Lennar, Concord part ways on base project after labor talks stall

Meanwhile, no deal with Coast Guard for affordable housing

Concord Naval Weapons Station (CNWS) master developer Lennar Concord LLC and the city of Concord called it quits March 24, when the council refused Lennar’s request for a six-month extension to the Exclusive Negotiating Agreement (ENA) – allowing it to expire March 31.

After negotiating for nearly two years, Lennar and the Contra Costa Building Trades Council (BTC) were unable to reach agreement on how much union labor the developer would use on the $6 billion project. Using 100 percent union labor would “sink the project, financially,” Kofi Bonner of Lennar Five Point told the council at a marathon meeting with more than five hours of public comment that stretched over two nights Jan. 7 and 8.

“No one can deliver the project envisioned by this community plan, satisfy the agreed to community benefits and meet the Navy and city’s revenue objectives under the terms of the building trades’ PLA (Project Labor Agreement),” he said.

Dan Cardoza, attorney for the BTC, said Lennar hadn’t given them enough financial information to back up its claims.

“We need to know what labor costs they assume,” Cardoza said. “Lennar has only given this information to the consultants.”

Lennar wanted recognition of ‘good faith’

Both sides acknowledged the impasse, and Bonner asked the city for direction. The City Council gave no further guidance, sending them back to the table to “refocus” and keep trying, a decision Bonner said was “unclear” and failed to provide a path forward.

In a Jan. 17 letter to the council, Lennar president Jonathan Jaffe reaffirmed the impasse and said his company would move forward on the project only if the council provided assurances that Lennar had negotiated with the BTC “in good faith” per their ENA, paving the way for future potential discussions with individual unions. They asked for a six-month extension to the ENA through Sept. 30.

At a special meeting held remotely on March 24, under the coronavirus shelter at home order, the council voted 3-2 to deny the request for extension and to allow the agreement to expire – bringing to an end the plans for the “world class” project.

Council pushing for labor agreements

Councilwoman Laura Hoffmeister and Mayor Tim McGallian wanted to grant the extension but were overruled by Carlyn Obringer, Edi Birsan and Dominic Aliano.
“What we did was tell Lennar their demands were unacceptable,” Birsan told the Pioneer in a telephone call the day after the meeting.

Birsan was on the council four years ago when the city entered the agreement with Lennar, based somewhat on their “very good” relationship with labor on the Hunters Point project in San Francisco.

“At the time, I said I don’t want anything less than what is going on at Hunters Point,” Birsan said. “Apparently, their calculations (on the CNWS project) did not include what they did at Hunters Point.”

It was clear by October 2019 that talks with the unions were not progressing. In November, Lennar effectively pulled the plug on the project when it closed the Concord office and ceased reimbursing the city the $37,000 a month for staff costs.

The city owes Lennar $800,000 in advances, which it will return by the end of April.

Coast Guard property disappointment

In another difficult twist for the city, reuse planning director Guy Bjerke reported that the Coast Guard has turned down the city’s and DeNova Homes’ offer to buy 58 acres in North Concord – dashing hopes for more affordable housing in the city.

Concord officials had been working with the General Services Administration and the Coast Guard to demonstrate the city would be a good partner. The dialogue started in 2014, after the Navy transferred the land to the Coast Guard.

DeNova Homes hoped to build a mixed-income residential project, with 25 percent of the units billed as affordable. However, the two sides could not agree on a price, and the Coast Guard plans to offer the property to the public at market rate.

Where to go from here

Meanwhile, Bjerke says the city has some work to do before moving ahead with finding a new developer for the weapons station property. “First, we need to get our balance back after COVID,” he said.

Then his team will work up a “lessons learned” document to review with the council before fall. He doesn’t realistically expect the search for a new developer to begin before January 2021, if then.

Several months ago, the Navy found new chemicals on the base that require retesting of the entire 2,500 acres. That will take two years.

“We are not blowing up the development on the base,” Bjerke told the Pioneer. “We are on no different schedule that we would have been with or without a developer.”

In the meantime, Bjerke said the council must take a good look at the whole project – which could include 13,000 units of housing, 6 million sq. ft. of commercial space, a sports complex, college campus and community center.

“It was a different council 10 years ago when the project was defined,” he said, noting that priorities could have shifted.

The city also needs to consider if the project would generate enough return to pay for all the hoped-for benefits in the original plans, given the city’s current fiscal picture and union labor requirements.

Although the city is back to the drawing board with finding a developer, Bjerke said the effort has not been wasted. In a big move forward, the Navy transferred title of 2,500 acres to the East Bay Regional Park District for open space, parkland and hiking trails.

Birsan is confident the city will find a new developer. “Remember, we had 16 qualified bidders last time,” he said.