In preparation for a July 20 vote on an as-yet to be revealed proposed City term sheet with the A's corporation, Dan Kalb has called for a “study session” of the project, its relevant financing, costs and history from the City. Last week, the City’s report and the analysis of the revenue streams and costs it commissioned by Century Urban for the session were published. All of the observations here are based on those two reports to be heard at the Community and Economic Development Committee that Kalb chairs and related documents.
The City, not the developer, produces the term sheet for public land for review by City Council, based on negotiations with the developer. There is no term sheet until the City Administration has approved one and is ready to present it to Council for council approval. The term sheet then remains a non-binding basis to create later binding agreements. Here's some key information that the report reveals about how the City envisions the proposed project.
1) It’s unlikely the City will present a term sheet to the City Council that contains a Jack London Square IFD. The City regards the Jack London Square IFD proposal as pure public financing.
In the report, the City clearly states its rejection of John Fisher’s Jack London Square IFD financing proposal. Submitted by the City’s point on the negotiations and project development, Elizabeth "Betsy" Lake, the report concretizes some of the things that the Schaaf administration has only suggested up until now. In an initial response to Kaval’s term sheet salvo, Schaaf referred to the deal in general as containing ”public investment at the high end.” Lake and her staffer Molly Maybrun [who is credited with preparing the report] at various public meetings have stated that the City isn't behind the JLS IFD. But now, the report all but says it’s not going to happen, and why. The report explains that:
—90% of the expected growth above the current tax valuation, even in the A’s math, would be due to existing dynamics, not the ballpark.
—developments envisioned in the Downtown Specific Plan and other planned changes for the JLS area will likely add to the valuation in ways that can’t be predicted or separated from the effects of a ballpark.
—large number of current residents and landowners in the area make forming the IFD district an unsure bet, even with the clipped process created by SB293.
—The IFD doesn’t make enough money fast enough, even by the A’s math, to serve as the basis for the infrastructure improvement financing mechanism. The report says it will provide less than 15% of the anticipated costs of the improvements it’s proposed to fund by the ballpark’s opening day.
2) Community benefits of $411.5 million would be paid over a period of 66 years through a mixture of funds, not just the IFD. The IFD produces only $55 MM for off-site affordable housing funds over 20 years.
Kaval admitted during a fraught Community Benefits Steering Committee meeting in May that despite assumptions by the Committee, Fisher intended to provide no community benefits out of pocket surrounding the project. Kaval argued that much of the specifics of the Community Benefits Agreement would come out of the IFDs—and much of that from the Jack London Square IFD. Now the City reports that many of the CBA’s benefits can’t be accomplished by the Howard Terminal IFD proceeds, which can only be invested in infrastructure.
The report acknowledges several facts. The pool of potential IFD money is smaller than Kaval suggests, the City doesn’t agree with Fisher about how much infrastructure should be publicly paid for, and there’s no money in the IFD for community benefits outside of affordable housing [see below].
Thus the City proposes that the CBA would be fulfilled by a mix of sources, including the existing Port of Oakland Social Justice Trust Fund, a pre-existing contractor fee-driven fund at the Port which contractors working on Fisher's project would pay into. A percentage of the condominium transfer fee generated and paid to the port whenever a Fisher condominium on the site is sold would also be put into the pot, according to the proposal.
The funds would accrue at the rate of a few million per year, according to the City proposal. A majority of the cash would be produced by diverting the Port-associated fund mechanisms—the Social Justice Trust Fund and the Condo Transfer Fee in the A’s agreement—not the IFD or Fisher's investment.
The IFD funds would produce 55 million dollars for off-site housing at the end of 20 years [in future inflated dollars], according to the report. For context, Measure KK produced $42 million for affordable housing and $37 million in infrastructure in its first two years.
3) The City is offering less affordable housing than the CBA demands. The site’s affordable housing requirements are convoluted but don't require the A’s by law to build as much affordable housing as even the City suggests.
Fisher, has been cagey about how the affordable housing at Howard Terminal would work, but regardless of his plans, there are several legal mechanisms that will control how much of Fisher’s residential development must be affordable housing. Likely, affordable housing advocates won't be happy with even the City's offer above the legal requirements. The City's proposed plan is significantly less than the 1000 units requested by the CBA committee, or the 35% ratio of affordable to market rate suggested by East Bay Housing Organizations.
State Affordable Housing Requirements: The site is exempt from the state surplus lands act, and so wouldn’t have the minimum percentage requirement in that law, according to the report. Rather, Howard Terminal is governed by a legal requirement of the Oakland Army Base Redevelopment Plan, which says that 15% of ALL the residential units in the Plan area in the aggregate must be affordable housing. The report says that given the amount of affordable housing pre-existing or planned in the Plan area, Fisher would only have to create a residential development that is 8% on-site affordable housing.
The City's Impact Fee Ordinance: Oakland has another set of laws that require developers to either pay a fee for each unit of market rate housing they create at a development, or to match the fee by building either on-site or off-site affordable units. Given the rules of the Army Base Plan, Fisher can’t satisfy the Impact Fees law by building off-site, because he will have to satisfy the Plan's rules about building on-site affordable housing. The report says that the Plan’s requirements and the on-site in-lieu levels are roughly the same and Fisher could satisfy both with the 8% mark, according to the report.
The City Wants Fisher to Build 15% Affordable Housing: But in a nod to the CBA demand, the City wants more housing on-site than that and is asking that 15% of the units be affordable—450 units by the City’s math. To make it easier on Fisher, the City also suggests using the IFD tax revenues to pay for the difference between the approximate 8% of affordable housing required by law, and the 15% suggested by the City. That would be a large public subsidy to Fisher’s affordable housing component at the project site, according to the report.
No Legal Requirement Beyond About 8% Affordable Housing: It's also worth noting that Fisher is not obligated to build more than around 8% at Howard Terminal by either law. The final affordable figure would be a product of negotiation and could change from what the report is suggesting.
Questions About Deep Affordability: The spread of affordability, according to the report, can reach up 120% AMI [$109k/year income], though the City recommends that the units average 60% AMI. This means that a significant proportion of the affordable units in the City’s suggested scheme would essentially be market rate housing.
4) The Project Would Cost the City $10.3 MM per Year in Required City Services
Though its a topic largely left out of the public discussion until now, the City will have to pay for services to the parks, residences and ballpark are built and these costs can’t be covered by the IFD by law. New services for Fire, Human Services, Parks and Rec and Police will cost the City $10.25 million yearly, according to the Century Urban report to the City. Policing makes up more than half that expense.
Subtracting the 10.4 million incremental property tax that would go to an IFD and the service costs, according to the report, the City will make around 15 million yearly from non-property taxes associated with the development and parking revenues at full build out. The property taxes go to the IFD meant to create the infrastructure necessary for the project.
5) Given statements from City in the report and other public documents, Kaval acted in bad faith by self-publishing a “term sheet” and demanding it be voted on by Council by July.
Kaval Misrepresented the Development Process and the Concept of a Term Sheet to the Public: Kaval self-published the A’s proposal for the Howard Terminal project in April, and subsequently demanded a vote on the proposed terms by Summer. At the time, and for a good part of the time since, it was assumed that Kaval was publishing the end-product of negotiation with the City. Even in his letter to Betsy Lake at the City that accompanied the term sheet rollout, Kaval strongly suggested that he was presenting the final version of the City/A's negotiation to the Council to jump-start vaguely referenced bureaucratic delays.
Fisher Was Falling Behind in the Process in April: The letter from Lake that Kaval was ostensibly responding to—part of the public record, but mostly unmentioned in media—now appears to have been part of a very different kind of thread. Lake was letting Kaval know just what a long-slog of public requirements the deal necessitated; how many tasks lay ahead of Fisher; that the term sheet at that time was still under negotiation and just how far from an affirmative vote the project was. And the letter appears to imply that it was the A's behind schedule.
Additionally, Lake attached a letter from the Planning and Building Department that noted a crucial application in the process had been rejected in March by the department and had to be resubmitted. Lake also noted in Kaval’s to-do list that the A’s company was still required to create a term sheet for the CBA Committee, a task due by July 9, according to the schedule. Another attachment from Lake's March letter was a spreadsheet of to-do's for Kaval and Fisher if they wanted the project in by the end of the year.
Kaval's Term Sheet Financials With a JLS IFD Weren't a Product of Negotiation: What wasn't yet clear in Lake's letter, given the weeks-separation in the City and Kaval's responses, was that the City and Fisher had not even gotten to the stage of final drafts for a term sheet. The report, ironically submitted by Lake, now publicly reveals that the City had not signed on to Fisher’s financing vision in April, despite Kaval’s rhetoric. At the time Kaval published the “term sheet”, the City did not support the Jack London Square IFD and there was no finished term sheet ready for a Council vote.
The report also makes it clear that the City had not given Kaval reason to believe the financial plan could be integrated into a City term sheet at that time. The documents combined with the report strongly suggest Kaval was deliberately gaslighting the City and public in April.
“With limited exceptions, most of the terms contained in the term sheet released by the A’s on April 23, 2021, provided in Attachment 2, were negotiated and mutually agreed upon between City and A’s between April 2020 and April 2021. However, the A’s first submitted their proposed Financial Plan (Exhibit F to the A’s Proposed Term Sheet in Attachment 2) in April 2021, and that exhibit does not represent a consensus of A’s and City Staff. Staff is continuing to evaluate, revise, and attempt to arrive at consensus with the A’s on a new Term Sheet and Financial Plan. Staff’s proposed term sheet will be presented to the City Council on July 20, 2021.”
When selling or leasing public land for development, the term sheet is the product of negotiation between the City and the developer. The term sheet is the basis for the creation of a development agreement between the parties, also approved by Council. But the term sheet is the exclusive jurisdiction of the City Administration, which creates it and proposes it to the Council. It goes without saying that the Council could not have voted on Kaval’s proposal. The City is finally pushing back on Kaval’s narrative. More importantly, the City all but says the term sheet it's set to publish next week will not contain a JLS IFD.
Fisher Was Responsible for One Year of Delay in the Process: Kaval's justification for the publication of the term sheet in April was that the A's have waited too long to get an answer from the City. Kaval often references the several years that have passed since Fisher began negotiating with the Port. But the report reveals that Fisher himself was responsible for at least one year of the delay [and Lake refers to this same delay in the letter Kaval was responding too].
The publication of the Draft EIR is a necessary and time-consuming part of the process, as commentary must be gathered and the EIR must be justified or changed according to it—a process that continues today, and will not end until Fall. Kaval published his “term sheet” and demanded a vote several days before the Planning Commission’s public meeting on the DEIR and while the mandatory public comment period continued. Even if the City Council voted for a genuine City-sanctioned term sheet, a down vote on the EIR, or an EIR that could not justify the project would mean the July vote was pointless.
There are very few ways that Kaval's actions and statements can be interpreted except as bad faith and deliberately misleading actions during a negotiation for public land.