Lennar's failures at Hunters Point Shipyard highlight the risk of putting the Bay Area's prime real estate into the hands of profit-driven developers
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For the past decade, Florida-based megadeveloper Lennar Corp. has been snatching up the rights to the Bay Area's former naval bases, those vast stretches of land that once housed the Pacific Fleet but are now home to rats, weeds, and in some places, low-income renters.
When the Navy pulled out of Hunters Point Shipyard in 1974, it left behind a landscape pitted with abandoned barracks, cracked runways, spooky radiation laboratories, antique cranes, rusting docks, and countless toxic spills.
A quarter century later, Lennar came knocking at the shipyard's door and those of other military bases abandoned in the waning days of the cold war recognizing these toxic wastelands as the last frontier of underdeveloped land in urban American and an unparalleled opportunity to make big money.
Lennar had already won its first battle in 1997, seizing control of the Bay Area's former military pearl in Vallejo when it was named master developer for the old Mare Island Naval Shipyard. Two years later it almost lost its bid for Hunters Point Shipyard when a consultant for the San Francisco Redevelopment Agency recommended giving the development rights to the Ohio-based Forest City.
Lennar fought back, calling on politically connected friends and citing its deep pockets and its track record at Mare Island.
A parade of Lennar supporters, many of them friends of then-mayor Willie Brown and Rep. Nancy Pelosi, told the Redevelopment Agency commissioners that Lennar was the only developer that had bothered to reach out to the BayviewHunters Point community. In the end, the commissioners all of them mayoral appointees ignored their consultant's advice and voted for Lennar.
Nobody knows if Forest City would have done a better job. A developer is, after all, a developer. But Lennar's victory at the shipyard helped it win the rights, four years later, to redevelop Treasure Island long before it had even broken ground at Hunters Point. And a couple years ago, it parlayed those footholds into an exclusive development agreement for Candlestick Point.
Now the Fortune 500 company, which had revenues of $16.3 billion in 2006, does have a track record at the shipyard. And that performance is raising doubts about whether San Francisco should have entrusted almost its entire undeveloped coastline to a profit-driven corporation that is proving difficult to regulate or hold accountable for its actions.
Sure, Lennar has provided job training for southeast San Francisco residents, set up small-business assistance and community builder programs, and invested $75 million in the first phase of development. That's the good news.
But on Lennar's watch, a subcontractor failed to monitor and control dangerous asbestos dust next to a school at the Hunters Point Shipyard, potentially exposing students to a deadly toxin despite promising to carefully monitor the air and control the construction dust.
And when the homebuilding industry took a nosedive last year, Lennar reneged on its promise to provide needed rental housing on Hunters Point saying that its profit margins were no longer good enough to make rentals worthwhile. All of which raises questions about whether this company, which is working with Mayor Gavin Newsom to build a stadium at the shipyard to keep the 49ers in town, really has San Francisco's interests in mind.
BayviewHunters Point native Dr. Ahimsa Porter Sumchai, a physician and a Sierra Club member, called the Lennar deal the "dirty transfer of the shipyard." She told us, "There is no reason why I'd trust Lennar more than I would the Navy and the federal regulators who have stringently worked on the cleanup of Hunters Point Shipyard, and yet it still remains toxic."
"This is just a play to get the shipyard," said Porter Sumchai, whose father was a longshore worker at the shipyard and died from asbestosis.
Part of the problem is systemic: the Redevelopment Agency hands over these giant projects to master, for-profit developers who can then change the plans based on financial considerations, not community needs. And while Lennar likes to tell decision makers of its massive size and resources, the actual work at these bases has been delegated to limited-liability subsidiaries with far fewer available assets.
In this case, Lennar experienced a 3 percent drop in sales last year, a 29 percent increase in cancellation rates on homes, and a 15 percent dip in its fourth quarter profits. The downturn prompted Lennar's president and CEO, Stuart Miller, to identify ways to improve what he described in the annual report as the company's "margin of improvement" in 2007. These included "reducing construction costs by negotiating lower prices, redesigning products to meet today's market demand and building on land at current market prices."
A Lennar spokesperson, Sam Singer, issued a statement to us saying that "Lennar BVHP is committed to operating responsibly, continually incorporating best community and environmental practices into our everyday business decisions."
But for a look at how Lennar's model clashes with community interests, you need go no further than the edge of the site where Lennar has been digging up asbestos-laden rock.
The Muhammed University of Islam is a small private school that occupies a modest flat-roofed hilltop building on Kiska Road with a bird's-eye view of the abandoned Hunters Point Shipyard. This year-round K12 school is affiliated with the Nation of Islam and attracts mostly African American students but also brings in Latino, Asian, and Pacific Islander children, many of whom have had problems in the public school system and whose parents can't cover the cost of a private school.
"We find a way," the school's mustachioed and nattily dressed minister, Christopher Muhammed, recently told the Redevelopment Agency in a veiled allusion to the financial nexus between the MUI and the Nation of Islam's mosque and bakery on Third Street. "Many students aren't members of our tradition but live across the street, down the street, or come from Oakland and Vallejo."
The minister is asking the Redevelopment Agency, the agency that selected Lennar and oversees the project, to permanently relocate the school. The school's classrooms and basketball courts sit on the other side of a chain-link fence from Parcel A, which is the first and only plot of land that the Navy has certified at the shipyard as clean and ready for development.
Standing on these courts, the children have been able to watch heavy machinery digging up and moving huge amounts of earth in preparation for the 1,600 condos and town houses that Lennar wants to build on this sunny hillside, which has views of the bay and the rest of the shipyard.
The shipyard's other five parcels are still part of a federal Superfund site, despite having undergone years of decontamination. Black tarps cover piles of soil that have been tagged as contaminated, and recently, radiological deposits were found in the sewers and soil. The Navy is still cleaning up a long list of nasty toxins, including PCBs and solvents, on Parcels B through F, the land Newsom now wants the city to take over so that it can hastily build a stadium for the 49ers.
But the minister's request to relocate the MUI isn't inspired by fear of Navy-related contamination or the impact of a stadium on the neighborhood but rather by the reality that asbestos is naturally present in this hillside and Lennar's excavation work on the other side of the school's chain-link fence has been kicking up dust for almost a year.
It's not that Lennar and the city didn't know about the asbestos. In April 2000 the environmental impact report for the shipyard reuse noted, "Because asbestos-containing serpentinite rock occurs at Hunters Point Shipyard, construction-related excavation activities could cause chrysotile asbestos associated with serpentinite to become airborne, creating a potentially significant impact to public health and safety."
So when Lennar proposed demolishing abandoned housing and roads and grading and transferring massive amounts of earth on Parcel A, the Bay Area Air Quality Management District demanded an asbestos dust mitigation plan that included sweeping and watering the construction sites and making sure that vehicle tires are washed before drivers exit.
The state Asbestos Air Control Toxic Measure also stipulates that if a school lies within a quarter mile of a construction site, local air districts can require developers to install asbestos dust monitors and shut down their sites whenever asbestos registers 16,000 fibers per cubic meter. The state requires these extra steps because children have higher metabolisms, growing lungs, and longer life expectancy. Plus, they're lower to the ground and are likely to run, skip, hop, and play ball games that kick up dust.
Although Lennar agreed to abide by the air district's requirements, the developer failed to properly implement this plan for more than a year.
The air district's records show that Lennar's environmental consultant, CH2M Hill, failed to include any air monitoring in its original plan for Parcel A, which is odd because the school is obvious to anyone who visits the site. It was only when the air district pointed out the existence of the Hunters Point Boys and Girls Club, the Milton Meyer Recreation Center, and the MUI, all within the quarter-mile limit, that Lennar agreed, at least on paper, to what the air district describes as "one of the most stringent asbestos dust mitigation plans in the state."
The plan combines the air district's asbestos requirements with the city's demands that Lennar limit "ordinary dust" that can cause respiratory irritation and aggravate existing respiratory conditions, such as asthma and bronchitis. Lennar agreed to implement the plan in the summer of 2005 and determine background levels of dust and toxins at the site before work began in the spring of 2006.
But that didn't happen. For 13 months there is no data to show how much asbestos the MUI students were exposed to, neither for the 10 months before construction started on the cleared site nor for the first three hot and dusty months when Lennar's subcontractors began massive earth-moving operations next to the school.
You'd think that after these failures became public knowledge, a devastated Lennar would have gotten a black eye and perhaps fired the subcontractors involved. Failing to protect children in a community that's been the repeat victim of environmental injustice is a public relations nightmare, particularly in a part of town where distrust of redevelopment runs deep, thanks to the travesties in the Fillmore in the 1960s, followed by the city's recent rejection of a referendum to put the BayviewHunters Point Redevelopment Plan to a public vote.
But while Lennar's executives finally did the right thing last August by alerting the air district and replacing CH2M Hill, they didn't release their two other subcontractors, Gordon Ball and Luster, nor did they sufficiently rein them in when violations continued, critics have testified at agency meetings.
And instead of apologizing to the air district and the city's Department of Public Health for making them look like impotent fools, Lennar executives pushed back, contending that asbestos monitoring wasn't necessary until May 2006 and that they didn't need to water the tires of private vehicles.
They even listed economic rationalizations for the screwups that did happen. According to a memo marked "confidential" that the Guardian unearthed in the air district's files, written by the air district's inspector, Wayne Lee, Lennar stated, "It costs approximately $40,000 a day to stop grading and construction activity" and "Gordon Ball would have to idle about 26 employees on site, and employees tend to look for other work when the work is not consistent."
Meanwhile, the Department of Public Health was left reeling. Environmental health director Dr. Rajiv Bhatia told us, "It was very disappointing. We worked very hard. We wanted this system to be health protective. Whenever things don't work, it takes time to get back to levels of trust. This hurts trust and credibility."
In September 2006 the air district issued Lennar a notice of violation for the period of July 14, 2005, through Aug. 3, 2006. Lee wrote that vegetation removal on the site "disturbed the soil and in some cases, likely resulted in dust." He also made it clear that "any track onto common roads could be tracked out to public thoroughfares and create asbestos dust plumes."
Lennar's fines have yet to be determined, but they could reach into millions of dollars. State fines for emitting air contaminants range from $1,000 a day, if the violation wasn't the result of intentional or negligent conduct, to $75,000 a day, if the conduct was deemed willful and intentional.
But as the air district weighs the evidence, one thing's for sure: this wasn't an isolated case of one set of monitors failing or one subcontractor screwing up. This case involves numerous violations and three subcontractors, two of which Gordon Ball and Luster are still working next to the MUI (neither company returned our calls).
Records show that once Lennar fired its environmental compliance subcontractor, CH2M Hill, properly installed monitors immediately detected asbestos dust, triggering 15 health-protective shutdowns during the course of the next six months. From these results, is it reasonable to conclude that had Lennar got its monitoring right from the beginning, further shutdowns would have cost Lennar's construction subcontractors even more truckloads of money, as would have adequate watering of the site, which they didn't get right for months?
So far, the only explanation for the watering deficiencies has come from Kofi Bonner, president of Lennar Urban for Northern California, who told the Redevelopment Agency, "Given the hilly terrain, it can only be watered enough so as not to create difficult conditions for the workers going up and down the site."
Lennar didn't finally start to really control its subcontractors until January, when Lennar ordered Gordon Ball and Luster to "replace two site superintendents with new personnel who must demonstrate environmental sensitivity in conducting their work," according to public records.
Headquartered in Miami Beach, Fla., Lennar began in 1954 as a small home builder, but by 1969 it was developing, owning, and managing commercial and residential real estate. Three years later it became a publicly traded company and has been profitable ever since, spinning off new entities.
Lennar Urban is one such venture. Established in 2003 to focus on military-base reuse, Lennar Urban recently produced a glossy brochure in which it proclaimed, "Military base reuse is our business this is what we do."
Military-base development may be good business but it isn't always such a good deal for cities, particularly when communities don't end up receiving what was promised on the front end.
In November 2006, Lennar announced it wouldn't build any rental homes in its 1,600-unit development at the Hunters Point Shipyard. The Redevelopment Agency had originally approved a plan for 700 rental units on the 500-acre site, but Lennar said rising construction costs make rentals a losing investment.
Also in November, Arc Ecology economist Eve Bach warned the Board of Supervisors that Lennar's public-benefits package for Treasure Island could be seriously compromised.
The package includes 1,800 below-market affordable housing units, 300 acres of parks, open space and recreational amenities, thousands of permanent and construction jobs, green building standards, and innovative transportation.
Bach summed up these proposals as "good concepts, uncertain delivery" and noted the discrepancy between Lennar's stated desire for a 25 percent return and Budget Analyst Harvey Rose's conservative prediction of an 18.6 percent return.
"Particularly at risk of shortfalls are transit service levels, very-low-income housing, and open-space maintenance," Bach warned.
With community benefits up in the air, high profits expected, and Lennar's ability to regulate developers uncertain, many community activists question just what San Francisco is getting from the company.
"I can't say that Lennar is trustworthy, not when they come up with a community benefits package that has no benefit for the community," activist Marie Harrison said. "I'd like to be able to say that the bulk of our community are going to be homeowners, but I resent that Lennar is spoon-feeding that idea to folks in public housing who want a roof over their heads and don't want to live with mold and mildew but don't have jobs or good credit or a down payment. I've heard seniors say, 'I can't even afford to die.' Lennar is not being realistic, and that hurts my feelings and breaks my heart."
The story of Lennar and Muhammed University of Islam underscores the problems with a system that essentially relies on developers to regulate themselves. Bay Area Air Quality Management District records show officials didn't know monitoring equipment at the site wasn't working until August 2006, when Lennar discovered and reported the problem.
Lee reported after an Aug. 31, 2006, meeting with CH2M Hill staff, "They were not confident that the air sampling equipment was sampling correctly, due to faulty records and suspect batteries. CH2M Hill staff discovered depleted batteries and could not determine when they drained."
The air district's air quality program manager, Janet Glasgow, told the Guardian, "The district had never been in this situation before, in which a developer, Lennar, came in and self-reported that they discovered a problem with their monitoring something the district would never have been able to determine."
Worrisome as Glasgow's statement is, there's also the possibility that CH2M Hill's failures might never have come to light had it not been for the city's decision to demand another layer of dust controls. As Department of Public Health engineer Amy Brownell said, her inspectors were witnessing trails of dust firsthand, yet CH2M Hill's monitors kept registering "non-detect" around asbestos.
"Which was suspicious," Brownell told us, "since they were doing massive earthwork."
Saul Bloom, who is executive director for Arc Ecology, a local nonprofit that helps communities plan for base closures and cleanups, told us he recalls "waiting for the first shoe to drop, wondering how there could be no work stoppages when Lennar was digging up a hillside of serpentinite."
The other shoe did drop shortly after the August 2006 meeting. It was black and well polished and attached to the foot of Muhammed, who began questioning whether the dust wasn't harming his students.
But Muhammed found his questions weren't easy to answer, given that Lennar had failed to monitor itself and therefore lacked the data that could have proved no harm was done, a scary situation since health problems from asbestos exposure don't generally manifest themselves until many years later.
Those questions raised others about Lennar and whether it should be trusted to self-regulate.
In December 2006, Redevelopment Agency Commissioner Francee Covington asked Lennar's environmental manager, Sheila Roebuck, if the company had any asbestos issues at other projects in the nation. Roebuck replied no, not to her knowledge.
But the Guardian has learned that Lennar already had problems with naturally occurring asbestos in El Dorado. The problems concerned dynamiting in hills that were full of naturally occurring asbestos and resulted in a $350,000 settlement in November 2006. The case involved two El Dorado Hills developers, Angelo K. Tsakopoulos and Larry Gualco, and their earthmoving subcontractor, DeSilva Gates Construction of Dublin.
As part of the terms of the settlement, the county agreed, at the behest of the developers, to make their earthmoving contractor, DeSilva Gates, who provided the dynamite, solely responsible for the settlement. Accused of, but not formally charged with, 47 violations of air- and water-pollution laws is West Valley, a limited liability company composed of Lennar Communities of Roseville, Gualco, and Tsakopoulos's AKT Investments of Sacramento, with Lennar managing the LLC and AKT acting as the investor.
But as the Sacramento Bee's Chris Bowman reported, El Dorado Air Quality Management District head Marcella McTaggart expressed her displeasure directly to Lennar Communities, writing, "We are very disappointed to note that the agreed-upon measures to minimize ... dust were completely disregarded by your company."
McTaggart's words bear an eerie resemblance to Bhatia's comments about how Lennar's failure to protect the public heath "hurts trust and credibility."
"Ultimately, I'm very interested in being able to talk to the families and children who believe they have been harmed," Bhatia told us. "I want to help with people's uncertainties and fears."
Uncertainty and fear were on display at the Redevelopment Agency's December 2006 meeting when Muhammed claimed that serpentinite, arsenic, and antimony had been found on his students and staff through "resonance testing."
Lung cancer experts doubt that methodology, telling us the only way to detect serpentinite in bodies is by doing an autopsy.
Following the minister's claims, a rattled Bonner told the Redevelopment Agency, "Lennar cannot continue to be accused of covering something up or willfully poisoning the community because of profits. Lennar is a national public company, and the accusations and allegations are very serious."
Unfortunately for Lennar and the city, the company's failures to monitor and control dust have left both entities exposed, since they formed a limited liability company without extensive resources, Lennar BVHP, to conduct the shipyard cleanup.
This exposure became even more evident when Muhammed returned to the Redevelopment Agency Commission in January with 15 MUI students in tow to ask for a temporary shutdown of Lennar's site until a permanent relocation of the school had been worked out.
"It doesn't seem proper to have peace discussions while the other side is still shooting," Muhammed said.
His relocation request got BayviewHunters Point community activist Espanola Jackson raising more questions: "OK, but where are the other residents going? How can you displace them? Have the residents on Kiska Road been notified? Or on Palou? Nope. You give people dollars to do outreach, but they don't come to my door. Someone is being paid to not give the truth."
Scott Madison, a member of the Hunters Point Shipyard Citizens Advisory Committee, who'd observed large excavation machines breaking rock but not using water or any other dust controls, said, "I don't understand how Lennar, who I believe has a sincere interest in doing right, can continue to have a contractor who is out of control."
Bonner explained that Lennar sent notices of default to its subcontractors and hired people from the community to be monitors, plus installed a secondary level of consultants to monitor contractors. But when Redevelopment Agency commissioner London Breed expressed interest in releasing the old contractor and hiring a new one, the agency's executive director, Marcia Rosen, chimed in.
"Our agreement," Rosen said, "is not with the subcontractor. Our agreement is with Lennar." Her words illustrated the agency's impotency or unwillingness to crack the whip over Lennar and its subcontractors. But when Lennar Urban vice president Paul Menaker began to explain that its contractors have a 10-day cure period, it was too much for Commissioner Covington.
"We're way past that," Covington exploded. "We're not hams!"
Perhaps they're not hams, but the commissioners' apparent inability to pull the plug on Lennar or its subcontractors leaves observers wondering how best to characterize the relationship between the agency, the city, the community, and Lennar.
Redevelopment Agency commissioners have been appointed either by Mayor Gavin Newsom or his predecessor, the consummate dealmaker Willie Brown. But the incestuous web of political connections goes even further.
Newsom is Speaker of the House Nancy Pelosi's nephew by marriage. Newsom's campaign treasurer is another Pelosi nephew, Laurence Pelosi, who used to be vice president of acquisitions for Lennar and now works for Morgan Stanley Real Estate, which holds Lennar stock.
Both Newsom and Laurence Pelosi are connected to lobbyist Darius Anderson, who hosted a fundraiser to pay off Newsom's campaign debts. Anderson counts Lennar as his client for Treasure Island, Mare Island, the Hunters Point Shipyard, and Candlestick Point, another vast swath of land that Lennar controls.
Brown's ties to the agency and Lennar run equally deep, thanks in part to Lennar's Bonner, who was Brown's former head of economic development and before that worked for the Redevelopment Agency, where he recommended hiring KPMG Peat Marwick to choose between Catellus, Lennar, and Forest City for the Hunters Point project.
KPMG acknowledged all three were capable master developers, but the commission decided to go with the most deep-pocketed entity.
Clearly, Lennar plays both sides of the political fence, a reality that suggests it would be wiser for cities to give elected officials such as the Board of Supervisors, not mayoral appointees, the job of controlling developers.
Under the current system, in which Lennar seems accountable to no one except an apparently toothless Redevelopment Agency, you can't trust Lennar to answer tough questions once it's already won your military base.
Asked about asbestos at the Hunters Point Shipyard, Bonner directed the Guardian's questions to veteran flack Sam Singer, who also handles PR for Ruby Rippey-Tourk. Singer tried to dodge the issue by cherry-picking quotes, beginning with a Dec. 1, 2006, letter that the city's health director, Dr. Mitch Katz, sent to Redevelopment's Rosen.
Katz wrote, "I believe that regulatory mechanisms currently in place for Shipyard Redevelopment are appropriate and adequate to protect the public from potential environmental hazards."
The assessment would seem to be at odds with that of Katz's environmental health director Bhatia, who has been on the frontline of the asbestos fallout and wrote in a Jan. 25 letter, "The failure to secure timely compliance with the regulations by the developer and the repeated violations has also challenged our credibility as a public health agency able and committed to securing the regulatory compliance necessary to protect public health."
Singer also quoted from a Feb. 20 Arc Ecology report on asbestos and dust control for Parcel A, which stated, "Lennar's responses have been consistently cooperative." But he failed to include Arc's criticisms of Lennar, namely that its "subcontractors have consistently undermined its compliance requirements," that it has "not exercised sufficient contractual control over its subcontractors so as to ensure compliance," and that it was "overly slow" in implementing an enhanced community air-monitoring system.
Singer focused instead on Arc's observation that "there is currently no evidence that asbestos from the grading operation on Parcel A poses an endangerment to human health and the environment."
Lack of evidence is not the same as proof, and while Arc's Saul Bloom doesn't believe that "asbestos dust is the issue," he does believe that not moving the school, at least temporarily, leaves Lennar and the city liable.
"They formed a partnership, protective measures didn't happen, the subcontractors continue to be unreliable, and dust in general continues to be a problem," Bloom told us.
Bloom also recommends the Redevelopment Agency have an independent consultant on-site each day and bar contractors who screw up. "Without these teeth, the Redevelopment Agency's claims that they have enforcement capabilities are like arguments for the existence of God."
Raymond Tompkins, an associate researcher in the Chemistry Department at San Francisco State University and a member of the Remediation Advisory Board to the Navy who has family in BayviewHunters Point, says what's missing from the city's relationship with Lennar is accountability, independence, and citizen oversight.
"If you can't put water on dirt so dust doesn't come up, you can't deal with the processes at the rest of the shipyard, which are far more complicated," says Tompkins, who doesn't want the Navy to walk away and believes an industrial hygienist is needed.
"The cavalier attitude around asbestos dust and Lennar at the shipyard fosters the concerns of the African American community that gentrification is taking place and that, next stop, they are going to be sacrificed for a stadium." *