[Hpn] Sacramento Homeless lay claim to McClellan Air Base homes

coh coh@sfo.com
Tue, 31 Jul 2001 13:17:43 -0700


Sacramento Business Journal

Homeless lay claim to McClellan homes
Mike McCarthy  Staff Writer

Sacramento County's battle with a homeless advocate over how to create
homeless housing at McClellan Park is close to taking a nasty turn toward
the courts. 

A legal dispute could slow the recently closed Air Force base's continuing
re-emergence as a business park.

The advocate, Sacramento Cottage Housing Inc., says it has a good claim to
homeless housing at McClellan. It wants the housing provided quickly -- in
the park's hotel and in 50 single-family homes -- or else it will force
arbitration and might take the matter to trial.

The county says it has offered to solve Cottage Housing's claim by helping
the group build new housing for the homeless elsewhere in the park.

"The county is supposed to be neutral in balancing the economic development
with homeless interests," said Robert Tobin, Cottage Housing's executive
director. "But at every step, the county has shown it has a conflict of
interest in favoring Stanford Ranch."

By "Stanford Ranch" he means developer Larry Kelley and Morgan Stanley Real
Estate Fund. They're partners in Stanford Ranch in Rocklin and in McClellan
Park LLC -- the company redeveloping the base as a private business park in
cooperation with the county.

"It's being handled by the county and we're not involved," Kelley said. "And
I'm glad we're out of it."

Tobin hasn't been cooperative, county officials say. "We really are trying
to do the right thing here," said Paul Hahn, the county's economic
development director. "The county does not want to be painted as not trying
to help the homeless."

A `homeless emergency': Tobin has been refused use of McClellan's existing
hotel complex and some 50 single-family homes, known as the "Wherry homes,"
because the hotel is part of a conference center that Kelley's group
believes will attract corporate tenants.

Kelley and the county have discounted the idea of homeless people mixing
with the center. 

"If they get the hotel, it would be in the middle of the conference center
and take away any possibility for the conference center to thrive," Hahn
said. "The conference center is critical to the reuse of McClellan."

The developers plan to rent the mostly vacant single-family homes.

Meanwhile, local groups that help homeless people say they've received
significantly more requests for help this year than last. The economy has
slowed, apartment rents have hit record levels and apartment vacancy rates
have dropped below 3 percent.

The Sacramento County & Cities Board on Homelessness, a group appointed by
the county and city, is about to declare that the homeless situation has
reached emergency status this year. One director points accusingly at

"McClellan has been disappointing, because it's an opportunity for the
county to provide fairly immediate housing," said Tim Brown, who is also
executive director of the Loaves & Fishes homeless facility. "There are
desperately needed housing resources out there."

The basis for the claim: The federal government announced in 1995 that
McClellan Air Force Base was surplus and would close in 2001. It also said
it would transfer the property to county control.

A 1994 federal law assigns the homeless the right to claim property in
shuttered military bases.

Accordingly, Sacramento Cottage Housing in 1997 claimed the base's existing,
118-room "hotel" -- the three-building quarters for visiting officers, plus
a small satellite building. In 1998, Cottage Housing signed a contract in
which the county agreed to hand over the hotel or a "substantial equivalent"
to Cottage Housing.

The hotel could plainly help attract corporate tenants to the new business
park, Hahn said, so the county figured it would find that "substantial
equivalent" to the hotel.

In 2000, Kelley's group won the county contract to convert the base into a
business park. The company would manage the park, and buy it for $118
million once the Air Force removes all the toxics on the property.

Kelley's group claims the hotel for the conference center. McClellan Park
LLC has hired a manager and is operating the center, called Lion's Gate, for
small conferences in support of McClellan Park's existing tenants. Lion's
Gate is using the hotel.

But large conferences are unlikely, Hahn said, until the cloud cast by the
homeless issue is resolved.

Where things stand: The parties started talking about alternative homeless
housing last year. But there has been little talk and no agreement.

In early June the county offered to give 3 to 5 acres on the north side of
the base to Cottage Housing to build 82 apartments for the homeless, Hahn
said. An existing, rundown 18-apartment building would be thrown in,
bringing the total to 100 apartments. Or the county would build 100 all-new

The project would cost about $10 million, the parties estimate.

The county would also provide a child-care center and a job-training
operation nearby, said Roger Dickinson, the county supervisor whose district
includes McClellan.

Financing would be arranged largely through a state program that allocates
federal tax credits to developments that serve low-income occupants.
Developers then sell the tax credits to corporations and others in return
for the cash needed to build the projects.

Cottage Housing would have to apply for the credits and compete with other

The county would also chip in $250,000 in federal grant money annually for
operating costs. 

Claims and arguments: Cottage Housing, faced with housing the growing number
of homeless, thinks the county should make the interim housing available
while the new housing is built, Tobin said.

The 18-apartment complex the county offers to remodel immediately would
house too few homeless people, and is in the middle of the acreage slated
for the new apartments. The homeless would be assailed by construction noise
and dust for years, he said.

"I've told them the Wherry homes are off the table, spoken for," Hahn said.
"The hotel is not available. It is worth an estimated $2 million and we'll
help them build a $10 million new facility."

Employees who work in the park will use the Wherry housing, he added.

Cottage Housing also wants the county to guarantee the $10 million financing
for the new apartment project, said Tina Thomas, a principal in the law firm
of Remy, Thomas & Moose, which is working pro bono for Cottage Housing.

One worry, Tobin said, is that the project might not get the tax credit

The county might use some of McClellan Park's future redevelopment revenues
-- bonding against the new redevelopment area's future property tax income,
Thomas said. 

"We're going to help them find the $10 million," Hahn responded. "And if
that doesn't work, we'll find another deal for them. There's no risk

He wouldn't discuss the redevelopment tax revenue idea.

Another potential problem is that the county doesn't guarantee zoning for
the apartment project, Tobin said.

County staff will support the rezone, but it needs to go through the normal
rezone process, subject to county study and approvals.

Another dispute is that Cottage Housing's attorneys last month fired off a
list of questions about the county offer and the county hasn't responded
yet, said William Kennedy, managing attorney for Legal Services of Northern
California, who is working with Thomas.

"We can resolve this if we can just sit down and talk," said Hahn, who added
that the answers to the questions are being drafted.

An initial meeting between Hahn and Thomas and others was slated for
Thursday. None of the parties expect the meeting to resolve the disputes.

Litigation? The county's 1998 agreement with Cottage Housing lets either
party call for nonbinding arbitration if they can't agree on the homeless
housing. If that fails, Cottage Housing can sue for breach of contract, said
Michael Stusiak, a partner in the big San Francisco law firm of Morrison and

Cottage Housing has enlisted the firm to handle the court case pro bono,
said lawyer Thomas.

"As soon as we believe we can't resolve things, Morrison and Foerster would
take the lead," Thomas said. "It's a real thing, and Morrison and Foerster
have shown they are willing to do this. They believe a case is there."

The homeless: The County & Cities Board on Homelessness believes the
county's homeless plight has reached a crisis. In April, May and June,
staffers of St. John's Emergency Shelter had to turn away 1,669 women and
children -- 29 percent more than they turned away a year earlier, Brown

Another local shelter, Sacramento Area Emergency Housing, turned away 3,390
families in the first half of this year, up 20 percent from 2,812 families
sent away a year earlier.

Cheryl Davis, director of the county's Department of Human Assistance, has
data indicating that the four homeless shelters in the county have seen a
dramatic increase in demand since last winter. But more research is needed,
she added. 

The board believes that more people are homeless because rents are soaring
and vacancies are dropping, Brown and Davis said.

Rents climb Everest: The local rental picture has changed dramatically,
according to Marcus & Millichap, a commercial real estate brokerage
specializing in investment property.

Between the first quarter of 1998 and the first quarter of this year, rents
for an average apartment in the four-county Sacramento region rose 28
percent, to $784 from $613.

During the same period, rents for units built before 1970 -- usually more
affordable -- rose 30 percent to an average of $614.

Rents rose less than 7 percent in 1998 and 1999, the brokerage reports, and
then jumped 13 percent in 2000. The current regional average rent is $805 to

Apartment vacancy has dropped to 2.4 percent, off sharply from 6.5 percent
at the start of 1998 and 4.2 percent at the start of 2000, reports the

The need: To meet the need for homeless housing, the Cities & County Board
estimates, the area needs to build housing for 320 people a year for five
years, or 1,600 units total.

A report on regional housing requirements being drafted by the Sacramento
Area Council of Governments says Sacramento County and its cities would have
to zone land for 22,790 low-income and very-low-income units between 2000
and 2007 to meet its share of the need for affordable housing.

Human assistance director Davis said the SACOG figure gives a better picture
of the challenge facing the county.

While her view on McClellan and Cottage Housing is in line with Hahn's,
Davis' main concern is the homeless, not the business park.

"Our feeling is that we need to increase the supply of affordable homes,"
she said. "The only way to get ahead is to make a concentrated effort. Folks
making $40,000 a year are homeless now."

 American City Business Journals Inc.

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