in Richmond, this is an illustration of the environment in which too frequently we operate.
CONCLUSION
The prior section shows the lengths we go to try and reduce the litigation load in a community who has spent $23M in litigation in the last five years. This is in reality a distraction from the real issue. In the month of December, we brought this agreement to a stage where the City has the option of proceeding with this Project instead of proceeding by the Surplus Land Act. Moreover, in that month we served as a mediator between the Developer and community so we could narrow the differences. We turn back to the first
3 As an example, the Lewis claim objects that the November 22 agenda did not fully describe the action, the Resolution and Project Proforma were not available, there was not adequate “reporting out” from closed session, and that keeping the Proforma confidential violated the “spirit” of the Brown Act. While there are valid arguments against each of these positions, the City’s intent has been to make this meeting perfect ly transparent and Brown Act compliant.
February 7, 2023
question, have we refined the Agreement to the extent that the community believes this is a superior option to starting over with the SLA Process? DOCUMENTS ATTACHED:
Attachment 1 - Proposed Resolution
Attachment 2 - Exhibit C-2
Attachment 3 - Resolution 168-22 (November 22, 2022)
Attachment 4 - HCD Approval Letter
Attachment 5 - Mayor’s email
Attachment 6 – First Amendment to Land Disposition Agreement (ALDA)