Then there was one: Contentious Concord Council denies Catellus’ demands, accepts withdrawal, approves refund, leaves Lennar

Council to decide how, when and if they will work with Lennar at Tuesday’s meeting

By Allen Payton

At their special meeting on Monday, March 28, after hours of questioning Guy Bjerke, the Director of Community Reuse Planning for the Naval Weapons Station project, the Concord City Council, acting as the Local Reuse Authority (LRA) voted 2-1 to deny Catellus’ demands, accepted their offer to withdraw and refund their Good Faith Deposit.

Both Councilmembers Ron Leone and Tim Grayson were not in attendance, because they had recused themselves from participating in the selection process. Mayor Laura Hoffmeister pointed out that Leone had to do so because he lives within 500 feet of the project site.

The staff presentation and answers to Council members’ questions included Bjerke demonstrating the patience of Job and admitting the staff and consultants preferred Catellus and didn’t want to have to recommend the Council approve the company’s withdrawal. But, they were “unanimous in this,” he said.

“Staff estimates a transfer of between $350,000 and $700,000 in financial risk from Catellus to the City,” he said. “It would eliminate any leverage the city has.”

He spoke of the “insurmountable trust and confidence issues between our staffs.”

Bjerke also stated that Catellus would not be participating in the meeting.

Later in the meeting he said the following:

“Our staff recommended Catellus, last September,” he said. “There is no one on city staff or on my team that likes making these recommendations, tonight. But we’re doing what we think are our professional responsibility and fiduciary responsibility to protect the city.”

The report on the investigation of Catellus’ complaints against Lennar by the outside attorney, Michael Jenkins, revealed that Catellus has wanted out of the process since at least last September.

So, their latest request, although it included a demand for the refund of deposit money, didn’t come as a surprise.

Bjerke advised the council members of their three options with Lennar, at this Tuesday’s council meeting, if they voted to reject Catellus’ demands and accept their withdrawal.

First, they can select Lennar as the Master Developer and approve their term sheet. Second, they can direct staff to meet with Lennar and renegotiate their term sheet, or third, they can reject Lennar’s term sheet, which would reopen the process.

The council members asked a few questions of Bjerke before Hoffmeister opened the public comments, which were split between supporting Catellus and Lennar.

She asked each speaker, who didn’t offer a recommendation on the agendized item, what they thought the Council should do.

Public Comments

Tim Lynch, Jr. stated clearly, “Please reject special favors…for Catellus.”

Dennis Costanza, President of the Community Youth Center, said he was there representing himself, “Because I care about the community of Concord.”

“I agree with staff. You should reject Catellus’ desire to change their term sheet. Refund the money and allow them to withdraw,” Constanza stated. “Make today the first day of the rest of this project.”

Another speaker was less cordial.

“I blame the incompetence of the city staff” and their “gross lack of negotiating skills,” said Greg Sandborn. He opened his comments by disclosing that he is Councilmember Edi Birsan’s campaign treasurer and that he is an elected member of the county Democratic Central Committee representing Concord and Birsan is his alternate.

He went on to ask for the resignation of the city manager, “without severance” and the political issues surrounding Grayson and his State Assembly campaign consultant. Regarding the refund of money to Catellus, Sandborn said, “That money should come from Councilman Grayson’s pocket.”

However, he asked the Council to “grant Catellus’ request. Go forward and select from the two.”

Phyllis Gordon said she was “Here as a citizen of the region” and that the developer chosen “will be the region’s partner.” She supported Catellus’ request to withdraw.

Louise McGuire said “I can understand Catellus wanting to put boundaries in place,” then proposed a third developer and wanted “LEED housing…be brought back in.”

“Lennar’s credibility has been tarnished in their dealings with Councilman Grayson,” she added.

Dr. Harmesh Kumar, a former Concord City Council candidate and now candidate for State Assembly against Grayson, said “I think there has been some bias” and that the “Lennar group has been tainted.”

“I have been told not to say these things,” he continued. “Objectivity we are losing in this city.”

Ralph Oliver, a resident of Sun Terrace area in north Concord said, “I am a stakeholder in the process. I don’t desire to deal with Lennar because I don’t trust them.”

“Catellus has been put in a difficult situation at no fault of their own,” he continued. “I suggest you grant Catellus’ request. Catellus is just trying to protect themselves.”

Hope Johnson was the most animated of the speakers, and continued to speak out during the meeting from her seat and was asked to be quiet by both Hoffmeister and Birsan.

“It’s Concord who broke the agreement,” she stated. “You are the ones who violated it…with Lennar. You’ve created a hostile environment.”

“Most of us don’t trust you. Your handling of this. You failed us and we’re embarrassed,” Johnson continued. “This is the biggest project in Contra Costa County. There’s three of you voting.”
She then mentioned one difference in the term sheets between the two developers.

“Lennar has only $16 million for roads. Catellus has $67 million.”

Helix Statement

Following the close of public comments, Councilmember Dan Helix read from a prepared statement.

“We need to understand how one of the two finalists believe the deck is stacked against them,” he said. “This is not easy for me but I must continue.”

“I’m not sure how the city manager [Valerie Barone] came to her conclusion. I have not heard a persuasive reason for deleting the staff recommendation…which would have favored Catellus.”

“I do not blame Catellus for their concern,” Helix continued. “Of the 10 areas in the Term Sheets Catellus was seriously ahead in six areas.”

He also mentioned the offsite road improvements of $67 million in Catellus’ plan compared to Lennar’s $16 million.

“I would prefer this not happen,” he said. “There’s a difference in Lennar’s request [to change their term sheet, last fall] and Catellus’ request is based on the trust factor…a matter of good faith and trust.”

“I want very much for them to be here next week to compete to be Master Developer,” Helix added and then advocated that the Council members “also accept Lennar’s changes. Let them change their term sheet.”

“This is why I came back to this city council to work on this huge, huge opportunity,” he stated. “I’m also old enough to know it takes two out of three.”

Hoffmeister then asked “Is that legally possible?”

Bjerke responded, for the first of multiple times, “What staff recommends that you likewise grant those same changes to Lennar. But keep the underlying principles of their Term Sheet. You need to make identical changes to Lennar’s Term Sheet.”

Acting City Attorney Brian Libow expounded on Bjerke’s statement.

“Under the process, any changes to that contract have to be by mutual assent by the City, Catellus and Lennar,” he stated. “It is my opinion we cannot change Lennar’s Term Sheet.”

Hoffmeister then reiterated “We can only change the engagement and staff costs. But we can not accept the changes to the term sheets.”

Helix responded.

“I just want to keep two Master Developers in the process,” he said.

Hoffmeister then attempted to appease Helix’s desire and asked should changes be allowed to the Term Sheets what would be the time frame.

“It would be at least a month,” Bjerke responded.

“Could that be done by the 5^th of April,” Hoffmeister then asked.

“No,” Bjerke flatly stated.

Libbow then said “Both parties would have to concur.”

Bjerke clarified.

“The Term Sheets are a framework but are not the final document for the DDA [Disposition and Development Agreement] process,” he said.

That process will occur once the Council chooses the Master Developer for the project.

“The staff will work with the Master Developer to turn that Term Sheet into a DDA,” Bjerke explained, later.

The difference between Lennar’s requested changes and Catellus’ was Lennar’s were to aspects of their Term Sheet while “Catellus’ requested changes are in their Rules of Engagement,” Bjerke explained. “$350,000 more is required upon being selected as Master Developer. If they are selected as Master Developer but can’t agree on a DDA, they get their $350,000 back.”

That’s what Catellus was demanding of the City Council.

However, “If they stay in the process they’re only allowed a refund of the $71,000 [of their initial $250,000 deposit] remaining,” he added.

Birsan’s Key Question & Answer

Birsan offered a key question and scenario.

“If we grant Catellus’ request to withdraw could we renegotiate [with Lennar]?” he asked.

Libbow said that was possible “with only one developer left in the process.”

That is what the Council majority of Birsan and Hoffmeister ended up making possible. But, not before Helix made a motion to accept the request by Catellus. The motion died without one of the other council members offering a second.

“Where we are, there is no change to the Term Sheet whatsoever,” Helix then stated. “We are back to square one.”

His failed motion, which hinted at how the other two would eventually vote, was followed by another lengthy discussion and questions and answers between council members and Bjerke.

Birsan offered his argument against Catellus’ demands for a refund if no DDA could be agreed upon should they be selected as Master Developer.

“We have no hammer,” he stated. “The power is shifted to the developers. The City abdicates its power.”

Birsan then made another motion, to direct staff to provide a complete refund of fees and accept the withdrawal of Catellus.

Hoffmeister seconded the motion and offered what sounded like a contradictory statement.

“I would like to keep Catellus in…but it seems to be an indication they want to part…go their separate way,” she stated. “I would encourage them to reconsider that. In the DDA stage, these are things that could be addressed.”

“Us approving this is an option for them to consider,” Hoffmeister continued, to groans from the audience and a few verbal outbursts. “If they don’t want to sign the letter they can stay in the process.”

The Council then voted 2-1 with Helix dissenting, approving the motion.

Following the meeting, when asked if she understood the motion she voted on, Hoffmeister responded, “They don’t have to accept the refund. I’m just allowing them the option.”

When Bjerke was asked if that was correct, he stated, “They could. But they won’t.”

And they didn’t.

During the week following the Monday meeting, Catellus chose to withdraw from the process leaving just Lennar remaining as the sole, current option for the Council to choose as Master Developer.

Tuesday Meeting, Staff Recommends Council Defers Decision

The Concord City Council, acting as the Local Reuse Authority, will at their meeting, tonight, Tuesday, April 5, have the option to do just that. If they do, it will be according to the staff report “to negotiate a DDA to implement the First Phase of the Concord Reuse Project (CRP) Area Plan.”

Also in the staff report for Item 6 on the Council’s meeting agenda, staff lists five “Primary areas of concern:

1. Use of binding arbitration to resolve disputes over reimbursement of City costs (Sec 8.f.iii)
2. Transfer of the Remaining Development Footprint (Sec 7. B.ii and Sec 25. a.b.c.)
3. Affordable Housing Gap Subsidies (Sec 3 d.e. and Exhibit H Sec 4)
4. Offsite Improvements (Sec 6 and Exhibit I)
5. Use of a limited liability corporation structure and the relationship to Five Point Holdings (Sec 25)”

Staff is recommending the City Council “Request staff to re-open negotiations with Lennar on the five primary areas of concern noted above as well as any others that the Council identifies at tonight’s meeting and defer the selection of Lennar to be the Master Developer until staff can return with a revised Term Sheet for Council consideration.”

The meeting begins at 6:30 p.m. and will be held at the Concord Senior Center, 2727 Parkside Drive.

For the complete Council Agenda, click here.  To see the complete staff report on Item 6 click here.