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9CHAIRPERSON CONNELL: And we do have some publicI'll call them in the order in which we receivedNspeakers.Wa request to address the Committee today.When you do come forward -- where would you likeunthem to come forward today? Are you going to put them nextto you?Please identify yourself for the record.The first speaker will be Rick Dongell. The91011second speaker will be Jim Mccabe. The third speaker willbe Lester Denevan.And the last speaker will be Don Lay.Rick, please come forward. And each of you will12be given the statutory three-minute time period to address13Committee members.14MR. DONGELL : Good morning, Commission Members.15My name is Richard Dongell. I'm legal counsel on behalf of16developer, Developers Diversified. And I am willing to17waive my time. I just arrived today to be on hand to answer18any questions or clarify any issues that may arise. I'd be19willing to waive the balance of my time to Jim Mccabe, the20in-house counsel for the City of Long Beach.21CHAIRPERSON CONNELL: Excellent.22Mr. Mccabe.23here today, Mr. Mccabe.Wasn't that an exciting air flight upWeren't you on my flight? I24appreciate a little excitement on these otherwise tedious25flights up and back. I think you were on that flight, Alan?PETERS SHORTHAND REPORTING CORPORATION3336 BRADSHAW ROAD. SUITE 240, SACRAMENTO, CA 95827 / (916) 362-2345

10MR. HAGAR: No, I wasn't. Did you come from LAX?23CHAIRPERSON CONNELL : No. I came from Burbank.You weren't on the flight, Alan?4MR. HAGAR: No, I wasn't. No, I was on the 8:05.InCHAIRPERSON CONNELL :6The 8:00 o'clock from LAXwas an exciting flight?7MR. HAGAR: A little bumpy.8CHAIRPERSON CONNELL : Yes.9Mr. Mccabe.1011MR. MCCABE: Commissioner, my name is Jim Mccabe,Deputy City Counsel for the City of Long Beach. I just want12to reassure the Commission that the City is receiving13periodic reports from the developer on the leasing14situation. The project is proceeding without phasing as15reported, and the City is cognizant of all aspects of the16exchange agreement and we want to be sure that they're17complied with.18I respectfully reserve the remainder of my time19until I find out what the objections are from the public,20and perhaps I can answer some of those concerns.21CHAIRPERSON CONNELL: :Certainly. And we do want22to have that opportunity. We would have given it to you23whether you used up your time or not.2425MR. MCCABE: Sure.CHAIRPERSON CONNELL :Because that's just the wayPETERS SHORTHAND REPORTING CORPORATION3336 BRADSHAW ROAD. SUITE 240. SACRAMENTO. CA 95827 / (916) 362-2345

111this commission operates.2MR. MCCABE: We're very cognizant of all theWaspects of the exchange agreement. We are keeping in4periodic touch, frequent touch, with the developer as to theleases, particularly on the five parcels that were part of6the exchange, and we'll continue to be sure that the project7is proceeding without phasing.CHAIRPERSON CONNELL : Jim, may I ask you, can youCO9illuminate for us what exactly, since you're there, I mean10we know the classes of the leases. But I'm curious as to11who's actually signed retail leases, this is a difficult12economy .13MR. MCCABE: It is a very difficult economy. And14the report I have seen is the same report that's before you.15And although I didn't bring it with me today, I'm aware that16it is almost exclusively at this point restaurants which are17certainly acceptable uses, and Gameworks which is an upscale18restaurant video game kind of tourist-oriented use that19would have no objection, from the City at least, as to a20tideland's use.21So everything we've seen is what you've seen.22will receive more reports and the developer's out there23beating the bushes for more leasing, presumably particularly24more retail leasing. The City would like to see, of course,25a balance of uses, although that's not required by thePETERS SHORTHAND REPORTING CORPORATION3336 BRADSHAW ROAD, SUITE 240, SACRAMENTO, CA 95827 / (916) 362-2345We

12Hexchange agreement per se. But we're keeping in touch withNthe situation.CHAIRPERSON CONNELL: Did you want to commentWfurther?No.All right. Lester Denevan.unAnd then we have ourfinal speaker, Don May, after that.Good morning, Lester.8MR. DENEVAN: Morning.CHAIRPERSON CONNELL: Did you drive up or fly up?10MR. DENEVAN: I drove up.11CHAIRPERSON CONNELL: Oh, a sane person in every12group .MR. DENEVAN: Lester Denevan, resident of Long131415Okay .Beach.I'm concerned about the progression of this16project, of the Queensway Bay in Long Beach. Among other17things, there has been a change in the amount of floor area.18I understand it would be reduced from 508, 000 square feet to19370, 000. So this will be a less intense development than20originally contemplated.212223CHAIRPERSON CONNELL: And is that good or bad,from your perspective?MR. DENEVAN: It can be good and bad. I don't24think there should be any commercial on the property, but if25you're going to make commercial uses, perhaps they should bePETERS SHORTHAND REPORTING CORPORATION3336 BRADSHAW ROAD, SUITE 240, SACRAMENTO, CA 95827 / (916) 362-2345

13Hvery intensive, in order to make full use of scarce publicNland on the shoreline. So if you have a major reduction in3the size of a project, it will compare to a suburban retailinvolvement. And that is not appropriate for this property,UTwhich is easily worth a million dollars an acre. That's myfirst item.Number two, and perhaps the staff can respond toJ8these four items, but with a change in the floor area, you9would also have a change in the parking requirements.10there's a question of the parking in relationship with the11total types of uses down there. And, number two, that12according to the Queensway Bay exchange agreement of a year13ago, and that would be 627, 000 square feet of floor area.14Now, that, I believe, includes both north of Shoreline15Drive, the five parcels, and south of Shoreline Drive. I'd16like to see that total floor area. And if that is needed in17order to accommodate the provision of the required parking,18depending on the floor area.1920CHAIRPERSON CONNELL: What is that ratio, doesstaff know, of parking to square footage?EXECUTIVE OFFICER THAYER: I don't know what the2122City's requirement is. Curtis, do you?23MR. FOSSUM: No. We haven't been looking at24parking as an issue there, parking, you know, near the25tidelands.And some of this parking is to be used for thePETERS SHORTHAND REPORTING CORPORATION3336 BRADSHAW ROAD, SUITE 240. SACRAMENTO, CA 95827 / (916) 362-2345And

14Haquarium that's in the area, as well as public access.2it's sorely needed as it is in most waterfront areas.SoCHAIRPERSON CONNELL: Well, is that part of our3agreement?5MR. FOSSUM: No.6CHAIRPERSON CONNELL : So it wasn't one of thethings you monitored?8MR. FOSSUM:9CHAIRPERSON CONNELL: So, Lester, we can't provide10That's correct.an answer to that.11MR. DENEVAN: Okay. My third item, the classes of12the retail uses that are to be built at Queensway Bay. What13happened to the box retail, what happened to the bookstore?14And then in reference to retail, quote, unquote, Calendar15Item Number 63, that includes a Staples, a grocery store, a16Savon Drugs. I'd like to know what those retail uses are,17because many retail uses are not an appropriate type of18public trust use.19CHAIRPERSON CONNELL: Who in the audience think20they can provide that information? I asked a similar21question.22Mr. Mccabe, do you have that information?23MR. MCCABE:24CHAIRPERSON CONNELL: No, no, we want a specific25I can comment in general, but - -layout of the leases to date. Somebody must know that.PETERS SHORTHAND REPORTING CORPORATION3336 BRADSHAW ROAD, SUITE 240, SACRAMENTO, CA 95827 / (916) 362-2345

15EXECUTIVE OFFICER THAYER: As I understandNLester's comment, correct me if I'm wrong, is that you're3not necessarily saying that those uses are proposed, but you4want to know whether they could be allowed?MR. DENEVAN: Well, I don't like to see a blankcheck. Your report refers to retail on several of the five7parcels.EXECUTIVE OFFICER THAYER: Right.9MR. DENEVAN: Is that a Cost Plus as originally10contemplated, or will these be appropriate uses for the11tidelands?CHAIRPERSON CONNELL: Well, let's let our staff1213respond.EXECUTIVE OFFICER THAYER:14In answer to that first15question, if there are more, we're, of course, happy to16respond, the five parcels from which the trust is being17lifted are not contemplated for public trust uses. And, in18fact, it was because the Commission found that those uses,19the ones you're describing, Cost Plus and that kind of20thing, were not public trust uses, that this exchange went21forward and the determination that these lands were needed22for the trust.232425CHAIRPERSON CONNELL: Well, that's why it'simportant to know what do they have. Do we know that?EXECUTIVE OFFICER THAYER:And at the moment, theyPETERS SHORTHAND REPORTING CORPORATION3336 BRADSHAW ROAD, SUITE 240, SACRAMENTO, CA 95827 / (916) 362-2345

161have leases only for, I believe, one of the cinemas, and for2the Gameworks.34MR. FOSSUM:Our understanding is that right nowthere are two operating agreements on the property for theGameworks on Parcel C and the cinema on Parcel CD. That's6the only ones that as of now have been signed that we're7aware of. And the City maybe correct me if I'm wrong onthat. But that's what the latest information that has been9given to us is.CHAIRPERSON CONNELL: So we have restaurants1011basically. What kinds of restaurants?12MR. FOSSUM: Well, there are no restaurants on the13five parcels at this time that I'm aware of. The14restaurants that leases have been executed for are on other15parts of the Queensway Bay where we weren't looking at the16problem, because as far as we were concerned there was no17issue of inconsistency with the trust. Visitor facilities18on the waterfront are a very typical type of trust activity,19and so the Commission staff certainly had no question about20the City's operation of that area for those uses.21The problem arose when they proposed these retail22uses and the cinema-type uses that were not a traditional23trust use.24of the agreement were on those uses. And because they were25terminated, the agreement provides that retail can go intoSo the Commission's investigation and the focusPETERS SHORTHAND REPORTING CORPORATION3336 BRADSHAW ROAD. SUITE 240, SACRAMENTO. CA 95827 / (916) 362-2345

17those uses.1It's also what the Coastal Commission hasauthorized by their permit.2So there doesn't appear to be any conflict as far34as we're concerned if those go for typical retail. There5have been some issues raised by some people in the city who6heard that some nonretail-type of uses might go in there,and we've investigated that and talked to the City, and as7Bfar as we know, nothing like that is contemplated.910CHAIRPERSON CONNELL: Mr. Denevan?MR. DENEVAN: The land is owned, it is still11publicly-owned land, public recreational land, and so it's12no longer the state public trust status, but it is public13land, and there is a trade off which provided for these uses14to go or not to go throughout that Queensway Bay project.15You looked at the entire project, there's a report that16encompasses both north and south of Shoreline Drive, so17there should be something more specific then in your report18here and what kind of uses, retail uses, that are going to19go in there. And otherwise, it's a blank check.20And my last point, number four, would be the large21screen format theater and the multiplex movie theater. The22question is are both of these to be allowed or only one?23This is Item Number 63, December 16th, in your report.24last I heard, the large-format screen had been abandoned.25Could that be clarified for the Commission, please?PETERS SHORTHAND REPORTING CORPORATION3336 BRADSHAW ROAD. SUITE 240. SACRAMENTO, CA 95827 / (916) 362-2345The

181CHAIRPERSON CONNELL: Certainly.2MR. DENEVAN:WMR. FOSSUM: Madam Chair, those are both requiredThank you.as part of the agreement. So if the City does not put inun6one of those two uses, that particular parcel would revertto its trust status. The City would still have control ofit, but they would need to put a trust-consistent use on8that parcel.9CHAIRPERSON CONNELL: So what are you saying?10MR. FOSSUM: If they don't build a -- for example,11if on the parcel that's designated for a large-format12theater, if that parcel cannot get a tenant for that use,13then the parcel will have to be used for a trust-consistent14use. The City would have to rededicate that parcel to the15trust.16comply with the Commission's requirements that these uses be17made or that it comes back to the trust.18That's the way the agreement was drafted in order toMR. DENEVAN: Just briefly, reading this on page193, it says multiplex theater and so and so forth, and a20large-format theater.It looks like both.21EXECUTIVE OFFICER THAYER: Yes.22MR. FOSSUM:23MR. DENEVAN: And if one is not built, then2425That's correct.they're in default, the City's in default?MR. FOSSUM: That's correct.PETERS SHORTHAND REPORTING CORPORATION3336 BRADSHAW ROAD. SUITE 240, SACRAMENTO, CA 95827 / (916) 362-2345

19CHAIRPERSON CONNELL: Well, let us go through that12process.WDongell, that given this economic climate that we're in, I4mean that we're going to have any kind of theater. I mean5it's been a while since I was in the retail underwritingI mean how likely is it, either Mr. Mccabe or Mr.game, but I can't imagine that the numbers are any more7persuasive now than they would have been in any other8downturn of the economy. It's a very difficult class of use9to structure in an economic downturn. Rick, do you want to10join us. Just let him sit down with you, that's fine.11MR. DONGELL : I can even speak from here.12CHAIRPERSON CONNELL: Oh, that's fine. Please1314feel comfortable to sit down.MR. DONGELL: The developer was held up, frankly,15in their ability to lease this project due to the fact that16the cloud was created by the litigation that was filed by17California Earth Corps. It made it very difficult to try to18enter into any serious meaningful leasing negotiations while19that litigation remained in place. The litigation, as you20may know, was defeated in state court here in Sacramento.21And since that time the developer has been engaged in22serious meaningful negotiations with a wide variety of high-23quality tenants and they are in the middle of that process24and they're trying to make up for some lost time as a result25of the litigation. But in the meantime, as stated by Mr.PETERS SHORTHAND REPORTING CORPORATION3336 BRADSHAW ROAD, SUITE 240, SACRAMENTO, CA 95827 / (916) 362-2345

20PFossum here, and he's very correct in stating how theNagreement would work. When we build the project and it'sWopen for business, we're either going to have a tenantfitting that use in place, and if we can't put up or shutunTup, then that property will revert back to the trustrestrictions. I think that's accurately stated.CHAIRPERSON CONNELL: All right. So there has8been no negotiation with a theater at this point.9Now, Lester, I must -MR. FOSSUM: If I could, Madam Chair, there is an1011operating agreement for the multiplex theater, but not for12the large format.13CHAIRPERSON CONNELL: Okay.MR. DONGELL:14The Imax theater, they're still in15negotiations for potential tenants for that use. But with16regard to the multiplex theater, there is an agreement in17place.BTCHAIRPERSON CONNELL : There is or is not?19MR. DONGELL :20CHAIRPERSON CONNELL :21MR. DONGELL :22CHAIRPERSON CONNELL: Mr. Denevan, we're going toThere is.There is, okay.Thank you, Commissioner.23have to wrap it up. We have been more than generous with24the time here.25Great .But we do have one other speaker, Don May.PETERS SHORTHAND REPORTING CORPORATION3336 BRADSHAW ROAD, SUITE 240, SACRAMENTO, CA 95827 / (916) 362-2345

21Don are you waving at us with your pad there?Nyou the person that they were talking about that filed theWlitigation?4MR. MAY : Yes, ma'am.CHAIRPERSON CONNELL :6Would you like to give us anupdate on what's going on?MR. MAY: Sure. Thank you, Chairman, if that's8the proper way to address you, I hope.CHAIRPERSON CONNELL: It's all and above, that's10fine.11MR. MAY: First, let me comment, if I can, on the12staff report. And I didn't know whether they were in favor,13or supporting or opposing.14get some answers on some rather vague areas out here. We do15have a lot of questions about whether or not, in fact, they16are in concurrence with the May 31 deadline because some17and I am particularly glad that you're here and able to18refresh our memories.I guess it's mostly trying toWe have not seen the transcript on the September192017 meeting, and my recollection was a tad different than21what is here, in that, number one, starting, we had22interpreted as the ground would be breaking, they would be23moving ahead. If they didn't meet that, they certainly have24now.25was 60 percent to two-thirds, something like that, 60 to 65But more importantly was that there would be -- and itPETERS SHORTHAND REPORTING CORPORATION3336 BRADSHAW ROAD. SUITE 240. SACRAMENTO, CA 95827 / (916) 362-2345Are

22percent of leases would have been in before that May 312time. And as you see, they're still not. Now part of that3was this looking at one-third, one-third, one-third, some4diversity of what those leases would be. However, on the5properties in which the public trust has been lifted,6nothing has gone forward. So we don't see much injury.Our big concern was that we have not been able toget exactly what the status of those leases or if it's a9lease option agreement or exactly what those are. And, in10fact, the last page on your staff addendum is the best that11we have gotten.12There is also just a lot of gossip around town as13this project has morphed from a pedestrian-oriented tourist14serving facility into one that's sales tax driven as the15City strives to make up some budget shortfall that has16caused, we believe, the project to change substantially, not17only from what it was intended back when it was in the18planning process, but since last May. That, in particular,19as is mentioned in here, there's been talk and an editorial20comment in the local newspapers about in order to serve the21residential uses that are adjacent better that there be dry22cleaners and other resident-serving facilities put in. And23we strongly believe that those a

STATE OF CALIFORNIA . SACRAMENTO, CALIFORNIA . MONDAY, DECEMBER 16 , 2002 11:00 A.M. MICHAEL MAC IVER SHORTHAND REPORTER . ORIGINAL. PETERS SHORTHAND REPORTING CORPORATION . 3336 BRADSHAW ROAD. SUITE 240, SACRAMENTO, CA 95827 / (916) 362-2345 . Paul Thayer, Executive Officer Jack Rump, Chief Counsel . Alan Scott Curt Fossum .