HERCULES -- A skeptical City Council sent its city manager back to the bargaining table with Safeway over a prime downtown retail site, after a majority signaled it was ready to vote down a tentative deal Tuesday.

City Manager Steve Duran wanted the city to sell the 11.44-acre, so-called Sycamore Crossing tract to Safeway for $5 million, or about $10 a square foot. The proceeds would be reduced by $2 million to $4 million, the cost of removing about 120,000 to 200,000 square feet of stockpiled dirt from the property, and undergrounding utilities. The leftover proceeds of about $1 million to $3 million would not go to the city's general fund but instead toward paying off debts of the former redevelopment agency.

Hercules City Manager Steve Duran
Hercules City Manager Steve Duran (Laura A. Oda/Staff file)

The council, by a 3-2 vote, postponed to Oct. 8 a vote on a revised deal; Councilwomen Myrna de Vera and Sherry McCoy dissented.

After a short break following two hours of discussion of Sycamore North, a second land deal, a sale of the 17.27-acre, so-called Parcel C to Lewis Land Developers LLC for $8 million, breezed to approval by 5-0. Lewis envisions a residential development similar to the nearby Bayside subdivision, a company vice president told the council.

Both deals are on Wednesday's agenda of the Hercules Redevelopment Agency Successor Agency Oversight Board, which is not bound by Tuesday's council action. The state Department of Finance, in turn, can endorse or reject oversight board actions.


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The Parcel C deal includes the deduction of a $400,000 commission, closing costs of $50,000, a bond payment of $1.7 million and a $2.5 million debt, including interest, to a construction company for work at another city property. The remaining $3.35 million of proceeds will go toward a court-approved settlement of a $6.5 million debt to the city's bond insurer, Ambac Assurance Co.

Lewis was among four bidders for Parcel C, which it once owned before selling it to Wal-Mart around the middle of the last decade; Wal-Mart eventually dropped plans for a store and sold Parcel C back to the city.

The other bidders for Parcel C, according to Duran, were City Ventures, South Coast Developers and AndersonPacific LLC; the latter is the developer of the planned Hercules Bayfront Transit Village.

Council members Dan Romero, de Vera, McCoy and, somewhat less emphatically, Mayor John Delgado criticized the proposed deal for Sycamore Crossing as a virtual giveaway to Safeway. An earlier incarnation of the deal, dating to January 2012, had called for a sale at $16 a square foot.

But a deed restriction barring a grocery store on the larger of two parcels that make up the 11.44-acre tract propelled Safeway to plan a more expensive, two-story store with rooftop parking on the smaller, 3.2-acre portion. The discounted price partially took into account an estimated $5 million in extra construction costs.

Romero, de Vera, McCoy and Delgado balked at the notion that the city should absorb most of Safeway's extra construction costs, noting that the grocery giant built similar two-level stores in Pleasanton and Burlingame without city subsidies.

Councilman Bill Kelly was the lone advocate for approval of the Sycamore Crossing deal.

"Price is secondary." Kelly noted, adding that whether the property sells for $1 or $100 million, "the city won't see one dime" because the proceeds would go toward redevelopment debt.

The real value of the deal to the city, Kelly said, would be in the sales tax and other tax revenue from a Safeway grocery and gas station that a consultant projected at $14 million to $26 million over 30 years.

De Vera and McCoy said the proposed deal would protect Safeway while leaving the city exposed. Both noted that the city negotiated exclusively with Safeway and had never marketed the property to the general development community. They also lamented the absence of a specific timeline for Safeway to build,

Romero, complaining that he and his peers had only a few days to review a complex and largely new deal, said the council must get information in a timely manner to make a rational decision.

"I'm not going to give the property away," Romero said.

Contact Tom Lochner at 510-262-2760 or tlochner@bayareanewsgroup.com. Follow him at twitter.com/tomlochner

IF YOU GO
What: Hercules Redevelopment Agency Successor Agency Oversight Board
Where: Hercules City Hall, 111 Civic Drive
When: 6:30 p.m. Wednesday