Dirty Dealings at the Dock

San Francisco is planning to take title to the decommissioned Hunters Point Naval Shipyard before the military completes an environmental cleanup. The move could cost the city hundreds of millions of dollars -- or more.

Assuming title to the land is the crucial first step in any real estate deal. No bank will talk to a developer about a loan until the developer owns land, or possesses a long-term lease on it. And no developer will talk seriously to the city about executing a redevelopment scheme at the shipyard until he is confident he can assemble the necessary financing for the project.

And that delay threatens to extend the transfer of much of the shipyard beyond Mayor Brown's term in office, which cannot last beyond 2003, even if he wins election to a second term. And the city's chief executive has made it absolutely clear, in a speech before the Redevelopment Commission in mid-December, that the shipyard is one of his two top redevelopment priorities. (The other is Mission Bay, the 250-acre-plus mixed-use development planned for the postindustrial wasteland along China Basin.)

But if the mayor wants to spur any economic development of significance at the shipyard during his term, if Willie Brown wants to choose the developer or developers who build out Hunters Point, he has to get his hands on most if not all the land in the next couple of years.

Somehow.

It just so happens that the Department of Defense -- the very entity that has been frustrating city attempts to take over the shipyard -- has also helped create a method of ending the frustration. That method is not, however, without complications.

Last year, Pentagon officials went to Congress with a modest paragraph of proposed law that would have allowed the DOD to transfer former base sites to local governments "dirty" -- that is, without completing an environmental cleanup -- and walk away. That didn't pass, but in the end, despite the objections of environmental groups, state attorneys general, and state environmental regulators, Congress did pass an amendment to the Superfund law that allows for what's called an early -- or, if you prefer, dirty -- transfer.

An early transfer could alter the time line at Hunters Point dramatically. If given before cleanup, the entire shipyard could fall into the hands of the city as early as this year, bringing job opportunities to a part of town that badly needs them and generating political points for the mayor. But early transfer also threatens to cost the city hundreds of millions of dollars, while placing the responsibility for environmental cleanup in the hands of a private developer.

The early-transfer option has crept past the theoretical state at Hunters Point. The city is actively considering losing millions of dollars on the shipyard deal, if that will spur development there sooner rather than later.

For months now, Redevelopment Agency officials have been talking to developers and the Navy about the possibility of allowing a city-selected builder to pay for and clean up the toxics at the base as a way of moving title into the city's hands much earlier than currently planned. The city would of course discount the price paid for the land to compensate the developer for financing the cleanup. This loss of revenue means, in essence, that the city would fund the cleanup, rather than the Navy, as the Superfund law originally contemplated.

When asked about just such an early transfer and the accompanying loss of city revenue, the Redevelopment Agency's Morales asked several questions back.

"Is it possible? Is it a good idea to perhaps subsidize an early development to create the perception that you can develop on a Superfund site in the southeast of the city? Would it make sense?"

Then he answered them.
"Yes. Absolutely. It would be part of the social cost of making something good happen out there."

The early-transfer amendment to the Superfund law is largely untested. There's really no way of telling right now how smart it is to rely on private developers to clean up toxics of the magnitude found at the Hunters Point Naval Shipyard. Some early transfers have been allowed in California, says Bob Carr, the base closure expert for the EPA's regional office in San Francisco. But they have been small in scope and the military has paid for the option. Never before has a city allowed a private-sector company to pay for and clean up a Superfund site. It would be a first, Carr says.

"I can't imagine a developer wanting to take on the job," he says.
Indeed, cleaning up the shipyard promises to be an arduous undertaking. A task, it might be argued, that requires time, patience, and more money than most people can easily imagine. A task, you might say, that should not be wedded to the urgency of a mayor looking for political benefit, or a developer looking to make hay while a sunny real estate market is still shining.

What is known about the toxic pollution at the Hunters Point shipyard is simply staggering. Taking on the task and responsibility for the cleanup is no trivial matter.

Across the base, toxic materials in the soil and ground water have been determined by the Navy and government regulators to pose an unacceptable cancer risk to future workers and residents. The toxics also pose health risks other than cancer -- everything from hair loss and impotence to reproductive disorders and human intelligence degradation -- in widespread areas. Marine organisms, from worms in the offshore sediment to the California sea lions that ply the waters off the shipyard, are also at risk.

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