Oakland (Special to ZennieReport.com) – In the OBOT versus City of Oakland case, Alameda County Superior Court Judge Noël Wise (Democrat appointed by California Governor Edmond G. Brown, Jr. in 2014) issued a proposed statement of decision on Monday December 11th, 2023, laying out the alternative remedies for Oakland / East Bay real estate developer Phil Tagami and his company Oakland Bulk and Oversized Terminal, or OBOT. Judge Noel Wise ruled OBOT can choose to keep its lease and have it extended for 2 years or give-up the lease and receive $317,683 in damages. (Follow-up: the author is a Democrat worked for Governor Brown when he was Mayor of Oakland, and from 1999 to 2001.)
$317,683 in damages. A number far less than any reasoned observer would expect, but one reported without any analysis or consideration. Since it came with the usual insufferable cheering from the maow-maow crowd, this urban-planning-and-economics-trained UTA undergrad, Berkeley Department of City and Regional Planning Masters Degree graduate author who made market studies and pro-formas of for a proposed bulk terminal for Domtar Gypsum America in 1986-1987 believed an analysis was in order.
Phil Tagami told Zennie62Media that the judge’s decision “is what it is” and offered no criticism of it. He said “The City of Oakland breached the lease and acted in bad faith”.
Where Did Judge Noel Wise’ $317,683 In Damages Really Come From?
But this author wondered where the $317,683 in damage estimate came from, especially since it does not even reflect the market data avaiable for bulk terminals. While Judge Noel Wise claims the developers did not analyze the profits and losses of other bulk commodity terminals, as a basis for figuring out OBOT’s projected revenues and expenses, someone needs to tell the Judge that’s not how a proforma of any development project is created.
As anyone who’s had to make a pro-forma for a building development (or for that matter a business) will tell you, you have to estimate your costs for materials and labor against local, regional, and global factors that combine to produce an estimate of annual sales for that particular bulk terminal. That includes common volume estimates for comparable facilities in the area or region, against through-put volume capacity. In other words, your costs are unique to your planned bulk terminal, and the revenues are dependent on the size and design of the bulk terminal and projected demand for its use, from which revenue is derived.
Judge Wise Doesn’t Understand How To Make A Real Estate Development Pro-Forma
The way Judge Wise expressed it, one can just come up with an average number and paste that into the pro-forma. Doing that would get one laughed out of a presentation. This author knows because he made such an analysis for Oakland-based Domtar Gypsum America when he was an intern for the organization from 1986 to 1987 (while a grad student at Cal).
Domtar Gypsum America was interested in building a bulk commodity terminal near Anitoch, California. This intern’s job was to make a “preliminary” pro-forma of the proposed port facility. To do that, I had to know Domtar’s own shipping volume and then calculate that for other business partners that would contract to use our facility. And then came the estimate of cost of construction, permits and fees costs, and then the cost of labor associated with annual operation an of the facility. Out of that, we have a unique numerical picture of how the Domtar Gypsum America port would behave from a financial perspective.
Obviously, Judge Wise has no experience in the area of facilities pro-forma development. Thus, she had no business making a guess about something she knew nothing about – but that’s what she did. Judge Wise wrote “For these reasons, the Court separately finds that OBOT’s claim for lost profits is speculative and not reasonably certain”. But what is an estimate of $317,683 in damages for a multi-million-dollar facility but speculative and not reasonably certain? In this author’s opinion, The Judge had to do that just did that out of meaness as much as any concern for City of Oakland’s finances – nothing more.
Actual Bulk Commodity Terminal Numbers Online Reveal OBOT Truth
Thankfully, we have the Internet to use as a data resource. For example, 2022 revenue for the Millennium Bulk Terminals-Longview, a commodities terminal located in Longview, Washington (and thus a potential competitor for Oakland-based OBOT) was $6.6 million according to ZOOMINFO. While the specific number is not readily available, profit from the facility as a percentage of the total revenue is not hard to determine. In using The Port of Stockton as a basis for determining a rate to use (because the information was quickly available), the profit margin was 25 percent in 2016, 39 percent in 2015, and 14.5 percent in 2014, based on reports available via Bing Search.
If we use 14.5 percent profit margin as a low-end rate comparison, we come to $6.66 million times .145 or $966,666.57 – that’s roughly tripple the $317,683 damage estimate the judge arrived at. And the profit margins were better than that and up to 30 percent, which means we’re looking at $1,999,999.80 for a profit margin In short, there’s no way to reasonably justify the Judge’s damage estimate, even if she was considering profit margin. It looks to this seasoned observer like Judge Wise made up the number, rather than any real analysis. That’s sad.
Judge Wise Massively Short-Changed OBOT
Perhaps Judge Wise should honestly explain her real motivations? Since profit margins can wildly fluctuate, why not use the actual expected revenue from not just the Oakland Bulk and Oversized Terminal, but other bulk terminals, like Millennium Bulk Terminals-Longview? If the loss in possible revenue annually is $6.6 million, then a year-to-year 2018 to 2023 total would be $39,999,996.00 – let’s round that to $40 million.
Thus, a real estimate of what the City of Oakland owes California Capital Investment Group in OBOT damages is $40 million.
In closing, this author is an unabashed technocrat, who believes that the climate change problem can be solved via the constant development of new technologies rather than NIMBY tribal behavior pushing people out of job opportunities. But we’d better get to it: the lag-effect of any change with respect to the global environment is between 15-and-20 years. If you’re into system dynamics (or learning about it), just reach out via the contact info above.