Concord is nearly $40 million in the hole for Naval Weapons Station project. Here’s how they plan to get it back.

CONCORD — Transforming an abandoned military base into a massive $6 billion, mixed-use community is no simple task — and Concord has the $40 million bill to prove it.

For nearly two decades, the city has attempted to revitalize the former Concord Naval Weapons Station into tens of thousands of homes and millions of square-feet of schools, offices, shops and restaurants.

But that vision had only racked up nearly $40 million in expenses by the end of 2023 — with almost nothing to show for it. The project is on its third developer, specific plans have not been finalized, construction timelines remain unclear and the U.S. Navy still technically owns the 2,300-acre site.

Despite the long list of expenditures, Concord officials are confident that the city’s coffers will be spared from those past (and future) debts.

That’s because Brookfield Properties — the third and current developer of the Naval Weapons Station — has committed to fully reimbursing the city for all project costs.

In March, the Concord City Council, acting as the Local Reuse Authority (LRA), tentatively approved Brookfield’s plan to develop roughly 6 million square-feet of commercial space, 880 acres of greenspace and more than 12,200 homes at the Naval Weapons Station.

More recently — and quietly — Concord’s elected officials approved $1.6 million for 12 one-year agreements with legal and professional consultants, who have started ironing out details of a Development and Disposition Agreement (DDA) with Brookfield.

The agreement with Brookfield includes a commitment that both the company’s upfront investments and loans from Concord’s general fund to the LRA — currently tallying $14.6 million, which is already in the the $40 million hole — will be repaid as homes are sold. This is profit-sharing model that aims to recoup everyone’s money after the first 10 years of residential construction, according to Guy Bjerke, the city’s director of Economic Development and Base Reuse.

Brookfield has estimated that their sunk costs will total $22 million by the time the project is fully entitled. After the first phase of construction is complete, that total may balloon to around $200 million in order to cover all of the initial, backbone infrastructure investments necessary to start getting residential units on the market — such as sewage lines, water utilities and roadways.

In return for taking on the risks of financing the project up-front, Brookfield will be compensated with an “entitlement fee” from future home sales, equal to three times the amount of all incurred costs.

The nearly $40 million in consulting expenses is due in large part to the project’s troubled history with its previous developers — Lennar Urban and Concord First Partners. Agreements for both of those plans were eventually scrapped in 2020 and 2023, respectively, following a host of labor disputes, power plays and allegations of backroom deals.

Those false starts have prompted questions about Concord’s ability to adequately craft complex contracts and make good on its promise to develop an economically feasible project.

After a resident complained about financial transparency, a Contra Costa County Civil Grand Jury report from June 2023 asserted that “little (had) been achieved” since Concord started studying how best to utilize the decommissioned Concord Naval Weapons Station. But Bjerke contends that the critical grand jury report fails to understand just how much detailed, painstaking work the LRA has tackled over the last 18 years.

He said the new arrangement is designed so that the city could maintain ownership of the Naval Weapons Station land, while also retaining some control over a project that effectively pays for itself.

“One of the overarching goals is to be fiscally neutral to the city of Concord — or even beneficial, but not negative,” Bjerke said, explaining the costs associated with starting from scratch on otherwise dilapidated land. “The Navy probably would have taken a re-use plan written on the back of a napkin … (but) we were trying to get this planned and approved in an appropriate way, and that can be an expensive endeavor.”

But the future reimbursement plan doesn’t solve the need to pay projects planners in the meantime — expenses covered by money the city has effectively loaned to itself, through the LRA.

Between Oct. 2005 and Dec. 2023, the city of Concord has signed agreements worth a cumulative $30.7 million to 38 vendors and consultants — a quarter of which are currently working on the project.

An additional $8.6 million has covered Concord’s payroll and other office costs associated with the Naval Weapons Station, which is sandwiched between Thurgood Marshall Regional Park and residential neighborhoods along Concord’s northern border, near the Sacramento-San Joaquin River Delta.

Averaging roughly $2.1 million in annual expenses, Bjerke said that total may continue to swell through March 2028 — the deadline to negotiate a property transfer agreement with the U.S. Navy, draft a specific plan, prepare an Environmental Impact Report and tackle other necessary legal permits. However, Brookfield and Concord’s team are aiming to finish that work early in 2026.

Concord resident Hope Johnson applauded such detailed conversations about the money involved in such an extensive project.

“I am maybe the biggest skeptic of developers in Concord, and I would like to say that Brookfield has dealt with us credibly and honestly,” Johnson said at a council meeting in March. “(Financing) is not sexy, it’s not fun, but it’s going to come up again and again.”