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Exploring the Debate over City Loans to Private Businesses

On July 21, the Alameda Post published a letter to the Editor from Tod Hickman regarding loans made by the City to private businesses. Hickman referred to a $9.5 million loan the City is making to BC West Midway LLC to build infrastructure for the RESHAP supportive housing project and a $300,000 loan made to Firebrand Bakery to complete a retail café at Alameda Point. The Post is providing further background about these loans to help readers understand the debate over them.

Alameda Post - an aerial rendering of where all the West Midway Project homes would go on Alameda Point
The proposed West Midway Project housing and RESHAP housing at Alameda Point. Image presented by Associate Principal David Burton of KTGY at the May 22, 2023, Planning Board meeting.

Loan to BC West Midway LLC

At its July 18 meeting, City Council approved development agreements for the RESHAP (Rebuilding Existing Supportive Housing at Alameda Point) Project of 309 supportive housing units and the West Midway Project of 478 condominiums and townhomes at Alameda Point. Council also allocated $9.5 million from the City’s Fund 290 (the Alameda Point Fund) for a loan to the West Midway developer, BC West Midway LLC, to build infrastructure and perform site preparation for the RESHAP site. The developer must repay the loan with interest at a rate of prime plus 1%.

Councilmember Trish Herrera Spencer asked why the City would loan money to a private developer. Planning, Building, and Transportation Director Andrew Thomas explained that ultimately the developer would fund the infrastructure and site preparation at the RESHAP site by selling market-rate homes at the adjacent West Midway development. However, the City is loaning money to the developer so they can start building the RESHAP infrastructure immediately.



City Manager Jennifer Ott added that the developer is building Alameda Point infrastructure in exchange for receiving land at the Midway site to develop. The City has opted to front the money to the developer so RESHAP infrastructure construction doesn’t have to wait for the sale of the market-rate West Midway homes. Ott said, “We were going to get the infrastructure from (the developer) eventually, (but thanks to the loan), we’re going to get it sooner.” She and Councilmember Malia Vella characterized this as essentially the City loaning money to itself.

Councilmember Herrera Spencer asked how the loan is guaranteed. Outside Council Karen Tiedemann of Goldfarb and Lipman responded that the developer must provide a payment guaranty from its parent corporations, Brookfield Bay Area Development Holdings LLC and Catellus Development Corporation, as part of the Disposition and Development Agreement. Should they not pay, the City can collect on the guaranty. She characterized this as a typical financial instrument used to secure loans.

Vice Mayor Tony Daysog said that Council doesn’t take it lightly that the City is investing base reuse funds for infrastructure at the RESHAP site. He believes that, on balance, the loan is a plus for the City and especially for the West End, as Alameda is served by having modern new housing, 40% of which is affordable for those with very low, low, and moderate incomes.

Council voted 4-1 in favor of the housing developments and loan arrangement, with Councilmember Herrera Spencer voting against. Public speakers, except Hickman, voiced support.

Loan to Firebrand

Alameda Post - Firebrand Cafe interior
Inside the Firebrand Café at Alameda Point. Photo Karin K Jensen.

More controversial was a loan to Firebrand Artisan Breads. At its September 20, 2022 meeting, Council approved a $300,000 loan to Firebrand to complete a 1,500-square-foot retail café at 707 West Tower Rd., where Firebrand has been headquartered and has operated a production facility since 2021. The original design called for a retail café. However, while the initial work on the café was completed in 2021, rising construction costs prevented its completion. Community Development Department staff and Firebrand began discussing financial assistance through a low-interest loan to complete the build-out.

Firebrand started in 2008 with four employees and today employs approximately 100 employees, making bread and pastries for retail partners across the Bay Area. The café provides a full-service food menu with food service to neighboring Almanac Brewery customers.

In arguing for extending a low-interest loan to facilitate completion of the café, Community Development Manager Walker Toma emphasized that Firebrand focuses on hiring local people with high barriers to employment, such as those experiencing homelessness and the formerly incarcerated, making it well suited to its proximity to the upcoming RESHAP development.

The production facility features a worker resource center staffed by the local nonprofit Five Keys, which provides additional life skills training such as financial literacy and English as a Second Language. The café would provide 15 full-time jobs to Alameda Point and additional sales tax revenue to the City. Mr. Toma argued that the café would help activate an area of Alameda with minimal retail options and attract additional investment. The City issued a similar loan to Alameda Entertainment Associates, LP, in 2007 to help fund improvements to the Historic Alameda Theater.

Councilmember Herrera Spencer expressed concern about the City becoming a bank and extending a loan for seven years at an interest rate of 2%, where the collateral offered was Firebrand’s industrial kitchen equipment. She questioned why Firebrand was not eligible for a small business loan, whether the equipment had adequate value, and why there was no personal guarantee. She suggested the funds could be better spent addressing maintenance issues for Alameda Point tenants.

Mr. Toma responded that he had researched the secondary market for industrial kitchen equipment. He was satisfied that there was a robust market for the type of equipment Firebrand owns and that the equipment would fetch sufficient prices. Community Development Director Lisa Maxwell said her staff was working to address tenant issues.

Mayor Marilyn Ezzy Ashcraft said that for its unique work in hiring those with high employment barriers, she considered Firebrand a model business, which she had showcased to the League of California Cities and the East Bay Economic Development Alliance. She added that Alameda Point workers were excited to finally have a place to buy coffee, tea, and food. Councilmember Malia Vella also considered the loan an investment with positive returns for the community.

Vice Mayor Tony Daysog disagreed, saying that a business with 100 employees is successful and should seek a private sector loan. Hickman and one other public commenter also objected to the loan. Council approved the loan 3-2, with Vice Mayor Daysog and Councilmember Herrera Spencer voting against.

Contributing writer Karin K. Jensen covers boards and commissions for the Alameda Post. Contact her via [email protected]. Her writing is collected at https://linktr.ee/karinkjensen and https://alamedapost.com/Karin-K-Jensen.

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