Be sure to count your (ex)change

True or false:  An affiliate of residential developer Tim Lewis Communities is legally entitled to build 589 new housing units on the site of the former Encinal Terminals along the northern waterfront.

If you answered true, turn to the left, where Mike O’Hara – you know, the guy who plays Santa Claus at Tim Lewis’s Christmas party – is icing down the champagne in anticipation of Council’s pro forma approval next month of his employer’s latest development project.

But if you answered false (or even “I’m not sure”), pull up a chair and keep reading.

At first glance, the truth of the stated proposition seems simple enough:

  • The Encinal Terminals site is zoned for “mixed-use” development.  Since the zoning ordinance does not require that an MX-zoned parcel set aside any specific percentage of the total acreage for non-residential uses (and Council rejected, by a 3-2 vote, Councilman Frank Matarrese’s attempt to establish such a standard), Tim Lewis can devote as much land as it wants to housing as long as it also includes some commercial/retail and open space.
  • According to the master plan submitted to the City, Tim Lewis owns 16.73 acres of land at the site:  15.48 acres on which multi-family housing is allowed and another 1.25 acres to which the density limits imposed by Measure A apply.  This yields a total of 491 units permitted by the existing zoning.  (15.48 times 30, plus 1.25 times 21.78)
  • Under the master plan, Tim Lewis will build 25 units restricted by deed for sale or lease to “very low” income households (i.e., households earning 50 percent or less of area median income – $28,050 to $46,750).  This is – just barely – equal to five percent of the total units permitted by the existing zoning, and thus state and local law mandate a 20 percent “density bonus” for the developer, entitling Tim Lewis to construct another 98 market-rate units (491 times .2).  This brings the project total up to 589 units.

So what’s the hitch?

In short, it’s this:  the land on which Tim Lewis intends to build the project described in the master plan is not the same as the land it currently owns.  In fact, the proposed development depends on a “swap” by the City and the developer of so-called “Tidelands Trust land,” the purpose of which is to give Tim Lewis an additional developable parcel at the core of the site.  As Assistant Community Development Director and City Planner Andrew Thomas told the Planning Board on July 17, “You can’t do this master plan without a Tidelands exchange.”

Under state law, the State Lands Commission must review any exchange of Tidelands Trust land, and there is no guarantee that the Commission will approve this one.  But more importantly, if the swap is approved, Tim Lewis will end up with fewer total acres than are necessary to justify a residential development of 589 units – even with a 20 percent density bonus.  As a political matter, a majority on the current Council may be inclined to rubber-stamp Tim Lewis’s proposal.  (The Planning Board okayed it by a 4-2 vote.)  But the developer’s legal entitlement to that result is by no means clear.

To begin, take a look at the diagram below from the original version of the master plan:

Tidelands Encinal - currentThe red area labeled “Private Property” is land now owned by Tim Lewis; the beige area labeled “Public Access Property” is the “Tidelands Trust land” owned by the City.

The Tidelands Trust parcel can be traced to a statutory grant from the State of California to the City of Alameda in 1913.  Under the statute, land subject to the Tidelands Trust can be used only for maritime-related purposes.  As the First District Court of Appeal recently stated, “The [Tidelands] Trust generally prohibits residential, general office, non-maritime industrial, and certain recreational uses on lands that are subject to the Trust.” During the Encinal Terminals era, the Tidelands Trust land was part of an operating “container-care” facility.

As the diagram shows, the Tidelands Trust parcel creates a gaping “hole” in the middle of any residential development proposed for the Encinal Terminals site.  For that reason, the northern waterfront amendment to the General Plan adopted in 2007 recommended that any future master plan for the site “should consider relocating the tidelands trust lands to the perimeter of the site to allow residential mixed-use development in the core of the site with publicly accessible open space around the perimeter of the site.”

Tim Lewis took up the invitation.  A key element of its development plan is to swap a portion of the land it now owns for the bulk of the Tidelands Trust parcel.  After the “exchange,” the land transferred to Tim Lewis will be free of the trust restrictions (and the land transferred to the City will be subject to them).

The diagram below, taken from the March 17 version of the master plan, depicts the details:

Encinal conceptual plan with exchange

The red area shows the Tidelands Trust land that will go to Tim Lewis; the red cross-hatched area shows the Tim Lewis-owned land that will go to the City in exchange.

After the swap, the diagram below, taken from the original version of the master plan, outlines how the site will look after the swap:

Tidelands Encinal - proposed

As in the first diagram, the red area is the land to be owned by Tim Lewis, and the beige area is the Tidelands Trust land to be owned by the City, after the swap.  (There also will be a thin strip of City-owned Tidelands Trust land running vertically through the middle of the Tim-Lewis-owned property).

So far, so good.  But take a look at the second diagram again.  It leads to the conclusion that, as a result of the “exchange,” Tim Lewis will end up with fewer acres than it started with:  the developer will give up 8.73 acres of land it now owns (the red cross-hatched area) in return for 4.93 acres of Tidelands Trust land (the red area).  This represents a net “loss” of 3.8 acres.  Subtract this net loss from the pre-swap acreage and you get 12.93 acres on which the project described in the master plan – including the 589 new housing units – is proposed to be built (16.73 minus 3.8).

But here’s the rub:  Under the zoning and density bonus ordinances, a developer isn’t entitled to build 589 new housing units on a 12.93-acre parcel.  In fact, even if one assumes that multi-family housing is allowed on all 12.93 acres, the number of units permitted by the existing zoning would be 388.  And if one then applies a 20 percent density bonus, the maximum total number of units is only 466.  But that’s 123 fewer units than Tim Lewis proposes to build on the site!  (The total number of permissible units is even lower if one assumes that the Measure A density limit still applies to 1.25 acres.)

The master plan presented to the Planning Board on July 17 omits the diagram included in the March 17 version, but the accompanying draft development agreement refers to an exchange of 9.5 acres of “waterfront uplands” for “approximately 5 acres” of “land-locked Tidelands property.”  If these numbers accurately describe the final swap, the net “loss” from the “Tidelands exchange” increases to 4.5 acres, and the number of permissible housing units decreases by another 25 units.

Does Tim Lewis really have the legal right to build so many more units on the Encinal Terminals site than are authorized for a 12.93-acre (or a 12.23-acre) parcel?  Only, it would appear, under the dubious premise that the number of permissible units depends on the acreage originally owned rather than on the acreage of the final project.  We don’t question that Tim Lewis owned 16.73 acres when it filed its application.  But even the first version of the master plan made clear that the developer intended to do a swap that would affect how much land it would end up owning (and building on).  And the fact is that, after the swap, the acreage owned by Tim Lewis is lower than the amount used by the developer to calculate the residential entitlement.

In one sense, this discrepancy poses a legal question, which – we hope – someone on Council will ask City Attorney Janet Kern to opine on.  In another sense, it raises a policy issue:  The zoning ordinance imposes a 35-foot height limit for multi-family buildings, and the northern waterfront General Plan sets a 60-foot height limit for all structures.  Tim Lewis is seeking a waiver of the former and an amendment of the latter.  Why?  So that the developer can cram – the staff report uses a different word – 589 units onto the site.  If Tim Lewis were limited to the 466 units allowed on a 12.93-acre parcel, however, there would be no reason to waive, or amend, the standards established by existing law.

The foregoing analysis assumes, as Tim Lewis and the recipients of its campaign contributions (like the PAC that backed Council members Marilyn Ezzy Ashcraft and Malia Vella in the last election) probably do, that approval of the swap by the State Lands Commission is a lock.  But is it?

To be sure, the benefits of the swap for Tim Lewis are obvious:  it gives up restricted land around the perimeter of the site and, in return, gets fully developable land at the core.  The strips of land the developer now owns along the edges lie within 100 feet of the shoreline.  If no swap occurred, Tim Lewis still could develop these strips, but it would need a permit from the Bay Conservation and Development Commission, which could impose conditions like a very high seawall.  By contrast, not only will the swap give Tim Lewis land at the center of the site that is free of the Tidelands Trust restrictions, the parcel does not fall under BCDC’s jurisdiction, either.  If we’re reading the diagrams and charts in the master plan correctly, all or part of five “sub-areas” proposed for development will be located in this area, and Tim Lewis plans to put at least 380 new housing units there.

But the statute governing an exchange of Tidelands Trust land is not concerned with whether the transaction confers an economic benefit on a private developer; rather, it requires the State Lands Commission to determine that the “purpose” of the exchange is to “enhance public access to or along the water,” to “enhance waterfront and nearshore development or redevelopment for public trust purposes,” or to “preserve [or] enhance . . . open space.”  Tim Lewis undoubtedly will argue that the Encinal Terminals swap meets one or more these requirements, but an environmentalist may take a different view.  As Sierra Club activist and environmental blogger Richard Bangert told us,

The project under which this exchange is being proposed will provide marine-related uses (marina, waterfront promenade) that are approved tidelands trust uses. But tidelands protection is not a prerequisite for building a marina and waterfront promenade.  The city gets something out of the deal (such as completion of Clement Avenue), but I don’t see what the state gets that could not be achieved by leaving the tidelands boundaries as is.  It appears to be a land use sleight of hand that allows for an otherwise prohibited use (housing) on tidelands.

Proposals as yet unseen or envisioned could bring about enhancements of the site with potentially more robust ecological features such as a marsh or wetland of the kind that once existed there.  And I would argue that these ecological features would be more in line with a growing consensus on sea level rise adaptation.

When the Encinal Terminals proposal is presented to Council next month, we expect that anyone who raises the environmental issue will be told to take his concerns to the State Lands Commission or the BCDC.  But it may be harder to dismiss so readily the argument about the maximum number of housing units allowed by law at the site.  The legal issue may not make any difference to the Triumvirate that runs Council, but it takes four votes to approve an exchange of City-owned land, and Councilman Matarrese and Mayor Trish Spencer may have a few questions for staff and the developer.   We can only hope that they’re willing to withstand the inevitable invective – “NIMBYs!”  “Homeless haters!”  “Trump supporters!” – that the pro-housing ideologues will unleash if they have the temerity to ask those questions.

Editor’s note:  Paul Foreman, chair of the Open Government Commission, first spotted the issue about the discrepancy in parcel size, and he shared his analysis with us.  Richard Bangert, in addition to providing an environmentalist’s perspective on the exchange, educated us about the Tidelands Trust and related matters.  We appreciate their insights.  Needless to say, neither is responsible for our interpretations.



Original master plan: 2016-05-23 Ex. 1 to staff report to PB – Draft Master Plan

March 17, 2017 master plan: Final master plan (Part II)

July 17, 2017 master plan: 2017-07-17 Ex. 1 to staff report to PB- Encinal Master Plan

July 17, 2017 draft development agreement: 2017-07-17 Ex. 3 to staff report to PB – Draft Development Agreement

Staff report to Planning Board: 2017-07-17 staff report to PB re master plan etc.



About Robert Sullwold

Partner, Sullwold & Hughes Specializes in investment litigation
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6 Responses to Be sure to count your (ex)change

  1. Paul S Foreman says:

    I thank Mr. Sullwold for his in depth expansion on my discovery of the miscalculated residential unit count of the Encinal Terminals project.

    In the next few days I will be publishing a short version of the issue in Mark Greenside will also be publishing a column in coming editions of our local newspapers. If you read all three of these items, you will see differences in the computation of the correct number of residential units. This is not due to our faulty math or disagreement. It is due to vagaries and inconsistencies in the various planning documents that are on the record.

    The proposed Development Agreement does not state how many acres of land will be owned by the developer after the swap. It states the current developable acreage as 16.66 acres and the current city tidelands acreage as 6.4 acres. In then states that the City will convey 5 acres of tidelands to the developer, and that after the swap, the City will own 9.5 acres of tidelands, leaving it to the reader to calculate how much the acreage of the developers land will be reduced. Mr. Sullwold calculated the loss of acreage from the difference between 9.5 and 5 (4.5). My calculation was to assume that the 9.5 included the residual 1.4 acres from the original 6.4 acres. Thus, I came up with an acreage loss to the developer of 3.1 acres. (9.5 -1.4 = 8.1 – 5= 3.1)

    However, the more accurate acreage loss to the developer is closer to the 3.8 acre calculation made by Mr. Sullwold in reliance upon the first illustration in his article where the developer purports to show the acreage for each plot. However, even that illustration is ambiguous. It identifies three parcels as the new tidelands, one along the western and northern shore line, marked as 8.73 acres that includes two triangular pieces that must be the 1.4 acre residual original tidelands referred to in the paragraph above, a parcel marked in blue as a wharf area at .81 acres, and a parcel in the center of the property for which no acreage is designated. Put all of this together and the parcel conveyed to the City is probably at least 9 acres and the net loss 4 acres.

    The bottom line to all of this is that the Developer and the City Planning Office have failed to publish an illustration that clearly identifies the developable acreage that will be owned by the developer after the swap and also illustrates what portion thereof that will be dedicated to purely commercial use and thus cannot be included in the residential density calculation. Until that illustration is published there should not have been any Planning Board Approval and there is not sufficient information upon which any Councilmember can cast a vote.

  2. Cheryl Saxton says:

    Why, oh why, is this not surprising… Thank you.

  3. barbara thomas says:

    The General Plan also requires subtraction of the acreage used for streets, sidewalks, public spaces, and any other acreage not used for building units to be subtracted from the amount of acreage used to compute the number of allowable units. I cannot tell from the analysis if the developer made this subtraction. If this was not done, the number of units should be reduced even more.

  4. Paul S Foreman says:

    Correction: The article appearing in today’s Sun, which I attributed to Mark Greenside is published under the byline of Gretchen Lipow as President of Alameda Citizens Task Force.

  5. L. Loeb says:

    THANK YOU for all of the work that you do in researching and writing these cogent, and I believe well balanced pieces. I would be curious for your take on the PSI/DOER battle at the Alameda Marina property after reading Liz Taylor’s op-ed today in the Alameda Sun.

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