Arrested Development

One afternoon in late September, Mayor Willie Brown broke into his out-of-town schedule to conduct a conference call with a group of citizens from southeast San Francisco. For some weeks, the group -- which includes residents, environmental activists, and artists from the Bayview neighborhood and is known as the Hunters Point Shipyard Citizens Advisory Committee -- had been reviewing a plan for the first phase of development at the former Hunters Point Shipyard.

For the past 10 years or so, the 500-acre shipyard, a federal Superfund site, has been the subject of a massive, still incomplete environmental cleanup by the U.S. Navy. After completing the cleanup, the Navy is to transfer the shipyard land to the San Francisco Redevelopment Agency, which plans to remake the area as a mixed-use community.

In his call, the mayor urged members of the advisory committee to work quickly in reviewing the first phase of the project, which the Redevelopment Commission is expected to consider -- and most likely approve -- as early as next month. This development deal would be the largest in recent city history, an agreement to build out what is often jokingly referred to as "the last 500 acres in San Francisco." The first phase of development includes the improvement and sale of 93 acres of that land. If the plan gains approval, a group led by the Lennar Corporation, America's largest homebuilder, would eventually turn the acreage into improved land for some 1,600 houses and 300,000 square feet of commercial space.

Those present for the mayor's call say he suggested the advisory group spend only a short time -- perhaps 30 days -- reviewing the first-phase deal. And it's no secret that Mayor Brown wants the Lennar deal done before he leaves office at the end of the year; it would be a permanent part of Brown's mayoral legacy. Later, though, some committee members harrumphed, saying that the deal has taken 30 years to get to this point, and the mayor should cool his heels while they look at what City Hall has in store for them.

A good, long look at the first phase of shipyard redevelopment may well be in order. A review of documents related to the project, supplemented by interviews with a wide variety of interested parties and experts, reveals potentially serious problems in a deal that seems generous to its developer and less than fully advantageous to the city of San Francisco or residents of the Bayview.

If the Phase 1 agreement is signed, the city will have hired a developer to build out a Superfund site where the full extent of toxic pollution is not yet known. Navy contractors have yet to complete significant portions of an environmental assessment of the property, which has been the subject of one toxic surprise after another. State and federal environmental regulators have not yet approved any of the property for transfer. And the Navy has yet to sign an agreement specifying how the land will be transferred to the city.

On the financial front, the group that would develop the first phase -- a partnership among Lennar and two local firms -- stands to benefit significantly if redevelopment commissioners approve the deal. To be sure, Lennar has spent millions of dollars on planning for, and meeting with the community about, the project. Still, the deal seems to all but guarantee Lennar repayment of its predevelopment costs and a large profit, while insulating the developer from almost all risk.

For starters, if the deal is approved, Lennar will be developing land it did not have to buy. (The military is under a congressional mandate to clean up the land and turn it over to the city.) More than half of the cost of building basic infrastructure for the land -- streets and sewers, among other things -- will be financed through public bond sales. Once the infrastructure is in place, Lennar will be in line to receive a huge chunk of the profits from the sale of land -- or it could sell the land to itself. And Lennar would be relieved of the largest risk involved in developing the shipyard -- the risk of future lawsuits over environmental problems -- through environmental insurance paid for from proceeds of the land sale.

The proposed deal would also seem to lock Lennar into a position of almost complete control of the shipyard. For more than four years, Lennar has held an exclusive right to develop the property that prevents the city from dealing with any other developers and precludes Lennar from having to compete. If redevelopment commissioners approve the first-phase deal, Lennar would continue to enjoy that exclusive concession.