SIZING UP DEL NORTE PLACE

By Peter S. Loubal, El Cerrito.

The expected sale, for $20,550,000, of Del Norte Place, 4.1 acres, close to the Del Norte BART station, 135 apartments (27 low-cost), 21,500 sq.ft. of retail, provides a good opportunity to reevaluate this showcase of Smart Growth Transit-Oriented development.

A report (http://transweb.sjsu.edu/publications/Public_land_private_part.pdf) written by Dr. Scott Lefaver, devotes 28 pages to the project, as example of what's achievable by a private/public (redevelopment) partnerhip (written in 1997, reprinted 2001). Well-researched, it gives a historic overview, sympathetic to the project.

Del Norte Place has deep ideological meaning for those on the opposing sides of the redevelopment debate. Its renters, its close and less close neighbors, other perspectives, also deserve to be heard. It would be silly not to learn from its history, yet naïve to expect an objective assessment that will juxtapose the good and bad. Good analysis can best come from a dialogue between the various viewpoints, on a common or on separate websites with pointers to opposing views (http://…..).

Here, some major perspectives, all valid in their own right:

1. The developers (John Stewart Co./IBEX): The goal of this established and successful firm, was to try out a new type of transit-based project, within a novel financing scheme. The results were mixed, and characterized by its developer as "troubled, but positive". Clearly, the project had unexpected costs, and was less profitable than expected (http://..).

2. The Redevelopment Agency's (actually City Council and Staff's): Often embattled, (in 1994 Redevelopment "survived" by a 40 vote margin), the Agency faced the daunting task of removing blight at a major auto traffic/public transit bottleneck, akin to "turning a sow's ear into a silk purse". The Agency spent the bulk of $40 million in the Del Norte area, perhaps $7 million or more on this one project. The Agency acknowledges it invested some $3.5 million, but has so far resisted producing a total figure that would include borrowing, staff and consultant costs.

The function of Redevelopment is to "go where private enterprise won't" rather than being profitable. Clearly, the Agency is embarrassed by the high cost of this project, and two other projects in the Del Norte area, and does not want details discussed openly. Whether the moneys spent were worth it is a complex issue. What would have happened if the Agency had not existed? What if the funds had gone elsewhere? This can only be speculated. But an Agency poised to spend tens of millions of dollars more should provide details on past expenditures. (http://…)

3. Another obvious perspective is that of tenants: Were they satisfied? How long did they stay? Can they suggest improvements? What was the real cost in public funds to house the low-income tenants? Couldn't many more have been housed via another scheme?

4. Finally, there are the project's neighbors, most of them living in single-family homes and duplexes on the other side of BART. How did the project affect the neighborhood? Did it lead to other projects that are seen as beneficial or harmful? Could, in hindsight, the funds have been spent more effectively elsewhere? What next for the area? That's the viewpoint I plan to cover, but hope to connect to those of others. (http://…)

First a few more details about the project and its sale: Built in 1992, the total project cost was $18,786,300 ($3,370,500 from the El Cerrito Redevelopment Agency, $15,415,800 construction and "soft" costs covered by the private partnership). The Agency provided the land, and the developer the structures, agreeing to a 20% to 80% ownership split (later changed to 18% to 82%). Including its "soft costs" (staff, consultants, financing) the Agency's contributed at least $7 million. If it wishes to dispute this, it needs to show where else the $40 million it spent to date went. The private partners originally invested $5 million, and borrowed close to $11million via tax-exempt bonds. They claim to have later invested $2 million more to a total of $7 million, and refinanced the debt to over $11 million. It would seem that the partners and the Agency invested approximately equal amounts, yet the partners ended up owning 82%. Maybe, that's the best deal the Agency could get.

In 1998 the project started generating some profit, totaling over five years $500,000 for the Agency, and $2 million for the partners. On August 18, 2003 the El Cerrito City Council approved the conditions of the proposed sale for $20.5 million, with the Agency's sales proceeds set at $1.4 million, while the private partners realize nearly $8 million, based on an agreement renegotiated in1997. Clearly, the project has not been a big money-maker for the investors (unless, perhaps, we consider tax-shelter and management fees). It came nowhere close to offsetting the Agency's contribution, even if new sales and property tax increments are added on. Redevelopment gambled with "our money", and lost upwards of $5 million.

It is premature to make too much of the numbers, we should wait for the more detailed data that was promised. Also, financials are not the only criterion by which to judge the project. A "case study" was requested by a Council-member. Will the Agency comply? . El Cerrito's Redevelopment Manager said, "..the really good news is the property value has gone up more than anybody expected, it's really a windfall for us." She presumably referred to the fact that the project had been down-assessed from $20 to $14 million some years ago. This helped the partners reduce taxes, and further cut the Agency's share in a controversial 3:2 Council vote split. A notorious official "Consultant Report" claimed "the land value dropped to $0". No, no kickbacks, that's not the way to play this game.

These decisions are driven by the need to preserve Redevelopment and the jobs it creates. Developers must be compensated, to put up with the bureaucracy. Also, redevelopment generates campaign contributions for politicians, the worse the project the more the $$'s. A more immediate reason for a thorough analysis of this project's impacts and financials is that El Cerrito is currently considering a new "mixed use" project at Del Norte. Once again a developer plans a huge mixed use project on the parking lots at Del Norte BART. Three times as large, on twice the amount of land. The same developer, who in 1994 proposed a Del Norte Mega-Theater. This was an insane proposal in view of the area's traffic and parking problems. It took two years for the project to fold, not because the City respected neighborhood desires, but mainly because of economic constraints.

The following is a first-cut assessment by the author, a close neighbor of the project, who shares "smart growth" ideals, but is horrified when these are used to promote unsuitable projects for political advantage. It is written from the perspective of trying to improve Redevelopment, but some neighbors see redevelopment as a lost cause. They expect nothing good, and are happy to see funds wasted by flaying around with doomed projects.

Does the Del Norte neighborhood have redevelopment fans? Maybe, but few, and far between. Del Norte Place tenants deserve to be housed, they are there because "the good outweighs the bad". We sometimes eat there. Our grandkids like the small playground. The only store we really liked, a mail and copy service, could not afford the rent and quit. Occasionally, we use the coffee shop but prefer Berkeley's ambiance. Sadly, there's no courtyard sheltered from BART and traffic noise, to provide a quiet neighborhood retail corner. Clearly, it took quite long to achieve full commercial tenancy. Now, in a rental slump, it is rumored the 22 vacancies of a few months ago have been reduced to 3, thanks to paying up to $1,500 bonuses to new lease-signers. Many or most of the market-rate tenants are short term. The project certainly did not spark a neighborhood renaissance.

So, our misgivings about Del Norte Place derive more from the hoopla and politics that surround it, not from project impacts. Other than low-rent tenants, the only people who seem to have truly benefited were City/Redevelopment officials, construction interests, bond brokers, consultants, politicians. They were the victors and they will try to write the history, recycling theories and slogans, showing pretty pictures, extolling the virtues of ever denser living by means of dummied up arguments. That needs to be countered.

We need to get the facts on car-ownership and transit-usage, average length of tenancy, household size, the demographics of the project. Before more are built. Rather than doing a survey or learning from the year 2000 census, the Agency is spending $100,000 on Design Guidelines for the area. We need facts not fiction. Project promoters, public and private, gladly falsify environmental impacts. Even if reality prevails and a project is rejected, those who have been retained to promote it will have been paid, and given a chance to prove their loyalty. They tend to be kicked, not out, but up, to cushier jobs.

This latest Del Norte proposal is yet another inappropriate project, masquerading as "smart-growth". Fortunately, it is not economically feasible, due to the horrendous cost associated with BART parking. This leads to a "replacement" cost of some $3 or $4 million for each acre of parking - much more than was spent on Del Norte Place. That can only be recouped with densities that will overwhelm our already congested area.

The Del Norte area is first and foremost a transit hub, and also a traffic chokepoint. If that is ignored, any new large-scale, hi-density project will greatly add to the cost of countering congestion. Many people, for ideological reasons, money, jobs, hope to spend hundreds of millions of tax dollars on dense housing and public transit. But in California's present economic condition, we simply don't have the funds to do the job right. The most likely outcome is fewer people housed and ever-worse traffic. Using redevelopment to foster congestion under the guise of promoting public transit, is silly and must be stopped.

Del Norte cannot be expected to achieve the amenities of a "downtown". It does not deserve traffic metering and gridlock so as to promote careers of officials and generate jobs and profit for people who live elsewhere. If "smart growth" is to have a future it has to stop being a bully, and think about "what belongs where, and why, and at what cost". Del Norte Place should be used to provide a lesson of what works and what does not.