Affordable Housing becoming a dangerous game of Musical Chairs

Skyrocketing housing prices in Concord and Central County has got the attention of local city councils


As I remember from my childhood Musical Chairs is a game where kids circle around a group of seats while a song is played. When the music stops, the players scramble to occupy the available chairs. Those who cannot find a place to sit are eliminated from the competition.

Tenants Together model of how rental housing should operate
Tenants Together model of how rental housing should operate

A similar pass time has been found locally in the Bay Area and throughout all of California. It’s called Affordable Housing for families of limited means. In this case musical chairs is a cruel game where those who lose don’t have a place to live.

In a deregulated rental market Adam Smith’s law of supply and demand prevails.  Those who have the monetary resources come out on top when lease agreements are negotiated. Such an economic model in the lower income Monument Corridor is working to perfection. The only problem is that long term residents of the area have become FOB sidewalk because they have been unable to have enough income to pay skyrocketing rents.

A good example of this is the Gonzalez family. They have lived in a two bedroom apartment on Virginia Way for almost 9 years. Maria works as a maid at the Hilton while her husband is an employee of a roofing company. Their three children aged 6 to 11 attend local schools.

When they first moved to the area it cost $ 975.00 to rent their apartment.  Until a year ago, they only had to pay only $150.00 more. In 2015 they received a  $225.00 increase.  Six months later $ 350.00 was added on.  Three months ago the real estate agency who manages the property tacked on another three bills to make the place they call home run $ 2000.00 per month

The Lopez family found themselves between a rock and a hard spot. They could opt to work extra jobs to make up the difference which is impossible because they were already moon lighting. There are simply not enough hours left in the day to do another shift

To make ends meet sharing  a dwelling with another family would not be practical because of all the children involved. If nothing can be worked out there would be no choice but to move to an area in the Central Valley where housing would be more affordable.

Meanwhile seven miles away in Walnut Creek a different situation was unfolding affecting the same apartment house of Virginia Lane.  Tom and Sally concluded with the arrival of their new son, the one bedroom unit they were renting  would no longer be large enough to accompany their growing family.

The pair decided to move into a 2 bedroom configuration that better suited them.  The problem was that the $ 1,950.00 per month they were paying would cost at least $700.00 more if such a space could be located close by.  Lacking the funds to do this, Tom and Sally determined it would be better to move to nearby Concord where they could rent an extra bedroom for the baby at a similar amount than what they were paying in Walnut Creek.

The third couple who came into the Virginia Lane equation had been living in a fashionable part of Emeryville. With a household income of $116,000 per year, they could well afford to pay $ 3,780.00 per month to house themselves on the 9th story of a building that featured a partially obstructed view of San Francisco Bay.

Rent control will looking good to some on paper has not proven to be a remedy to spur construction of affordable housing
Rent control, while looking good to some on paper, has not proven to be a remedy to spur construction of affordable housing for those cities that have enacted it.

Unfortunately for Frank and Tina, he lost his job as a mortgage broker when the firm he was working for moved to Austin Texas. After being jobless for five months, they could not make ends meet on the $51,350.00 Tina made being a speech therapist in Alameda. As a result the couple decided it was best for them and their four year old son to move on the other side of the Caldecott Tunnel to Virginia Lane where lodging could be procured for  a more affordable $ 2,000.00 per month.

Having more prospective renters than they had space to offer, the real estate management company who were operated the 24 unit building on Virginia Way, found themselves in the cat birds seat.  They could bring in fresh blood that would not complain about how much they were paying (and get a commission for handling the transaction) or deal with the Lopez Family who was struggling to pay rent each month.

With their backs to the wall the Lopez clan was not ready to depart Concord without a fight. At Queen of All Saints church, Maria went to confer with her parish priest to see if anything could be done to help them. For the Father, this  was not the first tale of woe he has recently listened to.  Many of other members of the parish have come to him with similar problems.  This is one case where praying and uttering several Hail Mary’s won’t work.

Eventually the plight of the Lopez family and others like it has reached the upper echelons of the local Catholic community.  Their respected spiritual leader Father Mangini of St. Bonaventure has been a leading advocate of affordable housing to assist not only their parishioners, but all those who lack the resources to live in the area

Recently Mangini’s church hall hosted the “Raise the Roof” Conference in June where over 150 concerned individuals came together to see what they could do to ease the affordable housing crunch in the Monument but  also other places in the region as well.

Father Mangini has become a leading advocate for building more affordable housing.
Father Mangini has become a leading advocate for building more affordable housing for the poor.

At this conference everyone present expressed hope that rent increases could be checked by government action and that it had to be a major priority to build more affordable housing where it is needed.

Edwardo Torres organizer for the San Francisco based non-profit Tenants Together had a strong presence at this event.  While the Concord City Council has been basically ignoring the pleas of families in the Monument to halt their rent increases, his organization has been taking up the cause of helping these people.

Refusing to pay increases until improvements are made and promoting rent control are the immediate solutions they offered.  Thus far a great deal of interest has been created by Tenants Together. Three months ago, more residents attended their work shop at JFK University than a City Council meeting that was going on at the same time.

Tenants Together, an organization with close ties to the Occupy Wall Street movement, feels the suburbs are a good place for them to organize low income folks against local government they feel ignores the needs of the people.

Also very much in evidence at the Raise the Roof Conference were local labor unions that paid for day care, breakfast, and lunch for the Saturday conference. After  listening to testimonials of those adversely affected by rent hikes, Margaret Hanlan-Gradie from the Contra Costa Central Labor Council advocated:

  1. Affordable Housing be constructed utilizing union labor whose income would allow them to live near where they work
  2. Increase minimum wages to at least $15.00 per hour so that families can remain in the community
  3. Encourage the local and state government to subsidize the construction of affordable housing
  4. Institute rent control if necessary to protect the interests of long time local residents

While staying out of the political spectrum representatives of the Catholic Church have endorsed building low income housing in the region.  They were greatly responsible for getting Lennar-Urban to pledge $ 40,000,000 to build at least 25% of housing at the new Concord Naval Weapons Station project to serve those of moderate and low incomes.

Taking in the proceedings could be found Concord City Manager Valarie Barone, Mayor Laura Hoffmeister along with City Council members Tim Grayson and Ron Leone ; all of whom were observing Raising the Roof  in the back of the hall. This group, which failed for four months to cobble a majority among them to authorize their Housing Committee to look into recent rent increases in the Monument, had finally woken up that a crisis was at hand

The real life game being played of Rental Housing Musical Chairs had finally resonated with the powers that be of Concord.

Next week- What can local government do to ease the affordable housing crunch?


What lies ahead for the CNWS Reuse Project now that Lennar is at the helm

What lies ahead for Concord Naval Weapons Station after Lennar is named Master Developer by Concord City Council


If ever there was to be a laboratory experiment of how all of the special interest groups, entitlement laws, and government regulations that make up the Progressive Agenda in California work, it would be the Concord Naval Weapons Station (CNWS) Reuse Project.

Concord City Council has allowed Lennar to bid for a $6 billion project with no competing offers.
Concord City Council has allowed Lennar to receive approval to be Master Developer for a $6 billion project with no competing offers.

With the crowning of Lennar-Urban as Master Developer at the May 11th meeting, the table has been set for the creation of a leftist utopia that would make Karl Marx proud.  Here is how it will all work.

Housing will be created that will cater to (A) Those who are at middle to low income levels that require government entitlements (B) People who are willing to live in multi-family dwellings with little privacy (C) Individuals with mental or other disabilities that require special services to function. (D)  Millennia’s  who can afford housing but prefer to live near mass transit (such as North concord BART) and are content to live in high rise apartments prior to starting a family.

Missing from this equation are the middle class and blue collar population which make up the largest components of  current demography for the region.  No one came forth from this group enumerating their interests in the Master Developer selection process.  At the same time the middle class are being asked to subsidize the less fortunate and others who want their special interests to be placed in the front of the line in developing the Naval Base.

Among this growing group of organizations and causes we have:

  1. Affordable housing advocates many affiliated with religious organizations. Even with the State and Federal Governments mandating at least 25% of units built fall into this category, this group wants a greater percentage of what is to be built in the new development. The only problem is that the larger number of these subsidized units built, the higher the selling prices of market rate properties in the complex.
  2. Special needs and the homeless. It is thought that if this growing segment of the population is to have their priorities addressed, than this will improve social conditions in society. The reality especially with the homeless is that having a roof over their head is a step in the right direction but not the entire answer. In virtually every case treatment for substance abuse and mental illness issues are just as important.  How this might relate to residents in the CNWS very much comes into play. Providing solar powered shopping carts to the homeless will not likely ease the security concerns of their nearby neighbors.
  3.  Open Space and environmental groups: With the vast majority of lands on the CNWS being devoted to parks and open space, the question comes up is who will be paying for the construction of bike paths, hiking trails, sources of water, and other amenities desired  for recreation purposes.  There are also soccer fields, parks adjacent to dwellings, and other facilities that the city wants to be built.  Like other amenities local government wants, the questions arises is if the developer has the economic resources to make everyone’s dreams come true4
  4. Year institution of Higher Education: On the CNWS lands. During the developer selection process talking about the possibility of having a campus of UC or the State College system has been much talked about especially by members of the Concord City Council. There is a consensus to allocate prime property near the BART station for this purpose.  While this is a great idea that the mass majority of citizens in the region desire, it will also take away prime space from residential and commercial developments putting more pressure on raising revenue from market rate housing.

    Will housing in the CNWS property be affordable for both the poor and the middle class who are being asked to subsidize them?
    Will housing in the CNWS property be affordable for both the poor and the middle class who are being asked to subsidize them?
  1. Churches, Public Schools & Non-Profits: These groups which want land bestowed to them for free or at discounted rates, also want a piece of the pie at the CNWS. They are an important component of society who has a place in this development which will eventually house over 40,000 new citizens of Concord.  Again we come to the situation that giving special consideration to these groups, someone whether it is the developer or tax payers are going to have to chip in if these entities are to be represented in the milieu of the new development.
  2. Commercial development: One of the most important components of the plans for the CNWS lands is job creation for both the local community and new residents of the area. As such, it will likely be necessary to provide incentives to attract large businesses to locate there. If past history is any indication, cheap land, facilities, and possibly lower property taxes will be required to attract these businesses.  Again, in doing this, more pressure to obtain revenue will be placed on the developer and the city to make ends meet.
  3. Project Labor Agreements (PLA): Put forth by organized Labor. With such a pact a near certainty, opponents of these agreements feel that PLAs bloat construction costs more than 20% because they feel independent contractors are excluded from participating in building the new properties.  Organized labor disagrees with this assessment but no one debates that California has one of the highest construction costs of anywhere in the United States.  However, it should also be noted government regulations, environmental laws, and expensive permit expenses, also contribute to added costs for conducting business in the “Golden State.”
  4.  Expense of Removing Toxic Waste from CNWS: Various estimates abound on the cost of removing or burying contaminants from the land left over by the Navy. Lead, arsenic, and even nuclear waste have been mentioned. Until proper surveys and testing is done, how much it will cost to remove hazmat (and who is to be pay for this) is yet to be determined.  This is why the Environmental Impact Reports (EIRs) should done in small segments as the process of dealing with Hazmat questions will take a long time to resolve.  Whatever the outcome of this question it is certain that large expenses will be involved for which those residing in the new development will ultimately be responsible for.
  5. Infrastructure expenses in the surrounding areas: It does not take a rocket scientist to realize that the amount of funds allocated in the Lennar proposal will not even come close to paying for improvements on existing roads, construction of new traffic arteries, and public transportation facilities that will be needed in the future.  Politicians, who live in a world that runs from election cycle to election cycle, try to claim that future needs are taken into account with projects such as the CNWS.  However, it is well documented that reality ends up being much different.

    As the Master Developer for the CNWS Kofi Bonner and his team have a lot of special interests to please
    As the Master Developer for the CNWS project,  Kofi Bonner and his team have a lot of special interests to please
  1. The lack of water on the CNWS lands: Listening to the endless parade of speakers who have come forth with their  lofty visions during the developer selection process, one would think that the property is some kind of nature’s wonderland where all kinds of wild animals and abundant plant life exists. Unfortunately, this is hardly the case. Most of the CNWS property is a wasteland of chaparral with a few scattered oak trees where the absence of H2O does not allow much to flourish.  Trying to fantasize that residents of the region will flock to this alleged paradise might be considered a “leap of faith” The only way open space can be made beneficial to the public is by pumping precious water resources into the Naval Base lands.  This could prove to be costly and face opposition from environmentalists. Sounds like law suits waiting to happen.

With all of the expenses and liabilities to be incurred not to mention the special interest groups grabbing for a piece of the pie with both hands, the job of any developer making ends meet and hopefully making a profit are challenging at best.  This might be a major factor in Catellus, faced with perceived obstacles from local government in Concord and various organizations wanting their piece of the rock, decided to withdraw from being considered to be Master Developer.

It also explains why Lennar plans to build at least 200 market rate homes bordering Willow Pass before having to construct affordable ones.  By the time Lennar has to construct (at least 10 years from now) low income dwellings, they hope the market improves or more government subsidies are available.

For Kofi Bonner trying to manage his ex-military base empire is no easy task.  In the coming years he will no doubt want to use the leverage gained by managing the CNWS project that Concord City Council member Dan Helix has referred to as a “gold mine” to finance this venture and others in Lennar’s portfolio.

All I can say is “good luck guys”.




Concord Council set to rubber stamp Lennar as CNWS Master Developer

Despite numerous warning signs, Concord Council is set to name Lennar as Master Developer for the $6B redevelopment project for the former Concord Naval Weapons Station


As  Concord is scheduled to make its decision on the selection of a Master Developer for the Concord Naval Weapons Station project on May 11, the City Council are acting like courtesy clerks at Safeway offering their constituents “paper or plastic” to wrap up the deal for Lennar-Urban.

Valerie Barone, City Manager Concord California
” Valerie Barone, Concord City Manager under fire from CNWS selection process critics

Proclaiming “transparency” in claiming Lennar’s proposal is superior to the one of Catellus which dropped out of the running a month ago, does not hide the fact that meat and potatoes Council is selling are tainted with financial problems.

Many prominent citizens feel Lennar’s shortcomings far outweigh any promises it makes to the city. No amount of “paper or plastic” gestures Council offers citizens can white wash the stench.

An item slipped into the Concord City council agenda on May  authored by Guy Bjerke states:

On Tuesday, May 3, 2016 Lennar Urban informed the LRA that Lennar Corporation is contributing several of its assets to FivePoint Holdings LLC and that other projects in which the Lennar Corporation retains an ownership interest will be managed by FivePoint Holdings LLC. FivePoint Holdings LLC will also manage Lennar Concord LLC, as a Lennar Corporation asset, as proposed in Section 25. b. ii. of the Revised Lennar Term Sheet.

Let’s take a look at this Lennar Subsidiary to see if Concord’s future should be placed under their umbrella. Here are the facts that should be considered before the city and Lennar do a ring exchange at the altar:

1. Five Point Holdings is an outgrowth of LandSource which went bankrupt in 2008. Mare Island also went under, approximately 1.6 billion dollars was lost by investors including 922 million dollars by the public pension funds protecting government workers in California Lennar was the fiduciarily-responsible manager of both entities. Now Concord wants to attach their future to this star.

2. After the bankruptcy, LandSource debt was acquired for a very steep discount by distressed debt buyers like Third Avenue Fund, now in an SEC-supervised liquidation. Other funds involved with Five Point include OCH Ziff Capital, Marathon Asset Management, Castle Lake L.P., and Anchorage Capital. These companies all have one thing in common; they have no desire to continue working with Lennar, and would be the first in line to receive funds should Five Point Holdings have an IPO stock offering to raise capital.

3. Over half the present assets of Five Point are tied up with the Newhall Ranch Development in Santa Clarita. Earlier this the year the California Supreme Court threw out their Environmental Impact Report (EIR) as being marginally fraudulent in their estimates for potential traffic, creation of over 269,000 tons greenhouse gases, and for the possible destruction of the Santa Clara River basin. The court ruled a new EIR must be completely redone which will likely render the project valueless for years to come.

4. Given the sad state of the Newhall Ranch development, it would appear Lennar is anxious to prop up Five Point Holdings which is struggling to raise capital to finance their operations. As an indication on May 2nd, Lennar did an 8K filing with the Securities and Exchange Commission withdrawing their proposed stock offering for Five Point. While they cited a “choppy IPO market” for taking this action, speculation in financial markets indicates investors had little or no interest in buying what they are trying to sell.

5. After the disaster with the collapse of Land Source, investment banks, which are normally major players in developing projects such as the Concord Naval Weapons Depot, are reluctant to get involved with Lennar which further handicaps their ability to borrow in financial markets to fund their venture.

Concord's Mayor Laura Hoffmeister navigating thru stormy weather selecting a Master Develooper
Concord’s Mayor Laura Hoffmeister navigating thru stormy weather selecting a Master Develooper

How all of this might affect what transpires with City of Concord partnering up with Lennar is uncertain. Even if the contents of what is listed above are even partially true, why in the world would the  decision makers on the Concord City Council desire to be even remotely involved with Five Point Holdings?

Since Catellus dropped out of consideration for completing to be Master Developer, a great deal of speculation has surfaced for their reasons why. According to my sources which include the top executives of the company, they did not believe the current city manager, staff, or city council members with the exception of Dan Helix were giving them a fair shake.

The Catellus people also said they were weary of being falsely accused of using illegal tactics to obtain the contract. They denied being in some sort on conspiracy with the Albert Seeno Company to take over the project and bribe city staff with free Golden State Warrior tickets as former mayor Tim Grayson alleged last year Even though the late City Attorney Mark Coon, the Jenkins Report, and former head of the Reuse Project Michael Wright refuted these charges, the rumors and innuendos of back door dealings by Catellus persist to this day.

The $350,000 refund Catellus received from the city when they pulled out of the running to become Master Developer was not about the money but rather the loss of confidence they felt in dealing with local government. This fact makes what has transpired since then even more regrettable.

With only one company left in the fray, the city claims it has been able to negotiate with Lennar to gain equal if not better terms than Catellus offered in their term sheet that city staff endorsed. This does not erase the earlier actions of the City Manager Valarie Barone along with the three council members Tim Grayson, Laura Hoffmeister, and Edi Birsan tried to keep the pro Catellus staff recommendation away from voters in what was later acknowledged to be a violation of the Brown Act.

Throughout this whole process the elephant in the room is the ability of Lennar versus Catellus to finance the lofty expectations of the CNWS project. Unfortunately for the city, the company who feels they were kicked to the curb, Catellus, has the ability to pay for building the project without utilizing  risky IPO’s, bundling  together different ventures, or selling EB-5 visa’s with Willie Brown’s Golden Gate Development partners to pay the bills.

Guy Bjerke Director of Community Reuse Planning
Guy Bjerke Director of Community Reuse Planning. is trying to prop up the sagging fortunes of the city council

Given what has ocurrred, it is not surprising that a large number of prominent community leaders from Concord’s past and present have seen the dark side of selection process. Apparently, it makes them shudder to witness what has been going on. Even the stipulation that Concord would be receiving under the Lennar proposal $20,000,000 annually for ten years as a down payment is met with skepticism because the money would be paid back to Lennar at a later date at a 20% compounded interest rate.

A dark cloud seems to be hovering above the entire selection process. With Vice Mayor Ron Leone recusing himself because of his residence’s proximity the Naval Base and Tim Grayson doing the same because of accepting secret campaign contributions for his State Assembly race from Lennar affiliated concerns, a sense of cynicism persists with how city government is conducting themselves.

Making a decision of selecting a Master Developer on a 6 billion dollars project is much more difficult than bestowing certificates of achievement and plaques to worthy citizens or determining where to fix pot holes. This is a six billion dollar project where “chump change” needs to be thrown out the window in order that the long range objectives of the community are to be served.

Unfortunately to this point the citizens of Concord and the entire region are being served a menu of “paper or plastic” by the “transparency for lunch bunch” at city hall. It is there that the real issues are heating up under the surface which threaten to one day explode like a volcano blowing its top.



New Lennar term sheet is a good framework for Concord

On Wednesday May 11, the Concord City Council will discuss the selection of a Master Developer for the Concord Naval Weapons Station. The meeting will be held in the City Council Chambers at Civic Center, 1950 Parkside Drive at 6:30 p.m.

The Concord City Council will make its decision on the selection of the Master Developer for the Concord Naval Weapons Base Reuse Project at a special meeting scheduled for Wednesday, May 11, beginning at 6:30. The meeting will be held at the Concord City Council Chambers

The Local Reuse Authority (LRA) of the City of Concord has completed a critical facet of its job toward the selection of the Master Developer of the Concord Naval Weapons Station Reuse Project. See this serviceable summation at Claycord.

During this process that had been turned on its ear in September 2015, there has been no little irritation expressed by many Concordians and this site concerning Lennar business practices, its original Term Sheet, and questionable ethics and business intelligence of the sitting City Council.

Despite the drama that surrounded accusations of payola and influence peddling, the fact remained that Lennar’s proposed Master Developer Term Sheet as originally submitted to City Council was inferior to that submitted by Catellus. Even the East Bay Times figured correctly that the Catellus Term Sheet was superior in every way to Lennar’s.

But after Catellus walked away from the Master Developer selection process, leaving only Lennar, there were justifiable fears that due to the lack of competition, Lennar’s original term sheet might be accepted in toto without modification. Fortunately, the City Council had enough collective brain cells left to refer the matter back to the Local Reuse Authority to hammer out changes to the Lennar Term Sheet that Concord could work with.

Let’s recall that this is the same LRA that recommended Catellus after remarkable study and due diligence. So there is some evidence that its work can be trusted and the new recommendation to accept Lennar’s updated Term Sheet is also based on the same professional scrutiny and due diligence to deliver the best framework for the future of Concord.

(Ahem…Not that Concord Councilmembers have accepted previous Master Developer recommendations from the LRA, nor even the recommendations of its own investigation into Council impropriety, so nothing is for certain….just sayin’)

First of all, in its report to Council the Concord staff present the pros and cons of moving forward with the Master Developer Selection process or considering other options including starting again from scratch. You can see this section at beginning at page 13 of 170. Staff and its consulting team concludes that on balance, none of the available based alternatives to a Master Developer would be appropriate for Concord, based on critical factors including: A. Access to sufficient capital; B. Functional capacity to perform; C. Efficiency of implementation; D. Appropriate risk allocation; E. Control over the implementation process; and F. Potential financial return to the public sector.

The lennar-urban-topographical for proposed master developer plan for Concord naval Weapons Station
The lennar-urban-topographical for proposed master developer plan for Concord naval Weapons Station

Moving forward then, the term sheet is a framework; not a contract etched in stone. IF accepted by Council, it will be further negotiated during the DDA process over the next 6 months to iron out details, and deal with new items that crop up. There are a host of issues that are not addressed by any of these terms sheets. Even Catellus was spitballing in its original estimates about costs and profits to Concord without knowing what flies could yet land in the ointment. And given the differing modes of business operations and accounting where a comparison wouldn’t even be apples to oranges, to assume that even the Catellus offer would not be changed, tradeoffs made or cut back in places over the next six months is unrealistic.

In fact none of the term sheets account for a host of unknown variables: how much is the Navy going to charge for the transfer and any other of its requirements, CEQA mitigation of environment impacts and endangered species, ongoing negotiations with the East Bay Parks, State Fish & Wildlife, Bay Area Air Quality poohbahs, and more.

There still hasn’t been a NEXUS traffic study for the entire project that will determine how to apportion road construction costs whether as upfront costs Lennar must shoulder or to fees paid by buyers of new homes or by district bonds, or to be paid by any additional developers Concord decides to bring in for specific parcels. Thus to say that Lennar is short sheeting Concord on traffic mitigation money or profit participation is in computer programming language, a “serious wild ass guess” (SWAG) not to be confused with the more pedestrian wild ass guess (WAG).

The new term sheet addresses many of the weaknesses, silliness, hamfisted one-sidedness, and (some of) the vagueness in the original Lennar Term Sheet. Originally Lennar wanted to own the entire CNWS project including all phases. In the new term sheet before Council, Lennar will only get dribs and drabs and not one parcel more until it has funded and completed requirements for each project. For instance, of the first 1100 acres Concord has to work with, Lennar only gets 400 acres for construction near the North Concord/Martinez BART station, and possible prioritization of the proposed Sports Complex. By maintaining ownership of the land Concord can put to rest (not unfounded) fears that Lennar could dangle the value of all of the CNWS land as an asset in its proposed Five Points IPO and subsequent financial shenanigans. By controlling the land, if Lennar only builds 200 houses in 10 years like in Hunters Point or Mare Island, or doesn’t build the amenities or community centers it says it will, then Concord can refuse to release any more parcels to it and is free to bring in other developers.

Former Concord Councilmember and former Mayor Guy Bjerke is the Director of Community Reuse Planning.
Former Concord Councilmember and former Mayor Guy Bjerke, is the Director of Community Reuse Planning.

Which puts an interesting bell around Concord’s neck, because if the CNWS goes South, it won’t be Lennar’s fault.

In its May 3 report to Council that will be heard at the upcoming Master Developer Selection meeting (date TBD) The LRA outlines the the areas that it renegotiated with Lennar. In part that report reads:

Lennar has updated the financial pro-forma supporting the Revised Lennar Term Sheet, to show more revenue from land sales, and $49.6 million in additional project infrastructure costs, amenities and benefits. These additional costs include $40.0 million for affordable housing gap subsidies and $15.7 million for Willow Pass Road and bridge improvements. As a result of the additional affordable housing commitment, Lennar has reduced the guaranteed EPIP (community benefits) Fund by $10.0 million, to a new sum of $20.0 million, but Lennar also reduced the Internal Rate or Return threshold for LRA profit participation to 20 percent, from 25 percent in the Original Lennar Term Sheet. This change, together with higher overall net revenues from completion of the Development Phase One Property indicates that the LRA share of profits that could be used at the LRA’s discretion for the benefit of the property to be transferred to the LRA by the U.S. Navy would total $23.5M, although this sum is not guaranteed.1

In addition, Lennar has now agreed to:

• Remove requirements for binding arbitration over any disputed City costs

• Remove its option to purchase additional Economic Development Conveyance (EDC) property for future development phases; maintain completely open book accounting of the project

• More clearly specify its intention to take down the Development Phase One Property for infrastructure installation in small parcels, leaving the ownership of the remaining land with the LRA until needed for development

• Clarify that the LRA will retain ownership of all land outside of the Development Phase One Property for future development and/or land leasing opportunities

• Prepare the Specific Plan concurrent with negotiations for a Disposition and Development Agreement (DDA)

• Via the Specific Plan, explore ways to expedite transit-oriented development (TOD) around the BART station, rollout of Transportation Demand Management (TDM) programs and offsite infrastructure for traffic mitigation and infrastructure for the proposed tournament sports facility.

To see the full scope of the changes and see where reasonable tradeoffs were made please review the Reports RED LETTER edition of the term sheet that shows the markup of the original agreement with the deletions, changes, and additions that now make up the Term Sheet to be presented to City Council.

There is no perfect deal. There are just deals that are better than others. With a reasonable framework for six months further negotiations to even reach a contract, the new Lennar term sheet is a good start for Concord.

Lennar CNWS Red-letter Term Sheet by ContraCostaBee


Lennar’s Master Developer Bid at CNWS Falls Short

The revised term sheet is inferior to the previous superior bid. It results in a minimum cost of $35 million to current Concord residents when this project should not be costing them any money at all.


Author’s note: This letter was sent to the full Concord City Council.

No justification supports staff’s recommendation to select Lennar as master developer at the Concord Naval Weapons Station.  Lennar’s revised term sheet is not the “better deal” council and staff promised to negotiate.

Instead, staff and Lennar have merely shuffled money around, countering additions in some places by taking away from others.  This proposed term sheet continues to fall short of the superior bid submitted by Catellus, the baseline term sheet Guy Bjerke and council represented would be used to negotiate more for Concord from Lennar.

The Lennar-urban-topographical for proposed master developer plan for Concord naval Weapons Station
Lennar Urban topographical for proposed master developer plan at Concord Naval Weapons Station.

Lennar’s bid remains inferior to the bid we learned was originally recommended by staff, despite the City Manager and Council’s attempt to hide this recommendation from the public.  In addition, staff has now admitted that negotiating with one developer only is not the competitive process council claimed it would be.  We were told that competition would be through the option to start the process over should the revised Lennar bid fall short.  Now, staff’s memo is stating that starting over is not a viable option.  If true, staff and council previously lied to us to appease the public’s concern that one bidding developer fails to be a “competitive” process.”

Selecting Lennar without adding competition for this $6 billion project is beyond unacceptable.  Staff is proposing selecting a master developer by default for the most important project in Northern California.

This revised term sheet is inferior to the previous superior bid.  It results in a minimum cost of $35 million to current Concord residents when this project should not be costing them any money at all.

Willow Pass Road must be upgraded for inevitable increased traffic before redevelopment at Concord Naval Weapons Station can begin. (photo credit: Greg Stidham, Bay Area News Group)
Willow Pass Road, the site of many recent fatalities, must be upgraded for inevitable increased traffic before redevelopment at Concord Naval Weapons Station can begin. (photo credit: Greg Stidham, Bay Area News Group)

As discussed at previous council meetings, Lennar’s term sheet was $50 million short on funds to upgrade infrastructure outside of the redevelopment property when compared to the superior bid chased away by council.  This outside infrastructure work is not optional; roadways especially must be upgraded to accommodate the large trucks and traffic generated at the onset of the project.  Thus, any amount short will immediately become the burden of current Concord residents.

Lennar added only $15 million for this, and then only for Willow Pass Road and the related bridge.  This new provision completely ignores the already over-burdened roadways near North Concord BART and entrances to major freeways.  In a counter move, Lennar has reduced promised community benefits by $10 million.  Factoring in the reduction to Concord benefits, Lennar leaves $45 million up to current Concord residents to cover this necessary beginning work.  Current Concord residents should not be subsidizing work needed to start the project or give up community benefits to repair Willow Pass Road.

Port Chicago Hwy at North Concord BART station
Port Chicago Hwy at the North Concord BART station narrows to one lane in each direction at points.   Lennar’s term sheet falls at least $35 million short on funds to upgrade outside infrastructure compared to staff’s previously recommended Catellus bid.

Lennar originally offered no funds to assist with the affordable housing gap.  The revised term sheet has allocated $40 million.  This amount remains inferior to the term sheet snubbed by the council, falling $16 million short of the bid by Catellus.  Again, in a counter move, Lennar has added more than this amount to the total cost of the project as well as reducing profits available to Concord.  Clearly, there is evidence Concord can do better than what Lennar has been forced to even consider offering.

It should be noted here that any profits generated by the project must be used for only the redevelopment property for 20 years.  Only property taxes from the development will be available for Concord’s general fund during that time.  This will be an issue should the council select Lennar because Lennar has such a poor history of actually building housing at its projects.  It has built only 260 units at Mare Island since 1997 and, as of mid-2015, only 288 of 3,500 affordable units promised at Hunters Point since 1999.

Lennar continues to demand title to some land rather than leasing from Concord.  This is not acceptable.  At nearby Mare Island, Lennar received title to land in exchange for contributing money to the bankruptcy reorganization of its subsidiary.  This allowed Lennar to purchase the land from Vallejo at ten cents on the dollar, another broken agreement.  Staff’s assertion that the development agreement could protect Concord’s ability to control land titled to Lennar is contrary to bankruptcy law.  Staff is asking council to agree to give Lennar the option of transferring title to one of its subsidiaries, Five Point.  Should this happen and Five Point file for bankruptcy, any provision protecting Concord’s rights to the land would be overridden by bankruptcy reorganization laws.

cnws photo by greenbelt alliance
Property at the Concord Naval Weapons Station has triggered an avalanche of greed and pay to play politics at Concord City Hall. (photo credit: Greenbelt Alliance)

This isn’t complicated and very similar to personal bankruptcy; when someone files for bankruptcy, the courts override all credit card and bank agreements.  Lennar has demonstrated it is more than willing to do this, and there is no reason to take the risk it will not do it again.  The revised term sheet does not protect Concord; it merely allows the council to sneak title to Five Point away from public scrutiny after the development agreement is signed.

In addition, Concord should not allow any possibility of the fate of Concord Naval Weapons Station property from becoming entwined with Lennar’s projects in San Francisco and San Diego.  Lennar states it plans to transfer title to those projects to Five Point if that company’s recent IPO application is granted.  Concord should eliminate any possibility of being caught up in any bankruptcy of Five Point, especially since courts have halted development of the San Diego property to be transferred by voiding an EIR and withholding permits until Lennar addresses environmental and transparency issues.  An investment fund associated with the San Diego project, Third Avenue Real Estate, is already experiencing financial trouble.  Allowing Lennar any possibility of associating title at Concord’s project with this already shaky San Diego deal is undeniably irresponsible.

The above is not a comprehensive review of the continued short falls in Lennar’s term sheet and the troubled selection process created by council’s poor decisions.  It also doesn’t even address Lennar’s troubles with environmental issues, such as its alliance with Tetra Tech, the company found by NBC Investigations to have falsified toxic soil samples at Hunters Point.

Concord City Council has allowed Lennar to bid for a $6 billion project with no competing offers.
Concord City Council has allowed Lennar to bid on the Concord Naval Weapons Station without competing offers, systematically handing over a $6 billion project by default.

The lack of competition is resulting in staff asking for Lennar to receive the contract by default.  This project is far too complex and important for the council to accept this unreasonable premise.  Further, Lennar should have been disqualified when it violated the negotiating agreement by lobbying, demonstrating pay to play politics is dominating the selection process.

Even the majority of speakers at public comment supporting Lennar are individuals and entities who received monetary and in-kind gifts from the company.  None are owners of Lennar homes or people directly employed in nearby Lennar projects.  One former San Francisco sheriff even stated that Lennar had benevolently met with the community and added water trucks when dust during demolition became an issue for the community, completely failing to acknowledge that the Bay Area Air Quality Management District had fined Lennar $515,000 for violations in handling the dust.

Dan Helix, Laura Hoffmeister and Edi Birsan confer at meeting where Kofi Bonner pitches Lennar to be Master Developer
Concord Mayor Hoffmeister (center) and Councilmember Birsan (right) have been instrumental in pushing the non-competitive master selection process.

Everyone can see that something is not right about the decisions and illogical arguments put forth by council and staff to keep Lennar in the process.  It is time for the council to apologize to Concord, and start the process over.  The staff memo and revised term sheet are an insult to the residents of Concord.

Council should not be settling for the inferior for Concord on this project.


$15 an hour minimum wage is pure fiction

The $15 minimum wage sounds great for some employees. But, in some cases, the minimum wage will fall to $0 per hour if the employee loses his job.


Total fiction is the idea that a minimum wage of $15 an hour will really be $15 an hour.

minimum wage hikes depress labor demand
Editor’s Note:

The science is settled. Don’t be a denier.

The demand for labor is downward sloping.

As the price of labor (the wage rate) increases, it becomes more expensive relative to other inputs, and employers will substitute away from labor. That is, they will decrease the amount of labor they use and increase the use of other inputs, such as capital.

This is why you’ll be buying burgers from robots in the near future.

Currently, there is a plan to boost California’s minimum wage to the so-called level of $15 an hour. The cost of the plan will really be higher than $15 an hour.

Between March 29 and April 1, the State of California may set a minimum wage of $15 per hour. The $15 figure would, presumably, be phased in over several years.

Why is a minimum wage of $15 an hour fiction?

For each wage-earner, an employer has to pay for Social Security, Medicare, Workers Compensation Insurance, and Unemployment Insurance. There can be additional expenses associated with putting someone on a payroll.

At $15 an hour, the cost for Social Security is $0.93 an hour. The Medicare cost adds another $0.2175 per hour.

So far, the $15 per hour minimum wage is up to $16.1475 per hour.

The unemployment insurance adds $0.0976 per hour.

That brings the $15 wage up to $16.2451 per hour.

The cost for Workers Compensation Insurance depends on the kind of work done. For general office work, the cost is $0.1392 per hour. (For those people working in dangerous professions (like stunt pilots), the insurance costs will be much higher.)

Assuming an office environment, Workers Compensation Insurance pushes the $15 wage up to $16.2580.

Here is a summary of the extra employment costs associated with a minimum wage of $15 an hour.

– $15.0000 Base Wage
– $ 0.9300 Social Security
– $ 0.2175 Medicare
– $ 0.0976 Unemployment Insurance
– $ 0.0129 Workers Compensation Insurance (for office work)

$16.2580 Total Wage (in dollars per hour)

If the employer provides health benefits, sick leave, vacation pay, and retirement benefits, the ultimate wage can be $17.00 to $20.00 per hour.

If the employer is having a good year, he (or she) can probably pay some extra money.

However, if the employer is not doing well, he might have to cut an employee’s hours or terminate an employee.

If cost pressures on an employer become too great, the employer may have to move to another state or another country. Other options are to automate the business (as can be done with computers or robots) or close the business down completely.

The $15 minimum wage sounds great for some employees. But, in some cases, the minimum wage will fall to $0 per hour if the employee loses his job.

For the sake of preserving jobs, government can stay out of the practice of setting wages.