When Oakland Mayor Jean Quan revealed plans to take advantage of the federal government’s EB-5 visa/foreign investment program, I called it creative and a good potential source of funds to replace redevelopment. What was missing prior to this year was a healthy, rebounding real estate market to encourage investment. That moment has come, culminating with Governor Jerry Brown’s announcement in Beijing of the Brooklyn Basin development, formerly Oak-to-Ninth (or “O29”). I don’t know for certain that Chinese firm Zarsion Holdings Group Ltd. is a pool of EB-5 investors, but considering the lack of information about the company and the City’s push to get EB-5 investment in China, it seems quite likely. The first phase of the project will include 1,300 of the planned 3,100 housing units.

Brooklyn Basin, comprised of two small peninsulas jutting into the Estuary to the east of Jack London Square, has undergone a painful and grueling process to get to this point. Formally initiated in 2006, the mixed-use development plan went through multiple lawsuits, EIR challenges, and even required legislation to make the land transaction work. When the recession hit, any hope of the project breaking ground before the end of the decade was dashed. Former councilman Ignacio De La Fuente occasionally spoke out for a ballpark as a favor to his developer friends at Signature Properties, to no avail. The land was included in the 2001 HOK study, coming up short compared to Uptown and other sites. I visited community meetings in 2006 to gauge sentiment on a ballpark there, and it was not met with much support due to the infrastructure problems that exist along the Embarcadero. In addition, not all of the land was available, as Oakland landowner J.W. Silveira fired off lawsuits against Oakland to send a message that their slice was not up for sale or eminent domain.

So no, Brooklyn Basin has never been considered a serious ballpark site contender. Could it be a catalyst to complement a ballpark at Howard Terminal? Perhaps. The question at Howard Terminal, as ever, is how will any of it get paid for. The East Bay Express reported yesterday that the Port of Oakland, which controls Howard Terminal, is in debt up to its eyeballs. This is a problem, because the loss of funds from redevelopment could be backfilled by additional debt on the Port. If the Port is strapped for cash, it’ll be hard to build the proper infrastructure that would be required to support a ballpark. Even AT&T Park got help from San Francisco on the infrastructure front. Victory Court died partly because costs to prep the site far surpassed the $85 million that was originally budgeted for the site. The loss of redevelopment money was the final nail in the coffin. At this point there is no true cost estimate for Howard Terminal, and there won’t be unless an EIR is done there to ascertain the cost of cleaning up the site in advance of a ballpark’s foundation work.

Mayor Quan has talked about Coliseum City as a candidate for EB-5 funding, which I can see happening. While that’s promising, it’s important to keep EB-5’s impact in perspective. For the first phase of Brooklyn Basin, Zarsion is only putting in $28 million, or less than 2% of the entire project’s cost. With Coliseum City’s much larger price tag, developers and the City will have to either get foreign investors to bump up their share (which may be limited by how EB-5 works) or find other sources which don’t include redevelopment, state, and perhaps even sales tax money. In the end it all has to pencil out. It’s unclear how either site pencils out with the limitations set on the City and County.

When the City of Oakland sold the Henry J. Kaiser Convention Center to the City’s dying redevelopment agency for $29 million last May, most observers saw through the shell game and figured that it would only be a matter of time before the state’s Department of Finance came looking for the money. Now we know that the raid is happening, thanks to Mayor Jean Quan’s warnings to the City Council this week. For more background on what got Oakland to this point, I’ll point you to two past blog posts.

• Quan takes it down to the wire (6/15/11)
• State bills Oakland $29 million for Henry J. Kaiser Center sale (5/29/12)

As Oakland scrambled to deal with the ramifications of redevelopment’s demise, the City sought creative ways to move money around to fund basic city services. Methods included using redevelopment money to pay for items that would have normally be covered by the general fund, and transfers like HJKCC. State Controller John Chiang warned cities doing such transfers that if they felt that assets would be at risk for seizure, those assets should be placed in a reserve, which Oakland did to the tune of $30 million. In 2012, the City received a large uptick in tax revenues, bringing its surplus to over $80 million including the reserve. Quan expressed confidence about the surplus.

Even under the worst-case scenario, we have $45 million in reserves. We can cover this.

That worst-case scenario is approaching soon, as the seizures will occur, short-term benefits deals cut with unions to help balance the budget are set to expire, major unfunded pension liabilities loom, and the City works to maintain and add to police staffing. During Tuesday’s City Council meeting, a large union contingent was in attendance to protest any notions of prolonged or additional concessions.

Oakland made a huge mistake in 2011 in assuming that a crippled form of redevelopment would be allowed if bills AB 1x 26 & 27 passed. The nightmare scenario came to fruition when AB 1X 27 was ruled unconstitutional, leaving no avenue for future RDA activities. In addition to the state coming down on the HJKCC deal, the DoF asked Oakland to return $18 million of RDA money in January. All told, Oakland could be dealing with a new $50+ million hole that will go straight to future budgets. Unlike some of the other illegal transfers such as the ballpark land in San Jose, Oakland’s problems are related to cash that was either allocated or spent. The City still has the reserve that can backfill most of the hole, but it will put other parts of the budget at risk and jeopardize other projects, including broad development initiatives such as Coliseum City. Land transfers are a different case in that they don’t have to be liquidated unless the DoF determines that a city has come up so short that a fire sale is needed. In many cases, it’s merely a matter of determining that a piece of land has to be taxed normally instead of being placed in a RDA-style tax increment scenario.

Howard Terminal is owned by the Port while the Coliseum is jointly owned by the City and Alameda County. Neither HT nor Coliseum City are at greater risk in terms of feasibility due to the coming raid. However, it’s possible that the budget crunch will cause additional funding for pre-dev work at HT or CC to be rerouted elsewhere as both fall down the priority list in favor of more pressing matters. That already happened once with Victory Court in 2011, and we all know what happened with that plan.

The full impact of the RDA seizure and clawback won’t be known until the DoF releases its final report on Oakland and the City bakes the impact into its next budget.