Berkeley council adopts community benefits package

2211 Harold Way is one of several tall building proposals in the pipeline that must offer "significant community benefits" under the Downtown Area Plan. Image: MVEI Architecture and Planning — 2211 Harold Way is one of several tall building proposals in the pipeline that must offer “significant community benefits” under the Downtown Area Plan. Image: MVEI Architecture and Planning

The Berkeley City Council voted Tuesday to clarify its approach to the community benefits required of developers who wish to construct buildings taller than 75 feet downtown.

Seven of these buildings were approved when Berkeley residents voted in favor of the city’s Downtown Area Plan in 2010, but the type of significant community benefits required of those projects was left vague to allow flexibility during the permitting process.

Since then, city zoning board commissioners have expressed frustration about that ambiguity, and asked for more direction from council. In April, council launched a series of public discussions to clarify the requirements.

In late June, city officials voted in favor of a proposal from council members Lori Droste and Darryl Moore designed to help guide the process going forward. They described their proposition as a compromise meant to combine the best elements of earlier proposals that had been introduced by Councilman Jesse Arreguín and, separately, Mayor Tom Bates and Councilman Laurie Capitelli.

Council ratified that vote Tuesday night. The four-part resolution will now be shared with the city’s Zoning Adjustments Board to help it determine whether projects that come before it meet the city’s requirements. The resolution is meant to offer guidance to the zoning board about the council’s policy as it relates to significant community benefits. The resolution could, however, potentially be challenged by a referendum from local residents who disagree with the approach.

Community benefits package offers two approaches

The resolution sets up a process for how developers will submit their community benefits packages to the city, and requires an independent review of project finances and a valuation of the proposed benefits package.

Developers have two options for how to approach the requirement. They can either provide affordable housing as well as a project labor agreement and other benefits defined by the city, or they can pay a residential per-square-foot fee set through an independent financial analysis. The benefits, as defined by the city, “may include, but are not limited to: affordable housing, supportive social services, green features, open space, transportation demand management features, job training, and/or employment opportunities.”

Under both options, developers who commit to a project labor agreement are set to receive a credit for 5% of the construction costs.

Council also approved an amendment Tuesday night that asks developers to allocate 60% of the remaining benefit or fee toward affordable housing (by providing housing on-site or paying into the city’s Housing Trust Fund), and allot the other 40% to the additional benefits described above. The amendment clarifies that the resolution is “intended solely to express how the Council would be inclined to address the issue of community benefits” for buildings taller than 75 feet in the downtown mixed-use district.

“By far this is really the most progressive community benefits package in the East Bay,” Droste said Thursday. “It just blows away the competition.”

Droste pointed to a chart completed by the mayor’s office in May that compares the community benefits required of development projects in Berkeley, Oakland, Mountain View, Fremont, Walnut Creek, Dublin, Menlo Park and Santa Monica. From the affordable housing requirements and those related to labor and construction, as well as other benefits, she said Berkeley’s Downtown Area Plan far surpasses what other cities ask for.

Tuesday night, council members Max Anderson and Kriss Worthington voted against the package, while the rest of the council voted in favor.

Worthington attempted to propose an amendment that would have asked developers for an additional 10% of affordable housing, either on site or payable to the Housing Trust Fund, on top of the 10% already required by the city. His amendment failed to garner enough votes to pass.

Worthington also said he opposed the fact that the item was coming up for a vote so late at night, at approximately 11 p.m., because it did not give the public a fair chance to understand and weigh in on such an important subject.

The zoning board voted to certify the Harold Way EIR on Thursday night. Image: MVEI Architecture and Planning — Designs for 2211 Harold Way have continued to evolve in recent months. Image: MVEI Architecture and Planning

Square footage fee set for Harold Way

The resolution also sets a per-square-foot-fee for project applications submitted to the city more than two years ago: $100 per rentable residential square foot from 75 to 120 feet and $150 per rentable residential square foot from 121 to 180 feet. Councilman Capitelli had proposed those numbers in May as part of the original Bates-Capitelli proposal after calling numerous management companies and consulting various websites to determine how much extra rent can be charged for units higher above ground.

There’s only one project in that category, proposed at 2211 Harold Way across from the Berkeley Public Library. The 302-unit complex contiguous to the Shattuck Hotel is currently set, according to project documents, to include six movie theaters — to replace the Shattuck Cinemas Landmark — and other ground-floor commercial features, as well as a large underground parking garage. (According to the developer there are actually nine theaters planned, though the most recent plan sets submitted to the city and Environmental Impact Report still show just six.)

Critics of the community benefits package said Tuesday that setting the fee for projects in the pipeline is a “carve out” meant to lessen the financial burden on Harold Way developer Joseph Penner of Hill Street Realty.

Worthington said he did not think the resolution should set that fee — which applies only to Harold Way — and said that “gives that particular building millions of dollars in benefits” and “extra profits.”

Worthington described the project as a major giveaway to a corporation, particularly because he said Harold Way will not have to submit to an independent financial analysis. Council members asked at a prior meeting for that analysis to be done, but Worthington said after Tuesday’s meeting that the request was not legally binding and that Harold Way would not have to comply with it.

According to a consultant’s report by AECOM that was commissioned by the city and handed out at Tuesday night’s meeting, the average residential per-square-foot fee for East Bay buildings from 75 to 120 square feet is $50, which is $50 less per square foot than the fee set by council. AECOM found that $150 was the average fee for rental residential space from 121 to 180 feet.

The report noted that its analysis was “confined to the view premiums of upper floor units and does not attempt to calculate the marginal gain in profit from achieving more floor area through increased height allowances.” Worthington said the narrow analysis resulted in an incomplete assessment of the numbers and failed to set appropriate fees.

Capitelli disagreed.

“I think it demonstrates that my numbers are generous toward the city,” Capitelli said Thursday. He said he felt it would be unfair to send the project back to the zoning board without the specificity of the fee amounts, given that the project was submitted to the city in December 2012. And he said, other than slowing down the process, the end result would be unlikely to change. “If we were to go back to square one with these folks, I think we’d come up with pretty much the same numbers.”

Consultant Mark Rhoades of Rhoades Planning Group said this week that Hill Street expects to be assessed more than $13.5 million in square-footage-fee costs under the new community benefits package. That amount would then presumably be reduced by 5% of the construction costs if the project moves ahead with its commitment to a labor agreement, which it announced last October.

The development team provided additional estimates related to project finances earlier this year. The Harold Way design has shifted in recent months however, which could affect those estimates.

In February, Rhoades said the Harold Way project labor agreement would have a value of $11 million, while its retention of the Shattuck Cinemas would have a value of $16 million related to both construction costs and rent subsidies. Rhoades wrote in a memo to the city that this translates into 23% of the total expected project costs of $120 million.

Rhoades said Thursday by email that making sense of all the finances can be tricky due to the overlap in various fees and costs, but noted that the “actual value of what we are proposing well exceeds the $13.5 million.”

He said, for example, that while the project labor agreement would increase construction costs by 10% to 15%, the city only provides a 5% credit for it. The theaters are another example, he said, noting that the project expects to receive a $7 million offset in construction costs, but is projecting a subsidy for the theater with “a multimillion dollar capitalized value over 20 years as well.”

Developer Penner told Berkeleyside in January that, over 20 years, the project expects to provide more than $40 million in community benefits to the city under the various requirements of the Downtown Area Plan, such as with its labor agreement, rent subsidies, green features, transit-related provisions and employment opportunities.

He said earlier this month that Hill Street is also open to helping Habitot Children’s Museum, which would be displaced by the project, relocate to a new property it has purchased in South Berkeley.

“We understand that the city is interested in including a payment to Habitot for $250,000,” Penner said by email. This money, if allocated by the city, would come out of the $13.5 million square-footage-fee estimate above, Rhoades said. “We do not oppose that action, and we believe that the city may direct funds as they see fit.”

Councilman Worthington said he believes that interpretation is at odds with the resolution approved by council Tuesday night, which states that “Project developers should address the detriment created by the project on nonprofits which serve the Berkeley community.” He said he believes that the council policy separates detrimental impacts on nonprofits from the significant community benefits themselves.

Penner told Berkeleyside previously that he had offered financial assistance to Habitot and also to BOSS, a homelessness services nonprofit, but had not finalized an agreement at that time.

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[Editor’s Note: This story was updated Friday, July 17, to add additional context to the comments expressed by Councilman Kriss Worthington; to clarify the scope of the financial analysis completed by AECOM; and to include the language in the resolution adopted by council relating the detrimental project impacts on nonprofits.]

Community benefits package offers two approaches

Square footage fee set for Harold Way

Emilie Raguso