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Richmond Policies, CEQA Violations and Housing Recession May Doom Toll project
August 27, 2006
There are two articles here. The first from the August 23 Contra Costa Times summarizes evidence already provided to E-FORUM readers that the City of Richmond Community Redevelopment Agency breached legal and ethical standards to make sure a historic structure did not get in the way of Point Richmond Shores. Director Steve Duran confirmed that the historic warehouse was never in the picture: "Developers submitted proposed designs, there was staff analysis, and none of these plans for reports included saving the warehouse."

The second is from the August 25 New York Times describes Toll Brothers’ gloomy outlook on the housing market.

How are these two stories related? The Point Richmond Shores project was born in the heady days of the housing boom. It should have already been under construction. But it still exists only on paper due primarily to delays imposed by a large group of concerned neighbors who have never opposed the project but simply want to make it a better fit for the neighborhood. Instead of working with those Richmond residents whose taxes pay their salaries, Richmond officials joined with Toll Brothers, fighting the neighbors tooth and nail. All with the encouragement of the City Council majority, I might add. City of Richmond officials have long seen themselves as “pro-development,” reflecting their perception of what the City Council majority desires as public policy. In their misguided zeal, however, to please their elected leaders, they have a decades-long habit of cutting legal corners of the entitlement process. More than once, this has come back to bite, but they are slow to take the lesson and continue to persist.

I don’t know why our officials and our City Council can’t learn that a city can be both pro-development and pro-community. We could have a win-win public policy about development, but we have chosen the win-lose (and sometimes lose-lose) model instead. This has a lot of downsides. It alienates the community, angers developers and gives the City a poor reputation.

Now, due to errors and omissions in the EIR, the neighbors have sufficient ammunition to take the City and Toll to court and win. All because City officials cut corners to help Toll and get that purchase money into this year’s budget where it has already been spent. When will they ever learn?

Now, it seems there is a very good chance that Toll will simply walk away from the deal due to the bad housing market. The General Fund budget will go looking for a lost $8 million. Toll, the Redevelopment Agency and the City Council will blame those intractable neighbors, and maybe a couple of City Council members for making the deal go bad.

This could have been a win-win.

History in way of development?
RICHMOND: City Councilman says agency hired historian who would say warehouse wasn't worth saving


Posted on Wed, Aug. 23, 2006

The Richmond red Posted on Wed, Aug. 23, 2006evelopment agency may have gone expert shopping to assure that a 91-year-old waterfront warehouse is razed to make way for a five-story, 330-unit condominium complex.

Rather than architectural expertise, city officials wanted a historian willing to guarantee a historical evaluation that determined the 740-foot-long warehouse is unworthy of saving, Councilman Tom Butt said.

Butt has collected supporting documents, including e-mails and letters from the city and two historical preservation consultants, which he published in his popular e-mail forum.

By declaring the warehouse historically insignificant, it would be easier for Toll Brothers home builders, the project developer, to raze the vacant building and increase the value of the condominiums. The condominium project is planned for 10 acres of city-owned land known as Terminal 1.

"In short, the city of Richmond staff wanted to achieve a certain outcome. They wanted to make sure Toll Brothers constructed the largest possible building at the Terminal 1 site, and that nothing got in the way," Butt said. "Of course, to achieve all of these objectives, the pesky old Terminal 1 building had to be removed from its underlying pier in order to not obstruct the views of owners of million-dollar condominiums."

The warehouse's historical evaluation was completely proper, said Community and Economic Development Director Steve Duran.

"Everything was done in the light of day," he said. "Developers submitted proposed designs, there was staff analysis, and none of these plans for reports included saving the warehouse."

The California Environmental Quality Act requires that buildings of possible historical significance be evaluated before they are razed. If they are determined to be significant, CEQA does not preclude them from demolition, though it would require additional study.

In 2003, the city contracted with historic preservation consultant Sheila McElroyof San Francisco-based Circa for the warehouse evaluation. McElroy submitted a preliminary 12-page report that determined the structure is eligible for the California Register of Historical Resources because it played an important role in Richmond's early development, and the original design and structure are largely intact.

Shortly after it received the preliminary assessment, the redevelopment agency paid McElroy for her services and did not ask her to prepare the final report.

Instead, the city turned to Nancy Stoltz, another historic preservation consultant who had worked on other Richmond projects. But prior to entering into a contract with Stoltz, redevelopment project manager Craig Murray asked for a specific result, according to a July 23, 2003, e-mail.

"I'm asking your assistance to provide, as immediately available, confirmation that the city has concluded its reasonable, legitimate analysis to conclude (the warehouse) was not locally significant," Murray's e-mail reads.

When Stoltz declined to prepare a predetermined report, she was taken out of the running for the contract.

"We got pretty far along in discussions, but Craig essentially wanted me to determine Terminal 1 is not locally significant," Stoltz said. "I told him I could not guarantee such a determination and that from what I know of the structure, even before I read Sheila's draft report, it was very likely significant."

The city finally settled on consultant Mark Hulbert of Oakland-based Preservation Architecture. Hulbert's evaluation determined the warehouse is not historically significant, which clears the path to demolish the building without additional study.

Butt called Hulbert's evaluation methods "innovative."

"I believe that both Mark Hulbert and the Richmond community redevelopment agency knew the outcome of the Terminal 1 report before it even started," Butt said.

Hulbert said the city never asked, or even suggested, he make a predetermined finding.

"Of course they didn't," he said. "There's no way a city would come to someone like me and ask for a certain result."

The Richmond Planning Commission is to consider approving the condominium's environmental impact report, which includes Hulbert's historical analysis, Sept. 7.

Reach John Geluardi at 510-262-2787 or jgeluardi@cctimes.com.


Housing Gets Ugly

By PAUL KRUGMAN, Op-Ed Columnist, New York Times, 25August 2006

Bubble, bubble, Toll's in trouble. This week, Toll Brothers, the nation's premier builder of McMansions, announced that sales were way off, profits were down, and the company was walking away from already-purchased options on land for future development.

Toll's announcement was one of many indications that the long-feared housing bust has arrived. Home sales are down sharply; home prices, which rose 57 percent over the past five years (and much more than that along the coasts), are now falling in much of the country. The inventory of unsold existing homes is at a 13-year high; builders' confidence is at a 15-year low.

A year ago, Robert Toll, who runs Toll Brothers, was euphoric about the housing boom, declaring: "We've got the supply, and the market has got the demand. So it's a match made in heaven." In a New York Times profile of his company published last October, he dismissed worries about a possible bust. "Why can't real estate just have a boom like every other industry?" he asked. "Why do we have to have a bubble and then a pop?"

The current downturn, Mr. Toll now says, is unlike anything he's seen: sales are slumping despite the absence of any "macroeconomic nasty condition" taking housing down along with the rest of the economy. He suggests that unease about the direction of the country and the war in Iraq is undermining confidence. All I have to say is: pop!

Now what? Until recently most business economists were predicting a "soft landing" for housing. Even now, the majority opinion seems to be that we're looking at a cooling market, not a bust. But this complacency looks increasingly like denial, as hard data — which tend, for technical reasons, to lag what's actually going on in the market — start to confirm anecdotal evidence that it is, indeed, a bust.

Why the sudden crackup? When prices were rising rapidly, some people bought houses purely as investments, betting that prices would keep going up. Other people rushed to buy houses, or stretched themselves to buy houses they couldn't really afford, because they feared that prices would rise out of reach if they waited. And all this speculative demand pushed prices even higher. In other words, there was a market bubble.

But eventually prices reached a level beyond what even optimistic potential buyers were willing to pay, especially after interest rates rose a bit. (They're still low by historical standards.) As demand fell short of supply, double-digit price increases declined into the low single digits, then went negative everywhere except in the South.

And with prices falling in many areas, the speculative demand for houses has gone into reverse, as people try to get out with a profit while they still can. There's now a rapidly growing glut of unsold houses. This is a recipe for a major bust, not a soft landing.

Moreover, it could be both a deep and a prolonged bust. Since 2000, much of the nation has experienced a rise in home prices comparable to the boom in Southern California during the late 1980's. After that bubble popped, Los Angeles house prices began a slow, grinding deflation, eventually falling 20 percent (34 percent after adjusting for inflation). Prices didn't begin a sustained recovery until 1996, more than six years after the downturn began.

Now imagine the same thing happening across a large part of the United States. It's an ugly picture, and not just for people and companies in the construction business. Many homeowners — especially those who bought their houses with interest-only loans or with minimal down payments — will find themselves in financial distress. And the economy as a whole will take a hit.

As far as I know, Nouriel Roubini of Roubini Global Economics is the only well-known economist flatly predicting a housing-led recession in the coming year. Most forecasters consider his call alarmist, and many Federal Reserve officials remain optimistic. Last week, Richard Fisher, the president of the Federal Reserve Bank of Dallas, dismissed "Eeyores in the analytical community" who worry about a possible recession.

Call me Eeyore. While I don't share Mr. Roubini's certainty, I see his point: housing has been the main engine of U.S. economic growth over the past three years, and with that engine now going into reverse, it's hard to see how we can avoid a serious slowdown.

Thomas L. Friedman is on vacation.
Copyright 2006 The New York Times Company