Waterfront Development Plan Faces Another Round of Approvals

The city is inching closer to reaching an agreement on a plan to turn Hercules' waterfront into a new urban, transit-oriented community.

The plan has been 10 years in the making and has faced a number of problems, partly due to a troubled relationship between former city officials and waterfront landowner Hercules Bayfront LLC.

, the former city manager who was recently hired by the city as a consultant to negotiate on the waterfront project, has put together a set of preliminary deal points to be used in an agreement between the city and Hercules Bayfront LLC.

The document will go before the Hercules City Council at Tuesday's council meeting. If approved, the city's legal counsel will begin drafting agreements on the basis of those terms. The agreements will eventually go back before the council and then presented to Hercules Bayfront LLC.

Here are the deal points put together by Long with input from the resident-run Bayfront Task Force. Share your thoughts on the proposal under "Comments."

Preliminary Deal Points Bayfront/ITC

March 21, 2011

Business terms among the Hercules Bayfront, the Agency and the City will be stipulated in a joint owner participation agreement/developer agreement (the Agreement) acted upon simultaneously by the Agency and City.

Agreement provisions:

1.            Entitlement:  Vesting of the entitlement for the Bayfront Project over 20 with 2 five year renewals, subject, to performance, in return for benefits created by the project.

2.            Consent by current lien holder:  Agreement to be recorded as a condition of title and current lien holder to consent to the agreement and to forebear from foreclosure.

3.            Prevailing Wage:  City and Agency to approve as an additional party the Project Stabilization Agreement between Hercules Bayfront and Contra Costa Labor Council and to limit application of the City Redevelopment Agency’s Prevailing Wage Policy solely to project components defined as public works projects.

4.            HBL performance schedule:  HBL will meet performance schedule that includes:

a.            Open escrow to convey all land and easements for public improvements/access as listed in EXHIBIT A within 30 days.

b.            Implementation of a work plan that addresses:

i.            Development phasing plan to be included in the Agreement.  Accountability for meeting this development phasing plan will be built into the Agreement and will set performance schedules based on the dates at which permitting for construction permits has been obtained from regulatory agencies.  Performance scheduling shall address:

1.            Schedule for initiating private development.

2.            Capital financing commitments for private development.

3.            Budgets and tasks for a work plan that finishes the pre-development phase and moves the project to the development phase shall be included in the Agreement.  Capital needed to implement this work plan shall be secured and verified by Hercules Bayfront within 30 days of the date of the Agreement.

ii.            Accountability for meeting milestones in the performance schedule shall be built into the work plan and shall be in the form of financial penalties.

5.            Agency/City performance schedule:  Agency/City will meet a performance schedule from the date of the Agreement as follows:

a.            Complete due diligence on all land within 90 days.  If issues uncovered during due diligence, Hercules Bayfront and Agency/City will work in good faith to resolve.  All land, use rights and easements shall be conveyed free and clear of liens associated with loans or of other conditions that would make the properties unusable for the use intended.  City/Agency shall review the condition of the sites, including condition of title and soils prior to close of escrow and may identify conditions that require resolution by the parties prior to close of escrow.

b.            Close of escrow on all land to occur 30 days after completion of due diligence.

c.            Formation of an economic development corporation within 30 days to serve as a vehicle for developing and disbursing capital to the Bayfront/ITC project.

d.            Confirmation of the “Agency Interface” commitments as part of the Joint Project Management program.

e.            Conveyance of real property formerly held by the Redevelopment Agency to economic development corporation within 45 days.

f.            Formation of a Parking District CFD to fund parking for commercial and for transit needs within 90 days and complete comprehensive parking management strategy within another 90 days.

g.            Processing of all environmental permits for construction of the ITC components.

h.            Securing $5 million of capital to fund local share of costs of ITC within 180 days and funding, through local and outside sources the following the potential components of the ITC:

If the Agency is unable to secure funding for the local share of the ITC project components, the parties will need to negotiate a resolution.

i.            Completion of development program for Hercules Point recreation area within 1 year of date of Agreement.

6.            Reimbursement of certain costs:  City/Agency shall consider reimbursement of certain costs incurred by Hercules Bayfront to accommodate the ITC project.  Agency/City may agree to record a lien for an amount (to be determined prior to City/Agency) to be incorporated into the Agreement against Parcel C to the benefit of Hercules Bayfront or assignee.  This amount paid upon sale of Parcel C.

7.            Land purchase:  As payment for all land, temporary construction easements and use rights listed in Attachment A, Agency/City to record a lien for an amount (to be determined prior to City/Agency action on the Agreement) against Parcel C to the benefit of Hercules Bayfront or assignee.

a.            Upon sale of Parcel C, beneficiary of the lien that is the sum of payment for land and the payment of predevelopment expenses shall receive from sale the amount of the lien plus a percentage of net sale proceeds. (lien and percentage to be determined prior to City/Agency action on the Agreement)

b.            Sale of Parcel C to occur within 3 years of effective date of the Agreement.  Hercules Bayfront or assignee shall have a right of first offer to insure a market sale price.

c.            If the Agency/City needs temporary parking for the transit center, terms of a temporary lease will negotiated.

d.            There will be no additional payments for use of private property for joint parking structures or temporary construction easements.

8.            Tax Increment application:  Available tax increment means non-housing tax increment revenues received by the Redevelopment Agency in excess of Agency obligations for bond service, statutory obligations, and for prior owner participation agreements from anywhere in the merged project areas.  Agency available tax increment shall be applied in accordance with the following priorities:

i.            Debt service issued by the Parking District for parking for transit.

ii.            Contribution to offset debt service burden of commercial to Parking District debt service until commercial is 90% occupied and has average rents of $30 per square foot per year.  For each $1/sf increase in average rents over $30/sf commercial will assume additional 10% of debt service burden.  Hercules Bayfront shall provide rent roles for commercial properties to determine the level of Agency contribution to debt service.

iii.            Funding for the local share of other ITC components.

iv.            Targeted application of tax increment to fund financial gaps in specific project components of Bayfront to be negotiated based on validated cost and market data.

v.            Credits to development impact fees up to the full amount of such fees.

vi.            Payment of the public art fee of 1% of construction value

vii.            Payment of the general plan fee of 1% of construction value

viii.            If there is no tax increment available to apply to the purposes listed above, the parties will negotiate how to address the financial viability of the ITC and Bayfront project.

9.            Affordable housing requirement:  Project to develop or cause development resulting in production of 15% of the residential units as affordable by people of low and moderate income with 40% of these units of this set aside for “very low income”.  This requirement must be met within the Hercules Bayfront project and cannot be met by payment of in-lieu fees or production of units at other locations.

a.            Hercules Bayfront may apply for the use of the 30% for tax increment allocated to affordable housing to assist with meeting its affordable housing set aside requirement, but may, as a consequence of use of these funds be required to produce a higher percentage of affordable units within its project.

b.             The parties will review the financial impact of the affordable housing requirement and will work in good faith to attempt to address impacts that undermine the overall financial viability of the Bayfront project.

10.            Consolidated Project Management:  Agency/City and Hercules Bayfront will establish a Consolidated Project Management responsible for scheduling for all project components, including ITC.  The overall goal of the CMP is to work together to get things done sooner.  The CMP has the following operating principles and structure:

a.            Operating principles

i.            Capture cost savings for all components by constructing public and private components together;

ii.            Allow private value creation to occur at the earliest possible time.

iii.            Maximize use of outside funding sources in early phases for the ITC components to allow the City/Agency the time to acquire capital for project management and local match necessary to attract more outside funding;

iv.            Timely and continuous communication to all parties about project status and funding needs.

v.            Monitor funding availability to trigger re-design of ITC components if necessary to reduce costs within available funding.

b.            Structure:

i.            Agency/City Interface — Agency/City will assign

1.            A City Councilmember to assist with interface with funding agencies on behalf of the project.

2.            Executive manager as spokesperson and manager of the Agency/City activities.

3.            Project manager for day-to-day activities

4.            Planning Manager

ii.      Hercules Bayfront will fully participate in the CPM teams and assign engineering, legal and management participants to the teams.

1.                                             iii.     cchTeams:
   1. Fund raising: Lead by City/Agency
   2. Conditions of approval management: Lead by  City/Agency
   3. Permitting management: Lead by City/Agency
   4. Design Management: Lead by Hercules Bayfront;
   5. Schedule Management: Lead by Hercules Bayfront.

11.            Limits on Deal Points.  These preliminary deal points do not obligate or commit the City or Agency to enter into any agreement.  The City and Agency’s actions are merely an agreement to conduct further negotiations, reserving for subsequent City and Agency action the final discretion and approval regarding any agreement.  Any agreement resulting from negotiations shall become effective only if and after such agreement has been considered and approved by the City and Agency in their sole discretion following conduct of all legally required procedures, including, without limitation, all required environmental review processes and all other applicable governmental approvals and such agreement shall comply with all then and existing laws.