When SunCal Came to Town

By Sam Felsing---In the four-plus years that Southern California developer SunCal unsuccessfully tried to redevelop the old Alameda Naval Air Station, it backed a ballot measure that 85 percent of Alameda voters rejected; got involved in a public transparency scandal involving a city councilmember; spent record sums of money trying to influence local elections; and forced the city to pay out $4.1 million in a legal settlement.

That’s what happened when SunCal came to Alameda. 

SunCal, which is now trying to redevelop the Oak Knoll Naval Hospital property in the Oakland Hills, wasn’t the Alameda City Council’s first choice to redo the old Naval Air Station property, now known as Alameda Point. The Point was originally going to be developed by Alameda Point Community Partners (APCP), a coalition of private financiers, but APCP had to back out due to economic concerns. After APCP dropped out, the Council requested that Catellus Development Group and Lennar Urban form a partnership to redevelop the former Naval Base, but the companies’ efforts to do so were unsuccessful. Then city staff recommended that the Council select Catellus as the sole developer, but the Council rejected that idea and selected SunCal in a 3-2 vote in 2007.[1] 

There was some initial uneasiness between the City Council and SunCal. In the original draft of the negotiation agreement between the city and the developer, prepared in 2007, SunCal was required to put in just 5 percent of the equity required to fully implement the redevelopment of Alameda Point. Some Council members expressed concern that the 5 percent was too little and that SunCal didn’t have enough incentive to stick around and see the project through. “If I’m in this agreement, I want to know who I’m dealing with in the long haul,” then-Councilmember Marie Gilmore warned SunCal at the time.[2]

The 5 percent concerns were eventually worked out, but the city again became uneasy with SunCal a couple years later when SunCal tried to overturn very popular city laws.[3] 

In 1973, Alameda residents passed Measure A, which prohibited the construction of apartment buildings or other multi-unit buildings larger than a duplex. Voters then passed a measure in 1991 to require all residential structures be built on a minimum of 2,000 square feet.[4]

Measure A and the 1991 follow-up measure posed problems for SunCal. In order to build the 1,000 detached single-family homes, 2,000 townhomes, and 1,000 condos it envisioned for the point [5], SunCal needed an exemption from the long-standing measures. The City Council could have placed a ballot measure before voters asking for such an exemption, but as Measure A and the 1991 follow-up were highly regarded among voters, council members chose not to.[6]

In 2009, SunCal decided to place its own measure on the ballot to get its exemption. The measure, Measure B, was highly flawed. It was nearly 300 pages long and included a development agreement describing its and the city’s responsibilities to the project, what would be built at Alameda Point, and how the redevelopment would be governed. It was hardly a simple exemption.[7]   

The interim city manager of Alameda at the time, Anne Marie Gallant, said that the proposed measure would make it difficult for the city to negotiate matters related to the Point, and that it might cause a $4.8 million hit to the city’s general fund. Gallant also believed the $200 million cap that SunCal placed on infrastructure improvements to the Point was insufficient.[8]

City Treasurer Kevin Kearney signed a ballot statement stating that the city would lose $51 million in fees for basic infrastructure improvements to the Point and another $12 million yearly in lease revenue if Measure B were to pass.[9] 

Though Measure B was initially supported by Mayor Beverly Johnson and Councilmember Frank Matarrese, both withdrew their support after being convinced by Gallant and other city staff that it would put too much of a financial burden on the city.[10]

The San Francisco Chronicle did not endorse the measure, saying that SunCal presented “voters with an up-or-down decision on a highly detailed, nearly 300-page development agreement that would provide it with a huge hammer over the city in future negotiations.” [11]

The East Bay Express said that Measure B “may be the most ill-advised local ballot initiative in recent memory.”[12]

SunCal spent $1.2 million on advertisements and public relations efforts trying to get Measure B passed. The opposition spent $50,000. [13]

Eighty-five percent of Alameda voters rejected Measure B in February 2010. [14]

SunCal continued to negotiate with the City Council on a development deal for the Point before its negotiation agreement with the city ended in July 2010.  While it was attempting to negotiate, it got embroiled in a government transparency scandal. 

Gallant accused City Councilmember Lena Tam of leaking confidential emails to SunCal during negotiations. Tam, who was the last supporter of SunCal on the Council, denied the accusations. The Alameda County District Attorney later cleared Tam of wrongdoing.[15]

Gallant was later fired for what she believed was wrongful termination due to her accusations against Tam. Gallant sued the city for wrongful termination, but was unsuccessful.[16]

The City Council ultimately voted to sever its relationship with SunCal in July of 2010. City staff recommended terminating the project because they weren’t convinced that SunCal would bring enough jobs to Alameda, that the developer had failed to address traffic congestion issues related to the development at the Point, and that the developer’s financial commitment to the project was questionable. 

"We think there are a lot of risks," Deputy City Manager Jennifer Ott told the San Francisco Chronicle at the time. "We think their [SunCal’s] assumptions about revenue are very aggressive, but their estimates about costs are very low."[17]

SunCal still didn’t give up.

In the 2010 November city elections, SunCal spent heavily both for and against candidates supportive of its efforts. According to an election analysis conducted by the Alameda Citizens Task Force, in 2010 SunCal “raised $600,038 to drive adoption of their ballot measure and also to spend against candidates who opposed their measure,” and voters in the November 2010 election were “bombarded with TV ads, mailers, signs, polling efforts, ‘robo-calls’ and more. Candidates found themselves in a sea of accusations and acrimony.”[18]   

SunCal ended up suing Alameda to recover some of its losses, a lawsuit the City Council chose to settle for $4.1 million in December of 2012.[19]

Matarrese offered this advice for Oakland’s City Council: “Be careful with your ENA or other agreements – they [SunCal] have good lawyers and ended up with several million dollars of Alameda money in a settlement to close out the relationship:”