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Thursday, January 31, 2013

School Bond Corporate Power Player: Emeryville Firm Reaping Big Profits

Emeryville: Center Of School Bond Universe

As school districts up and down the state buckle under the interest heavy debt incurred by a recent spate of facility construction Capital Appreciation Bond (CAB) financing, Emery included, a local bond writing firm has positioned itself as the top bond selling corporation in California. It's Caldwell Flores & Winter, the educational bond selling heavy weight located right here in Emeryville.
The Christie Avenue firm, founded in 1986, has moved up through the ranks of educational bond sellers and now represents over 200 school and community college districts in California.  Caldwell Flores & Winter has emerged as the top seller of school bonds in the state, including the fiscally ruinous CAB financing, with some 84 deals (Emery included) totaling $6.8 million in fees under its belt.

"This Emeryille firm has emerged 
as the top seller of 
school bonds in the state". 

Caldwell Flores & Winter collects fees on school bond sales but it also has a bond election division, charging school districts for election services to help coax voters to spend money on bonds for school rebuilding.  So money goes from school districts to Caldwell to help win their bond elections but Caldwell is also known to generously help finance school bond elections with their own corporate donations so money flows both directions.

Here in Emeryville, Caldwell Flores & Winter donated $10,500 (more than any corporation or individual) to Measure J, the school construction bond in 2010.  That measure, meant to authorize the selling of bonds to pay for a new school at the Center of Community Life, passed with 73% of Emeryville residents supporting it after a blistering wall-to-wall campaign barrage featuring mailers, telephoning and door-to-door campaigning.  Caldwell will receive fees for Emery's bond sales, an amount the School District has yet to disclose.
It should be noted also, Caldwell Flores & Winter Vice President, Greg Kato, donated $1000 of his own money to Measure J, ostensibly to help Emeryville school children, even though Mr Kato doesn't live in Emeryville.

The firm touts its winning record running bond election campaigns, winning more than 200 of them, including traditional 2/3 General Obligation Bond elections with an impressive 90% success rate. The corporate website features a promise to prospective school districts, "Give us the resources and a handful of volunteers and we will deliver a win on Election Day" a motivating factor for Emery's School Board in 2010.

"Give us the resources 
and a handful of volunteers 
and we will deliver a win on Election Day"

Calwell Flores & Winter has become a major player in the lucrative educational bond market with over 550 bond sales and $5 billion in bond proceeds sold.  They have worked the Washington angle, receiving more than $260 million in Federal Stimulus authorization.

Lobbying For CAB's
With public anger rising over ruinous interest rates and multi generational school loans, Caldwell's lobbying arm has of late, taken up the task of protecting the infamous delayed interest Capital Appreciation Bonds, the firm's bread and butter.  As State Schools Superintendent Tom Torlakson and Treasurer Bill Lockyer have moved to make CABs illegal in California, Caldwell Flores & Winter are fighting back, complaining that no other similarly restrictive measures are being discussed for other governmental entities.
Caldwell says in some communities hard hit by the recession, CAB financing is the only type available to them and making this type of bond illegal will rob these school districts of their much needed school facility improvements.  Furthermore, Caldwell maintains, "Restricting CAB's  could result in reductions of 30% or more of facilities funds available to school districts for construction at a time when the unemployment rate hovers near 10%.  It's like telling homeowners that you can only take out a 15 year mortgage when they really need is (sic) a 30 year home loan."

With bankruptcy looming for many California school districts in the wake of crushing interest payments as their CAB loans come to term, Caldwell Flores and Winter use their website to tell citizens and lawmakers, "Let's not bankrupt our future or tie the hands of California's nearly 1,000 school districts by restricting its (sic) financial options".

School Districts Reeling From Bad Press Over Bond Funding

The bad press keeps hammering away on a reckless form of school construction bond borrowing some California school districts have turned to called Capital Appreciation Bonds.  Here at Emery Unified School District, the School Board recently voted to saddle us with our own CAB to pay for the new school facilities at the Center of Community Life and a debt we'll be paying back for 34 years, a usurious loan according to State Treasurer Bill Lockyer.  Emery's newly approved CAB hasn't been sold yet and actual amount Emeryville taxpayers will have to pay for the newly released CAB has not yet been released by Emery.  
The video at the top of the story below has an ominous quote that may be portentous for Emery: "The [Alvord] District is bankrupt already, they just don't know it yet."

Warning to readers: the interactive graphic in the story doesn't show Emery Unified School District's new CAB loan yet.  The amount shown is only what the District owed from before the latest round of borrowing.

From California Watch and the Center for Investigative Reporting:

Controversial school bonds create ‘debt for the next generation’

Decade of Debt: Capital Appreciation Bonds

Uncover how much high-interest debt school districts, community colleges and government agencies have issued. Each circle represents a public entity. The larger the circle, the greater the debt. The redder the circle, the higher the interest that entity will pay.

Herb Calderon stood on the campus of Hillcrest High School, staring at a wall that cost $10 million to build.
The mile-long barrier was constructed to prevent the hillside above from sliding into the new school during a heavy storm. The state-of-the-art campus with its extravagant sculpted concrete wall, he said, has helped upgrade the image of the downtrodden district.
“They wanted a beautiful high school, and we gave them a beautiful high school,” said Calderon, assistant superintendent for business services of the Alvord Unified School District in Riverside. “If people knew how much it cost, I’m sure we’d get some flak.”
The school, including the wall, cost $110 million to build, but by 2046, when it is finally paid for, it will have cost taxpayers at least $485 million.
Alvord is one of at least 1,350 school districts and government agencies across the nation that have turned to a controversialform of borrowing called capital appreciation bonds to finance major projects, a California Watch analysis of bond financing data in the U.S. shows. Relying on these bonds has allowed districts to borrow billions of dollars while postponing payments in some cases for decades.
This form of borrowing has created billions of dollars in debt for taxpayers and hundreds of millions of dollars in revenue for financial advisers and underwriters. Voters are usually unaware of the bonds’ high interest. At least one state, Michigan, has banned their use.
In California, where rules governing the loans are among the loosest, more than 400 school districts and other agencies have racked up greater capital appreciation bond debt in the past six years than in any other state.
They have borrowed $9 billion that will cost taxpayers $36 billion to repay over the next 40 years, according to data compiled by California Treasurer Bill Lockyer. He called it “debt for the next generation.”
“The average tenure of a school superintendent is about three and a half years, so they aren’t going to be around in most instances to worry about paying that off,” Lockyer said in an interview.“Nor will the voters, probably, that enacted it in the first place.”
The capital appreciation bondbusiness in California has been lucrative for dozens of private financial advisers, banks and credit rating firms that have charged government entities nearly $400 million for financial services since 2007, state data show.
The bonds are unusual in public finance because they postpone debt far into the future. Typical school bonds require borrowers to begin making payments immediately and cost two to three times the principal amount to repay. But with deferred payments, districts have ended up paying as much as 23 times the amount borrowed.
The decision to issue these bonds instead of traditional bonds typically is made by district officials after voters have approved bond measures, and the public usually has no knowledge of how much they will cost to repay.
Earlier this month, Lockyer and Tom Torlakson, the state superintendent of public instruction, called for a statewide moratorium on capital appreciation bonds until new legislation limiting their use is in place.
The issue first came to light last year after the Voice of San Diego and a Michigan bloggerreported on a questionable capital appreciation bond issued by the Poway Unified School District.
But a California Watch analysis shows that the issue is not unique to California.
Since 2007, school districts and government agencies in at least 27 states and Puerto Rico have financed projects with capital appreciation bonds.
In Texas, 590 districts and other government entities have issued these bonds over the past six years – more than any other state, according to a California Watch review of a database maintained by the Municipal Securities Rulemaking Board, a federal regulatory agency that oversees the municipal bond market. California was second, with 404, followed by Ohio, with 202.
Nationally, the total amount of debt generated by these bonds is unclear. States rely on varying methods for reporting, and in some cases the data is incomplete. Many capital appreciation bonds were issued in packages with other types of bonds, and national databases do not tally their independent values. 
In California, some of the most dubious deals occurred in San Diego County, where the Poway Unified School District in 2011 used the bonds to borrow $105 million that will cost $982 million to pay back, a repayment rate of about 9.4 to 1. The same year, the Santee School District borrowed $3.5 million that must be repaid at $58.6 million, or 16.6 times the principal.
Besides school districts, four agencies that receive tobacco-company payments from a court settlement have issued these bonds to construct health care facilities and operate programs. The largest was issued by the Inland Empire Tobacco Securitization Authority – a $206.4 million bond that will cost $3.8 billion to pay back, or more than 18 times the principal.
To finish building Hillcrest High School, the Alvord district issued a $57 million bond in 2011. By 2046, when the loan is paid off, Calderon said, it will have cost taxpayers $375 million – 6.6 times the principal.
Calderon, who joined the Alvord district as chief business officer in July, called the deal “a necessary evil” and said falling property tax revenue and dwindling state funding had left districts with no choice but to engage in risky borrowing.
“If this was a mortgage, you would run,” he said. “But this type of creative financing is what we’re forced to do.”
David Bauman/The Press-EnterpriseHerb Calderon, Alvord Unified School District’s assistant superintendent, walks the football field at Hillcrest High School in Riverside. The district issued a controversial $57 million capital appreciation bond but ran out of money to build bleachers.
Bypassing state tax cap
Some California districts, including Alvord, have used the bonds to get around a state limit on property taxes. To pay off bonds, unified school districts are allowed to tax residents no more than $60 per $100,000 of their assessed property valueeach year. By issuing capital appreciation bonds, districts that have reached that limit can push the tax burdens of new bonds far into the future.
When districts issue these bonds, they are betting that property values will increase enough over time to pay their debts. They often hire private firms to calculate property value projections and structure the deals.
The private firms are paid to determine how much money is safe for districts to borrow, but Lockyer said some financial advisers appear to have exaggerated property value growth projections to get the deals approved.
Although private firms are not obligated to report their fees to state regulators, the state treasurer’s office has compiled some fee information found in official bond statements. At least 42 financial firms have charged school districts and other agencies in California a total of $389 million since 2007, Lockyer’s office reported.
According to data available to the treasurer, Caldwell Flores Winters, a California-based company specializing in public finance, made the most money advising on California’s capital appreciation bonds – $6.8 million on 84 deals. Second was Dale Scott & Co. in San Francisco, with 55 deals worth $4.6 million. California Financial Services, a financial planning firm, was third with $3.5 million on 28 deals.
Financial advisers have been meeting with Lockyer and state legislators to discuss a measure that would limit repayment rates to as little as four times the amount borrowed with capital appreciation bonds, also known as CABs.
“Even though CABs can be a useful tool in managing a district's debt, it appears there have been a number of abuses,” said Dale Scott, whose firm was hired by Alvord last year to help manage the district’s debt. “That's why we strongly support the proposed legislation that would provide significant taxpayer protections.”
While financial advisers help districts structure the bonds, underwriters – typically large banks and investment firms – broker the deals for a commission, selling the bonds whole or breaking them into smaller pieces and selling them to multiple investors.
According to state records, Piper Jaffray was the busiest underwriter since 2007, brokering 165 capital appreciation bondsfor a price of $638,045. Goldman Sachs made the most money as an underwriter during the same time period – $1.6 million on a single deal with the San Diego Unified School District.
Both firms declined to comment for this story.
Highly leveraged deals
Nationwide, falling property values have hurt districts’ tax revenues, prompting some to turn to long-term bonds. Outside California, however, tighter regulations helped curb their use.
Ohio, for instance, prohibits the type of ballooning debt structures found in many California deals by requiring bonds to maintain a flat debt service. That means the annual payment must remain roughly the same each year.
California removed its flat debt service requirement on long-term bonds in 2009 with the passage of AB 1388. The bill was sponsored by the California Public Securities Association, which lobbies state lawmakers on behalf of financial consultants and underwriters. An association official declined to comment.
While districts have been relying on capital appreciation bonds for more than a decade, there was a slight increase in their use after the bill took effect, state data shows.
“Looking back, the Legislature's decision to eliminate the flat debt service requirement in 2009 is what led to a lot of these highly leveraged deals,” said Scott, the financial adviser.
School districts that issued these bonds fall into two categories: those that could not issue standard bonds because they had reached the $60 state tax cap, like Alvord, and others, like the Napa Valley Unified School District, that simply promised voters they would keep their tax rates low.
Napa issued its bonds in 2009 and 2010, in part, because officials had pledged to keep the tax rate well below the state limit.
“Our promise to the voters of Napa was to keep their tax bill at or below $36, and we were able to accomplish that,” said Jose Hurtado, a Napa school board member.
In 2006, Napa voters authorized $183 million to repair old school buildings and build a new high school in American Canyon, a rapidly growing area in southern Napa County.
By 2009, when the high school was nearly completed, property values had dropped and the district suddenly found itself short of cash.
On the advice of KNN Public Finance, an Oakland firm, Napa issued a nearly $22 million capital appreciation bond. The loan will cost $154 million – seven times the principal – when it is paid off in 2049.  
Three months later, the district issued another bond for $7 million that will have cost $28 million by 2033.
Hurtado said the board did not explain to voters the high cost of repaying the bonds, as far as he knows.
“I don’t recall any of those conversations going on,” he said. “It doesn’t mean they didn’t happen, I just don’t recall.”
KNN charged the district $156,000 for advising on the deals, according to state records.Advisers at KNN declined to be interviewed, but Dave Olson, a managing director for the firm, said in a statement to California Watch that, ultimately, districts set their own fiscal policies.
“The role of the financial advisor is to present the full range of reasonable alternatives to implement that policy,” the statement said. “We hope that the district feels we did so in this case.”
Some officials have criticized districts like Napa for shifting debt to future taxpayers instead of asking voters to pay now.
“If they’re trying to stay under a tax rate promised to the voters, that’s completely egregious,” said Glenn Byers, assistant treasurer of Los Angeles County, who has been critical of capital appreciation bonds that take longer than 25 years to repay.“If they’re not at the tax rate’s legal limit, it’s a slam dunk: They shouldn’t be doing (it).”
Complex finance plans
Whether Napa’s school board understood the long-term implications when it approved the dealremains unclear. When California Watchfirst asked school board member Joe Schunk about the deal in November, he said Napa had not issued any capital appreciation bonds.
A week later, he called backand said he had been mistaken.
Fellow board member Hurtado said that KNN had explained the deal but that “it was hard to understand.”
“When you’re trying to have discussions about CABs versus traditional (bonds) and tax rates, occasionally it all runs together,” he said.
Lockyer said the inability of district leaders to grasp complex municipal finance is a problem around the state.
“I’ve seen materials that went to a school board when they authorized the original issuance and there were blanks where the interest rate amount was to be determined someday,” he said. “But that’s what they saw when they agreed to a deal.”
Ben Johnson, a longtime school board member in Alvord, said he could not remember how the district’s $57 million deal was explained to the board when members approved it 2011.
“I think the thought process was that housing prices would increase,” he said. “If you’re asking me if I would do it in the future, I would not, but you can’t go back in time.”
Piper Jaffray charged the district $569,416 to underwrite the bond, according to state data.
Calderon, Alvord’s chief business officer, lamented the lack of financial expertise that leaves many districts unqualified to navigate complex bond deals – or to do business with high-powered financial advisers and Wall Street investors.
“They’re swimming with the big sharks,” said Calderon, who likened running a school district to heading up a large corporation. “These are principals and assistant superintendents of curriculum, and they’re being promoted in the role of a chief business officer.”
Unlike Napa, Alvord had reached the $60 tax cap at the time it decided to issueits capital appreciation bond.
Before Hillcrest High School opened in 2012, Calderon said, Alvord’s other two high schools were bursting at the seams. Postponing construction on the new school would have meant holding classes in portable structures, “like a tent city.”
With the district unable to borrow more money with traditional bonds and voters demanding a new school, district leaders began to feel the political heat.
“It’s one of those situations that people are forced into when there’s a lot of pressure put on by either boards or superintendents, that they want this building finished and they want it today,” Calderon said.
David Bauman/The Press-EnterpriseHillcrest High School was supposed to have an Olympic-size pool, but it was halved to 25 meters when construction funds ran short. A large concrete deck fills the space where the rest of the pool was meant to be.
Cycle of borrowing
Alvord’s financial troubles date back at least five years, when the district got stuck in a cycle of borrowing money to pay off previous loans.
“Our whole issue is that, technically, the district is bankrupt,” said Scott Andrews, an Alvord district resident who has led opposition to the district’s borrowing practices, which according to district officials have left taxpayers $500 million in debt. “No one has been able to explain to me how they’re going to pay this back in the future.”
Johnson brushed off criticism that the district had dug a hole for itself by spending more than it could afford.
“Alvord at times has been secondary in some people’s minds in the county of Riverside,” Johnson said. “We want to make sure our students don’t go without any opportunities, not just educational but in terms of facilities.”
Hence the extravagant design of Hillcrest High School.
Built into the side of a hill, the campus features state-of-the-art facilities, including a stadium, aquatic center and air-conditioned gym. But even after issuing the $57 million bond to complete the school’s construction, parts of the campus remain unfinished because the district ran out of money.
For starters, the stadium has no seats. The district could not afford them, so families bring lawn chairs to watch the school’s football games.
What was supposed to be an Olympic-size swimming pool was scaled down by half to 25 meters when construction money ran out, leaving a large concrete deck where the rest of the pool was meant to be.
When Calderon first toured the aquatic center after joining the district last summer, he was shocked. “The first words out of my mouth were, ‘Where is the rest of the pool?’ ” he recalled.
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Although Hillcrest originally was designed to serve 2,500 students, the district had to scratch an entire wing of classrooms from the building plans due to budget shortages. The school now has space for 1,600 students.
Each classroom cost $10,000 to furnish with hardware and technology, including digital blackboards that likely will be obsolete when the district’s first bondpayment comes due in 2026.
The school sat empty for a year after it was built because the district did not have enough money to operate it.
Still, Calderon insists that Alvord didn’t overreach. Although the district is $500 million in debt, he said, it’s “good debt” put toward facilities that will enhance learning for generations of students.
“Maybe one of these years or one of these decades,” he said, “if we ever get to sell another bond or do fundraising, maybe we can break open that concrete and build ourselves a true 50-meter, Olympic-size pool.”

Friday, January 25, 2013

Emery's School Bond Gets In Just Under The Wire

Sacramento lawmakers are finally closing the noose around capital appreciation school bond (CAB) financing as usurious and abusive to taxpayers.  This type of bond financing is the same type Emery Unified School District voted last month to impose on Emeryville taxpayers.  The LA Times article below notes how school bond payback terms more than 25 years will be made illegal in California by the new law.  
Emery's latest bond now being prepared for the school rebuild project known as the Center of Community Life will entail a 34 year payback, illegal if it were passed after Sacramento passes the new law.  Emery will get in just under the wire as it turns out and taxpayers here will be on the hook repaying until 2047.  
Emery School District, well aware of the looming law, sought to move quickly in order to beat Sacramento.  Before State lawmakers recently released the information about the 25 year maximum being considered, Emery school architect Roy Miller erroneously assured the School Board that the new bond would be within the legal limits even after any new law passed by Sacramento.  With that (incorrect) information, the Emery School Board voted to sell the 34 year bond. 

Emery's nimble moves may make it notorious however; it may be the last school district in the state to saddle its taxpayers with the soon-to-be-illegal CAB financing.

Here's the Los Angeles Times story:

State legislators seek crackdown on expensive form of school finance

January 25, 2013 
Photo: Newport Harbor High School in Newport Beach is part of the Newport Mesa School District, which issued $83 million in long-term notes in May 2011. Credit: Mark Boster / Los Angeles Times

Two state lawmakers moved on Friday to crack down on a costly method of finance that hundreds of school districts have been relying on to pay for new construction.
Assembly members Ben Hueso (D-San Diego) and Joan Buchanan (D-Alamo) introduced legislation that seeks to check the use of long-term capital appreciation bonds, which can carry debt payments many times the amount borrowed to build schools, classrooms and sports facilities.
Fiscal watchdogs, including county treasurers and California State Treasurer Bill Lockyer, have warned repeatedly that the bonds are risky and reminiscent of the lending and Wall Street excesses that contributed to the Great Recession.
“We have been very careful to draft the bill in a way that will solve the problem,” Hueso said. “All the points we put together should address any potential abuse in financing strategies.”
The legislation would reduce the maximum maturity of capital appreciation bonds from 40 years to 25 years and limit a school district’s repayment ratio to no more than $4 in interest and principal for every $1 borrowed.
Districts would be given an option to refinance capital appreciation bonds with maturities greater than 10 years if better terms become available. Schools also would be required to provide their boards with public reports that detail planned borrowings that involve capital appreciation notes.
The analysis would include the cost of the bond issue, a comparison to conventional forms of financing, the reason for using capital appreciation notes and disclosures by brokerages hired as underwriters.

So-called CABs with maturities of 25 to 40 years have become a highly controversial way to fund school construction because they result in debt payments that can be eight, 10, even 20 times greater than the principal.
According to a Times analysis, at least 200 school and community college districts in California have borrowed billions of dollars using the long-term notes since 2007. The bonds have saddled them with staggering debts that will eventually have to be paid off by district property owners who are assessed a tax per bond issue.
Nearly 70% of the money borrowed involves extended 30- to 40-year notes, which will cost taxpayers $13.1 billion, or about 6.6 times the amount borrowed on average and far more than conventional bonds.
The bill is expected to be heavily scrutinized by members of the state public finance industry, school district officials and various education-related interest groups.
Though the capital appreciation bonds are more costly than conventional notes, local educators have said such bonds have been an effective way to finance capital improvement projects during the tough economy while still complying with statutory limits on property taxes that can be imposed per bond measure.
Officials for the Coalition for Adequate School Housing and the California Assn. of School Business Officials have said the Legislature should not take a cookie-cutter approach to school finance or restrict the flexibility of districts to pay for new construction.

RULE Meeting

R   U   L   E  
Residents United For A Livable Emeryville

Next meeting:  Saturday, January 26
10:00 - 12:00
5514 Doyle St., Community Room, 1st floor

Bring breakfast snacks
Coffee and tea provided

Our agenda:  

  • ECDC and Wellness Committee – Ruth Major
  • Sherwin Williams site – Scott Donahue
  • Update on Wareham – Bill Reuter 
  • What kind of City Manager does RULE want? - Scott Donahue
  • Emeryville Property Owners Association Ballot Initiative - Ken Bukowski
  • Possible:  Urban Forestry and Historic Buildings initiative - Richard Ambro

Facilitator:  April Atencio
Future agenda items:
Remaining issues of RULE bylaws:  roles for Steering Committee members, for example
Baystreet Site B.....what's next?
Planning our agenda for 2013. In addition to working on the election, what are our other priorities? Some ideas include the remaining land to be developed in town;  ECCL and the city's debt;  tree ordinance/ urban forestry  and historic building preservation ordinance

Tuesday, January 22, 2013

Parking Crisis In North Emeryville

After 25 Years Of Unfettered Development Residents Can't Find A Place To Park 
& Now They're Angry

Who Could Have Guessed This Would Happen?

The Emeryville city council majority has welcomed a 25 year reign of unfettered development, a 'hands off developers' philosophy that has earned the town the reputation in the region of being extremely business friendly.  The council majority that enabled this pro-business culture have always denied any associated negative impacts for residents as they carried on with their 'what's-good-for-business-is-what's-good-for-Emeryville' agenda.  But those days may be coming to an end.

After  the Emeryville Property Owners Association (EPOA) recent town hall meeting on parking in the north Hollis Street area, there's no longer any way it can be denied: residents and now even small businesses that rely on street parking can no longer reliably find parking spaces... and they're angry.  It's been an increasing quality of life reduction for residents that promises to get worse as the council moves to start charging money for on street parking.

Where's The TDM?
The problem stems from the rampant rate of development over the last couple of decades combined with a lack of Transportation Demand Management (TDM) practices to mitigate the problems brought on by all the cars associated with the new development.  Transportation Demand management practices are paid for by the developers and they lower the use of cars generated by the development by expanding transportation alternatives, providing incentives and rewards for employees for undertaking alternative transportation, imposing full-cost pricing on automobile use and other such measures.  These measures have been considered best practice solutions for urban parking by city planners since the 1970's...except in Emeryville.
It should be noted that councilwoman Jennifer West has been calling for mandatory developer paid TDM measures over the last couple of years.

The city council majority has been adverse to asking for developers to provide any TDM measures as they have approved project after project.  Twenty five year Councilwoman Nora Davis and her friends on the council have historically characterized any such requirements as anti-business and therefore illegitimate.  The parking crisis has been built up over the years in this way.
It's valuable to identify those public servants who have contributed to this mess. In addition to Ms Davis, councilwoman Ruth Atkin has been a reliable YES vote for the developers over the years as has newcomer and now mayor Kurt Brinkman.  EPOA founder and 20 year former councilman Ken Bukowski also shares in the blame even as he now screams from the sidelines about the parking fiasco in north Emeryville. 

No TDM, No Parking
It must be stated clearly, had a different council majority been in power over the decades, a council interested in leadership without an overt pro-business ideology, the residents wouldn't be in this fix.  Residents that may feel compelled to shake their fists at businesses and all the cars they bring as they search for a parking spot or as they start to pay for parking should know the real culprit here....  it's because the council didn't force developers to mitigate the negative impacts their projects have on the limited supply of on street parking.

Any idiot can sit back at the dais and say YES to what developers request.  Without a newspaper in town, it's the easiest thing in the world for a city council member to do.
We look for an accountability moment as residents circle for parking and start paying for parking, beginning in north Emeryville and spreading out from there.  Bad public policy should have consequences.

Sunday, January 20, 2013

Wareham Welches On Deal To Save Historic Factory In Berkeley

Like Emeryville, the planning department at Berkeley city hall is allowing Wareham Development to run the table, at least in the West Berkeley Project area.  With an all-too-familiar bait and switch tactic, Wareham is now going to demolish the historic Heinz factory building in west Berkeley after having previously promised to save at least two walls of the building as they begin construction of a lab complex there.  
Many preservationists have noted the idea that historic buildings can be considered "saved" by allowing only a wall or two left standing and incorporated into a much larger new building is dubious at best.  But in Berkeley as in Emeryville, some developers can't even grant this meager concession. At Emeryville's City Limits condo project on 67th Street, only one wall was to be left standing from the original historic factory but that was later determined to be "too expensive" to save so the developer, Pulte Homes, was allowed to tear down the whole thing.  This determination was made by Pulte after the agreement was made with the city of Emeryville but before work began on the project.  Pulte told the city that saving the wall "won't pencil out" and that was good enough for City Hall.   
That Pulte and Wareham originally expressed desires to tear down their whole buildings is not considered to be enough evidence that the agreement between the city and the developer was entered into in bad faith apparently.  Developers it would appear, are always to be given the benefit of the doubt regardless that the raison d'etre of these development corporations is first and foremost the fiduciary duties to their shareholders.

Here is the Berkeleyside story on Wareham:

Wareham: Preservation of historic factory too expensive

Wareham Development will demolish the seismically unstable Copra Warehouse at 740 Heinz Ave. to build a new laboratory. Photo: Ira Serkes
Wareham Development will demolish the seismically unstable Copra Warehouse at 740 Heinz Ave. to build a new laboratory. Photo: Ira Serkes
Four years after Wareham Development proposed transforming a historic West Berkeley warehouse into a laboratory building, the company is seeking to tear down the entire structure instead of preserving two brick walls.
Construction costs have gone up and rents have declined since the city approved Wareham’s 2009 design for 740 Heinz and it is now too expensive to build around the rickety walls, according to Chris Barlow, a partner in Wareham, which is headquartered in San Rafael. It will be much easier – and cheaper – to build a new 100,000 square foot structure, Barlow told the Zoning Adjustments Board in late September.
ZAB approved Wareham’s application to completely tear down the Copra Warehouse, which was part of the Durkee Foods complex built in 1917. Jeff Kaplan, representing The Friends of the West Berkeley Plan, is challenging the approval. The City Council will take up the matter on Jan. 22.
“This seems like a very greedy move to me,” David Bowman told ZAB at the Sept. 27 hearing. “They got 98% of what they wanted in the process the last time. They did not follow through when they could afford it. Now they want to make it so it works better financially. That is not your duty.”
Wareham, which leases the building from Garr Land and Resource Management, already owns a number of other structures at its adjacent Aquatic Park Center complex. The developer has been trying to do something with 740 Heinz for more than 10 years. The building, which was designated a Berkeley landmark in 1985, is unreinforced masonry and is considered one of the most seismically unsafe in the city, according to a planning department report. In 2002, the city declared the property a public nuisance.
In 2009, Berkeley granted Wareham a variance to develop the property. In exchange for retaining the historic north and south facades, the city allowed the company to exceed the neighborhood’s height and story limit. While the bulk of the old factory was 34 feet high, one section went as high as 74 feet. The city gave Wareham permission to build a $52 million, four-story research and development structure that was 74 feet high and had a 49-stall underground parking garage. Wareham had to do an EIR as part of the development plan.
Wareham wants to modify that design, stating it is too expensive to build and will not provide an adequate return on investment.  Since 2009, construction costs have increased by 17% and rents for bioscience R&D have declined 15%, which together make keeping the two historic walls financial unfeasible, said Barlow. Now the company wants to build an entirely new $44.5 million structure with a two-story lobby with a green roof on the south side of the building. It has also asked to slightly expand the first, third, and fourth floors, but maintain the setbacks established in 2009, and eliminate the parking, among other changes.
“The only way to make (the building’s financials) feasible is to take down the two walls,” Barlow told ZAB. “Keeping them comes at a significant expense.”
The generally accepted industry threshold for an acceptable investment risk for this kind of project is 7.2%, according to a report prepared for ZAB. The old design would have given Wareham a 4.85% return, while the new design will generate a 5.86% return, which is still below the industry norm.
The Copra Warehouse at night. Photo: Ira Serkes
The Copra Warehouse at night. Photo: Ira Serkes
ZAB, in a divided voted, approved the new plans and decided that the changes were minimal enough that Wareham only had to do an addendum to the existing EIR rather than an overhaul.
The Friends of the West Berkeley plan are arguing that the amended EIR “was neither adequate, subject to public comment, nor was it certified in compliance with CEQA.” The group has also expressed concern that researchers will be doing synthetic biology in the new complex and that the amended EIR did not adequately review “potential risks to the surrounding environment and human health associated with laboratory use.” More than 30 tenants of the nearby building at 800 Heinz signed a petition against the new structure.
As recently as 1985, there were eight buildings or features of the Durkee complex still standing. The destruction of the Copra Warehouse means there will only be two left, the Durkee Building at 800 Heinz and the Spice Warehouse at 820 Heinz.
City staff is recommending that the City Council deny the appeal of the Friends of the West Berkeley Plan, stating that the changes proposed by Wareham in 2012 do not materially affect the project approved in 2009. The city stands to collect at least $342,500 from the building’s construction: $194,000 will go into the Housing Trust Fund, $48,500 will go in the City Childcare Fund, and the owners will pay about $100,000 in property taxes the first year, according to a city staff report. The building will also create 300 new jobs.
Barlow told ZAB that “there is no research space of this quality available in Berkeley now.”