Vision gone viral

For years, the Right Thinkers in town have been working hard to reshape Alameda by encouraging the development of high-end apartment and condominium complexes and townhomes at Alameda Point and along the northern waterfront, and by taking actions designed to force local residents to get rid of their cars and take public transit instead.

Under their “vision,” no more would Alameda be the “City of Homes and Beaches.”  Rather, it would become a model of “Transit-Oriented Development” that would excite envy even among “progressives” in Seattle and Boulder.

Now, it appears that the coronavirus crisis may make it more difficult for the enlightened ones to achieve their goals.  According to recent published reports, experts are predicting that the pandemic will slow, if not kill off altogether, market-rate multi-family residential development in the Bay Area.  Likewise, they’re suggesting that the pandemic will reduce public-transit usage in the region – permanently.

If either of these predictions comes true in Alameda, the successes obtained by the Right Thinkers since their poster boy, current Vice Mayor John Knox White, joined the Planning Board in 2012 may turn out to have been in vain.  Re-wind the clock, Alice:  you’re back in Kansas again.

Let’s begin with residential development.

Former Mayor Marie Gilmore appointed Mr. Knox White to the Planning Board in February 2012.  Since then, the City has:

  • Approved the Site A project at Alameda Point containing 600 market-rate units;
  • Approved two residential projects at Alameda Landing, one with 237 market-rate units (which include 64 single-family homes), the other with 309 market-rate units (which include 30 single-family homes);
  • Approved six other residential projects along the northern waterfront (which we’ll define roughly as encompassing the area from Buena Vista Avenue north to the Oakland Estuary): Marina Shores, the Del Monte warehouse, 2100 Clement Street, the Encinal Terminals, Alameda Marina, and North Housing.  Taken together, these projects contain 1,802 units of market-rate housing, all of it (except for 52 single-family homes at Marina Shores) consisting of apartments, condominiums, or townhomes.

(We’ve omitted two other projects – Boatworks and Shipways – from the list, the first because it appears perpetually mired in litigation, the second because the developer withdrew its development plan in January 2019.  Including these two projects would add another 428 market-rate units to the total.)

The senior housing at Site A – consisting of “affordable,” not market-rate, units – has been completed, and construction has begun on some of the market-rate complexes at the site.  Three of the market-rate projects on the northern waterfront – the first Alameda Landing project, Marina Shores, and 2100 Clement – are finished, and demolition has started at the Del Monte warehouse site.  As far as we can tell, none of the other northern waterfront projects is close to being done.

But even before the coronavirus crisis hit, some signs of trouble had begun to appear in the local high-end multi-family residential market.

Last July, nearly five years after the Gilmore-led Council approved the Del Monte warehouse project as one of its last official acts, the developer – Tim Lewis Communities – ended up selling the property to Wood Partners, an Atlanta-based real-estate developer.  “Unfortunately, since 2014, TL Partners has been unable to secure financing [for the project],” City staff told the Planning Board.  (The walkaway came as no surprise to us, since Tim Lewis always had been better at promising than delivering.)

Likewise, the developer selected for Site A – Alameda Point Partners – has come to the City three times to re-negotiate the terms of the deal Council approved in June 2015.  These amendments did not change the total number of units, but the second of them allowed APP to begin building townhomes sooner than the original schedule called for and to move the moderate-income units included in the original plan to another parcel.

The saga of the so-called West Midway site at Alameda Point is even more disturbing.  As we’ve previously reported, Council selected two developers, one of which was APP, to compete for the right to build 291 market-rate units at the site.  The two finalists announced a partnership for the project, but the other developer then withdrew.  A few months later, APP also bowed out – “Through our first-hand experience of developing at Alameda Point,” the firm wrote to the City, “we have an appreciation for the complexity of the West Midway Development” – and staff started all over again.  The City issued another RFQ, and last month Council ended up picking a team composed of Brookfield Properties and Catellus.

And now comes the coronavirus crisis.

We confess that we’ve been following the economic side of the story more closely than the medical one, so we picked up on the article in last week’s San Francisco Chronicle about the consequences of the crisis for the housing market.  The story reported that the “coronavirus pandemic is driving rents down in San Francisco and across the region” – down 9% from a year ago in San Francisco and over 15% in some tech hubs in the South Bay – and that the downward trend was “likely [to] accelerate as layoffs mount and workers, newly liberated by work-from-home options, flee the Bay Area for cheaper
cities. . . .”

The article quoted tenant advocates as expressing delight at the decline in rents, but what caught our eye were the comments made by housing experts about the longer-term impact on market-rate multi-family residential development.  According to the Chronicle, one industry analyst predicted that that “Oakland housing – most of it targeting high-wage earners – could take a long time to fill up with renters.”  Demand for new condos, he stated, will be “very, very thin as the impact of job losses spreads across industries.”

Kenneth Rosen, an economics professor and chairman of the Berkeley Haas Fisher Center for Real Estate and Urban Economics at the University of California, offered an even bleaker forecast.  “Very few” market-rate projects will break ground in the foreseeable future, he told the Chronicle. “New developments were not penciling anyway,” the professor stated.  “New development going forward will be limited to subsidized affordable housing.”

Now, we don’t know whether Professor Rosen has a crystal ball, but he does have a Ph.D. in economics, so he seems qualified –  or at least more qualified than a politician – to make a prediction.

And what if he’s right?  In an era of declining rents, can APP afford to build the 600 market-rate units it has planned for Site A?  Can Pulte Homes cover its costs and make a profit from the 309 market-rate units it is proposing for the Alameda Landing waterfront?  Will Brookfield Properties and Catellus manage to put together an economically viable package of market-rate housing for the West Midway area?  And will the other market-rate projects Council already has approved along the northern waterfront actually come to fruition?

Nobody knows – or, if they do, they’re not talking.  The closed-session agenda for the May 19 Council meeting contained an item described as “conference with real property negotiators,” identifying the City and APP as the negotiating parties, Site A as the property at issue, and “price and terms” as the matter under negotiation.  But when we asked City Manager Eric Levitt if he would be willing to disclose what’s on the table, he replied: “Due to the confidentiality, I am unable to communicate on it currently.”

A similar item appears on the closed-session agenda for this Tuesday’s Council meeting.  This time, the negotiators are the City and North Cove Waterfront LLC (a Tim Lewis affiliate), the property is the Encinal Terminals, and the matter under negotiation is, again, “price and terms.”  (We didn’t bother to ask Mr. Levitt about this item, since we suspected his answer would be the same.)

Eventually, City officials may have to reveal publicly what went on in these secret meetings.  At this point all we can tell our readers with any confidence is that the story of the impact of the coronavirus crisis on market-rate multi-family residential development in Alameda is just beginning.  And it doesn’t look like it’s going to turn out quite the way the Right Thinkers would prefer.

The same can be said about the impact of the crisis on the campaign to move Alamedans out of their cars and onto public transit.

The anti-automobile aspect of the effort has focused on making parking less available and more expensive.  (Who wants to own a car if there’s nowhere to park it?)  For years, the Planning Board, spurred on by Mr. Knox White, has pressured developers to reduce the number of on-site parking spaces contained in their plans and to require a new resident to buy or lease the space separately from the housing unit itself.  For the rest of the city, the current Council has adopted policies with the purpose and effect of eliminating on‑street parking spaces under the rubric of “traffic calming.”  (With typical hyperbole, Mr. Knox White declared at the April 22 Council meeting that “where there is a tradeoff to be made between something that is unsafe and people dying and a parking space, we’re going to choose protecting our residents and the safety of our residents.”)  And the City now apparently is going to require drivers to pay to park at all City-owned facilities, including the ferry terminals.

The other side of the coin focuses on making public transit less expensive and more convenient.  The City currently operates the Alameda Loop Shuttle three days a week, but it runs only on the island, and, as far as we know, the City has no plans to enter the transit business on a grander scale on its own.  (The Greater Alameda Business Association does want the City to start operating a city-wide shuttle with connections to BART and the ferry terminals.)  So far, the principal strategy has been to subsidize – primarily with other people’s money – the use of public transit provided by other agencies.

For example, the City requires that all new developments arrange for free bus service to BART for their residents during peak hours.  (Alameda Landing already offers free shuttles; so does Harbor Bay.)  Likewise, the developers must contribute funds annually to the Alameda Transportation Management Association, which currently is providing free AC Transit bus passes to residents at Marina Shores and 2100 Clement and employees of Alameda Point businesses, and in the future will hand out free or discounted bus passes to new residents at Site A and the developments along the northern waterfront.  (Separately, the City is using Measure B/BB funds to enable the Alameda Housing Authority and the Alameda Point Collaborative to obtain free or discounted bus passes for their residents from AC Transit.)  In addition, the City agreed in March 2018 to pay AC Transit $491,215 over three years to keep buses on the new Line 19 running at 20-minute intervals during peak commute periods through December 2020.

The Transportation Choices Plan adopted by Council in January 2018 continues the emphasis on public transit.  Indeed, its top priorities are to (1) “expand transit, bicycling and walking to/from Oakland and BART,” (2) “expand transit and carpools to/from San Francisco,” and (3) “expand transit and achieve a low-cost or ‘free’ rider experience within Alameda.”  The Plan goes on to identify a host of projects and programs for meeting these goals, many of which are intended to get Alamedans to take the bus, BART, or the ferry more often.

But what if, as a result of the coronavirus crisis, local residents decide to stop, or reduce, their use of public transit?  Should the City move forward in the previously approved direction anyway?

The statistics released by the transit agencies about the short-term impact of the pandemic aren’t encouraging.  AC Transit ridership was down 72 percent (compared to a February baseline) as of May 8.  BART ridership stood at nine percent of the “expected baseline ridership” as of June 1.  Ridership on the ferries run by WETA has declined 96 percent since February 2020.

Not surprisingly, this reduced demand has prompted all three agencies to cut back dramatically on their service levels.  AC Transit is operating the equivalent of a Sunday schedule; BART is running trains only every 30 minutes on weekdays and shutting down at 9 p.m.; WETA has suspended the Harbor Bay ferry and curtailed trips to and from the Main Street terminal.  Moreover, each agency is being forced to re-think its long-term plans in light of the lower expected future demand.  You’re not going to see that second BART tube under the bay any time soon.

From what we’ve read in the papers, no one is forecasting that public transit ridership will remain at the current abysmally low levels.  By the same token, we haven’t seen any predictions that it will return to pre-coronavirus levels soon – or maybe at all.  “Are we returning to an old normal after this is over, or are we advancing to a new normal?” the Chronicle quoted San Francisco Muni director Steve Heminger as asking.  “My vote is probably the latter.”

But what will the “new normal” look like?  According to the San Jose Mercury News, “The question could come down to how many of the people transit officials call ‘choice’ riders –those who could drive but opt for public transportation – will instead hop in their cars.”  These are, it would seem, precisely the sort of people our local planners are targeting.  What will they decide to do?

A Metropolitan Transportation Commission official told the Mercury News that, in normal times, the decision about whether to drive or take public transit involves a “complex calculation” of cost, convenience, and time.  But the coronavirus has “added another factor to that mix,” he said:  Going forward, perceptions of the risk of getting sick from strangers on public transit “will play a bigger role in each individual’s personal calculation, for those who have a choice.”

Maybe this is an issue for which a psychology degree would come in handy.  We don’t have one.  (Know anyone on Council who does?)  But we can’t dismiss the fear factor out of hand.  Indeed, one could imagine the emergence of a vicious cycle:  commuters refrain from using public transit because they’re afraid it’s unsafe, which leads transit agencies to reduce service levels, which leads even more commuters to refrain from using it because it has become inconvenient.

And if this vicious cycle occurs, how will those who are unable to telecommute get to their jobs?  By driving, of course.  As Randy Rentschler, MTC’s legislative director, told the Chronicle:  “My joke to friends is go out and drive now and enjoy it,” he said. “Because when the economy picks up, freeway congestion is going to come roaring back.”  And don’t get us started on the traffic at the tubes and bridges leading out of Alameda.

If this scenario is seen as likely or even reasonably possible, maybe boosting access to public transit ought not to be the top priority of the City’s transportation planners.  Why promote a service few Alamedans may be willing to use?  And if more local residents are going to drive, either out of fear or necessity, maybe the City ought to make it easier, not harder, for them to use their cars – like by enabling them to find a place to park.  We know thoughts like these are heretical – but then we’ve never claimed to be a Right Thinker.

Sources:

Transportation Choices Plan: Transportation Choices Plan (January 2018); Status Report on Transportation (May 2020)

Transit agency updates: 2020-05-27 AC Transit staff report re coronavirus; 2020-06-11 BART COVID-19 Presentation; 2020-06-14 WETA staff report

About Robert Sullwold

Partner, Sullwold & Hughes Specializes in investment litigation
This entry was posted in Alameda Point, City Hall, Development and tagged , , , , , , , , , , , , , , , . Bookmark the permalink.

4 Responses to Vision gone viral

  1. mmegut says:

    Thank you for your time and research into this and many other local matters.

  2. Bill says:

    Robert. Another great blog. IT has seemed that City Hall has always tried to sell residents on the fact that people would use Public Transit and Bikes. Neither has come true. We never felt it would. Young residents want to drive their BMWs and very few people will put up with the insane population growth and traffic to risk their lives on a bike. Your findings are not a surprise. But, you offer content that explains the situation well. Stay safe.

  3. dave says:

    Why force payment for ferry parking? The ferry has the highest farebox recovery of any transit system (meaning it is the least subsidized by taxpayers.) Why on earth would we want to disincentivize that?

  4. Really says:

    Excellent analysis.too bad no one on the Council has the foresight and courage to lead Alameda during this time period. Isn’t it the job of the City Manager to guide the city safely into the economic future? No way people will opt to live in a big box, take the bus, and risk the constant exposure. Meanwhile, you may be called a “racist” if you don’t want to build more and more housing.

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