Concord City Council faces tough path forward on redevelopment of Concord Naval Weapons Station
Jan 06, 2020 01:14PM
By Pam Kessler
The San Francisco Business Times published an in-depth article on the upcoming vote at Concord City Council on Tuesday. It provides insightful perspectives with significant research. Excerpts posted below. Click the shared link below for the full story (subscription).
Labor union dispute threatens to kill $5 billion Concord Naval Weapons Station redevelopment By Blanca Torres, San Francisco Business Times, Jan 3, 2020
"Lennar Corp. has halted planning work on the Concord Naval Weapons Station reuse project amid a labor dispute."
For the past two years, master developer Lennar has been negotiating with the Contra Costa Building Trades Council on a project labor agreement that specifies how much of the project will be constructed by union workers, but documents from the city of Concord show the two sides have reached an impasse. The developer has agreed to use union labor on infrastructure and site preparation, but union leaders want a commitment that Lennar will use union labor on all construction over the two or three decades it will take to build the project.
Concord’s City Council is set to vote Tuesday whether to give Lennar clearance to proceed at the lower level or require the developer to commit to using more union labor — a move the developer and city staff say will make the project financially infeasible …The first phase will include 4,392 homes and 1.7 million square feet of commercial space. The broader plan for the entire project calls for 13,000 homes, of which 25 percent will be set aside for low-income residents; 6.1 million square feet of commercial space, including 2.3 million square feet for a college campus; up to six public schools; 800 acres of parks and open space; and several community facilities such as police stations, fire stations and events spaces ...
According to city records, Lennar estimates the entire project will cost $5.077 billion to build out by 2046, with about $1.2 billion for the first phase targeted for completion by 2032. Based on these costs, the developer projects $6.711 billion in revenue from the project by 2046, which equates to $1.634 billion in profit or a 17 percent return, potentially wiped out in phase one by union demands, city documents show.
A report by a consultant for the city indicates that if the all-trades agreement raises the cost of the project by 15 percent, it brings down the rate of return to 5.8 percent — lower than most developers will accept. If project costs shoot up by 25 percent, the project will lose money and no longer be feasible. 'Project Labor Agreements (PLA) can be complex agreements, but generally address wage rates, benefits and working conditions for all labor on a construction project,' states a city memo.
In a letter to the city dated Dec. 19, an attorney representing the unions wrote,'Between Oct. 2, 2017, and Aug. 29, 2019, the Building Trades presented a series of PLA coverage proposals to Lennar as a starting point for negotiations. Each successive proposal offered more substantial concessions as a beginning framework for discussion and indicated that the proposed framework and related agreement terms were open for negotiation. Each template for negotiation offered by the building trades was rejected by Lennar' ...
If the council votes in the developer’s favor, the project could move forward but rouse union opposition when its time for the city to approve the final development proposal. If the city votes against the developer or pushes back the vote to a later date, it’s considered likely Lennar will withdraw, meaning the city will have to start over to find a new developer to come up with a project that would pencil at higher labor costs …Starting over also means more costs to the city, a longer development time frame, and the need to renegotiate community benefits such as the educational component, open space, affordable housing and sports facilities.
The scale and scope of the project make it 'a once in a lifetime opportunity site that must not be missed,' says Matt Regan, senior vice president of public policy with the Bay Area Council, a business advocacy group. 'The city of Concord negotiated a very aggressive contract with Lennar when they were chosen as master developer …If this project is squeezed any more it will be squeezed to death, and years of hard work put in jeopardy' ...
While the union appears focused on ensuring top wages for its workers, delaying or killing the project means no new jobs, says Mark Orcutt, spokesman for the East Bay Leadership Council, a consortium of business leaders that support the project. "This is too important of a project to stall," he says this isn’t just about Concord, "it's about the future economic development and quality of life for the East Bay.”
Go to https://www.bizjournals.com/sanfrancisco/ to read the full story.