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.

More than 100 artists currently rent studios at the shipyard; a skateboard manufacturer, a ship-dismantling operation, and other leaseholds also require services.

But the city is unlikely to be able to strike large numbers of other short-term leases. Very few of the buildings at the base are inhabitable. Already, one business has turned down the opportunity to locate at the shipyard because it's concerned about the toxic risk associated with the cleanup plans.

An annual shortfall in the millions of dollars -- the difference between the cost of city services and the revenue leases provide -- will, therefore, become embedded in the city budget, and stay there until the Navy is finished with cleaning up the entire base, so it can all be redeveloped.

The city is in a weak bargaining position in regard to the former naval base at Hunters Point. The Navy could take just about as long as it wants to clean up and transfer the site. The city could not greatly shorten the time needed to complete that transfer, without essentially throwing away a quarter of a billion dollars in property value.

But if the city government and those who monitor its activities are not diligent, the costs of an early transfer could escalate to almost unimaginable levels.

The EPA's Carr says that if the city chooses the dirty-transfer route, the EPA will require that a detailed legal agreement be struck among the city, the Navy, the EPA, and the developer proposing to clean and redevelop the base. At the very least, he says the EPA would demand that someone -- the city or the developer -- promise to complete the cleanup, come hell, high water, war, acts of God, changing economic conditions -- or the discovery of unknown toxins at the base. He can't imagine a developer agreeing to such sweeping and open-ended financial risk.

But Carr acknowledges that the early-transfer law has a lot of breathing room, and such an agreement could take many forms. The city could, for instance, put itself on the hook by indemnifying the developer against unforeseen costs.

In short, the possibilities of early transfer are endless.
So, it seems, are the liabilities.

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