Undercurrents: On the Army Base Conversion, Oakland Should Pass on Tagami

By J. Douglas Allen-Taylor
Thursday September 25, 2008 - 09:53:00 AM

A little over a year from now, Oakland city staff will recommend—and the Oakland City Council will thereafter make a decision on—the master developer for one of Oakland’s largest and most important development projects in decades: the 108-acre Gateway Project on the old Oakland Army Base. 

As with any project this big, the political maneuvering has already begun, and if you wait until the scheduled June 2009 deadline for city staff making its final recommendation on the developer, it will be a barn-horse-door-already-gone-and-bye kind of a thing. 

How massive and important is the Gateway Project? It is only a little short of doubling the 64-acre Oak-to-Ninth project at the opposite end of the waterfront, which dominated so much of Oakland’s political and development discussion over the past couple of years. It also dwarfs many of the other projects listed on the city’s major development project website—the Wood Street Development Project (29.2 acres) or the MacArthur Transit Village Project (8.2 acres), for example. Gateway is also considerably larger than the other most-publicized city project of our time, Forest City’s Uptown Oakland, which only covers approximately 6.5 downtown acres. 

Only the 183-acre Oak Knoll Project on the old Naval Medical Center Oakland grounds is larger among current major Oakland projects. But there are two significant differences between Oak Knoll and Gateway. Oak Knoll is privately owned, and is planned primarily as a residential project, with a small (82,000 square feet) commercial Village Center. Further, Oak Knoll sits high and tucked away in the East Oakland hills in a residential neighborhood far from the city center. That doesn’t make Oak Knoll unimportant. It just makes it less important than Gateway for the city’s economic future. 

Gateway is city-owned property, so it is the city which will decide the final development plan. Gateway will be commercial/industrial rather than residential, and it sits both on the edge of downtown Oakland as well as astride the entranceway to the city from the Bay Bridge. Along with Jack London Square on the other end, it could become one of the pillars from which all of Oakland’s downtown economy is strung in between. 

So the importance of the Gateway Project to Oakland’s economic is difficult to overstate. 

The competition for the master developer project has been narrowed down to four finalists. One of those developers is a familiar face, AMB/California Capital Group’s Phil Tagami. Mr. Tagami has been lobbying hard for the job, with speculation in some circles that he has already gotten enough City Council commitments to assure him the contract. But Mr. Tagami is not the best developer for this particular project, and if he is awarded the Gateway development contract, it would be a mistake. 

Here are my reasons why I feel that way. You may agree or disagree with my reasoning, as you wish. 

For the last several decades, the mantra about Oakland is that the city is not an ideal destination point for developers. How much of this is because Oakland is actually not an ideal location to develop and how much of it is simply a way for some developers to bleed public subsidies out of the city to entice them to do Oakland projects is a subject for another column and another time. What is generally undisputed is that for many years, Oakland has been something of a development subsidy queen, thinking that we are so ugly that we willing to pass out many freebies to developers as a way for them to take us out on a date.  

This became such a hot and sensitive issue in Oakland that Jerry Brown based a portion of his 1998 mayoral campaign on it, saying that he would end the need for such massive development subsidies by “putting Oakland on the map” with developers. Promises, promises. When Brown’s signature Oakland development project—Forest City’s Uptown—won city approval five and a half years into Mr. Brown’s tenure, it was one of the most highly subsidized Oakland projects in recent memory, netting something over $65 million in city contributions, and counting. 

A June 2004 Oakland Tribune article reporting on Oakland City Council’s Community and Economic Development Committee approval of the project and subsidy pretty much spelled out the problem. “For many years the city tried to entice retailers to downtown Oakland, issuing a request for proposals for the Uptown site,” reporter Heather MacDonald wrote. “Finally, in 1998 the city gave up and contacted Forest City, which has redeveloped parts of San Jose and Chicago with success, about a mixed-use project. The city never solicited bids from other companies interested in building a residential development on the site. “ 

Forest City wasn’t picking on Oakland in particular. That’s just what big developers do, when they face little or no competition, and when they have you over a barrel. They take advantage, and squeeze out of you everything the market can bear. That’s simply the nature of capitalism. 

Thoughtful readers will have already seen that this leaves us with something of a puzzlement. If Oakland has such a reputation as an easy mark for developer subsidies, why doesn’t this overcome any developer reluctance to build in Oakland? One possible explanation-and here we get into the area of speculation, since this is not the kind of thing that gets written up in city reports-is that Oakland has a reputation as a “wired” town, that is, a town where development decisions are made not necessarily for their economic benefit to the residents of the city, but because the developer has made the right contacts among the city’s political establishment. It’s called “pay to play,” and whether this speculation is true or not, it’s certainly a part of Oakland’s reputation. In part, that’s what the State Senator Don Perata federal investigation has concentrated on. 

But now comes the old Oakland Army Base and Gateway, and something is distinctly different in the mix. Eight developers put in submissions from the original Request For Qualifications to develop the entire 108-acre parcel, with another five submitting proposals for some portion of the property. That is a far cry from the Uptown Oakland Project—in the midst of the developer-friendly Jerry Brown years and the housing boom-when the city had to go begging for a developer. Among the firms making initial submissions were Prologis/Catellus and Federal Development. Those names may be unfamiliar to you, but they are major players in national development circles, and their decision to ante up in the Oakland Army Base pot was significant enough that the East Bay Business Times—which covers these things for a living—put that fact in their headline in a March 2008 story on the Gateway Project. Oakland had clearly been put on the development map under an Oakland mayor, though that mayor wasn’t Jerry Brown. (Note (in a whisper)): the Gateway submissions happened under Ron Dellums, but I’m not supposed to say that, since every time I mention some fact about something good Mr. Dellums has done for Oakland, I get accused of being a “Dellums apologist” or even a “Black racist”—since both Mr. Dellums and I are African-American, and these days when one African-American says something good about another African-American, it can’t be because there actually is something good, but can only be because it’s those Black Folks sticking to their own kind again—anyhow, I’m not supposed to mention that the enhanced interest in Oakland development evidenced by the Gateway Project is happening under Ron Dellums, so you’ll have to figure that out on your own.) 

Back to the Gateway, and why picking Mr. Tagami’s project would be a mistake. 

Let us assume, for the sake of the discussion, that the Gateway proposals submitted by the four finalist developers-Prologis/Catellus, Federal Development, First Industrial Realty, and Mr. Tagami’s AMB/California Capital Group-are roughly comparable. All of them will promise to revitalize a largely economically barren area of Oakland in one way or another. All of them will promise to bring in increased revenues to city tax funds. All of them will promise to put area residents to work, both in the initial building phase and in jobs created by the new businesses that are created. All of them will be willing to tweak their proposals to accommodate particular city interests. At this point, then, without seeing any of the exact proposals, what is the major difference between them? 

Call it the buzz-creating factor. 

If either of the three major national firms are selected-Prologis/Catellus, Federal Development, or First Industrial Realty-it will create an immediate stir and wave of interest within the nation’s business community. It will send a signal that something different is happening in the Bay Area’s long-overlooked city. It would signal that major national companies are again interested in Oakland, and feel they can do business and make money here. Just as important, it would signal that the old-boys, insider-trader-networking days in Oakland are on the wane, and Oakland is opening its doors to the country and the world for business. Such a signal, if followed up properly, becomes a self-fulfilling prophecy. Businesses come to Oakland because the word gets spread that businesses want to come to Oakland. Look at Emeryville, which was once a seedy saloon-and-prostitute stop along San Pablo Avenue, and is now running out of real estate and in danger of sinking into the bay from the weight of the companies scrambling to get in the door. So goes Emeryville, so goes Oakland. 

And if Oakland chooses Mr. Tagami for Gateway? We may get a good project, with good jobs and increased tax revenues. If we’re lucky—this being Mr. Tagami, after all—we may not get stuck with a lot of cost overruns and after-the-fact requests for city bailout money. But that’s all we will get. Tagami at Gateway will get us no notice in the Wall Street Journal or the other national financial trade papers and websites, only a nod of gray heads and an affirmation around the business breakfast meetings that no unconnected outside company should waste time submitting proposals to Oakland, when the decision is already politically wired in to one of the good-old-boys of the local network. 

On the Gateway Project, Mr. Tagami brings us nothing but Mr. Tagami. And since Oakland already has him, shouldn’t this be a time to reach out for more? 

This is an opportunity Oakland should not waste.