President Obama opposes Speaker Pelosi on Treasure Island Navy base

Pelosi (D-Calif.) is among dozens of lawmakers pressing for language in the House version of the 2010 defense authorization bill that would transfer closed military bases, at no cost, to local authorities for economic development.

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But the White House is opposed to the provision, saying it would provide “potential windfalls” for private developers.

Responding on behalf of Obama to letters from several senators who support the House legislation, Dorothy Robyn, the deputy undersecretary of Defense for installations and environment, said the clause would create “potential windfalls for certain communities with high-value property and for private-sector developers working with those communities.”

One of those shuttered bases of potentially high value has been the subject of years of failed negotiations between San Francisco — the city Pelosi represents — and the Navy.

The two parties have been at a stalemate over Treasure Island, a Navy base that closed in 1993, sits atop a man-made island in San Francisco Bay and has city planners seeing dollar signs.

They have squabbled over the price. The Navy estimates it is worth $240 million; the city offered a tenth of that value.

Pelosi has personally fought and negotiated with the Navy over the land transfer, but those negotiations broke down. California’s two Democratic senators, Dianne Feinstein and Barbara Boxer, have also been involved, most recently with the letters sent to Obama, the Pentagon and the leaders of the House and Senate Armed Services panels.

Under the provision in the House bill, lawmakers could force the Navy to wave a white flag and accept a sweetheart deal for San Francisco and other cities that involves no immediate payment for the land.

Instead of negotiating the value and paying the Pentagon up front, the military services would transfer the land at no cost to local authorities for economic development. Cities and other local authorities can put off paying for that land until it is developed; the value will be determined at that point.

The Senate version of the bill does not include a similar provision and contains a “sense of the Senate” provision challenging the House language. The two chambers are in negotiations over the defense policy bill and the transfer of land has emerged as a sticking point.

Senate critics fear the Pentagon will ultimately receive a lot less money — if any at all — for the property and that payment will come at an uncertain time more than five years after the real estate transfer.

Pelosi’s office has pointed out that the Speaker is not directly involved in the fate of the provision. Pelosi did not request the language, but supports it and is closely monitoring it, in hopes that it is maintained in conference, Drew Hammill, Pelosi’s spokesman, told The Hill.

“The House language, which has strong bipartisan support, will benefit two dozen communities across the country where critical economic redevelopment projects are stalled, in some cases for over a decade, because the current system is not working. Inclusion of this provision will ensure the creation of thousands of new jobs in these impacted communities,” Hammill said.

The legislation was drafted by Rep. Sam Farr (D-Calif.) with bipartisan support and would benefit about 24 districts from Maine to California. Pelosi failed to get a provision in the defense policy bill last year that would have forced the Navy to sell the property at a price the city offered.

This year the Speaker engaged the White House on the issue of conveying military land for no cost, particularly after Feinstein urged the Obama administration to support such an approach, according to a Pelosi aide who spoke to The Hill for a July article. The Speaker has also engaged the new secretary of the Navy, Ray Mabus, on the matter.

Gov. Arnold Schwarzenegger (R-Calif.) also supports the no-cost proposal and has signed a letter, along with other governors, to that effect.

The city of San Francisco submitted a request to buy the Treasure Island property for an economic development project, and has been negotiating with the Navy for the last six years over a fair-market price.

The Navy has appraised the cost at $240 million, while San Francisco appraised it at $14 million. The city recently commissioned an independent appraisal by auditor KPMG that concluded the value was $22 million, which the city offered to pay to the Navy. The Navy argues the city is not offering a fair-market price for Treasure Island. The Navy has particularly relied on the use of land sales for cleaning up its bases slated for closure.

When the House included the provision in its version of the 2010 defense authorization bill, Pelosi released a statement hailing it.

“In total, more than $5 billion in public and private investments will create more than 2,500 permanent jobs, five times the number of civilian jobs that were lost with the closure of the base. Another 2,000 jobs will be created annually during construction,” she said.
Farr says the provision is necessary.

“Taxpayers have already forfeited these lands so bases could be built,” Farr said in a statement when he introduced his legislation earlier this year. “Then they subsidized the construction of the installations. Today, we’re paying even more to have bases scrubbed of toxic and hazardous waste. … The Department of Defense wants to squeeze more money by demanding communities pay once more for the land.”

Farr’s chief of staff, Rochelle Dornatt, told The Hill on Monday that the issues that Deputy Undersecretary Robyn objected to “are not so overwhelming that they should kill the provision in the bill.”

“Mr. Farr’s position is that there is always room for negotiation. This letter notwithstanding, our provision is not dead and we are urging the House conferees to hang in there,” she added.

The Obama administration fears that the provision, if enacted, would enable local redevelopment authorities to “flip” valuable properties that they obtain at no cost “for profits that can be used for purposes unrelated to the development of that property and diminishes potential property disposal returns to federal taxpayers,” Robyn wrote in her letter to more than a dozen senators, including those from California, Maine, Massachusetts and Texas.

The provision would also allow local authorities to free transfer of lands that have commercial market value, leaving those that don’t for the Pentagon to dispose of as land for public use, according to Robyn.

Under current law, a land transfer from the Department of Defense to local redevelopment authorities is made for “purposes of job generation” and could be of fair-market value or at no cost, Robyn explained. “This structure provides the Department with the flexibility it needs to tailor the disposal to meet the needs and circumstances of each local community,” Robyn wrote. The House provision would mandate all transfers, or conveyances, to be at no cost, regardless of local circumstances, she added.

One of the companies that stands to win the most from the provision is Miami-based Lennar Corp., which has become a major player in the Bay Area and other California development projects, including the decommissioned Mare Island Naval Station and Hunter’s Point shipyard and the Alameda naval air station. Lennar is vying to develop Concord Naval Weapons Station, which is in Rep. George Miller's (D-Calif.) district.

In 2003, Lennar joined a partnership that won the development of Treasure Island. That partnership was put together by Darius Anderson, a Democratic Party fundraiser and lobbyist. Anderson founded

Platinum Advisors as well as Kenwood Investments, which are part of the partnership known as Treasure Island Community Developers. Jay Wallace, who use to work on one of Pelosi’s early campaigns for the House, formed Kenwood Investments with Anderson.

Anderson, who has made contributions to numerous lawmakers across the country, including the Democratic Congressional Campaign Committee, reportedly helped San Francisco Mayor Gavin Newsom retire his campaign debt a few years ago.

Anderson, Wallace and their companies have not made any direct campaign contributions to Pelosi in the last 10 years, and neither did Lennar Corp., according to Federal Election Commission data. They contributed more than $10,000 to Boxer’s campaign funds and $3,000 to Feinstein’s.

Anderson and Wallace helped raise money for Obama’s campaign, as well as for the Obama Victory Fund.

Anderson and Wallace did not respond to requests for comment.

This story was updated at 10:14 a.m., Sept. 23.