Blog: Waterfront Revitalization on a Crash Course

Last night’s council meeting on CenterCal’s plan to revitalize the waterfront should serve as a red flag warning to the City Council and public. What I had been told in discussions with CenterCal CEO Fred Bruning and city staff was confirmed in testimony at the City Council meeting. The Bottom Line: The City and CenterCal cannot squeeze enough development into the harbor and pier area to cover the costs of required infrastructure restoral and replacement. You just can’t pack 10 pounds of development into a 5-pound bag.

This is not an attack on CenterCal’s plan. (Although the three-story parking lot at Beryl and Harbor has to go.) CenterCal has been an exemplary developer and their plan shows both vision and sensitivity to local needs. This is a call to take the action required to make this revitalization successful.

Normally, infrastructure sustainment funds are set aside from the revenues of an enterprise such as the harbor and pier. For example, any business understands their building will require maintenance and rework through the years, so a portion of the revenues from the business are set aside to cover these future costs. This is Business 101 stuff. The problem is our City has never set aside those funds. Harbor and pier revenue was allocated and spent on other things. Reminds me of the fable of the grasshopper and the ants.

In order to overcome the fiscal corner the City has painted itself into, the City has attempted to force these costs onto CenterCal. And that means CenterCal has to build more to generate more revenues to cover the financing required. CenterCal estimated their investment could be as high as $300 million. The problem is, the zoning, the constrained parking and traffic circulation infrastucture, and the limitations and challenges of developing on our waterfront won’t allow the amount of development required to cover the infrastructure sustainment and replacement costs. 

The other handwriting on the wall is that with the burden the City has placed on CenterCal, it is very unlikely that many of the harbor/pier mom and pop stores we frequent and love will be able to afford the increase in lease rates the new $300 million development will demand. Despite Steve Aspel’s demand that current businesses be the top priority, any back of the envelope estimation shows that demand just doesn’t pen out.

Putting the years of financial mismanagement entirely on the back of the waterfront developer is simply not going to work. We cannot afford to waste two more years to conclude, in the end, this is undoable. We should not squander the opportunity to work with a great and visionary developer like CenterCal. If CenterCal walks, the situation gets worse.

The time to correct our course is before us. Now is the time to throttle back density to realistic levels. Now is the time for the City to suck it up and do some heavy lifting (and heavy politicking) to get the funds to fix the infrastructure funding issues created by years of neglect and mismanagement. This is fixable, but it demands real leadership now.