Posted January 22, 2016 12:00 pm
By Brian Beveridge
The Oakland City Council is concerned about banning coal operations at their new Oakland Global Logistics center – because their master developer Phil Tagami is threatening to sue the city or quit the project if the council uses its legal authority to ban coal under health and safety codes.
Of course, Tagami can sue the city for interfering with his business dealings, but courts generally favor cities where health and safety of their citizens is concerned. The burden would be on Tagami to show that his coal venture would not create additional health impacts on the already overburdened West Oakland neighborhoods downwind of the Oakland Global Logistics center.
In his threats, Tagami has little to gain and everything to lose. The threat is classic political theater and pure smoke.
In the deal he signed with the city, he plays two roles. First, he is a fee-for-service construction manager for the site preparation phase, called horizontal development. Once the utilities and roads are rebuilt, Tagami becomes the master tenant and property manager for the next 66 years.
In his fee-for-service role as construction manager, Tagami’s company, CCIG, gets 4 percent of the horizontal development budget, plus other reimbursable costs.
According to the Oakland Office of Contract Compliance, phase one is about 60 percent complete, and the city’s published budgets estimate the total cost at around $450 million.
Tagami’s fee, then, is in the neighborhood of $22.5 million for just phase one. No business man walks away from that kind of money. Tagami’s threat to quit, with millions of dollars left on his contract, is just empty words.
So what if Tagami finishes phase one, gets his $22.5 million, and then quits?
The city would be without a master developer. The truth is, once the old army base is cleaned up and the roads and utilities are upgraded, the city doesn’t need a master developer, a master tenant, or a master anything.
In phase two, Tagami becomes a glorified property manager taking profits the city could retain by managing its own property. The Port of Oakland abandoned the master developer idea years ago and now leases construction-ready property to private development project that suit the Port’s strategic goals.
Oakland is positioned to do the same thing, without Phil Tagami or CCIG. Once the old army base is up to code, there will be no shortage of logistics companies lined up and eager to build facilities at one of the only deep-water ports on the West Coast.
His lease deal notwithstanding, Tagami is hardly the only game in town. The Oakland Global project includes seven separate development areas, four of which already have independent development projects in the works. CASS Metals and California Waste Solutions, two large recycling companies eager to vacate the West Oakland community, intend to build modern facilities in the North Gateway area adjacent to EBMUD.
Oakland Maritime Support Services (OMSS) will break ground this year on a privately funded trucking center and office building at the corner of West Grand Ave and Maritime Street. ProLogis, a global logistics developer is eager to begin construction on its modern distribution center in the Central Gateway, and Viridis Fuels has a lease to build a biofuels plant on another parcel near EBMUD.
In all, more than 95 acres of the project are already committed to private investment unrelated to Tagami or CCIG.
Tagami has his own interests in development of a warehouse district in the East Gateway and a short-line rail operation. These interests and his property management fees will bring him millions of dollars in profits over the next 66 years.
He would be a fool to quit now, but the city might be foolish to try to stop him.
As Mayor Schaaf has said, Tagami has been handed the opportunity of a lifetime. Several years ago Tagami told me personally that the army base project would be worth more than a billion dollars and would be both his retirement and his legacy.
It is unlikely he would walk away from all that. He should set hubris aside, find some gratitude for this opportunity, and create a graceful exit from his ill-conceived coal export venture.
Otherwise, our mayor and council should call his bluff, ban coal, and get back to the real work of growing a green, equitable Oakland.
Brian Beveridge is co-director of the West Oakland Environmental Indicators Project (WOEIP).