Council Reviews City’s Financial Health, Gaia Building

By Judith Scherr
Friday November 17, 2006

The city’s short-term fiscal health—with about $800,000 more in anticipated annual revenue than forecast—and a possible long-term structural deficit were highlighted at a City Council workshop Tuesday. 

At its regular meeting, the council considered the question of cultural uses at the Gaia building, financing difficulties at the Brower Center-Oxford Plaza project and referred the use of surveillance cameras to catch criminals to the city manager’s office. 



Budget report 

The good fiscal news was that anticipated annual hotel tax revenue is about $300,000 more than expected, parking fine revenue is forecast at $500,000 over the anticipated level and interest income is up almost as much. 

On the downside—for city coffers—home prices decreased from an average of $792,000 to $775,000 over one year and the volume of home sales decreased from 438 to 324 over a year causing transfer tax revenue to slip by about $1 million. 

Property taxes remain the city’s greatest revenue generator at an estimated $32 million, as had been anticipated. 

While the city’s sales tax revenues and business license tax revenues are expected to remain as forecast—about $14 million and $11 million respectively—economic development staff said city retail should be performing better, especially because of the large number of daytime non-residents who work or study in Berkeley.  

“People are spending money outside Berkeley or on the Internet,” said Dave Fogarty, economic development manager. “The per capita income has risen higher than the Alameda County average. We’re not realizing the potential sales tax.”  

Michael Caplan, recently appointed head of the economic development division, said a program to attract and retain business has to start with data collection. 

“We do not know the shifts in retail trends,” he told the council. 

The anticipated structural deficit (expenses built into the budget) includes cost of living increases for city staff (the amount will be determined through labor negotiations), increases in staff health care costs, the downturn in the housing market and the higher cost of construction materials, which impacts city projects  

Responding to the anticipated deficit, the staff said it would wait until February to make budget decisions on the level of Fire Department staffing and whether to continue funding the Telegraph Avenue Improvement Plan, which includes funding social service workers and police. 

Councilmember Kriss Worthington, whose district includes the Telegraph Avenue area, called for a “special focus on Telegraph at the next quarterly budget update” in February. 

In a phone interview Thursday, Worthington said that bicycle police and social service outreach on Telegraph should not be paid for with one-time funding. “This is an ongoing need,” he said, contending the city should return to community policing. 


Gaia Building 

At the council meeting, the question of cultural uses at the Gaia building—developer Patrick Kennedy was allowed to build two residential stories higher than normally permitted in exchange for the promise of cultural use on the first two floors—was again on the agenda. 

Gaia tenant Anna de Leon, who owns Anna’s Jazz Island, argued that the building’s use permit called for 100 percent cultural activities on the two floors.  

“It was intended to benefit the community—that’s why he got the bonus,” de Leon said. 

Kennedy contended that the first two floors of the building were never supposed to be 100 percent cultural use, given that the original use of the space was to be for the Gaia Bookstore that went out of business. The store was a for-profit business that also provided cultural activities.  

Councilmember Dona Spring said that to resolve the situation councilmembers should examine contracts Kennedy has with the management group, which also provides catering for private events, and other users of the space.  

“That’s confidential,” Kennedy said, to which Councilmember Dona Spring replied: “This is a public matter.” 

City staff said at some point they would call a closed-session meeting on the question: both parties have talked about suing the city to resolve the issue. 

The council voted 7-0-2 to hear the question again on Dec. 12, with Councilmembers Betty Olds and Gordon Wozniak abstaining. 


Oxford Plaza-Brower Center 

The $68 million Oxford Plaza-Brower Center has hit some snags, which the council discussed after midnight on Wednesday. The project is supposed to locate offices for non-profit environmental groups in the Brower Center, with retail on the ground floor. Oxford Plaza would house low-income families, also with retail on the ground floor, and would include a parking structure that would belong to the city.  

“We need a sense of the council to move forward,” Housing Director Steve Barton told a weary council, which, at around 1 a.m., voted 7-2 for staff to continue working on the project. Councilmembers Betty Olds and Gordon Wozniak voted in opposition. 

A major retailer, Patagonia, had signed a letter of intent to occupy retail space on the Oxford Plaza ground floor, but pulled out of the project. The presence of Patagonia would have ensured repayment of a $1 million HUD loan. Without a retailer in this space, the city may become liable for the $1 million in the eighth year of the loan. 

Also, construction costs are up 24 percent, which, in a worst-case scenario, could reach $7 million; the city could become responsible for $4 million of that. When the council discusses the project in December, it will have to decide whether to approve a soft close on the deal, that is, turning ownership of the Brower Center and Oxford Plaza over to developers conditionally, so that the land would revert to the city if the project does not work out.