Commentary: Why Do City Staff Plug Coporate Development? By GALE GARCIA

Tuesday June 21, 2005

I recently attended a meeting of the San Francisco Planning and Urban Research Association (SPUR), on the topic of mixed-use infill development in Berkeley, hosted by Berkeley Planning Director Dan Marks and Planning Manager Mark Rhoades—a truly enlightening experience.  

Early in the presentation, Mr. Marks casually stated that Berkeley’s building boom is “a disaster for small landlords” (due to the vacancies), yet he spent the rest of the hour cheerleading for massive development. I’m baffled. Small landlords are actual living people, a group which pays a disproportionate share of taxes and fees, and therefore contributes disproportionately to Berkeley’s revenue.  

Nonetheless, our Planning and Development Department continues to “incentivize” huge projects by national corporations, such as the subsidiary of real estate investment giant, Marcus and Millichap, currently seeking to demolish the Brennan’s and Celia’s buildings, and SNK Captec Arpeggio LLC, which has purchased the project formerly known as “Seagate.” Yet, incredibly, Marks claimed that Berkeley is being developed by “home-grown folks” who know the local market.  

Hmm, I don’t think so. At a meeting about the Brennan’s demolition project, the corporation’s representative said that two-bedroom apartments in the planned building would rent for up to $2,600 per month. However, one can now rent a three-bedroom cottage—with a dining room and yard—for much less than that, inspiring little confidence that this company has a clue about our rental market. 

Why would a planning director encourage national corporations to perform needless construction, which he admits is disastrous for local small property owners? For the tax revenue? But each of the big projects is owned by a limited liability corporation (LLC), so the buildings can be sold, under some circumstances, without generating a property transfer tax and without triggering a higher assessed value (see “Building LLCs Present Tax Collection Problems”, Daily Planet, May 6).  

Furthermore, “limited liability” means that if the project gets into debt, or fails, none of the corporate owners risks anything more than his initial investment. Rents have indeed dropped—vacancies have dramatically increased—and some of the new buildings are proving to be rather costly to maintain. Do these projects have a viable future? Does it make sense to add more of the same to an already glutted market? 

Unfortunately, Marks is not the only department head who appears to be working for love of construction rather than for the people of Berkeley. The partners of Seagate Properties, Inc. never seemed very interested in their nine-story zoning violation proposed for downtown. The rumor was that they wanted to secure the approvals and “flip” the property. At the Zoning Adjustments Board hearing of Oct. 14, 2004, no one from the company even bothered to show up! No problem—the project had Housing Director Steve Barton to speak on its behalf.  

Barton extolled the virtues of the luxury units in the plan, and the level of seismic reinforcement that might be performed. Curiously, he also brought up the financial risk involved in such projects, saying, “…and if they lose their shirts, the city will have gained even if the developers lost.” I wrote to him Jan. 10 of this year, inquiring how he thought the city might gain from failed developments, but I’ve yet to receive a reply. 

So, our well-paid department directors are encouraging a disaster for real home-grown folks (small landlords), while empowering corporations to demolish our local businesses (Brennan’s, Celia’s, and many others) for needless massive construction. Why are the concerned citizens of Berkeley allowing this to continue? 


Gale Garcia is Berkeley resident.?