Marin IJ: Housing projects Near San Quentin Face More Complications

In the face of mounting difficulties, developers want to revise a construction plan for two major housing projects on state land near San Quentin prison.

The change stems from an additional delay in financing and environmental clearances for one of the projects along East Sir Francis Drake Boulevard.

The Marin County Public Financing Authority, a joint powers agency formed by Marin County and the Marin County Office of Education, is overseeing one of the projects in partnership with Education Housing Partners. That project calls for 135 below-market rental apartments for local education employees and county workers.

The other project is being developed by Eden Housing. It involves 115 apartments that would be priced to be affordable to low-income households and extremely low-income households.

The two developments, known as the Oak Hill projects, will share common infrastructure. The problem is that the workforce project still hasn’t secured its financing. Meanwhile, the state has granted Eden Housing permission to issue $30 million in tax-exempt bonds and awarded it $8.67 million in state tax credits and $3.9 million in federal tax credits.

“We have this deadline to issue our bonds from the state by Oct. 19,” said Tim Gorman, Eden’s project developer. “If we are not able to issue our bonds and start construction by then, we lose our tax credit awards.”

Eden Housing proposed to move ahead and build the infrastructure for both projects so it can remain on schedule. But it wants the other developers to guarantee they will pay half of the estimated $43 million cost.

Matthew Hymel, director of the Marin County Public Financing Authority, has steadfastly maintained that it will not issue bonds for its project until the building site has been remediated and the budget balanced.

On May 7, however, Hymel said the joint agency could ask the county and the state, which together have contributed $24.7 million in grants to the project, to approve the expenditure. The county has contributed $13.7 million, including $7.5 million from its affordable housing trust fund.

“What would be important to them,” Hymel said, “is that there is a tangible asset at the end that would support building affordable housing at some subsequent point.”

He noted that Education Housing Partners holds the development rights until the county agency issues bonds.

Hymel said such an approach would require a new legal agreement with Education Housing Partners specifying that the county agency is not committing to going forward without a balanced budget, as well as an agreement among all parties on the scope of the shared infrastructure and the oversight of that work.

“The devil will be in the details,” he said, “and whether we can put that together over the next couple months.”

The workforce housing project has been beset by problems. First, it faced a budget deficit because interest rates doubled in the municipal bond market during development.

In February, the California Department of Toxic Substances Control notified the county agency that June would be the earliest the land could be approved for construction. Both projects are slated to be built on 8.5 acres of state land that used to include a gun range, and the land contains lead from expended ammunition.

Then, in late February, the United States and Israel attacked Iran, causing interest rates and construction costs to rise sharply. That once again left the project with an unspecified budget deficit.

During a meeting of the Marin County Public Financing Authority board this month, Joanna Julian, program director of Education Housing Partners, said the state notified her the site won’t be cleared for construction before September. The California Department of Toxic Substances Control is doing additional soil sampling and expects to release a remediation plan for public review in July or August.

“There would be another 30 days for public comment and then our expectation is that their remediation work would occur shortly after, so perhaps September-ish for their remediation work to be completed,” Julian said.

Gorman said Eden would start construction once the remediation plan is approved and wouldn’t wait until the remediation is completed. The Marin County Public Financing Authority has pledged to wait until the site has been cleaned up.

At the meeting, the board gave Hymel permission to pay S&P Global Ratings $35,000 to evaluate what kind of credit rating the bond issuance is likely to receive. Higher credit ratings signal lower default risk, enabling issuers to pay lower interest rates.

Hymel said the information will enable him to get a better handle on the size of the budget deficit. The authority is still relying on the county, the Marin County Office of Education and College of Marin to serve as guarantors for the bond repayment in order to lower interest costs.

As if all of this weren’t enough, Steve Moore, general manager of the Ross Valley Sanitary District, says he foresees a problem with a 54-inch sewer main that runs between the Oak Hill project sites.

Moore said the pipe is about 15 feet to 25 feet underground, but when additional fill is added in connection with the projects, it will be 50 feet below ground, making it nearly impossible to replace. Moore said he expects the pipe will have to be switched out in the next 15 to 30 years, and the price of relocating it could be up to $20 million.

“There is a real issue here,” said Doug Kelly, a Ross Valley Sanitary District board member. “We’re not giving a gift of public funds to the Oak Hill developer.”

Hymel said, “The environmental impact report process included consultation with Ross Valley Sanitary District staff, and no significant impacts were identified during that review process.”

Critics of the housing project have seized on its troubles to call for the Marin County Public Financing Authority to be dissolved.

“How can the JPA keep proceeding towards bond financing and incurring more upfront costs before it knows the lead cleanup method, the scope, the cost and the schedule?” asked Susan Cluff of Belvedere.

Mimi Willard, president of the Coalition of Sensible Taxpayers advocacy group, said, “There is an old adage: ‘If you find yourself in a hole, stop digging.’ I think that’s worth considering, because it appears currently that this agency is digging faster and faster hoping to outrun reality.”

Bruce Dorfman, cofounder of Education Housing Partners, dismissed the criticism.

“This is NIMBY up the wazoo,” he said.